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, 2002.

[ ] 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

                               ATA Holdings Corp.

             (Exact name of registrant as specified in its charter)

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

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

                                 (317) 247-4000

              (Registrant's telephone number, including area code)

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

                            None

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

                     Title of each class
                 Common Stock, No Par Value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter  periods that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]

The aggregate  market value of shares of the  registrant's  Common Stock held by
non-affiliates  of the  registrant  (based on closing  price of shares of Common
Stock on the NASDAQ  National Market on June 30, 2002) was  approximately  $23.4
million.

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

Common Stock,  Without Par Value - 11,764,753 shares  outstanding as of February
28, 2003.

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 ATA Holdings Corp.  Proxy  Statement to be filed within 120 days
after the close of the last fiscal year are  incorporated by reference into Part
III.

<PAGE>

                                TABLE OF CONTENTS
                         FORM 10-K ANNUAL REPORT - 2002
                       ATA HOLDINGS CORP. AND SUBSIDIARIES

                                                                          Page #
PART I
   Item 1.     Business........................................................3
   Item 2.     Properties......................................................9
   Item 3.     Legal Proceedings..............................................10
   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..   ......................13
   Item 7.     Management's Discussion and Analysis of Financial Condition and
               Results of Operations..........................................14
   Item 7a.    Quantitative and Qualitative Disclosures About Market Risk.....45
   Item 8.     Financial Statements and Supplementary Data....................47
   Item 9.     Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure.......................................76
PART III
   Item 10.    Directors and Officers of the Registrant.......................77
   Item 11.    Executive Compensation.........................................77
   Item 12.    Security Ownership of Certain Beneficial Owners and Management.77
   Item 13.    Certain Relationships and Related Transactions.................77
   Item 14.    Controls and Procedures........................................77
PART IV
   Item 15.    Exhibits, Financial Statement Schedule and Reports on Form 8-K.78
   Item 15d.   Valuation and Qualifying Accounts..............................80

                                       2
<PAGE>

PART I

Item 1.   Business

Company Overview

ATA Holdings  Corp.,  formerly  Amtran,  Inc. (the "Company") owns ATA Airlines,
Inc.,  formerly  American Trans Air, Inc.  ("ATA"),  the tenth largest passenger
airline in the United States,  based upon 2002 capacity and traffic. The Company
is a leading  provider  of  low-cost  scheduled  airline  services,  the largest
commercial  charter  airline in the United  States  based upon  revenues for the
twelve  months  ended June 30,  2002,  and is one of the  largest  providers  of
passenger airline services to the U.S.  military,  based upon 2002 revenue.  The
Company was incorporated in Indiana in 1984.

The following  table  summarizes the Company's  revenue  sources for the periods
indicated:
<TABLE>
<CAPTION>
                                                                      Year Ended December 31,

                                            2002           2001           2000           1999           1998
                                      ----------------------------------------------------------------------
                                                                       (Dollars in millions)
<S>                                   <C>           <C>            <C>            <C>             <C>
Scheduled Service                     $     886.6   $     820.7    $     753.3    $     624.6     $    511.3
                                      -----------   -----------    -----------    -----------     ----------



Commercial Charter                          131.3         192.2          246.7          263.8          222.6

Military Charter                            177.9         167.5          188.6          126.2          121.9
                                      -----------   -----------    -----------    -----------     ----------
     Total Charter Service                  309.2         359.7          435.3          390.0          344.5
                                      -----------   -----------    -----------    -----------     ----------
Other                                        81.6          95.1          103.0          107.8           63.6
                                      -----------   -----------    -----------    -----------     ----------
      Total                           $   1,277.4   $   1,275.5    $   1,291.6    $   1,122.4     $    919.4
                                      ===========   ===========    ===========    ===========     ==========

Percentage of Consolidated Revenues:
     Scheduled Service                      69.4%          64.3%          58.3%          55.7%          55.6%
     Commercial Charter                     10.3%          15.1%          19.1%          23.5%          24.2%
     Military Charter                       13.9%          13.1%          14.6%          11.2%          13.3%

</TABLE>

Scheduled  Service
The Company  provides  scheduled  airline  services on selected  routes where it
believes that it can be a leading carrier in those markets,  focusing  primarily
on low-cost, nonstop or direct flights. The Company currently provides scheduled
service primarily from its gateway cities of Chicago-Midway  and Indianapolis to
popular vacation and business  destinations such as Phoenix, Las Vegas, Florida,
California,  Mexico  and  the  Caribbean,  as well  as to New  York's  LaGuardia
Airport,  Philadelphia,  Denver,  Dallas-Ft.  Worth,  Washington,  D.C., Boston,
Seattle,  Minneapolis-St.  Paul, Newark and Charlotte. The Company also provides
transpacific service between the Western United States and Hawaii.

The  Company  owns all of the issued and  outstanding  stock of Chicago  Express
Airlines, Inc. ("Chicago Express"),  which currently operates a fleet of 17 SAAB
340B  34-seat  propeller  aircraft  and provides  commuter  passenger  scheduled
service between  Chicago-Midway  and the cities of  Indianapolis,  Cedar Rapids,
Dayton, Des Moines, Flint, Grand Rapids, Lexington,  Madison, Milwaukee, Moline,
Toledo, South Bend, and Springfield.

Included in the Company's jet scheduled  service are bulk-seat sales  agreements
with tour operators. Under these arrangements, a tour operator purchases a large
portion of the seats on an aircraft and assumes  responsibility for distribution
of those seats.  The Company sells the remaining seats through its own scheduled
service distribution network. Under bulk-seat sales arrangements, the Company is

                                       3
<PAGE>

obligated to provide transportation to the tour operators' customers even in the
event of  non-payment  to the  Company by tour  operators.  To reduce its credit
exposure under these  arrangements,  the Company  requires a letter of credit or
prepayment of a portion of the contract price.

Commercial  Charter Service
The Company provides  commercial  passenger charter airline services,  primarily
through U.S. tour operators.  The most significant portion of commercial charter
revenue  is  derived  from  contracts   with  tour  operators  for   repetitive,
leisure-oriented  round-trip  patterns,  operating over varying periods of time.
Under  such  contracts,  the tour  operator  pays a fixed  price  for use of the
aircraft  and  assumes  responsibility  and  risk  for  the  actual  sale of the
available aircraft seats.  Under most of its contracts with tour operators,  the
Company  passes  through  increases in fuel costs from a contracted  price.  The
Company is required to absorb  increases in fuel costs that occur within 14 days
of flight time.

In 2002, commercial charter revenue declined significantly, primarily due to the
retirement  of certain  Lockheed  L-1011 and Boeing  727-200  aircraft that were
historically used in commercial charter flying. The Company's replacement fleets
of new Boeing 737-800 and 757-300 aircraft are economically  disadvantaged  when
used in the  lower-utilization  charter  business,  due to  their  higher  fixed
ownership  cost.  Consequently,  the Company expects future  commercial  charter
revenue to continue to represent a declining percentage of total revenue.

Military/Government Charter Service
The Company has provided  passenger  airline services to the U.S. military since
1983 and is currently one of the largest  commercial  airline providers of these
services.  The Company believes that because these operations are generally less
seasonal than scheduled service, and because the military contract provides full
reimbursement  for actual fuel expenses,  they 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.  Each  contract year extends from
October 1 through  September  30. The Company  primarily  uses its fleet of four
Lockheed  L-1011-500 aircraft and certain Lockheed L-1011-50 and 100 aircraft to
support this military  business,  since these  aircraft have a range and seating
configuration preferred by the military.

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

Industry Overview

The  terrorist  attacks  of  September  11,  2001 and  generally  weak  economic
conditions  have adversely  affected the Company and the airline  industry.  The
industry as a whole, and the Company, suffered very significant financial losses
in 2001 and 2002. During 2002, two major air carriers,  US Airways Group and UAL
Corporation,  filed for  reorganization  under  Chapter 11 of the United  States
Bankruptcy Code.  Historically,  air carriers involved in  reorganizations  have
substantially  reduced their fares,  which could reduce  airline  yields further
from  current  levels.  Certain air  carriers  are seeking to recover,  at least
partially,  by  reducing  their  seat  capacity.  As  this  is  accomplished  by
eliminating  aircraft from operating  fleets,  the fair value of aircraft may be
adversely  affected.  The Company has recorded  substantial  charges to earnings
resulting  from  fleet  retirements  and  impairments  over the past two  years.
However,  during this period the Company has substantially replaced its fleet of
aging aircraft with new  fuel-efficient  Boeing  aircraft.  The industry and the
Company have also been  adversely  impacted by  substantially  higher  insurance
costs, and higher passenger security costs.

                                       4
<PAGE>

The Company has benefited  from some of the U.S.  Government's  initiatives  for
assisting  the airline  industry.  Most  significant  to the Company was the Air
Transportation Safety and System Stabilization Act ("Act") passed in 2001, which
provided for,  among other things,  up to $5.0 billion in  compensation  to U.S.
airlines and air cargo carriers for direct and incremental losses resulting from
the September 11, 2001  terrorist  attacks and the  availability  of up to $10.0
billion in U.S.  Government  guarantees  of certain  loans made to air carriers,
which are administered by the newly-established Air Transportation Stabilization
Board  ("ATSB").  The Company  received $50.1 million is U.S.  Government  grant
compensation.  The Company also obtained a $168.0 million  secured term loan, of
which $148.5 million is guaranteed by the ATSB.

While it is expected  that adverse  industry  conditions  are likely to continue
throughout  2003,  the  Company's  management  believes  it has a viable plan to
ensure sufficient cash to fund operations during the next 12 months. In addition
to the  assistance  the  Company  has  already  received  in the  form  of  U.S.
Government  grant  compensation  and the secured  term loan,  the plan calls for
focusing  marketing efforts on those routes where the Company believes it can be
a leading  provider and  implementing  a number of cost-saving  initiatives  the
Company  believes  will  enhance its  low-cost  advantage.  Although the Company
believes  the  assumptions   underlying  its  2003  financial   projections  are
reasonable,  there are  significant  risks which could cause the Company's  2003
financial  performance  to be  different  than  projected.  These  risks  relate
primarily  to further  declines in demand for air travel,  further  increases in
fuel prices,  the uncertain outcome of the two major airline  bankruptcies filed
in 2002, the possibility of other airline bankruptcy filings,  and the uncertain
outcome and geopolitical impact of the conflict in the Middle East.

Company Strategy

The Company intends to combat the adverse  industry  conditions by enhancing its
position as a leading provider of passenger airline services in 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  generally  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 nonstop schedules, value-oriented pricing, focused marketing
efforts and certain  airport and aircraft  advantages.  The Company is a leading
provider of commercial  and military  charter  services in large part because of
its  variety  of  aircraft  types,  superior  operational  performance  and  its
worldwide  service  capability.  The  Company  intends to expand its  operations
selectively  in areas  where it believes  it can  achieve  attractive  financial
returns.

Maintain Low-Cost Position and Maximize Aircraft  Utilization For 2002, 2001 and
2000, the Company's consolidated operating cost per available seat mile ("CASM")
of 8.17(cent),  8.45(cent) and 7.86(cent),  respectively,  was one of the lowest
among large U.S. passenger  airlines.  The Company believes that its lower costs
provide a significant  competitive  advantage.  Supplementing the Company's cost
control initiatives is the enhancement of aircraft  utilization,  or the average
number  of  hours  flown  per  aircraft  per  day.   This  strategy  has  become
increasingly  important  with  the  delivery  of many new  aircraft  in the last
several years.

                                       5
<PAGE>

Competition

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

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

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  71.2% of the Company's total scheduled  service
     capacity in 2002.  The Company is the number one carrier in terms of market
     share,  based upon  second  quarter  2002  origin and  destination  revenue
     passengers,   on  19  of  the  21  nonstop   jet  routes  it  serves   from
     Chicago-Midway.  The Company  believes its service at this gateway would be
     difficult  to  replicate   because  of  limited  airport   capacity.   This
     competitive   position  is  enhanced  by  the   customer   convenience   of
     Chicago-Midway's  proximity to downtown Chicago.  The Company also enjoys a
     strong  competitive  position  relative to the entire Chicago  metropolitan
     area.

o    Hawaii represented  approximately  13.7% of the Company's total scheduled
     service  capacity  in 2002.  A majority  of the  Company's  capacity in the
     Hawaiian market is contracted to the nation's largest independent  Hawaiian
     tour operator,  which assumes capacity, yield and most fuel-price risk. The
     Company  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.

o    Indianapolis  represented   approximately  10.5%  of  the  Company's  total
     scheduled  service  capacity in 2002. The Company believes that it benefits
     from being perceived as the hometown airline. The Company is the number one
     provider in terms of market  share,  based upon second  quarter 2002 origin
     and destination  revenue  passengers,  in seven of its nine jet routes from
     Indianapolis.  In  Indianapolis,  the Company operates  Ambassadair  Travel
     Club,  Inc.  ("Ambassadair"),   the  nation's  largest  travel  club,  with
     approximately  32,000  individual  or  family  memberships,  providing  the
     Company with another local marketing advantage.


Competition for Commercial  Charter  Services
In the commercial  charter market,  the Company  competes both against the major
U.S. scheduled  airlines and against small U.S. charter airlines.  The scheduled
carriers compete with the Company's commercial charter operations by 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.

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

                                       6
<PAGE>

Flight Operations and Aircraft Maintenance

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.

The Company's  Maintenance  and  Engineering  Center is located at  Indianapolis
International  Airport. This facility is an FAA-certificated  repair station and
has the  capability  to  perform  routine  and  non-routine  maintenance  on the
Company's  aircraft.  The  Company  also  has  a  maintenance  facility  at  the
Chicago-Midway Airport, which is used to provide line maintenance for the Boeing
757-200, Boeing 757-300 and Boeing 737-800 fleets. The Company has approximately
1,150 employees  supporting its aircraft maintenance  operations,  and currently
maintains 19 permanent  maintenance  facilities,  including its Indianapolis and
Chicago facilities.

Fuel Price Risk Management

The  Company has fuel  reimbursement  clauses and  guarantees  which  applied to
approximately 29.4%, 32.0%, and 33.5% respectively,  of consolidated revenues in
2002, 2001 and 2000. The Company occasionally enters into fuel-hedging contracts
to reduce  volatility of fuel prices for a portion of its scheduled service fuel
needs.  As of December  31,  2002,  the Company  had no  outstanding  fuel hedge
contracts.

Insurance

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

Immediately  following the September 11, 2001 terrorist  attacks,  the Company's
aviation  insurers,  and other air  carriers'  aviation  insurers,  reduced  the
maximum  amount of liability  insurance  coverage for losses  related to persons
other than  passengers  and employees,  resulting  from acts of terrorism,  war,
hijacking  or  other  similar  perils  (war-risk   coverage)  and  significantly
increased  their  premiums  for  this  reduced  coverage.  Pursuant  to the  Air
Transportation  Safety and System  Stabilization  Act ("Act") and other enabling
legislation,  the U.S. Government has issued  supplemental  war-risk coverage to
U.S. air carriers,  including the Company, which is expected to continue through
2003. It is anticipated that after this date, a commercial  product for war-risk
coverage  will  become  available,  but the  Company  expects  that it may incur
significant additional costs for this coverage.

Employees

As of December 31, 2002, the Company had approximately  7,200 full and part-time
employees,  approximately  2,600  of  whom  were  represented  under  collective
bargaining  agreements.  The Company's flight  attendants are represented by the
Association of Flight  Attendants  ("AFA").  The current  collective  bargaining
agreement with the AFA will become subject to amendment, but will not expire, in

                                       7
<PAGE>

October 2004. The Company's cockpit crews are represented by the Air Line Pilots
Association ("ALPA"). The current collective bargaining agreement with ALPA will
become  subject to amendment,  but will not expire,  in June 2006. The Company's
flight  dispatchers are represented by the Transport Workers Union ("TWU").  The
current collective agreement with the TWU will become subject to amendment,  but
will not expire, in August 2004. The Company's ramp service agents elected to be
represented by the International  Association of Machinists  ("IAM") in February
2001. The Company began negotiations with the IAM in May 2001, but no collective
bargaining  agreement  has been  finalized.  In  February  2002,  the  Company's
aircraft mechanics elected to be represented by the Aircraft Mechanics Fraternal
Association  ("AMFA").  The Company began  negotiations with the AMFA in October
2002, but no collective bargaining agreement has been finalized.

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

Regulation

The  Company is subject to a wide range of  governmental  regulation,  including
that of the  Department  of  Transportation  ("DOT")  and the  Federal  Aviation
Administration ("FAA").

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

In 2001, the Aviation and Transportation  Security Act ("Aviation Security Act")
was signed into law, creating the Transportation Security Administration ("TSA")
within  the DOT and  requiring  substantially  all  aspects  of  civil  aviation
passenger security and screening to be placed under federal control in 2002. The
cost of the  provisions  set forth in the Aviation  Security  Act are  partially
funded by a security fee of $2.50 per passenger  enplanement,  limited to $5 per
one-way trip and $10 per round trip. Air carriers,  including the Company, began
collecting the new fee on ticket sales  beginning in February 2002. The Aviation
Security Act is also funded by a separate security  infrastructure  fee assessed
to each air carrier  beginning in the second  quarter of 2002. The amount of the
air carrier  assessment  is payable  monthly and is equal to the amount each air
carrier spent on aviation security in 2000.

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


                                       8
<PAGE>

aircraft  are in foreign  countries,they  must comply with the  requirements  of
similar  authorities in those countries.  The Commerce Department also regulates
the  export  and  re-export  of the  Company's  U.S.-manufactured  aircraft  and
equipment.

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 a  Passenger  Facility  Charge of up to $4.50
collected  from each  passenger  departing  from the airport and remitted by the
Company to the applicable airport authority.

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

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

Environmental Matters

Under the Airport  Noise and Capacity  Act of 1990 and related FAA  regulations,
the Company's  aircraft must comply with certain Stage 3 noise  restrictions  by
certain  specified  deadlines.  In  general,  the  Company  is  prohibited  from
operating any Stage 2 aircraft after December 31, 1999. As of December 31, 2002,
the Company's entire fleet met Stage 3 requirements.

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

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

                                       9
<PAGE>

Item 2.    Properties

Aircraft Fleet

At December 31, 2002, ATA and Chicago Express were certified to operate a fleet
of 83 aircraft. The following table summarizes the ownership characteristics of
each aircraft type as of the end of 2002.

<TABLE>
<CAPTION>

                                  Owned (Encumbered-     Operating-Lease    Operating-Lease
                                   Pledged on Debt)      (Fixed Buy-out)      (No Buy-out)            Total

<S>                                        <C>                   <C>                 <C>               <C>
Lockheed L-1011-50 and 100                  5                     -                   1                 6

Lockheed L-1011-500                         4                     -                   -                 4

Boeing 737-800                              -                    18                  12                30

Boeing 757-200                              -                    14                   2                16

Boeing 757-300                              -                    10                   -                10

SAAB 340B                                   2                    15                   -                17
                                           --------------------------------------------------------------

             TOTAL                         11                    57                  15                83
                                           ==============================================================
</TABLE>

Lockheed L-1011 Aircraft
The Company's  Lockheed L-1011 aircraft are wide-body  aircraft,  and have a low
ownership cost relative to other  wide-body  aircraft types. Of the six Lockheed
L-1011-50 and 100 aircraft, three have a range of 2,971 nautical miles and three
have a range of 3,425 nautical miles. The four Lockheed L-1011-500 aircraft have
a range of 5,577  nautical  miles.  The  combined  fleet has an  average  age of
approximately 25 years.

Boeing 737-800 Aircraft
The Company's 30 Boeing  737-800  aircraft are  narrow-body  aircraft and have a
range of 2,500 nautical miles.  These aircraft have higher  ownership costs than
the Company's  Lockheed L-1011 fleet, but lower operational costs resulting from
reduced fuel consumption, lower maintenance and cockpit crew costs, and improved
operating reliability. The fleet has an average age of approximately 1 year, and
the leases on these  aircraft have initial  terms that expire  between June 2016
and December 2022.

Boeing 757-200 Aircraft
The Company's 16 Boeing 757-200 aircraft are narrow-body aircraft,  all of which
have a range of 3,679 nautical miles.  These aircraft also have higher ownership
costs than the Company's Lockheed L-1011 aircraft,  but lower operational costs.
In  addition,  the  Company's  Boeing  757-200s  have the capacity to operate on
extended  flights over water.  The fleet has an average age of  approximately  5
years,  and the leases on these  aircraft have initial terms that expire between
January 2003 and May 2022.

                                       10
<PAGE>

Boeing 757-300 Aircraft
The Company's 10 Boeing  757-300  aircraft are  narrow-body  aircraft and have a
range of 2,700 nautical miles.  These aircraft also have higher  ownership costs
than the Company's  Lockheed L-1011 aircraft,  but lower operational  costs. The
fleet  has an  average  age of  approximately  1 year,  and the  leases on these
aircraft have initial terms that expire on various dates between August 2021 and
September 2022.

SAAB 340B Aircraft
The  Company's 17 SAAB 340B aircraft are commuter  aircraft with twin  turboprop
engines.  These 34-seat aircraft have an average age of approximately 11.5 years
and the leases on 15 of these  aircraft  have  initial  lease  terms that expire
between September 2009 and March 2012.

Ground Properties

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

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

The Company leases Hangar No. 2 at Chicago's Midway Airport for an initial lease
term of ten years,  subject to two five-year  renewal options.  This property is
used to perform  line  maintenance  on the  Company's  narrow-body  fleets.  The
Company  also leases an  18,700-square-foot  reservation  facility  located near
Chicago's O'Hare Airport.

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

Item 3.    Legal Proceedings

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

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

No matter was submitted to a vote of security  holders  during the quarter ended
December 31, 2002.

                                       11
<PAGE>
PART II

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

The  Company's  common stock is quoted on the Nasdaq  National  Market under the
symbol   "ATAH."  The  Company   had  280  and  262   registered   shareholders,
respectively,  at December 31, 2002 and 2001.
<TABLE>
<CAPTION>
                                                   Market Prices of Common Stock
                                                    Year Ended December 31, 2002
                                                            (Amounts in dollars)

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


<S>                    <C>                 <C>                   <C>                  <C>
High                   16.30               14.95                 7.49                 7.17

Low                    11.75                6.01                 2.72                 3.15

Close                  14.00                6.86                 3.40                 4.57
</TABLE>
<TABLE>
<CAPTION>


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

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

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

Low                     9.44                9.00                  7.60                 5.50

Close                   9.63               21.89                  8.60                14.95
</TABLE>
No  dividends  have been  paid on the  Company's  common  stock  since  becoming
publicly held.

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

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

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

                                       12
<PAGE>

Item 6.  Selected Consolidated Financial Data - (Unaudited)

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

<TABLE>
<CAPTION>


                                                              ATA HOLDINGS CORP.
                                                               Five-Year Summary
                                                         Year Ended December 31,

(Dollars in thousands, except per share data and ratios)       2002          2001         2000         1999         1998
--------------------------------------------------------------------------------------------------------------------------

Statement of Operations Data:
<S>                                                        <C>            <C>          <C>           <C>          <C>
  Operating revenues                                       $1,277,370     $1,275,484   $1,291,553    $1,122,366   $919,369
  Operating expenses                                        1,437,407      1,367,354    1,288,983     1,032,339    843,996
  Operating income (loss) (1)                                (160,037)       (91,870)       2,570        90,027     75,373
  Income (loss) before taxes                                 (194,214)      (116,067)     (19,931)       77,797     67,210
  Net income (loss) available to common shareholders (2)     (174,984)       (81,885)     (15,699)       47,342     40,081
  Net income (loss) per share - basic                          (14.94)         (7.14)       (1.31)         3.86       3.41
  Net income (loss) per share - diluted                        (14.94)         (7.14)       (1.31)         3.51       3.07


Balance Sheet Data (at end of period):
  Property and equipment, net                              $  265,627    $   314,943    $ 522,119    $  511,832   $329,332
  Total assets                                                848,136      1,002,962    1,032,430       815,281    594,549
  Total debt                                                  509,428        497,592      457,949       347,871    246,671
  Redeemable preferred stock                                   82,485         80,000       80,000             -          -
  Shareholders' equity (deficit)                             (120,009)        44,132      124,654       151,376    102,751


Selected Consolidated Operating Statistics: (3)
  Revenue passengers carried (thousands)                     10,046.7        8,635.2      8,006.1       7,044.6    6,168.3
  Revenue passenger miles (millions)                         12,384.2       11,675.7     11,816.8      10,949.0    9,758.1
  Available seat miles (millions)                            17,600.0       16,187.7     16,390.1      15,082.6   13,851.7
  Passenger load factor                                          70.4%          72.1%        72.1%         72.6%      70.5%
</TABLE>
(1)  Operating  results for the years ended  December  31, 2002 and 2001 include
several   non-recurring  or  unusual  charges.  See  "Financial  Statements  and
Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - State
of the Industry and the Company," "Financial Statements and Supplementary Data -
Notes to  Consolidated  Financial  Statements - Note 15 - Fleet  Impairment" and
"Financial  Statements and Supplementary Data - Notes to Consolidated  Financial
Statements - Note 16- Goodwill and Other Intangible Assets."

(2) Preferred  stock dividends of $5.7 million,  $5.6 million,  and $0.4 million
were recorded in 2002,  2001 and 2000,  respectively.  No common stock dividends
were paid in any periods presented.

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

                                       13
<PAGE>

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

Overview

The Company is a leading  provider of low-cost  scheduled  airline  services and
charter airline services to value-oriented  travelers, and to the U.S. military.
The Company,  through its principal  subsidiary,  ATA, has been operating for 30
years  and is the tenth  largest  U.S.  airline  in terms of 2002  capacity  and
traffic.

The Company  recorded an operating loss of $160.0 million,  and a loss available
to common shareholders of $175.0 million,  for the year ended December 31, 2002.
Results of operations in 2002 were  significantly  impacted by non-cash aircraft
and goodwill  impairment  charges,  and an adjustment to reduce a receivable for
U.S. Government grant compensation; such charges totaled $89.9 million.

Consolidated  revenues were approximately  unchanged in 2002 from 2001, although
consolidated  available  seat  miles  ("ASMs")  increased  8.7%  between  years,
resulting  in a decline  in  revenue  per  available  seat mile  ("RASM".)  This
reflects a very weak  pricing  environment  experienced  by the  Company and the
entire airline industry in 2002.  Declining unit revenues are a result of excess
industry  capacity in the scheduled  service  business,  which began as a direct
result of the terrorist  attacks of September 11, 2001,  but has continued  with
the  weakened  economy.  The Company  also  believes  that  consumer  confidence
continues to be affected by both the  unsettled  economic  climate in the United
States, and by conflict in the Middle East and other geopolitical uncertainties.
The Company expects continued weakness in unit revenue throughout 2003.

The  Company's  unit costs  remained  among the lowest of the major  airlines in
2002. The Company is continuing its efforts to further reduce  operating  costs,
and expects to  continue to realize  additional  cost  savings  from the ongoing
deliveries of its new fleet of Boeing 737-800 and Boeing 757-300  aircraft.  The
Company also expects, however, that fuel costs will remain very high as compared
to long-term average energy prices,  and that these prices will adversely affect
the  Company's  results  of  operations  in 2003.  Due to the lack of  available
credit,  the Company does not have in place any fuel price hedge  contracts  for
expected 2003 consumption of jet fuel.

For the 2003 fiscal year, the Company  currently  expects that it may break even
or earn a small operating profit. However, significant uncertainties continue to
exist  with  respect  to unit  revenues  and fuel  prices,  both of which may be
adversely affected by geopolitical and economic events,  including the uncertain
outcome  of the two major  airline  bankruptcies  filed in 2002 and the  unknown
impact of the  conflict in the Middle East,  which are not within the  Company's
direct  control.  Therefore,  the Company can provide no assurance  that it will
break even or return to profitability in 2003.

Critical Accounting Policies

"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" discusses the Company's  consolidated  financial  statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United States  ("GAAP").  The preparation of these  financial  statements
requires  management to make  judgments  and estimates  that affect the reported
amounts of assets,  liabilities,  revenues and expenses,  and the disclosures of
contingent  assets and  liabilities.  Certain  significant  accounting  policies
applied in the  preparation of the financial  statements  require  management to
make difficult,  subjective or complex  judgments,  and are considered  critical
accounting  policies by the Company.  The Company has  identified  the following
areas as critical accounting policies.

                                       14
<PAGE>

Revenue  Recognition.  Passenger  ticket  sales  are  initially  recorded  as  a
component  of air  traffic  liability.  Revenue  derived  from  ticket  sales is
recognized at the time service is provided.  Tickets that are sold but not flown
on the scheduled travel date can be exchanged and reused for another flight,  up
to a year from the date of sale,  or can be refunded if the ticket is sold under
a refundable tariff. A small percentage of tickets (or  partially-used  tickets)
expire unused.  The majority of the Company's  tickets sold are nonrefundable in
cash,  which is the primary  source of forfeited  tickets.  The Company  records
estimates of earned  revenue in the period  tickets are  originally  sold, for a
percentage of those sales which are expected to expire unused over the period of
ticket validity.  These estimates are based upon historical experience over many
years,  with particular  emphasis given to expiration  experience in more recent
years. The Company has consistently  applied this accounting  method to estimate
revenue from future unused and expired tickets.

Revenue accruals for expired and unused tickets are routinely compared to actual
expired and unused  ticket  experience to validate the accuracy of the Company's
estimates with respect to forfeited tickets,  and accrual adjustments  resulting
from  these  comparisons  have not been  material  to the  Company's  results of
operations.  If, however,  customer behavior changes from historical patterns in
the manner in which  tickets are  purchased  and used,  it is possible  that the
Company's  revenue  accruals for unused and expired tickets may require material
future adjustments in order to account for those changes in customer behavior.

Impairments of Long-Lived Assets. Effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 144 ("FAS 144") , Accounting for
the  Impairment  or Disposal of Long-Lived  Assets,  which  superseded  FAS 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed of. The Company continues to account for aircraft and related assets
that were  impaired  prior to  January 1, 2002 and  classified  as held for sale
under the  provisions of FAS 121, which is required by FAS 144. Both FAS 144 and
FAS 121 require that whenever events and circumstances indicate that the Company
may not be able to recover the net book value of its productive assets, that the
undiscounted  estimated future cash flows must be compared to the net book value
of these productive assets to determine if impairment is indicated.  FAS 144 and
FAS 121 require that assets deemed  impaired be written down to their  estimated
fair  value  through a charge to  earnings.  FAS 144 and FAS 121 state that fair
values may be estimated  using  discounted  cash flow  analysis or quoted market
prices, together with other available information.

The Company had been performing impairment reviews in accordance with FAS 121 on
the Lockheed  L-1011-50 and 100 and the Boeing  727-200  fleets since the end of
2000, and both fleets  initially became impaired under FAS 121 subsequent to the
terrorist  attacks of September 11, 2001. The Company  primarily used discounted
cash flow analysis to estimate the fair value of the Lockheed  L-1011-50 and 100
fleet,  and used quoted  market  prices to estimate the fair value of the Boeing
727-200 fleet.

In 2002,  the  Company  decided  to retire one of its five  Lockheed  L-1011-500
aircraft  earlier  than  originally  planned.  This event  caused the Company to
consider  whether the remaining  four aircraft and related  assets in this fleet
were  impaired.  The Company  performed an  impairment  analysis on the Lockheed
L-1011-500  fleet and related assets in accordance  with FAS 144, and determined
that this fleet was not impaired.  The Company  primarily used  discounted  cash
flow analysis to estimate the fair value of the Lockheed L-1011-500 fleet.

The  application  of FAS 144 and FAS 121 required  the  exercise of  significant
judgment and the  preparation of numerous  significant  estimates.  Although the
Company  believes that its  estimates,  with regards to future cash flows,  were
reasonable and based upon all available  information,  they required substantial
judgments and were based upon material  assumptions  about future  events.  Such

                                       15
<PAGE>

estimates were significant in determining the amount of the impairment charge to
be recorded,  which could have been materially different under different sets of
assumptions and estimates.

Goodwill  Accounting.  In June 2001, the Financial  Accounting  Standards  Board
("FASB") issued Statement of Financial Accounting Standards No. 142 ("FAS 142"),
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001,  under which  goodwill and  intangible  assets deemed to have
indefinite  lives  will no longer be  amortized,  but will be  subject to annual
impairment  reviews.  A FAS 142 impairment  review involves a two-step  process.
Step one compares the fair value of a reporting unit (determined  through market
quotes or the present  value of  estimated  future cash flows) with its carrying
amount  (assets less  liabilities,  including  goodwill.) If the estimated  fair
value exceeds the carrying amount,  goodwill of the reporting unit is considered
not  impaired,  and step two of the  impairment  test is not  necessary.  If the
carrying amount of a reporting unit exceeds its estimated fair value, the second
step of the  goodwill  impairment  test is then  performed,  which  compares the
implied fair value of the reporting  unit's  goodwill  (determined in accordance
with purchase  accounting),  with the carrying  amount of the  reporting  unit's
goodwill.  If the carrying amount of the reporting  unit's goodwill  exceeds the
implied fair value of the  goodwill,  an  impairment  loss is  recognized  in an
amount equal to that excess.  If an impairment loss is recognized,  the adjusted
carrying  amount of the  goodwill  becomes the new  accounting  basis for future
impairment tests.

FAS 142 required companies to complete by June 30, 2002, a transitional goodwill
impairment review as of the date of adoption of the statement, which was January
1, 2002.  The Company's  recorded  goodwill as of January 1, 2002 was related to
its ATA Leisure Corp.,  ("ATALC"),  ATA Cargo and Chicago  Express  subsidiaries
acquired  in 1999.  During  the  transitional  impairment  review,  the  Company
identified  ATALC,  ATA Cargo and  Chicago  Express  as the  reporting  units as
defined by FAS 142. The fair values of all of the Company's reporting units were
estimated  using  discounted  future cash flows,  since  market  quotes were not
readily  available.  In all transitional  reviews,  the estimated fair value was
higher than the carrying  amount of each reporting  unit, and thus no impairment
was indicated.

In addition to the transitional  goodwill  impairment  review,  FAS 142 required
companies  to perform  the first of their  annual  goodwill  impairment  reviews
during  2002.  The Company  performed  its first annual  impairment  test in the
fourth  quarter of 2002. By this time, the Company had outsourced the management
of two of its ATALC brands to the Mark Travel Corporation  ("MTC").  The Company
continued  in 2002 to manage the other  ATALC  brands,  including  the Key Tours
Canadian Rail programs,  Key Tours Las Vegas ground  operations,  and the Kodiak
Call Center  (collectively  "KTI brands").  See further discussion in "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 13 - Segment  Disclosures."  Based upon  guidance  provided in FAS 142, the
Company determined that the reporting unit previously identified as ATALC during
the transition  test,  was more  appropriately  defined as two reporting  units,
after giving effect to the  operational  changes  resulting from the outsourcing
agreement  completed  in the  middle  of  2002.  In its  first  annual  goodwill
impairment  review,  the Company determined that the goodwill related to Chicago
Express,  ATA Cargo and the MTC brands was  unimpaired.  However,  the estimated
fair  value of the KTI  brands  was  determined  to be lower  than the  carrying
amount,  and an impairment  loss of $6.9 million was  therefore  recorded in the
fourth quarter of 2002.

All of the Company's fair value estimates  involved highly subjective  judgments
on the part of  management,  including the amounts of cash flows to be received,
their estimated  duration,  and perceived risk as reflected in selected discount
rates.  In some  cases,  cash  flows  were  estimated  without  the  benefit  of
historical data, although historical data was used where available. Although the
Company  believes  its  estimates  and  judgments  to be  reasonable,  different
assumptions and judgments might have resulted in additional impairment charges.

                                       16
<PAGE>

Results of Operations in Cents Per ASM

The following table sets forth, for the periods  indicated,  operating  revenues
and expenses expressed as cents per available seat mile ("ASM").

<TABLE>
<CAPTION>
                                                                         Cents per ASM
                                                                   Year Ended December 31,
                                                          ----------------------------------------
                                                          2002              2001              2000
                                                          ----              ----              ----
<S>                                                    <C>               <C>               <C>
Consolidated operating revenues                           7.26              7.88              7.88

Consolidated operating expenses:
    Salaries, wages and benefits                          2.02              2.01              1.81
    Fuel and oil                                          1.17              1.55              1.68
    Aircraft rentals                                      1.08              0.61              0.44
    Handling, landing and navigation fees                 0.63              0.55              0.59
    Depreciation and amortization                         0.44              0.75              0.76
    Crew and other employee travel                        0.31              0.37              0.40
    Aircraft maintenance, materials and repairs           0.30              0.38              0.43
    Other selling expenses                                0.25              0.26              0.22
    Advertising                                           0.23              0.16              0.13
    Passenger service                                     0.22              0.27              0.28
    Insurance                                             0.19              0.07              0.05
    Ground package cost                                   0.16              0.26              0.31
    Commissions                                           0.13              0.21              0.24
    Facilities and other rentals                          0.13              0.13              0.10
    Special charges                                       0.00              0.14              0.00
    Aircraft impairments and retirements                  0.38              0.73              0.00
    Goodwill impairment                                   0.04              0.00              0.00
    U.S. Government grant                                 0.09             (0.41)             0.00
    Other                                                 0.40              0.41              0.42
                                                          ----              ----              ----
Total consolidated operating expenses                     8.17              8.45              7.86
                                                          ----              ----              ----
Consolidated operating income (loss)                     (0.91)            (0.57)             0.02
                                                         ======            ======             ====
ASMs (in thousands)                                    17,599,968        16,187,687        16,390,101
</TABLE>

                                       17
<PAGE>

Year Ended December 31, 2002, Versus Year Ended December 31, 2001

Consolidated Flight Operations and Flight Data

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

<TABLE>
<CAPTION>

                                                 Twelve Months Ended December 31,
                                         ------------------------------------------------------
                                           2002           2001          Inc (Dec)  % Inc (Dec)
                                         ------------------------------------------------------
<S>                                     <C>            <C>             <C>             <C>
Departures Jet                              66,903         56,962          9,941       17.45
Departures SAAB                             42,105         26,836         15,269       56.90
                                        ------------------------------------------------------
     Total Departures                      109,008         83,798         25,210       30.08
                                        ------------------------------------------------------

Block Hours Jet                            199,290        172,207         27,083       15.73
Block Hours SAAB                            40,008         24,836         15,172       61.09
                                        ------------------------------------------------------
    Total Block Hours                      239,298        197,043         42,255       21.44
                                        ------------------------------------------------------

RPMs Jet (000s)                         12,231,661     11,581,733        649,928        5.61
RPMs SAAB (000s)                           152,576         94,009         58,567       62.30
                                        ------------------------------------------------------
    Total RPMs (000s) (a)               12,384,237     11,675,742        708,495        6.07
                                        ------------------------------------------------------

ASMs Jet (000s)                         17,362,835     16,041,928      1,320,907        8.23
ASMs SAAB (000s)                           237,133        145,759         91,374       62.69
                                        ------------------------------------------------------
    Total ASMs (000s) (b)               17,599,968     16,187,687      1,412,281        8.72
                                        ------------------------------------------------------

Load Factor Jet                             70.45           72.20          (1.75)      (2.42)
Load Factor SAAB                            64.34           64.50          (0.16)      (0.25)
                                        ------------------------------------------------------
    Total Load Factor (c)                   70.37           72.13          (1.76)      (2.44)
                                        ------------------------------------------------------

Passengers Enplaned Jet                  9,139,770      8,058,886      1,080,884       13.41
Passengers Enplaned SAAB                   906,909        576,339        330,570       57.36
                                        ------------------------------------------------------
    Total Passengers Enplaned (d)       10,046,679      8,635,225      1,411,454       16.35
                                        ------------------------------------------------------

Revenue $ (000s)                         1,277,370      1,275,484          1,886        0.15
RASM in cents (e)                             7.26           7.88          (0.62)      (7.87)
CASM in cents (f)                             8.17           8.45          (0.28)      (3.31)
Yield in cents (g)                           10.31          10.92          (0.61)      (5.59)

</TABLE>
See footnotes (c) through (g) on page 19.

(a) 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.

(b) 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.

                                       18
<PAGE>

(c) 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.

(d) 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."

(e) 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 (g) for the definition of yield).

(f) 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.

(g) 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 2002 increased 0.2% to $1.277 billion,  as compared
to $1.275 billion in 2001. This increase was due to a $65.9 million  increase in
scheduled  service  revenue,  a $10.4  million  increase in  military/government
charter revenues and a $3.0 million increase in other revenues, partially offset
by a $60.9 million  decrease in commercial  charter revenues and a $16.5 million
decrease in ground package revenues.

                                       19
<PAGE>

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

<TABLE>
<CAPTION>

                                                          Twelve Months Ended December 31,
                                       ------------------------------------------------------------------------
                                             2002             2001          Inc (Dec)        % Inc (Dec)
                                       ------------------------------------------------------------------------
<S>                                      <C>              <C>               <C>                 <C>
Scheduled Service

     Departures                              98,877           72,787           26,090            35.84
     Block Hours                            201,077          156,331           44,746            28.62
     RPMs (000's)  (a)                    9,911,884        8,694,323        1,217,561            14.00
     ASMs  (000's)  (b)                  13,608,326       11,443,304        2,165,022            18.92
     Load Factor  (c)                         72.84            75.98            (3.14)           (4.13)
     RASM in cents  (e)                        6.51             7.17            (0.66)           (9.21)
     Yield in cents  (g)                       8.94             9.44            (0.50)           (5.30)
     Revenue per segment $  (h)              100.08           112.74           (12.66)          (11.23)

Commercial Charter
     Departures                               6,459            7,293             (834)          (11.44)
     Block Hours                             22,159           24,495           (2,336)           (9.54)
     ASMs  (000's)  (b)                   1,875,885        2,588,780         (712,895)          (27.54)
     RASM in cents  (e)                        7.00             7.43            (0.43)           (5.79)
     RASM excluding fuel escalation  (i)       6.89             7.13            (0.24)           (3.37)

Military Charter
     Departures                               3,650            3,702              (52)           (1.40)
     Block Hours                             15,975           16,159             (184)           (1.14)
     ASMs  (000's)  (b)                   2,103,874        2,147,248          (43,374)           (2.02)
     RASM in cents  (e)                        8.46             7.80             0.66             8.46
     RASM excluding fuel escalation (j)        8.48             7.58             0.90            11.87

</TABLE>
See footnotes (a) through (g) on pages 18 and 19.

(h) 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.

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

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

                                       20
<PAGE>

Scheduled Service Revenues. Scheduled service revenues increased 8.0% in 2002 to
$886.6 million from $820.7 million in 2001. Scheduled service revenues comprised
69.4% of  consolidated  revenues in 2002,  as  compared to 64.3% in 2001.  While
total  scheduled  service  revenues and ASMs increased,  scheduled  service RASM
declined 9.2% from 7.17 cents in 2001 to 6.51 cents in 2002.  The declining unit
revenues experienced by the Company were a result of continuing  overcapacity in
the airline industry.  Customer demand declined  abruptly  immediately after the
terrorist attacks of September 11, 2001, and demand has also been lowered by the
slowing  pace of economic  activity in the United  States.  The Company does not
expect any  significant  recovery  in demand for its  services  until  after the
uncertainty of the conflict in the Middle East has been  resolved,  and economic
growth returns.

Scheduled service  departures grew 35.8% in 2002,  compared to the ASM growth of
18.9%.  This reflects the growth of the Chicago  Express SAAB 340B fleet from 11
aircraft as of December  31, 2001 to 17 aircraft as of December  31,  2002.  The
additional SAAB aircraft generated  significantly  more departures,  but because
the  aircraft  seats only 34  passengers  and  operates  on short  stage  length
flights, the increase in ASMs was not as great as departures.

Approximately 71.2% of the Company's scheduled service capacity was generated by
the  Chicago-Midway  market in 2002, as compared to 66.8% in 2001.  The Hawaiian
market  generated  approximately  13.7% of total scheduled  service  capacity in
2002,  as compared to 18.6% in 2001.  Another 10.5% of total  scheduled  service
capacity was generated in the  Indianapolis  market in 2002, as compared to 9.2%
in 2001.

The Company  anticipates  that its  Chicago-Midway  operation  will  continue to
represent a  substantial  proportion of its  scheduled  service  business in the
future.  The Company also anticipates  further growth at  Chicago-Midway,  which
will be accomplished in conjunction with the completion of new terminal and gate
facilities at the Chicago-Midway  Airport.  Once all construction is complete in
2004,  the  Company  expects  to occupy  at least 14 jet gates and one  commuter
aircraft  gate at the new  airport  concourses.  A  Federal  Inspection  Service
("FIS") facility was completed at  Chicago-Midway  in the first quarter of 2002,
which  allowed  the  Company  to  begin  nonstop  international   services  from
Chicago-Midway.  Also  contributing to the growth at  Chicago-Midway  is Chicago
Express,  which has been  performing well as a feeder of passengers to ATA's jet
system.  The Company  operated 152 peak daily jet and commuter  departures  from
Chicago-Midway  and  served  41  destinations  on a  nonstop  basis in 2002,  as
compared  to  109  peak  daily  jet  and  commuter  departures  and  28  nonstop
destinations in 2001.

The  Company's   declining   capacity  in  the  Hawaiian  market  was  primarily
attributable to the transition to the smaller  247-seat Boeing 757-300  aircraft
from the wide-body Lockheed L-1011 aircraft for certain West Coast-Hawaii routes
beginning in mid-2002.  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. From June to September 2002, the
Company operated seasonal service to Lihue from Los Angeles and San Francisco.

The Company's growth in the Indianapolis market is primarily attributable to the
addition of limited jet service between  Indianapolis and  Chicago-Midway in the
second  quarter  of  2002,  and the  addition  of  nonstop  service  to New York
LaGuardia and Phoenix beginning in the third quarter of 2002.

Commercial  Charter  Revenues.  Commercial  charter revenues  decreased 31.7% to
$131.3 million in 2002 from $192.2 million in 2001.  Commercial charter revenues
accounted  for 10.3% of  consolidated  revenues in 2002, as compared to 15.1% in
2001.

                                       21
<PAGE>

The  majority  of the  decline in  commercial  charter  revenues  was due to the
retirement  of certain  Lockheed  L-1011 and Boeing  727-200  aircraft  that the
Company has  traditionally  used in commercial  charter  flying.  Since aircraft
utilization  (number of  productive  hours of flying per aircraft each month) is
typically much lower for commercial  charter,  as compared to scheduled  service
flying,  the  Company's  replacement  fleets of new  Boeing  737-800  and Boeing
757-300  aircraft  are  economically  disadvantaged  when  used  in the  charter
business,  because  of their  higher  fixed-ownership  cost.  Consequently,  the
Company  expects its commercial  charter  revenues to continue to decline as the
fleet supporting this business continues to shrink through aircraft retirements.

The decrease in commercial charter RASM in 2002, as compared to 2001, was due to
the same economic and geopolitical  factors which have reduced scheduled service
unit revenues  between  years.  The Company  currently  expects that  commercial
charter will represent a less significant source of future revenues,  especially
after the end of 2003 when a contract with a major customer expires.

Military/Government   Charter  Revenues.   Military/government  charter  revenue
increased  6.2%  to  $177.9  million  in  2002  from  $167.5  million  in  2001.
Military/government charter revenue accounted for 13.9% of consolidated revenues
in 2002, as compared to 13.1% in 2001.

The  increase in revenue and RASM for  military/government  charter  revenues in
2002 was due  primarily to rate  increases  awarded for the contract  year ended
September 30, 2002,  based upon cost data submitted to the U.S.  military by the
Company and other air carriers  providing  these  services.  The Company  earned
$175.6  million in the contract year ended  September 30, 2002, a 10.2% increase
as  compared  to $159.3  million  earned in the  preceding  contract  year ended
September  30,  2001.  The Company  renewed its U.S.  military  contract for the
fiscal year  beginning  October 1, 2002,  although  the  reimbursement  rate was
nearly unchanged as compared to the prior contract year.

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
through its Ambassadair and ATALC  subsidiaries.  Ambassadair Travel Club offers
tour-guide-accompanied  vacation packages to its approximately 32,000 individual
and family members.  ATALC offers numerous ground  accommodations to the general
public,  which are marketed  through travel  agents,  as well as directly by the
Company.

In 2002, ground package revenues  decreased 31.6% to $35.7 million,  as compared
to $52.2  million in 2001.  This  decline in ground  package  sales (and related
ground package costs) is primarily due to the Company's July 1, 2002 outsourcing
of the  management  and  marketing  of its  ATA  Vacations  and  Travel  Charter
International  brands to MTC.  Under that  outsourcing  agreement,  MTC directly
sells ground  arrangements  to customers who also purchase  charter or scheduled
service air  transportation  from the Company.  Therefore,  ground package sales
(and related ground package costs) are no longer recorded by the Company for ATA
Vacations and Travel Charter International.

Other  Revenues.  Other revenues are comprised of the  consolidated  revenues of
certain affiliated companies,  together with miscellaneous categories of revenue
associated   with  operations  of  the  Company,   such  as   cancellation   and
miscellaneous  service fees,  Ambassadair  Travel Club membership dues and cargo
revenue.  Other revenues increased 7.0% to $45.9 million in 2002, as compared to
$42.9  million  in  2001,  primarily  due to an  increase  in  cancellation  and
administrative fee revenues.

                                       22
<PAGE>

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 2002 increased 9.2% to $355.2 million,
as compared to $325.2 million in 2001.

The increase in salaries,  wages and benefits  primarily  reflects the impact of
the Company's amended collective bargaining agreement with the Company's cockpit
crewmembers,  who are represented by ALPA. The Company  recorded $9.9 million in
2002 for a signing bonus as provided by the amended contract. Cockpit crewmember
contract rate increases became effective July 1, 2002. The Company also incurred
increasing  costs  in  2002  for  employee  medical  and  workers'  compensation
benefits.  The Company expects future  salaries,  wages and benefits costs to be
significantly  increased by the amended cockpit crewmember contract. The amended
contract  is  expected  to increase  cockpit  crewmembers'  average  salaries by
approximately 80% over the four-year contract period. Additionally,  the amended
contract provides for expanded retirement benefits for cockpit crewmembers.

Fuel and Oil. Fuel and oil expense decreased 17.8% to $206.6 million in 2002, as
compared to $251.3  million in 2001.  Although  total jet block hours  increased
15.7% in 2002, as compared to 2001,  the Company  consumed 8.9% fewer gallons of
jet fuel for flying operations.  This decrease was primarily due to the addition
of Boeing 737-800 and Boeing 757-300 aircraft to the Company's fleet beginning
in May 2001. These aircraft replaced certain  less-fuel-efficient Boeing 727-200
and Lockheed  L-1011  aircraft,  which were retired  from revenue  service.  The
decrease in fuel burn,  due to the new aircraft,  resulted in a decrease in fuel
and oil expense of approximately $25.0 million. Also contributing to the decline
in fuel expense was the decrease in the Company's average cost per gallon of jet
fuel  consumed  of 7.9%,  resulting  in an  additional  savings  in fuel and oil
expense of approximately $18.1 million.

Periodically,  the Company has entered into fuel price hedge contracts to reduce
the risk of fuel price fluctuations.  During 2002, the Company recorded gains of
$0.5 million on these hedge  contacts,  as compared to losses of $2.6 million in
2001.  As of  December  31,  2002,  the Company  had no  outstanding  fuel hedge
agreements.

Since  December  31,  2002,  the cost  per  gallon  of jet  fuel  has  increased
approximately 21% based on March 20, 2003 market prices.  Continued increases in
the cost of fuel will adversely affect the Company in 2003.

Aircraft Rentals.  The Company's operating leases require periodic cash payments
that vary in amount and  frequency.  The Company  accounts for aircraft  rentals
expense in equal monthly  amounts over the life of each operating  lease.  As of
December 31, 2002 and December 31, 2001,  the Company had recorded $68.8 million
and $49.2 million,  respectively,  of prepaid  aircraft rent under its operating
leases.  Aircraft rentals expense in 2002 increased 92.0% to $190.1 million from
$99.0 million in 2001. The increase was mainly  attributable  to the delivery of
30 leased Boeing 737-800 and 10 leased Boeing 757-300  aircraft between May 2001
and December 2002.

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

                                       23
<PAGE>

Handling,  landing and  navigation  fees increased by 24.6% to $110.5 million in
2002,  as compared to $88.7 million in 2001.  The increase in handling,  landing
and  navigation  fees between  years was  primarily  due to a 17.5%  increase in
system-wide jet departures. The Company also incurred approximately $5.7 million
in  additional   airport  security  costs  associated  with  increased  security
requirements implemented after the terrorist attacks on September 11, 2001.

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.  Depreciation and amortization  expense decreased 36.8% to
$76.7 million in 2002, as compared to $121.3 million in the 2001.

In 2001 and 2002,  the Company  retired eight Lockheed  L-1011-50  aircraft from
revenue service.  During the fourth quarter of 2001, the Company also determined
that the remaining fleet of Lockheed  L-1011-50 and 100 aircraft,  rotable parts
and  inventory  was  impaired.  These assets were  classified as held for use in
accordance  with FAS 121,  requiring them to be recorded on the balance sheet at
their  estimated  fair value at the time of  impairment,  which is the new asset
basis to be depreciated over their estimated remaining useful lives. The Company
recorded a further  reduction in the carrying value of these assets in 2002. Due
to the reduced cost basis of these assets,  the Company  recorded  $17.6 million
less  depreciation and amortization  expense for this fleet in 2002, as compared
to 2001.

In 2001,  the Company  decided to retire its Boeing  727-200  fleet earlier than
originally planned,  and these aircraft were determined to be impaired under FAS
121.  Boeing  727-200  aircraft  not  already  transferred  to BATA  Leasing LLC
("BATA"),  a 50/50 joint venture with Boeing Capital Corporation  ("BCC"),  have
been classified in the  accompanying  balance sheets as assets held for sale. In
accordance with FAS 121,  depreciation  expense was not recorded after the fleet
was deemed impaired and held for sale. As a result,  depreciation expense on the
Boeing 727-200 fleet decreased by $28.9 million in 2002, as compared to 2001.

Partially offsetting these decreases were increased  amortization of capitalized
engine and airframe overhauls on the Lockheed  L-1011-500 fleet and increases in
depreciation and amortization expense associated with other fleet rotable parts,
owned  engines  and  the  provision  for  inventory  obsolescence,   along  with
fluctuations in expenses  related to furniture and fixtures,  computer  hardware
and  software,  and  debt  issue  costs  between  periods,  none  of  which  was
individually significant.

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  crewmembers  incurred to position  crews away from their bases to operate
Company flights throughout the world. The cost of crew and other employee travel
decreased  7.6% to $54.8  million in 2002, as compared to $59.3 million in 2001.
This  decrease was mainly due to the  decrease in military  and charter  flights
between years,  which often operate to and from points remote from the Company's
crew bases  including  international  destinations,  thus requiring  significant
positioning  expenditures  for  crewmembers  on other  airlines and higher hotel
costs. The decrease also reflects a decline in non-crew employee travel in 2002,
as compared to 2001, due to the Company's cost-cutting initiatives.

Aircraft  Maintenance,  Materials and Repairs. This expense includes the cost of
expendable  aircraft  spare parts,  repairs to repairable  and rotable  aircraft
components, contract labor for maintenance activities, and other non-capitalized
direct costs related to fleet maintenance,  including spare engine leases, parts
loan and exchange fees, and related  shipping  costs. It also includes the costs
incurred under hourly engine maintenance agreements the Company has entered into
on its Boeing  737-800,  Boeing  757-200/300  and Saab 340B power plants.  These

                                       24
<PAGE>

agreements provide for the Company to pay monthly fees based on a specified rate
per engine flight hour, in exchange for major engine  overhauls and maintenance.
Aircraft  maintenance,  materials and repairs  expense  decreased 14.8% to $52.3
million in 2002, as compared to $61.4 million in 2001.

The decline in  maintenance,  materials and repairs expense in 2002, as compared
to 2001,  was  primarily  attributable  to a decrease in materials  consumed and
components  repaired  related to  maintenance  on the Company's  aging fleets of
Lockheed  L-1011-50 and 100 and Boeing 727-200  aircraft.  During 2001 and 2002,
the Company  placed 23 Boeing  727-200  aircraft  into BATA,  and retired  eight
Lockheed L-1011-50 aircraft prior to the due dates of heavy maintenance  visits.
Maintenance,  materials  and repairs  expense  associated  with these two fleets
decreased $20.1 million in 2002, as compared to 2001.

This decline in  maintenance,  materials and repairs was partially  offset by an
increase  in the  cost  of the  hourly  engine  maintenance  agreement  for  the
Company's  growing  fleet of Saab 340B  propeller  aircraft  operated by Chicago
Express.  In addition,  the Company  entered into an hourly  engine  maintenance
agreement for the Boeing 757-200 fleet in 2002, which resulted in an increase in
maintenance, materials and repair expense between years.

Other  Selling  Expenses.  Other  selling  expenses are  comprised  primarily of
booking fees paid to computer reservation systems ("CRS"),  credit card discount
expenses incurred when selling to customers using credit cards for payment,  and
toll-free  telephone  services  provided to  single-seat  and  vacation  package
customers who contact the Company directly to book  reservations.  Other selling
expenses  increased  5.5% to $43.9 million in 2002, as compared to $41.6 million
in 2001.  This  increase  is  primarily  the result of a greater  portion of the
Company's sales being made on credit cards, and higher CRS fees.

Advertising.  Advertising  expense  increased 51.5% to $40.0 million in 2002, as
compared  to $26.4  million  in  2001.  The  Company  incurs  advertising  costs
primarily  to support  single-seat  scheduled  service  sales.  The  increase in
advertising  was  primarily  attributable  to the promotion of the new scheduled
service  destinations  added in 2002 and the  promotion of low fares in a market
that had less demand for air service. The Company also increased  advertising in
an effort to increase  consumer  preference for the Company's  enhanced product,
especially in its important Chicago-Midway hub, which included a new advertising
campaign identifying the Company as "An Honestly Different Airline."

Passenger Service.  Passenger service expense includes the onboard costs of meal
and non-alcoholic  beverage  catering,  the cost of alcoholic  beverages 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  2002  and  2001,  catering  represented  82.1%  and  74.4%,
respectively, of total passenger service expense.

The total cost of passenger service decreased 12.8% to $38.3 million in 2002, as
compared to $43.9 million in 2001. Approximately $7.4 million of the decrease is
attributable to catering expense,  primarily because in 2002 the Company boarded
a higher ratio of scheduled  service  passengers to charter  passengers  than in
2001.  Scheduled service  passengers are provided a significantly less expensive
catering service than is provided to commercial charter and military passengers.
In addition, in 2002 the

Company introduced round-trip catering for flights originating in Chicago-Midway
to reduce catering  service  charges.  In 2002, as compared to 2001, the Company
also incurred approximately $4.8 million less expense for mishandled baggage and
passenger   inconvenience,   due  to  significantly   fewer  flight  delays  and
cancellations in 2002.
                                       25

<PAGE>

Insurance. Insurance expense represents the Company's cost of hull and liability
insurance  and the costs of  general  insurance  policies  held by the  Company,
including workers' compensation  insurance premiums. The total cost of insurance
increased 217.8% to $34.0 million in 2002, as compared to $10.7 million in 2001.

Liability  insurance  increased  $14.8  million in 2002,  as  compared  to 2001.
Immediately  following the September 11, 2001 terrorist  attacks,  the Company's
insurer reduced the maximum amount of insurance  coverage they would  underwrite
for liability to persons other than employees or passengers  resulting from acts
of terrorism,  war,  hijacking,  or other similar perils (war-risk coverage) and
significantly  increased their premiums for this reduced  coverage.  Pursuant to
the Air  Transportation  Safety and System  Stabilization Act and other enabling
legislation,  the U.S. Government has issued  supplemental  war-risk coverage to
U.S. air carriers,  including the Company, which is expected to continue through
2003. It is anticipated  that after this date a commercial  product for war-risk
coverage  will  become  available,   but  the  Company  may  continue  to  incur
significant additional costs for this coverage.

Hull insurance increased $5.1 million in 2002, as compared to 2001. The increase
is mainly  attributable  to the  increase in the  Company's  hull value  between
periods  due to the  addition  of the new  Boeing  737-800  and  Boeing  757-300
aircraft.  The  increase is also  attributable  to an increase in premium  rates
following the  September 11, 2001  terrorist  attacks.  Expenses  related to the
Company's general insurance policies increased $3.4 million in 2002, as compared
to 2001,  due  primarily  to an increase in workers'  compensation  premiums and
claims  handling  fees  between   periods,   and  general   increases  in  other
miscellaneous policies between years.

Ground Package Cost. Ground package cost is incurred by the Company with hotels,
car rental  companies,  cruise lines and similar  vendors who provide ground and
cruise  accommodations  to Ambassadair and ATALC customers.  Ground package cost
decreased  33.9% to $27.9 million in 2002, as compared to $42.2 million in 2001,
approximately  proportional to the decrease in ground package revenues.  See the
"Ground  Package  Revenues"  section above for an  explanation of the decline in
both ground package sales and related costs.

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  decreased  33.0% to $23.3  million in 2002,  as
compared to $34.8 million in 2001.

The Company  experienced a decrease in  commissions  of $3.8 million in 2002, as
compared to 2001,  attributable  to commissions  paid to travel agents by ATALC,
which is consistent with the decrease in related revenue. In addition, scheduled
service  commissions  decreased  $9.0 million in 2002 due to the  elimination of
standard  travel  agency  commissions  for sales made after March 21, 2002.  The
Company continues to pay special travel agency commissions  targeted to specific
markets and periods of the year.

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  11.9% to $22.6 million in 2002, as compared to $20.2 million
in 2001.  Growth in facilities costs between periods was primarily  attributable
to facilities  at airport  locations  required to support new scheduled  service
destinations  added in late 2001 and 2002,  and  expanded  services  at existing
destinations.

                                       26
<PAGE>

Special  Charges.  Special charges  represent  direct expenses which, due to the
events of  September  11,  2001,  were  considered  unusual in nature  under the
provisions of APB Opinion 30,  "Reporting  the Results of Operations - Reporting
the  Effects of  Disposal  of a Segment of a  Business,  and the  Extraordinary,
Unusual and Infrequently  Occurring Events and Transactions" ("APB 30"). Special
charges in 2001 were $21.5 million, while no expenses were classified as special
charges in 2002.  The 2001  special  charges were  comprised  primarily of costs
associated  with the early removal from service of the Company's  Boeing 727-200
fleet,  some of which were leased, a decision made  immediately  after September
11, 2001; costs associated with the Company's proposed  transaction in which ATA
Holdings Corp. would have been taken private,  which was substantially  complete
by  September  11,  2001,  when the Company  lost  financing  as a result of the
September  11, 2001 attacks;  and expenses  directly  associated  with the FAA's
temporarily-mandated  suspension of commercial flights on September 11, 2001 and
for several days  thereafter.  Also classified as special charges were increased
hull and liability insurance costs; additional advertising expense incurred as a
direct result of September 11, 2001;  interest  expense related to debt incurred
under the Company's  credit  facility to provide  operating cash after September
11, 2001; and other expenses not individually significant.

Aircraft Impairments and Retirements. Aircraft impairment and retirement costs
decreased 43.8% to $66.8 million in 2002, as compared to $118.9 million in 2001.

In 2001,  the Company  decided to retire its Boeing  727-200  fleet earlier than
originally  planned,  determined  the  aircraft  and related  rotable  parts and
inventory  were  impaired  under FAS 121 and recorded an impairment  charge.  In
accordance  with FAS 121,  the Company  continues  to  re-evaluate  current fair
values of previously  impaired  assets,  making  further  adjustments  as deemed
appropriate.  In 2002, the Company  recorded asset  impairment  charges of $35.9
million, as compared to $44.5 million in 2001, related to its remaining net book
value of Boeing 727-200  aircraft,  including those recorded as an investment in
BATA.

In 2001, the Company also determined  that the Lockheed  L-1011-50 and 100 fleet
and related rotable parts and inventory were impaired under FAS 121 and recorded
an  impairment  charge.  In  accordance  with FAS 144, the Company  continues to
re-evaluate  the current fair values of these  impaired  assets,  making further
adjustments  as  deemed  appropriate.   In  2002,  the  Company  recorded  asset
impairment  charges  of $7.6  million,  as  compared  to $67.8  million in 2001,
related to its remaining  net book value of Lockheed  L-1011-50 and 100 aircraft
and related parts.

In 2002, the Company retired three Lockheed L-1011-50  aircraft,  resulting in a
charge of $9.0 million, and retired one Lockheed L-1011-500 aircraft,  resulting
in a charge of $14.2  million.  In 2001,  the  Company  retired  three  Lockheed
L-1011-50  aircraft  resulting in a charge of $6.6  million.  These charges were
included as part of aircraft impairments and retirements.

Goodwill Impairment.  The Company began annual goodwill impairment reviews under
FAS 142 in 2002. In  accordance  with FAS 142, the Company  determined  that the
fair value of the KTI brands was lower than the  carrying  amount and a goodwill
impairment loss of $6.9 million was recorded in the fourth quarter of 2002.

U.S Government Grant. After the terrorist attacks of September 11, 2001, the Air
Transportation  Safety and System  Stabilization  Act ("Act") was passed,  which
provided for, among other things, up to $5.0 billion in compensation to U.S. air
carriers for direct and incremental losses resulting from the September 11, 2001
terrorist  attacks,  and  the  availability  of  up to  $10.0  billion  in  U.S.
Government  guarantees  of  certain  loans  made  to  air  carriers,  which  are
administered by the newly  established Air  Transportation  Stabilization  Board
("ATSB").

                                       27
<PAGE>

The Company had recorded $66.3 million in U. S. Government grant compensation as
of December 31, 2001. This estimate was based on guidance available from the DOT
at the time for identifying  those expenses it deemed  reimbursable.  Throughout
2002, the Company discussed the calculation with the DOT, and as of December 31,
2002  had  reversed  approximately  $16.2  million  of  the  accrued  government
reimbursement   and  revised  its  estimate  of  total  U.S.   Government  grant
compensation to $50.1 million. In early 2003, the Company received the last cash
installment of grant  reimbursement  from the U.S.  Government,  consistent with
that estimate.

Other  Operating  Expenses.  Other  operating  expenses  decreased 5.6% to $71.2
million in 2002, as compared to $67.4  million in 2001.  No expenses  comprising
this line item changed significantly between these periods.

Interest  Income  and  Expense.  Interest  expense  in 2002  increased  to $35.7
million, as compared to $30.1 million in 2001. The Company incurred $1.7 million
in 2002 in interest  expense  relating  to the $168.0  million  guaranteed  loan
funded in November  2002. No such  financing  was in place in 2001.  The Company
also  capitalized  $3.4  million  less  interest  in 2002,  as compared to 2001,
associated with new aircraft pre-delivery deposit requirements.

The Company  invested excess cash balances in short-term  government  securities
and  commercial  paper and thereby  earned $2.8 million in 2002,  as compared to
$5.3 million in 2001. The decrease in interest income between years is primarily
due to a decline in the average interest rate earned.

Income Tax Expense.  In 2002, the Company recorded an income tax credit of $25.0
million  applicable to $194.2 million in pre-tax loss, while in 2001 the Company
recorded an income tax credit of $39.8 million  applicable to $116.1  million in
pre-tax loss. The effective tax rate  applicable to 2002 was 12.8%,  as compared
to 34.2% in 2001.

As of December 31, 2002, the Company had incurred a three-year  cumulative loss.
Because of this cumulative loss and the presumption under accounting  principles
generally  accepted in the United  States that net deferred tax assets should be
fully  reserved  if it is more  likely  than not that they will not be  realized
through  carrybacks  or other tax  strategies,  the Company has  recorded a full
valuation  allowance  against  its net  deferred  asset of $43.3  million.  This
allowance adjustment,  included in income tax expense,  resulted in an effective
tax rate of 12.8% for a tax credit  applicable  to the loss incurred in 2002. As
of December 31, 2002,  the Company had recorded an income tax refund  receivable
of  $15.8  million  using a  five-year  carryback  of  alternative  minimum  tax
operating  losses from 1997 to 2001.  Payment  for this  refund was  received in
March 2003.

                                       28
<PAGE>

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

Consolidated Flight Operations and Financial Data

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

<TABLE>
<CAPTION>


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

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

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

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

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

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

Revenue $ (000s)                         1,275,484    1,291,553         (16,069)         ( 1.24)
RASM in cents (e)                             7.88         7.88               -               -
CASM in cents (f)                             8.45         7.86            0.59            7.51
Yield in cents (g)                           10.92        10.93           (0.01)          (0.09)

</TABLE>

 See footnotes (a) through (g) on pages 18 and 19.

(k) During the first three quarters of 2000, Chicago Express operated certain
19-seat Jetstream ("J31") aircraft as it phased in the SAAB fleet.

                                       29
<PAGE>

Operating Revenues

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

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

<TABLE>
<CAPTION>

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

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

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

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

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

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

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

</TABLE>

See footnotes (a) through (k) on pages 18 - 20 and 29.

                                       30
<PAGE>

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

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

The Company's  scheduled service at  Chicago-Midway  accounted for approximately
66.8% of scheduled  service ASMs and 86.6% of scheduled  service  departures  in
2001,  as compared to 63.5% and 83.5%,  respectively,  during  2000.  During the
third and fourth quarters of 2001, the Company began  operating  nonstop flights
to Newark and Miami.  During the second and third  quarters of 2000, the Company
beganoperating  nonstop flights to Ronald Reagan  Washington  National  Airport,
Boston,  Seattle and Minneapolis-St.  Paul. In addition to this new service, the
Company  served the  following  existing  jet markets in both years:  Dallas-Ft.
Worth,  Denver,  Ft. Lauderdale,  Ft. Myers, Las Vegas, Los Angeles,  New York's
LaGuardia  Airport,  Orlando,   Philadelphia,   Phoenix,  St.  Petersburg,   San
Francisco,  San Juan and Sarasota.  The Company  operated 109 peak daily jet and
commuter  departures from Chicago-Midway in 2001, as compared to 94 in 2000, and
served 28  destinations  on a nonstop  basis in 2001,  as compared to 25 nonstop
destinations served in 2000.

The Company's Hawaii service  accounted for 18.6% of scheduled  service ASMs and
3.9% of scheduled  service  departures  in 2001,  as compared to 17.0% and 4.3%,
respectively,  in 2000. The Company  provided nonstop service in both years from
Los  Angeles,  Phoenix  and  San  Francisco  to both  Honolulu  and  Maui,  with
connecting service between Honolulu and Maui.

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

Commercial Charter Revenues.  Commercial charter revenues accounted for 15.1% of
consolidated revenues in 2001 as compared to 19.1% in 2000.

The impact of the September 11, 2001 terrorist  attacks was less  significant on
the commercial charter business than on scheduled service. The Company estimates
that it lost  approximately  $1.4 million in  commercial  charter  revenues as a
result of flight  cancellations during the FAA-mandated air system shutdown from
September 11 until  September 13, and decreased  demand for  commercial  charter
flights  following  September  11. The  majority  of the  decline in  commercial
charter  revenues  in 2001,  as  compared to 2000,  was  principally  due to the
retirement  of certain  Lockheed  L-1011 and Boeing  727-200  aircraft  that the
Company has traditionally used in commercial charter flying.

                                       31
<PAGE>

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

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

See footnotes (a) through (i) on pages 18-20.

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

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

See footnotes (a) through (j) on pages 18-20.

The  Company  estimates  that it lost  approximately  $1.0  million in  military
revenues, net of cancellation fees, due to the FAA-mandated shut down of the air
traffic system from September 11 until September 13. After having resumed flight
operations late in the day on September 13, 2001, the Company's  military flight
schedule quickly returned to normal. Although current military flight operations
of the Company have not been significantly  affected by the terrorist attacks of
September 11, future operations may be significantly  affected by changes in the
transportation needs of the U.S. military, possibly in association with military
operations in the United States and abroad.

The decline in military revenues in 2001, as compared to 2000, was primarily due
to changes  in teaming  arrangements  used both by the  Company  and some of the
Company's competitors in the military/government  charter business. Such changes
reduced the  fixed-award  flying  allocated to the Company for the contract year
ending   September   30,   2001.   The   Company   earned   $159.3   million  in
military/government  charter  revenues in the contract year ended  September 30,
2001, a 6.0%  reduction as compared to $169.5  million  earned in the  preceding
contract year ended September 30, 2000.
                                       32

<PAGE>

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

Operating Expenses

Salaries, Wages and Benefits. Salaries, wages and benefits expense in 2001
increased 9.5% to $325.2 million from $297.0 million in 2000.

The Company  increased its average  equivalent  employees by approximately  4.7%
between 2001 and 2000.  This annual  growth rate combines  employment  growth in
conjunction  with a growing flight  schedule  prior to the terrorist  attacks on
September 11, offset by the employee furloughs under the Company's  cost-cutting
initiatives  implemented  shortly  after the  attacks.  By the middle of October
2001, the Company had furloughed  approximately 1,100 employees as a result of a
20% flight capacity reduction  implemented after the September 11 attacks. As of
December  31,  2001,  the  Company  had  recalled  approximately  half of  those
employees furloughed during the fourth quarter of 2001.

Additionally, in May 2000, the Company replaced its contracted ground handler at
its busiest airport, Chicago-Midway,  with its own ramp employees. Although this
contributed to a year-over-year  increase in salaries,  wages and benefits,  the
Company  experienced  a  corresponding   reduction  in  handling,   landing  and
navigation fees, where third-party handling expenses are classified.

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

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

During  2001 and 2000,  the  Company  entered  into  several  fuel  price  hedge
contracts  under  which the  Company  sought to  reduce  the risk of fuel  price
fluctuations.  The  Company  recorded  losses  of $2.6  million  on these  hedge
contracts in 2001 as compared to gains of $0.1  million in 2000.  As of December
31, 2001,  the Company had entered into swap  agreements for  approximately  6.3
million gallons of heating oil for future delivery between January 2002 and June
2002, which represented approximately 2.6% of total expected fuel consumption in
2002.

                                       33
<PAGE>

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

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

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

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

Depreciation and Amortization.  Depreciation and amortization  expense decreased
3.0% to $121.3 million in 2001, as compared to $125.0 million in 2000.

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

In March 2001,  the Company  entered  into an  agreement  to transfer its entire
fleet of 24 Boeing  727-200  aircraft to BATA by May 2002.  As a result,  in the
first quarter of 2001, the Company  implemented a change in accounting  estimate
to adjust the estimated  useful lives and salvage value of these aircraft to the
terms of the BATA agreement.  This change in accounting  estimate resulted in an
increase of depreciation expense of $2.5 million in 2001, as compared to 2000.

                                      34
<PAGE>

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

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

Crew and  Other  Employee  Travel.  The cost of crew and other  employee  travel
decreased 9.9% to $59.3 million in 2001 as compared to $65.8 million in 2000.

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

Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and
repairs expense decreased 12.8% to $61.4 million in 2001, as compared to $70.4
million in 2000.

The 2001 decline in  maintenance,  materials  and repairs  expense was primarily
attributable to a decrease in materials consumed and components repaired related
to  maintenance  on the  Company's  aging  fleets of Lockheed  L-1011 and Boeing
727-200  aircraft.  During 2001, the Company  placed 12 Boeing 727-200  aircraft
into BATA and retired three Lockheed L-1011 aircraft from service before related
heavy airframe maintenance checks were due to be performed.

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

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

Other Selling Expenses.  Other selling expenses increased 13.4% to $41.6 million
in 2001, as compared to $36.7 million in 2000.

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

                                       35
<PAGE>

Advertising.  Advertising  expense  increased 20.0% to $26.4 million in 2001, as
compared  to  $22.0  million  in  2000.  In  2001,  the  Company  increased  its
advertising  (introducing  a new  marketing  campaign)  primarily  in Chicago in
connection with the arrival of the new Boeing 737-800 and 757-300 aircraft,  the
opening of new ticketing and baggage claim facilities at Chicago-Midway Airport,
the announcement of new scheduled service destinations, and the promotion of low
fares as compared to the competition.

The Company also incurred $6.3 million of incremental  advertising costs in 2001
associated  with  rebuilding  customer  demand after the  September 11 terrorist
attacks,  but due to their  unusual  nature,  these  expenses  were  included as
special charges on the income statement.

Passenger  Service.  For 2001 and 2000,  catering  represented  74.4% and 78.8%,
respectively, of total passenger service expense.

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

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

Insurance Expense.  The total cost of insurance increased 39.0% to $10.7 million
in 2001, as compared to $7.7 million in 2000. The Company experienced  increases
in liability  insurance  and hull  insurance  between  years,  mainly due to the
increase in scheduled service traffic and the addition of the new Boeing 737-800
and Boeing  757-300 fleets  beginning in May 2001. The Company also  experienced
increases in miscellanous general insurance policies between years.

Ground Package Cost.  Ground  package cost  decreased  17.1% to $42.2 million in
2001, as compared to $50.9 million in 2000.  Ground  package costs vary based on
the mix of  vacation  destinations  served,  the  quality  and  types of  ground
accommodations  offered,  and general  competitive  conditions  in the Company's
markets, all of which factors can change from period to period. This decline was
more  significant than the decline in ground package revenue in 2001 as compared
to 2000, because the Company received  discounted hotel pricing in the last half
of the year due to the  weakening  economy and the  reduction  in travel  demand
after the September 11 attacks.

Commissions.  Commissions  expense  decreased 11.0% to $34.8 million in 2001, as
compared to $39.1 million in 2000.

Approximately  $3.8 million of the decrease in  commissions in 2001, as compared
to 2000, was  attributable  to lower military  commissions,  which is consistent

                                    36
<PAGE>

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

Facilities and Other Rentals. The cost of facilities and other rentals increased
27.8% to $20.2 million in 2001, as compared to $15.8 million in 2000.  Growth in
facilities  costs  between  periods was  primarily  attributable  to the need to
provide  maintenance,  flight crew and passenger  service  facilities at airport
locations to support new scheduled service  destinations and higher  frequencies
to existing  destinations.  The Company also began  occupancy  of  significantly
expanded  and  improved  passenger  check-in  and baggage  claim  facilities  at
Chicago-Midway Airport beginning in March 2001.

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

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

U.S.  Government Grant. As a result of the approval of its initial  applications
by the DOT, the Company  received  cash  payments of $32.6  million in the third
quarter of 2001,  and $11.9 million in the fourth  quarter of 2001.  The Company
recorded  total U.S.  Government  grant  revenues of $66.3 million in the second
half of 2001  relating  to its  estimates  of direct and  incremental  losses it
incurred  during  that time  period,  recording  a current  receivable  of $21.8
million for the balance of cash expected to be paid in 2002.

Other  Operating  Expenses.  Other operating  expenses  increased 10.9% to $84.6
million in 2001, as compared to $76.3 million in 2000.  The purchase by ATALC of
charter air  services  from  airlines  other than the  Company was $4.0  million
higher in 2001 than in 2000.  Flight  simulator  rentals  increased $3.3 million
between years due to the crew  training  required to introduce the new aircraft.
These  increases  were  partially  offset  by net  decreases  in other  expenses
included in this category, none of which was individually significant.

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

The Company also  incurred  approximately  $2.0  million in interest  expense in
2001, relating to three Boeing 757-300 aircraft which were temporarily  financed
with bridge debt  immediately  after the September 11, 2001  terrorist  attacks.
These aircraft were refinanced with operating leases at the end of 2001.
                                      37
<PAGE>

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

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

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

Liquidity and Capital Resources

Cash Flows. In 2002, net cash used in operating activities was $59.0 million, as
compared to net cash provided by operating activities in 2001 and 2000 of $144.4
million and $111.7 million, respectively. The change in cash provided by or used
in operating activities between 2002 and 2001 primarily resulted from a decrease
in earnings,  a decrease in the non-cash impact of impairment  losses recognized
on the  Boeing  727-200  and  Lockheed  L-1011-50  and  100  fleets,  and  lower
depreciation and amortization  expense due to those retirements and impairments.
The change was also  impacted by changes in  operating  assets and  liabilities,
most significantly an increase in a credit card holdback receivable  implemented
in late 2001, and a decrease in accrued  expenses  resulting  primarily from the
decrease in the deferred  payment of certain federal and state taxes  authorized
in the  wake of the  2001  terrorist  attacks,  and the  reduction  of  deferred
interest  payable on pre-delivery  deposits in conjunction  with the significant
number of aircraft  deliveries in 2002. These changes were partially offset by a
decrease in the U.S. Government grant receivable.

Net cash provided by investing  activities was $88.9 million in 2002,  while net
cash used in  investing  activities  was  $129.8  million  and  $290.8  million,
respectively,  in the years ended  December 31, 2001 and 2000.  In 2002,  $149.5
million in aircraft  pre-delivery  deposits were returned to the Company, net of
additional deposits made, in conjunction with aircraft deliveries, while in 2001
and 2000,  $30.8 million and $117.0 million,  respectively of expenditures  were
made for  pre-delivery  deposits on future  deliveries of new  aircraft,  net of
returned deposits on delivered aircraft.  Changes in cash provided by or used in
investing  activities  were  also  impacted  by  capital  expenditures.  Capital
expenditures  totaling  $59.3  million,   $119.8  million  and  $146.5  million,
respectively, were made in 2002, 2001 and 2000 primarily for aircraft purchases,
engine and  airframe  overhauls,  airframe  improvements,  and the  purchase  of
rotable parts.  The declining trend in capital  expenditures is due primarily to
the  replacement of older aircraft with newer fleets,  in which all the aircraft
are being leased under operating leases. The Company's maintenance cost per hour
agreements,  whereby payments are charged to maintenance expense as flight hours
are incurred,  have and are expected to continue to reduce  capital  spending on
related engine overhauls.

                                      38
<PAGE>

Net cash used in financing  activities was $14.2 million in 2002, while net cash
provided by financing  activities  was $40.7 million and $188.1  million for the
years ended December 31, 2001 and 2000, respectively. In all years, cash used in
or provided by  financing  activities  relates  primarily  to proceeds  from and
repayments of short-term and long-term  debt. In 2002, the Company repaid $109.9
million in pre-delivery deposit financings upon delivery of aircraft, net of new
borrowings  used to fund new deposits.  Also in 2002,  the Company  borrowed and
repaid $192.5 million in temporary  financing related to the purchase of certain
Boeing 737-800 and Boeing 757-300  aircraft,  which were  subsequently  financed
through operating leases. In addition, in 2002, the Company obtained a federally
guaranteed loan for $168.0 million, of which $10.0 million in proceeds were used
to fully repay remaining  borrowings  under its revolving  credit  facility.  In
2001, the Company obtained $28.4 million in proceeds related to the financing of
pre-delivery  deposits on aircraft,  borrowed  $35.0  million under the its bank
credit  facility,  and repaid $17.0 million in special  facility  revenue bonds.
Also in 2001,  the Company  borrowed and repaid $153.4 million in temporary debt
related  to  the  purchase  of  certain  Boeing  757-300  aircraft,  which  were
subsequently  financed with operating leases in late 2001. In 2000, net proceeds
from short-term and long-term debt primarily consisted of $89.9 million from the
financing of pre-delivery  deposits on aircraft and proceeds of $23.0 million in
notes collateralized by two L-1011-500 aircraft.

The Company presently  expects that cash on hand at December 31, 2002,  together
with cash  generated by future  operations and the return of  pre-delivery  cash
deposits held by the  manufacturers  on future  aircraft and engine  deliveries,
will be sufficient to fund the Company's obligations during 2003.

The adverse impact of current airline  industry  conditions on the Company,  and
the ongoing  sufficiency of its financial  resources to absorb that impact, will
depend upon a number of factors, including but not limited to: (1) the Company's
ability to continue to reduce its  operating  costs and conserve  its  financial
resources;  (2) the pace and extent of seat capacity reductions in the industry,
if any, as these may affect competitive pricing for the Company's services;  (3)
the  resolution  of the current war in the Middle East;  (4) changes in, if any,
the  Company's  current  credit  card  holdback  levels;  (5) the number of crew
members who may be called for duty in the United  States armed  forces,  and the
resulting impact on the Company's ability to operate as planned; (6) any further
declines in the values of the aircraft in the Company's  fleet, and any aircraft
or other asset impairment charges; (7) the increasing price of jet fuel consumed
by the Company; and (8) the Company's ability to retain its management and other
employees in light of current industry conditions.

Debt and Operating  Lease Cash Payment  Obligations.  The Company is required to
make cash  payments  in the future on debt  obligations  and  operating  leases.
Although  the Company is obligated  on a number of  long-term  operating  leases
which are not  recorded  on the balance  sheet  under  GAAP,  the Company has no
off-balance  sheet debt and,  with the  exception of  insignificant  amounts not
requiring disclosure under GAAP, does not guarantee the debt of any other party.
The following  table  summarizes  the Company's  contractual  debt and operating
lease  obligations  at December 31, 2002,  and the effect such  obligations  are
expected to have on its liquidity and cash flows in future periods.

                                       39
<PAGE>
<TABLE>
<CAPTION>
                                          Total                          2004            2006          After
                                     As of 12/31/02      2003           -2005           -2007           2007
                                     --------------      ----           -----           -----           ----
                                                                     (in thousands)

<S>                                     <C>            <C>            <C>             <C>           <C>
Current and long-term debt   (1)        $  516,828     $ 22,575       $  371,219      $ 60,477      $   62,557
Lease obligations (2)                    3,634,623      293,119          548,597       517,890       2,275,017
Expected future lease obligations (3)      816,810        5,155           90,156       116,719         604,780
                                        ----------     --------       ----------      --------      ----------
Total contractual cash obligations      $4,968,261     $320,849       $1,009,972      $695,086      $2,942,354
                                        ==========     ========       ==========      ========      ==========

</TABLE>

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

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

(3)  Represents  estimated  payments on 11 new Boeing 757-300 and Boeing 737-800
aircraft  the Company is committed  to taking  delivery of in 2003 and 2004,  as
well as four spare  engines the Company is  committed  to taking  delivery of in
2003 through 2006.  The Company  intends to finance  these  aircraft and engines
with operating leases.  However,  no such leases are in place as the Company has
not received the aircraft.  Payments for expected future lease  obligations were
derived using leases for  comparable  aircraft  currently in place.  For further
discussion,  see  "Financial  Statements  and  Supplementary  Data  -  Notes  to
Consolidated Financial Statements - Note 12 - Commitments and Contingencies."

Aircraft and Fleet  Transactions.  In 2000, the Company  entered into a purchase
agreement with the Boeing Company to purchase directly from Boeing 10 new Boeing
757-300s and 20 new Boeing 737-800s.  The Boeing 737-800 aircraft are powered by
General Electric CFM56-7B27 engines, and the Boeing 757-300 aircraft are powered
by Rolls-Royce  RB211-535 E4C engines. The Company also received purchase rights
for an additional 50 aircraft.  The  manufacturer's  list price is $73.6 million
for each 757-300 and $52.4 million for each 737-800, subject to escalation.  The
Company's purchase price for each aircraft is subject to various  discounts.  To
fulfill its  purchase  obligations,  the Company has  arranged for each of these
aircraft,  including the engines, to be purchased by third parties that will, in
turn, enter into long-term operating leases with the Company. As of December 31,
2002,  the  Company  had  taken  delivery  of 13 Boeing  737-800s  and 10 Boeing
757-300s obtained directly from Boeing.  All remaining  aircraft to be purchased
directly from Boeing are  scheduled for delivery  between July 2004 and December
2004. Aircraft pre-delivery  deposits are required for these purchases,  and the
Company has funded these deposits using operating cash and primarily  short-term
deposit  finance  facilities.  As of December  31,  2002,  the Company had $21.2
million in pre-delivery  deposits outstanding for these aircraft,  of which $8.4
million was  provided  by a deposit  finance  facility  with  Rolls-Royce.  Upon
delivery of the aircraft,  pre-delivery deposits funded with operating cash will
be returned to the  Company,  and those funded with a deposit  facility  will be
used to repay that facility.

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

The  Company  had  operating  lease  agreements  in place to lease 14 new Boeing

                                      40
<PAGE>

737-800s from ILFC. As of December 31, 2002,  the Company had taken  delivery of
12 Boeing 737-800s that are being leased from ILFC. The remaining aircraft under
these  operating lease  agreements are currently  scheduled for delivery in June
2003 and November 2003.

The Company had an agreement to acquire five  additional new Boeing  737-800s to
be financed by operating leases with GE Capital Aviation Services ("GECAS"). The
Company took  delivery of the fifth Boeing  737-800  aircraft  being leased from
GECAS in the third quarter of 2002.

Although  the Company  typically  finances  aircraft  with  long-term  operating
leases, it has a bridge financing facility which provides for maximum borrowings
of $200.0 million to finance new Boeing 737-800  aircraft and new Boeing 757-300
aircraft.  Borrowings under the facility bear interest, at the option of ATA, at
LIBOR plus a margin,  which  depends on the  percentage  of the  purchase  price
borrowed  and whether the  borrowing  matures 18 or 24 months after the aircraft
delivery date. During the first four months of 2002, the Company borrowed $192.5
million,  under this bridge facility, for the purchase of certain Boeing 737-800
and Boeing 757-300  aircraft.  As of June 30, 2002, these borrowings were repaid
in full,  while the related  aircraft were financed  under  long-term  operating
leases.

The Company  has an  agreement  with  General  Electric  to purchase  four spare
engines, which are scheduled for delivery between 2003 and 2006. The Company has
acquired two spare Rolls Royce engines,  one of which was delivered in 2001, and
the other in June 2002.

In May 2002, the Company entered into an agreement with AMR Leasing  Corporation
to lease six SAAB  340B  aircraft,  with  options  to lease up to 10  additional
aircraft.  As of September 30, 2002,  the Company had taken  delivery of all six
SAAB 340B aircraft under this agreement.

In March 2001, the Company entered into a limited  liability  company  agreement
with BCC to form BATA,  a 50/50 joint  venture.  Because  the  Company  does not
control BATA, the Company's  investment is being  accounted for under the equity
method of accounting. BATA is expected to remarket the Company's fleet of Boeing
727-200  aircraft in either passenger or cargo  configurations.  In exchange for
supplying the aircraft and certain  operating  services to BATA, the Company has
and will continue to receive both cash and equity in the income or loss of BATA.
As of December 31, 2002, the Company has transferred 23 of its original fleet of
24 Boeing 727-200 aircraft to BATA.

Significant  Financings.  On November  20, 2002,  the Company  obtained a $168.0
million  secured term loan,  of which $148.5  million was  guaranteed by the Air
Transportation  Stabilization  Board.  The net proceeds of the secured term loan
were approximately  $164.8 million,  after deducting issuance costs. The Company
used a portion of the net  proceeds to repay  borrowings  on its  existing  bank
credit facility and to collateralize new letters of credit,  previously  secured
under the bank facility.  The remaining funds will be used for general corporate
purposes.  Interest is payable monthly at LIBOR plus a margin. Guarantee fees of
5.5% of the outstanding guaranteed principal balance in 2003, with escalation to
9.5% on the outstanding  guaranteed  principal balance in 2004 through 2008, are
payable quarterly.

The  secured  term loan is  subject  to  certain  restrictive  covenants  and is
collateralized  primarily  by  certain  receivables,   certain  aircraft,  spare
engines,  and rotables.  The receivables had a carrying amount of  approximately
$44.2  million as of December 31, 2002.  The  aircraft,  spare engines and parts
consist of three Lockheed L-1011-500  aircraft,  nine Lockheed L-1011-50 and 100
aircraft,  two Saab 340B aircraft, 24 Rolls Royce RB211 spare engines and Boeing
757-200,  Boeing  757-300  and Boeing  737-800  rotables,  which held a combined
carrying amount of approximately $95.6 million as of December 31, 2002.

                                       41
<PAGE>

In  conjunction  with  obtaining  the secured  term loan,  the Company  issued a
warrant to the Federal  Government  to purchase up to 1.5 million  shares of its
common stock,  and  additional  warrants to purchase up to 0.2 million shares of
its common stock to other loan  participants,  in each case at an exercise price
of $3.53  per share for a term of ten  years.  The  Company  has  recorded  $7.4
million as the total fair value of warrants  issued,  which is also  recorded as
unamortized discount on the secured term loan as of December 31, 2002.

Prior to obtaining  the secured term loan,  the Company had a secured  revolving
bank credit  facility  which  provided for maximum  borrowings of $60.0 million,
including up to $50.0 million for stand-by  letters of credit.  Borrowings under
the facility were subject to an interest rate, at the option of the Company,  at
either  LIBOR plus a margin or the agent  bank's  prime rate.  The  facility was
subject to  certain  restrictive  covenants  and was  collateralized  by certain
aircraft, receivables, and engines. Upon repayment of the borrowings and letters
of credit,  the revolving bank credit  facility was  terminated,  and all assets
previously pledged as collateral were released.

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

More than half of these card sales are made using  MasterCard or Visa cards. The
Company  maintains an agreement with a bank for the processing and collection of
charges to these cards.  Under this agreement a sale is normally  charged to the
purchaser's card account and is paid to the Company in cash within a few days of
the date of purchase,  although the Company may provide the  purchased  services
days, weeks or months later. In 2002, the Company processed approximately $633.0
million in MasterCard and Visa charges under its merchant processing agreement.

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

The bank exercised its right to withhold  distributions  beginning shortly after
its notice to the Company.  As of December 31, 2002, the bank had withheld $30.0
million in cash. As of December 31, 2001,  the bank had withheld  $23.1 million,
$20.0  million  of which was funded by a letter of credit.  The  deposits  as of
December  31, 2002 and December 31, 2001  constituted  approximately  60% of the
Company's total future  obligations to provide services  purchased by charges to
card accounts as of those dates. The bank has subsequently  agreed to require an
ongoing 60% deposit, with that percentage being subject to increase up to either
75% or 100%,  in the event that  certain  restrictive  covenants  are not met. A
deposit  of  100% of this  obligation  would  have  resulted  in the  additional
retention of $20.0  million by the bank at December 31, 2002,  and $15.4 million
at December  31,  2001.  The bank's  right to  maintain a 60%  deposit  does not
terminate  unless,  in its reasonable  judgment and at its sole  discretion,  it
determines that a deposit is no longer required.

The  Company  has the  right to  terminate  its  agreement  with  the bank  upon
providing   appropriate  notice,  as  does  the  bank.  In  the  event  of  such
termination,  the bank may  retain a deposit  equal to the  amount of  purchased
services not yet performed, for up to 24 months from the date of termination.

                                  42
<PAGE>

Although the Company continues to process  significant  dollar amounts of ticket
sales using credit cards other than Mastercard and Visa, as of December 31, 2002
no cash deposit  requirements  had been implemented by the issuers or processors
of those cards.

Surety  Bonds.  The Company has  historically  provided  surety bonds to airport
authorities  and selected other parties,  to secure the Company's  obligation to
these parties.  The DOT also requires the Company to provide a surety bond or to
escrow customer  deposits to secure potential refund claims of charter customers
who have made prepayments to the Company for future  transportation.  One issuer
currently provides all surety bonds issued on behalf of the Company.

Prior to the terrorist  attacks of September 11, 2001 the Company had provided a
letter  of  credit of $1.5  million  as  security  to the  issuer  for its total
estimated surety bond obligations,  which were $20.9 million at August 31, 2001.
Effective  October 5, 2001,  the issuer  required  the Company to  increase  its
letter  of credit  to 50% of its  estimated  surety  bond  liability.  Effective
January 16, 2002, the issuer  implemented a requirement for the Company's letter
of credit to secure 100% of estimated  surety bond  obligations,  which  totaled
$19.8 million. The Company's letter of credit was adjusted accordingly,  and the
Company  is  subject to future  adjustments  of its letter of credit  based upon
further revisions to the estimated liability for total surety bonds outstanding.
As of December 31, 2002, the letter of credit requirement had decreased to $15.2
million, reflecting an actual decline in outstanding charter deposit obligations
of the Company. The Company has the right to replace the issuer with one or more
alternative  issuers  of surety  bonds,  although  the  Company  can  provide no
assurance  that it  will be able to  secure  more  favorable  terms  from  other
issuers.

Future Accounting Changes

In April of 2002, the FASB issued  Statement of Financial  Accounting  Standards
No. 145,  Rescission  of FASB  Statements  No. 4, 44 and 64,  Amendment  of FASB
Statement No. 13 and Technical  Corrections  ("FAS 145").  FAS 145 rescinds both
FASB  Statements of Financial  Accounting  Standards No. 4, Reporting  Gains and
Losses from  Extinguishment  of Debt, ("FAS 4"), and an amendment to FAS 4, FASB
Statements of Financial  Accounting  Standards No. 64,  Extinguishments  of Debt
Made to Satisfy  Sinking Fund  Requirements  ("FAS 64"). FAS 4 required that all
gains and losses from the extinguishment of debt be aggregated and, if material,
be classified as an  extraordinary  item,  net of the related income tax effect.
Upon the adoption of FAS 145, all gains and losses on the extinguishment of debt
for  periods  presented  in the  financial  statements  will  be  classified  as
extraordinary  items only if they meet the criteria of APB Opinion 30, Reporting
the Results of  Operations  - Reporting  the Effects of Disposal of a Segment of
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions  ("APB 30"). The provisions of FAS 145 related to the rescission of
FAS 4 and FAS 64 shall be applied for fiscal years beginning after May 15, 2002.

In June of 2002, the FASB issued Statement of Financial Accounting Standards No.
146,  Accounting for Costs  Associated  with Exit or Disposal  Activities  ("FAS
146").  FAS 146 nullifies  Emerging  Issues Task Force  ("EITF") Issue No. 94-3,
Liability  Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (Including Certain Costs Incurred in a Restructuring).  FAS
146  generally  requires  companies  to  recognize  costs  associated  with exit
activities when they are incurred, rather than at the date of a commitment to an
exit or disposal  plan, and is to be applied  prospectively  to exit or disposal
activities initiated after December 31, 2002.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
                                       43
<PAGE>

Indebtedness of Others" ("FIN 45"). FIN 45 requires a guarantor to recognize, at
the inception of a guarantee,  a liability for the fair value of the  obligation
undertaken in issuing the guarantee. FIN 45 also expands the disclosure required
to be made by a guarantor about its obligations under certain guarantees that it
has  issued.  Initial  recognition  and  measurement  provisions  of  FIN 45 are
applicable  on a  prospective  basis  to  guarantees  issued  or  modified.  The
disclosure requirements are effective immediately.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  ("FIN 46").  FIN 46 requires that  companies that
control  another entity through  interests  other than voting  interests  should
consolidate the controlled  entity. FIN 46 applies to variable interest entities
created after January 31, 2003,  and to variable  interest  entities in which an
enterprise  obtains  an  interest  in after that date.  The  related  disclosure
requirements are effective immediately.

See  "Financial  Statements  and  Supplementary  Data -  Notes  to  Consolidated
Financial Statements - Note 18 - Recently Issued Accounting Pronouncements."

Forward-Looking Information and Risk Factors

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

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

o        economic conditions;
o        labor costs;
o        aviation fuel costs;
o        competitive pressures on pricing;
o        weather conditions;
o        governmental legislation and regulation;
o        consumer perceptions of the Company's products;
o        demand for air  transportation  overall,  considering the impact of
         September 11, 2001, and  specifically in markets in which the Company
         operates;
o        higher costs associated with new security directives;
o        higher costs for insurance and the continued availability of such
         insurance;
o        the Company's ability to raise additional financing, and to refinance
         existing borrowings upon maturity;
o        declines in the value of the Company's aircraft, as these may result in
         lower collateral value and additional impairment charges; and
o        other risks and uncertainties listed from time to time in reports the
         Company periodically files with the Securities and Exchange Commission.

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

                                       44
<PAGE>

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

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

Aircraft Fuel Prices.  The Company's  results of  operations  are  significantly
impacted by changes in the price of aircraft  fuel.  During 2002,  aircraft fuel
accounted for approximately 14.4% of the Company's operating expenses,  compared
to 18.4% in 2001. In addition to purchasing fuel-hedging contracts,  the Company
obtains fuel price  fluctuation  protection from  escalation  clauses in certain
commercial charter, military charter, bulk scheduled service and mail contracts.

During 2002 and 2001,  the Company  entered into fuel hedge  contracts to reduce
the volatility of fuel prices, using heating oil swaps. As of December 31, 2002,
the Company had no outstanding fuel hedge agreements.

Market risk is estimated as a hypothetical 10% increase in the December 31, 2002
cost per  gallon  of  fuel.  Based  on  projected  2003  fuel  usage,  excluding
anticipated protection from escalation clauses, such a change would result in an
increase in aircraft fuel expense of approximately $19.4 million. As of December
31, 2001, that risk was $16.5 million.

Interest Rates. The Company's results of operations are affected by fluctuations
in market interest rates. As of December 31, 2002, the majority of the Company's
variable-rate  debt was  comprised  of  approximately  $168.0  million  and $8.4
million,  respectively, of variable-rate debt through the secured term loan, and
debt funding  aircraft  pre-delivery  deposits.  As of December  31,  2001,  the
majority of the  Company's  variable-rate  debt was  comprised of  approximately
$35.0 million and $118.2 million,  respectively, of variable-rate debt through a
revolving credit facility,  and debt funding aircraft pre-delivery  deposits. If
interest rates average 100 basis points more on  variable-rate  debt in 2003, as
compared to 2002 average rates, the Company's interest expense would increase by
approximately $1.8 million. In comparison,  if interest rates averaged 100 basis
points more on  variable-rate  debt in 2002, as compared to 2001 average  rates,
the  Company's  interest  expense  would have  increased by  approximately  $1.5
million.

As of December 31, 2002 and 2001, the majority of the Company's  fixed-rate debt
was comprised of unsecured debt with a carrying value of $300.0  million.  Based
upon a  calculation  of discounted  future cash flows using current  incremental
borrowing rates as of the end of the year for similar types of instruments,  the
fair value as of December  31, 2002 of this  fixed-rate  debt is estimated to be
approximately  $262.2 million.  Market risk, estimated as the potential increase
in fair value  resulting from a hypothetical  100 basis point decrease in market
interest rates, was  approximately  $32.5 million as of December 31, 2002. As of
December 31, 2001, that risk was approximately $17.2 million.
                                      45
<PAGE>

If 2003  average  short-term  interest  rates  decreased  by 100 basis points as
compared to 2002 average rates,  the Company's  projected  interest  income from
short-term   investments  would  decrease  by  approximately  $2.0  million.  In
comparison, the Company estimated that if 2002 average short-term interest rates
decreased by 100 basis points as compared to 2001 average  rates,  the Company's
interest   income  from   short-term   investments   would  have   decreased  by
approximately $1.8 million as of December 31, 2001.

All  estimated  changes  in  interest  income  and  expense  are  determined  by
considering  the  impact  of  hypothetical  changes  in  interest  rates  on the
Company's debt and cash balances at December 31, 2002 and 2001.
                                       46

<PAGE>

Item 8.        Financial Statements and Supplementary Data

                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
ATA Holdings Corp. and Subsidiaries

We have audited the  accompanying  consolidated  balance  sheets of ATA Holdings
Corp.  and  Subsidiaries  as of  December  31,  2002 and 2001,  and the  related
consolidated  statements of operations,  changes in redeemable  preferred stock,
common stock and other shareholders' equity (deficit) and cash flows for each of
the three years in the period ended  December 31, 2002. Our audits also included
the  financial  statement  schedule  listed  in the index at Item  15(a).  These
financial  statements  and  schedule  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of ATA Holdings Corp.
and Subsidiaries at December 31, 2002 and 2001, and the consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2002, in conformity  with  accounting  principles  generally
accepted in the United  States.  Also,  in our  opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth herein.

As  discussed in Note 16 to the  consolidated  financial  statements,  effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142 "Goodwill and Other Intangible Assets".


                                                               ERNST & YOUNG LLP

Indianapolis, Indiana
January 24, 2003

                                       47

<PAGE>

<TABLE>
<CAPTION>
                                                 ATA HOLDINGS CORP. AND SUBSIDIARIES
                                                     CONSOLIDATED BALANCE SHEETS
                                                       (Dollars in thousands)

                                                                                 December 31,             December 31,
                                                                                     2002                    2001
                                                                           -------------------   ----------------------
                          ASSETS
<S>                                                                        <C>                   <C>
Current assets:
     Cash and cash equivalents                                             $           200,160   $              184,439
     Aircraft pre-delivery deposits                                                     16,768                  166,574
     Receivables, net of allowance for doubtful accounts
     (2002 - $2,375; 2001 - $1,526)                                                     86,377                   75,046
     Inventories, net                                                                   51,233                   47,648
     Assets held for sale                                                                    -                   18,600
     Prepaid expenses and other current assets                                          39,214                   19,471
                                                                           -------------------   ----------------------
Total current assets                                                                   393,752                  511,778

Property and equipment:
     Flight equipment                                                                  312,652                  327,541
     Facilities and ground equipment                                                   134,355                  119,975
                                                                           -------------------   ----------------------
                                                                                       447,007                  447,516
     Accumulated depreciation                                                         (181,380)                (132,573)
                                                                           -------------------   ----------------------
                                                                                       265,627                  314,943

Restricted cash                                                                         30,360                        -
Goodwill                                                                                14,887                   21,780
Assets held for sale                                                                     5,090                   33,159
Prepaid aircraft rent                                                                   68,828                   49,159
Investment in BATA, LLC                                                                 22,968                   30,284
Deposits and other assets                                                               46,624                   41,859
                                                                           -------------------   ----------------------
Total assets                                                               $           848,136   $            1,002,962
                                                                           ===================   ======================

            LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Current maturities of long-term debt                                   $            14,191   $                5,820
    Short-term debt                                                                      8,384                  118,239
    Accounts payable                                                                    23,688                   26,948
    Air traffic liabilities                                                             94,693                  100,958
    Accrued expenses                                                                   160,924                  177,102
                                                                           -------------------   ----------------------
Total current liabilities                                                              301,880                  429,067

Long-term debt, less current maturities                                                486,853                  373,533
Deferred income taxes                                                                        -                   13,655
Deferred gains from sale and leaseback of aircraft                                      54,889                   45,815
Other deferred items                                                                    42,038                   16,760
                                                                           -------------------   ----------------------
Total liabilities                                                                      885,660                  878,830

Commitments and contingencies

Redeemable preferred stock; authorized and issued 800 shares                            82,485                  80,000

Shareholders' equity (deficit):

    Preferred stock; authorized 9,999,200 shares; none issued                                -                       -
    Common stock, without par value; authorized 30,000,000 shares;
       issued 13,476,193 - 2002; 13,266,642 - 2001                                      65,290                   61,964
    Treasury stock; 1,711,440 shares - 2002; 1,710,658 shares - 2001                   (24,778)                 (24,768)
    Additional paid-in capital                                                          18,374                   11,534
    Other comprehensive loss                                                                -                      (687)
    Retained deficit                                                                  (178,895)                  (3,911)
                                                                           -------------------   ----------------------
Total shareholders' equity (deficit)                                                  (120,009)                  44,132
                                                                           -------------------   ----------------------
Total liabilities and shareholders' equity (deficit)                       $           848,136   $            1,002,962
                                                                           ===================   ======================


See accompanying notes.
</TABLE>

                                       48
<PAGE>

<TABLE>
<CAPTION>
                                                 ATA HOLDINGS CORP. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                            (Dollars in thousands, except per share data)
                                                                       Year Ended December 31,
                                                               2002               2001               2000
                                                             --------------------------------------------------
<S>                                                          <C>                <C>                 <C>
Operating revenues:
   Scheduled service                                         $   886,579        $     820,666       $   753,301
   Charter                                                       309,242              359,770           435,262
   Ground package                                                 35,687               52,182            59,848
   Other                                                          45,862               42,866            43,142
                                                             -----------        -------------       -----------
Total operating revenues                                       1,277,370            1,275,484         1,291,553
                                                             -----------        -------------       -----------
Operating expenses:
  Salaries, wages and benefits                                   355,201              325,153           297,012
  Fuel and oil                                                   206,574              251,333           274,820
  Aircraft rentals                                               190,148               98,988            72,145
  Handling, landing and navigation fees                          110,528               88,653            97,414
  Depreciation and amortization                                   76,727              121,327           125,041
  Crew and other employee travel                                  54,774               59,278            65,758
  Aircraft maintenance, materials and repairs                     52,254               61,394            70,432
  Other selling expenses                                          43,934               41,601            36,650
  Advertising                                                     40,028               26,421            22,016
  Passenger service                                               38,345               43,856            45,571
  Insurance                                                       33,981               10,675             7,733
  Ground package cost                                             27,882               42,160            50,903
  Commissions                                                     23,326               34,789            39,065
  Facilities and other rentals                                    22,624               20,241            15,817
  Special charges                                                      -               21,525                 -
  Aircraft impairments and retirements                            66,787              118,868                 -
  Goodwill impairment                                              6,893                    -                 -
  U.S. Government grant                                           16,221              (66,318)                -
  Other                                                           71,180               67,410            68,606
                                                             -----------        -------------       -----------
Total operating expenses                                       1,437,407            1,367,354         1,288,983
                                                             -----------        -------------       -----------
Operating income (loss)                                         (160,037)             (91,870)            2,570

Other income (expense):
  Interest income                                                  2,829                5,331             8,389
  Interest expense                                               (35,746)             (30,082)          (31,452)
  Other                                                           (1,260)                 554               562
                                                             -----------        -------------       -----------
Other expenses                                                   (34,177)             (24,197)          (22,501)
                                                             -----------        -------------       -----------
Loss before income taxes                                        (194,214)            (116,067)          (19,931)
Income tax credit                                                (24,950)             (39,750)           (4,607)
                                                             -----------        -------------       -----------
Net loss                                                        (169,264)             (76,317)          (15,324)


Preferred stock dividends                                         (5,720)              (5,568)             (375)
                                                             -----------        -------------       -----------
Loss available to common shareholders                        $  (174,984)       $     (81,885)      $   (15,699)
                                                             ===========        =============       ===========

Basic earnings per common share:
Average shares outstanding                                    11,711,906            11,464,125        11,956,532
Net loss per common share                                    $    (14.94)       $       (7.14)      $     (1.31)
                                                             ===========        =============       ===========

Diluted earnings per common share:
Average shares outstanding                                    11,711,906            11,464,125        11,956,532
Net loss per common share                                    $    (14.94)       $       (7.14)      $     (1.31)
                                                             ===========        =============       ===========

See accompanying notes.
</TABLE>

                                       49
<PAGE>

<TABLE>
<CAPTION>
                                                 ATA HOLDINGS CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CHANGES IN PREFERRED STOCK, COMMON STOCK AND OTHER SHAREHOLDERS'
                                                          EQUITY (DEFICIT)
                                                       (Dollars in thousands)

                               Redeemable                        Additional    Deferred        Other       Retained       Total
                                Preferred    Common   Treasury    Paid-in    Comprehensive  Comprehensive  Earnings   Shareholders'
                                  Stock      Stock     Stock      Capital        ESOP         Income       (Deficit) Equity(Deficit)
                                 ------     -------  --------     -------        -----        -----       ---------- --------------
<S>                              <C>       <C>      <C>            <C>            <C>         <C>        <C>             <C>
Balance, December 31, 1999       $     -   $55,826  $(10,500)      $12,910        $(533)      $    -     $   93,673      $ 151,376
                                 ------    -------  --------       -------        -----       ------     ----------      ---------

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

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

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


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

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


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


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

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


Acquistions of businesses              -       182         -           (26)           -            -              -            156
                                  ------    -------  --------       -------        -----       -----      ----------      ---------

Balance as of December 31, 2000   80,000    59,012   (24,564)       12,232            -            -         77,974        124,654
                                 =======   =======   ========     =========       =====        =====      =========       =========

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

Net loss on derivative
instruments, net of  tax               -         -         -             -            -         (687)             -           (687)
                                                                                                ----        -------          ------


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


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


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


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


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

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

Balance as of December 31, 2001   80,000    61,964   (24,768)       11,534            -         (687)        (3,911)        44,132
                                 =======   =======   ========     =========       ======       =====      =========       =========

Net loss                                 -         -           -            -         -            -       (169,264)      (169,264)

Net gain on derivative
instruments, net of tax                  -         -           -            -         -          687              -            687
                                                                                                ----        -------          ------


Total comprehensive loss                 -         -           -            -         -          687       (169,264)      (168,577)
                                                                                                ----        -------          ------


Preferred dividends                      -         -           -            -         -            -         (5,720)        (5,720)


Restricted stock grants                  -        13        (10)            4         -            -              -              7


Payment of liability with stock          -     2,445           -        (295)         -            -              -          2,150


Stock options exercised                  -       868           -        (419)         -            -              -            449


Warrants issued with ATSB loan           -         -           -        7,424         -            -              -          7,424

Disqualifying disposition of
stock                                    -         -           -          126         -            -              -            126

Accrued preferred stock
dividends                            2,485         -           -            -         -            -              -              -
                                    ------    -------  --------       -------      -----       ------    ----------      ---------

Balance as of December 31, 2002    $82,485   $65,290   $(24,778)    $  18,374     $   -       $    -     $(178,895)      $(120,009)
                                   =======   =======   ========     =========     ======      =======    =========       =========

 See accompanying notes.
</TABLE>

                                       50
<PAGE>

<TABLE>
<CAPTION>
                                                 ATA HOLDINGS CORP. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       (Dollars in thousands)

                                                                        Year Ended December 31,
                                                             2002               2001               2000
                                                          -------------------------------------------------
Operating activities:

<S>                                                       <C>                <C>                 <C>
Net loss                                                  $(169,264)         $ (76,317)          $ (15,324)
Adjustments to reconcile net loss
  to net cash provided by operating activities:
     Depreciation and amortization                           76,727            121,327             125,041
     Aircraft impairments and retirements                    66,787            118,868                   -
     Goodwill impairments                                     6,893
     Deferred income tax credit                              (8,697)           (40,848)             (3,990)
     Other non-cash items                                    39,817              1,843               4,324
Changes in operating assets and liabilities:
     U.S. Government grant receivable                        16,221            (21,861)                  -
     Other receivables                                      (27,552)             3,420              (4,506)
     Inventories                                             (7,411)           (11,586)            (15,191)
     Prepaid expenses and other current assets              (24,701)             5,940              (2,466)
     Accounts payable                                        (3,260)            16,882             (10,168)
     Air traffic liabilities                                 (6,265)            (6,092)             13,543
     Accrued expenses                                       (18,309)            32,848              20,429
                                                          ---------          ---------           ---------
     Net cash provided by (used in) operating activities    (59,014)           144,424             111,692
                                                          ---------          ---------           ---------

Investing activities:

Aircraft pre-delivery deposits                              149,510            (30,781)           (116,978)
Capital expenditures                                        (59,346)          (119,798)           (146,523)
Noncurrent prepaid aircraft rent                            (12,304)           (17,180)            (16,811)
Investment in BATA                                           18,632             27,343                   -
(Additions) reductions to other assets                       (7,985)            10,474             (10,593)
Proceeds from sales of property and equipment                   424                151                  68
                                                          ---------          ---------           ---------
   Net cash provided by (used in) investing activities       88,931           (129,791)           (290,837)
                                                          ---------          ---------           ---------

Financing activities:

Preferred stock dividends                                    (3,235)            (5,568)               (375)
Proceeds from sale/leaseback transactions                     2,253              5,229              10,791
Proceeds from short-term debt                                56,858             71,537              90,825
Payments on short-term debt                                (167,839)           (44,123)                  -
Proceeds from long-term debt                                363,040            219,422              33,117
Payments on long-term debt                                 (235,352)          (207,294)            (13,998)
Increase in restricted cash                                 (30,360)                 -                   -
Proceeds from stock option exercises                            449              1,670               1,822
Proceeds from redeemable preferred stock                          -                  -              80,000
Purchase of treasury stock                                      (10)              (204)            (14,064)
                                                          ---------          ---------           ---------
   Net cash provided by (used in) financing activities      (14,196)            40,669             188,118
                                                          ---------          ---------           ---------

Increase in cash and cash equivalents                        15,721             55,302               8,973
Cash and cash equivalents, beginning of period              184,439            129,137             120,164
                                                          ---------          ---------           ---------
Cash and cash equivalents, end of period                  $ 200,160          $ 184,439           $ 129,137
                                                          =========          =========           =========

Supplemental disclosures:

Cash payments for:

    Interest                                              $  42,102          $  44,839           $  31,628
    Income taxes (refunds)                                $   1,572          $  (9,721)          $     579

Financing and investing activities not affecting cash:

    Capital lease                                         $       -          $       -           $     117
    Accrued capital interest                              $ (10,487)         $   7,465           $   7,890
    Notes payable                                         $   2,427          $       -           $       -
    Issuance of warrants                                  $   7,424          $       -           $       -

See accompanying notes.
</TABLE>

                                       51
<PAGE>

Notes to Consolidated Financial Statements

1.  Significant Accounting Policies

Basis of Presentation and Business Description

The  consolidated  financial  statements  include the  accounts of ATA  Holdings
Corp.,  formerly 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 ATA Airlines,
Inc. , formerly  American  Trans Air, Inc.  ("ATA"),  its principal  subsidiary,
which accounts for approximately 90% of the Company's operating revenues. ATA is
a U.S.-certificated air carrier providing domestic and international charter and
scheduled passenger air services.

Use of Estimates

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

Cash Equivalents

Cash  equivalents  are  carried  at cost,  which  approximates  market,  and are
primarily  comprised  of money  market funds and  investments  in U.S.  Treasury
repurchase agreements. (See "Note 3 - Cash and Cash Equivalents.")

Inventories

Inventories consist primarily of expendable aircraft spare parts, fuel and other
supplies.  Aircraft parts  inventories  are stated at cost and are reduced by an
allowance for obsolescence. The obsolescence allowance is provided by amortizing
the cost of the aircraft parts  inventory,  net of an estimated  residual value,
over the  related  fleet's  estimated  useful  service  life.  The  obsolescence
allowance  at December  31, 2002 and 2001 was $14.7  million and $10.9  million,
respectively. Inventories are charged to expense when consumed.

Investment in BATA, LLC

The Company  has a limited  liability  company  agreement  with  Boeing  Capital
Corporation  ("BCC")  forming BATA Leasing LLC ("BATA"),  a 50/50 joint venture.
Because the Company does not control BATA, the Company's investment is accounted
for under the equity  method of  accounting.  BATA is expected  to remarket  the
Company's  fleet  of  Boeing  727-200  aircraft  in  either  passenger  or cargo
configurations.  In exchange for  supplying  the aircraft and certain  operating
services to BATA, the Company has and will continue to receive both cash and its
share of the income or loss of BATA.  As of December 31,  2002,  the Company has
transferred 23 of its original fleet of 24 Boeing 727-200 aircraft to BATA.

                                       52
<PAGE>


Revenue Recognition

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

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 in advance  and not yet  recognized  as  expense  are
included  in  prepaid  expenses  and other  current  assets in the  accompanying
consolidated balance sheets.

Reclassifications

Certain 2001 balance sheet amounts have been reclassified to conform to the 2002
presentation.

Property and Equipment

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

                                       53
<PAGE>

Asset                                       Estimated Useful Service Life
-----                                       -----------------------------
Aircraft and related equipment

Lockheed L-1011 (Series 50 and 100)         Depreciating to individual aircraft
                                            retirement date (2003-2004)
                                            (See "Note 15 - Fleet Impairment.")


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

Boeing 737-800                              All aircraft are subject to
                                            operating leases

Boeing 757-200                              All aircraft are subject to
                                            operating leases

Boeing 757-300                              All aircraft are subject to
                                            operating leases

SAAB 340B                                   15 years

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

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

Other property and equipment                3-7 years

Aircraft Lease Return Conditions

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

Airframe and Engine Overhauls

The Company has entered into engine  manufacturers'  maintenance  agreements for
engines which power the Boeing 737-800,  Boeing 757-200, Boeing 757-300 and SAAB
340B  fleets,  which  provide  for the  Company to pay a monthly  fee per engine
flight hour in exchange for major overhaul and maintenance of those engines. The
Company  expenses the cost per flight hour under these  agreements  as incurred.
The cost of engine overhauls for remaining fleet types, and the cost of airframe
overhauls  for all fleet types other than the SAAB 340B,  are  capitalized  when
performed  and amortized  over  estimated  useful lives based upon usage,  or to
earlier fleet or aircraft  retirement dates, for both owned and leased aircraft.
This  accounting  treatment was also applied to Boeing 757-200 engine  overhauls
completed prior to October 2001, the effective date of the engine manufacturers'
maintenance  agreement for this fleet. Airframe overhauls for SAAB 340B aircraft
are expensed as incurred.

                                       54
<PAGE>

Aircraft Pre-delivery Deposits

Advance  payments for future aircraft  deliveries  scheduled  within the next 12
months  are  classified  as  current  aircraft   pre-delivery  deposits  in  the
accompanying  consolidated  balance sheets, as the aircraft will be acquired and
paid for by third parties who will lease them to the Company.  Advance  payments
for  future  aircraft  deliveries  not  scheduled  within the next 12 months are
classified  as deposits  and other  assets.  As of  December  31, 2002 and 2001,
deposits and other assets  included  advanced  payments for future  aircraft and
engine deliveries totaling $4.4 million and $4.1 million, respectively.

Restricted Cash

Restricted cash consists of deposits held to secure outstanding stand-by letters
of credit  currently  provided by the  Company.  While the  existing  letters of
credit mature within the next 12 months,  management  believes it is likely that
the letters of credit will be renewed and has classified the restricted  cash as
a long-term asset on the balance sheet as of December 31, 2002.

Intangible Assets

Goodwill,  which  represents  the  excess of cost over fair  value of net assets
acquired, was amortized on a straight-line basis over 20 years, until January 1,
2002, when the Company adopted FASB Statement of Financial  Accounting Standards
No. 142,  "Goodwill and Other  Intangible  Assets" ("FAS 142").  The Company now
annually tests goodwill and other  intangible  assets deemed to have  indefinite
lives for  impairment.  The Company's  policy is to record an impairment  charge
when it is determined that an asset's carrying value may not be recoverable.

Financial Instruments

The carrying amounts of cash  equivalents,  receivables and  variable-rate  debt
approximate  fair  value.  (See "Note 5 - Debt.")  The fair value of  fixed-rate
debt,  including  current  maturities,  is estimated using  discounted cash flow
analysis based on the Company's  current  incremental rates for similar types of
borrowing  arrangements.  The carrying value of the Company's  unsecured  senior
notes of $300 million had an aggregate  estimated  fair value of $124.5  million
and $226.4  million based upon  dealer-quoted  prices at December 31, 2002,  and
December 31, 2001, respectively.

Advertising

The Company expenses advertising costs in the period incurred.

Stock Based Compensation

During 1996, the Company adopted the disclosure  provisions of FASB Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based  Compensation
("FAS 123") with  respect to its stock  options.  As  permitted  by FAS 123, the
Company has elected to continue to account for employee stock options  following
the  intrinsic  value  method of  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

                                       55
<PAGE>

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

There were no options granted by the Company in 2002. The weighted-average  fair
value of options  granted  during 2001 and 2000 is  estimated at $5.44 and $6.02
per share, respectively,  on the grant date. These estimates were made using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions  for 2001 and 2000:  risk-free  interest  rate of 3.59%  and  5.06%;
expected  market price  volatility of 0.62 and 0.51;  weighted-average  expected
option life of 1.04 years and 0.94  years;  estimated  forfeitures  of 10.8% and
6.0%; 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>

                                                              2002              2001              2000
                                                        -------------------------------------------------
                                                                (In thousands, except per share data)
<S>                                                     <C>                <C>               <C>
Net loss available to common shareholders as
reported                                                $   (174,984)      $   (81,885)      $   (15,699)
Deduct:  Total stock-based employee compensation
expense determined under fair value based method,
net of related tax effects                                      (140)           (1,188)           (3,182)
                                                            --------           -------           -------
Net loss available to common shareholders pro forma         (175,124)          (83,073)          (18,881)
                                                            ========           =======           =======


Basic and Diluted loss per share as reported                  (14.94)            (7.14)            (1.31)
                                                            ========           =======           =======
Basic and Diluted loss per share pro forma                    (14.95)            (7.25)            (1.58)
                                                            ========           =======           =======
</TABLE>

2. State of the Industry and the Company

On  September  11, 2001,  four  commercial  aircraft  operated by two other U.S.
airlines were hijacked and destroyed in terrorist  attacks on the United States.
These attacks  resulted in significant  loss of life and property  damage in New
York City,  Washington,  D.C.  and  western  Pennsylvania.  In response to these
attacks,  on September 11, 2001 the FAA  temporarily  suspended  all  commercial
flights to, from and within the United  States until  September  13,  2001.  The
Company  resumed  limited  flight  operations  on September  13, 2001,  with the
exception of flights to and from Chicago-Midway Airport, which commenced partial
operations on September 14, 2001. From September 11, 2001 to September 14, 2001,
the Company canceled over 800 scheduled flights.

                                       56
<PAGE>

The  terrorist  attacks  of  September  11,  2001 and  generally  weak  economic
conditions  have adversely  affected the Company and the airline  industry.  The
industry as a whole, and the Company, suffered very significant financial losses
in 2001 and 2002. During 2002, two major air carriers,  US Airways Group and UAL
Corporation,  filed for  reorganization  under  Chapter 11 of the United  States
Bankruptcy Code.  Historically,  air carriers involved in  reorganizations  have
substantially  reduced their fares,  which could reduce  airline  yields further
from  current  levels.  Certain air  carriers  are seeking to recover,  at least
partially,  by  reducing  their  seat  capacity.  As  this  is  accomplished  by
eliminating  aircraft from operating  fleets,  the fair value of aircraft may be
adversely  affected.  The Company has recorded  substantial  charges to earnings
resulting  from  fleet  retirements  and  impairments  over the past two  years.
However,  during the period the Company has substantially  replaced its fleet of
aging  aircraft  with new  fuel-efficient  Boeing  aircraft.  These  new  Boeing
aircraft  are all leased and have higher  fixed  ownership  costs than the older
fleets.  The Company made large  operating  lease  payments on these aircraft in
early 2003,  which caused a substantial  decrease in the Company's  cash balance
since  December 31, 2002. In addition,  since all of these  aircraft are leased,
the Company has pledged receivables and other assets to secure debt, leaving the
Company  with few  unencumbered  assets.  The industry and the Company have also
been adversely  impacted by  substantially  higher  insurance  costs, and higher
passenger security costs.

The Company has benefited  from some of the U.S.  Government's  initiatives  for
assisting  the airline  industry.  Most  significant  to the Company was the Air
Transportation Safety and System Stabilization Act ("Act") passed in 2001, which
provided for,  among other things,  up to $5.0 billion in  compensation  to U.S.
airlines and air cargo carriers for direct and incremental losses resulting from
the September 11, 2001  terrorist  attacks and the  availability  of up to $10.0
billion in U.S.  Government  guarantees  of certain  loans made to air carriers,
which are administered by the newly-established Air Transportation Stabilization
Board ("ATSB").

The Company had recorded $66.3 million in U.S.  Government grant compensation as
of December 31, 2001. This estimate was based on guidance available from the DOT
at the time for identifying  those expenses it deemed  reimbursable.  Throughout
2002, the Company discussed the calculation with the DOT, and as of December 31,
2002 had  reversed  approximately  $16.2  million  ($15.2  million in the second
quarter and $1.0 million in the fourth  quarter) of that revenue and revised its
estimate of total U.S.  Government grant compensation to $50.1 million. In early
2003, the Company received the last cash installment of grant reimbursement from
the U.S. Government, consistent with that estimate.

In November 2002, the Company also obtained a $168.0 million  secured term loan,
of which $148.5 million was guaranteed by the ATSB. The net proceeds of the term
loan were  approximately  $164.8 million,  after deducting  issuance costs.  The
Company used a portion of the net proceeds to repay  borrowings  on its existing
revolving  bank  credit  facility  and to  collateralize  new letters of credit,
previously  secured by the bank  facility.  The  remainder  of the  proceeds  of
approximately  $104.7 million will be used for general  corporate  purposes.  In
conjunction  with  obtaining the secured term loan, the Company issued a warrant
to the Federal  Government  to  purchase up to 1.5 million  shares of its common
stock, and additional  warrants to other loan participants to purchase up to 0.2
million  shares of its common stock,  in each case at an exercise price of $3.53
per  share  over a term  of ten  years.  (See  "Note  5 -  Debt"  and  "Note 9 -
Shareholders' Equity (Deficit)" for additional information about the loan.)

While the  Company  believes  that  adverse  industry  conditions  are likely to
continue throughout 2003, the Company's management believes it has a viable plan
to ensure  sufficient  cash to fund  operations  during the next 12  months.  In
addition to the assistance the Company has already  received in the form of U.S.
Government  grant  compensation  and the secured  term loan,  the plan calls for
focusing  marketing efforts on those routes where the Company believes it can be
a leading  provider and  implementing  a number of cost-saving  initiatives  the

                                      57
<PAGE>

Company  believes  will  enhance its  low-cost  advantage.  Although the Company
believes  the  assumptions   underlying  its  2003  financial   projections  are
reasonable,  there are  significant  risks which could cause the Company's  2003
financial  performance  to be  different  than  projected.  These  risks  relate
primarily  to further  declines in demand for air travel,  further  increases in
fuel prices,  the uncertain outcome of the two major airline  bankruptcies filed
in 2002, the possibility of other airline bankruptcy filings,  and the uncertain
outcome and geopolitical impact of the conflict in the Middle East.

3. Cash and Cash Equivalents

Cash and cash equivalents consist of the following:


                                                      December 31,
                                                2002             2001
                                           ----------------------------------
                                                     (in thousands)
Cash and money market funds                $   176,404      $   180,388
U.S. Treasury repurchase agreements             23,756            4,051
                                           ----------------------------------
                                            $  200,160      $   184,439
                                           ==================================



4. Property and Equipment

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

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                      2002             2001
                                                                -----------------------------
                                                                         (in thousands)
<S>                                                             <C>             <C>
Flight equipment, including airframes, engines and other        $    312,652    $     327,541
Less accumulated depreciation                                         94,173           58,396
                                                                -------------   -------------
                                                                     218,479          269,145
                                                                -------------   -------------
Facilities and ground equipment                                      134,355          119,975
Less accumulated depreciation                                         87,207           74,177
                                                                -------------   -------------
                                                                      47,148           45,798
                                                                -------------   -------------
                                                                $    265,627    $     314,943
                                                                =============   =============
</TABLE>

Depreciation and amortization expense related to property and equipment was
$68.9 million, $113.3 million and $118.5 million for 2002, 2001 and 2000,
respectively.

                                       58
<PAGE>

5.       Debt

Debt consists of the following:

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                       2002         2001
                                                                                   --------      --------
                                                                                      (in thousands)

<S>                                                                                <C>           <C>
Partially guaranteed term loan, variable rate of LIBOR plus a margin,              $168,000      $      -
averaging 2.8% in 2002, payable in varying installments from November
2003 through November 2008


Unamortized discount on partially guaranteed term loan                               (7,400)            -

Unsecured Senior Notes, fixed rate of 10.5%, payable in August 2004                 175,000       175,000


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


Aircraft pre-delivery deposit finance facilities, variable rates of LIBOR plus
3.0% to 3.25%, averaging 4.1% in 2002 and 6.2% in 2001,
payable upon delivery of aircraft                                                     8,384       118,239


Secured note payable to institutional lender, variable rate of LIBOR
plus 2.0%, averaging 5.0% in 2002 and 6.7% in 2001, payable in varying
installments through October 2005                                                     7,675         9,375


Secured note payable to institutional lender, variable rate of LIBOR
plus 2.0%, averaging 5.0% in 2002 and 6.7% in 2001, payable in varying
installments through March 2005                                                       6,683         8,383


Mortgage note payable to institutional lender, fixed rate of 8.75%,
payable in varying installments through June 2014                                     9,080         9,538


Mortgage note payable to institutional lender, fixed rate of 8.30%,
payable in varying installments through June 2014                                     6,915         7,280


City of Chicago variable rate (averaging 1.5% in 2002 and 2.7% in 2001)
special facility revenue bonds, payable in December 2020                              6,000         6,000



Borrowings against secured revolving bank credit facility                                 -        35,000


Other                                                                                 4,091         3,777
                                                                                   --------      --------
                                                                                    509,428       497,592

Less current maturities and short-term debt                                          22,575       124,059
                                                                                   --------      --------
                                                                                   $486,853      $373,533
                                                                                   ========      ========
</TABLE>

                                       59
<PAGE>

On November 20, 2002, the Company  obtained a $168.0 million  secured term loan,
of which $148.5  million is guaranteed by the Air  Transportation  Stabilization
Board.  Interest is payable  monthly at LIBOR plus a margin.  Guarantee  fees of
5.5% of the outstanding  guaranteed principal balance in 2003 with escalation to
9.5% on the outstanding  guaranteed  principal  balance in 2004 through 2008 are
payable quarterly.  The net proceeds of the term loan were approximately  $164.8
million,  after deducting  issuance costs. The Company used a portion of the net
proceeds to repay borrowings on its existing  revolving bank credit facility and
to collateralize new letters of credit, previously secured by the bank facility.
Upon  repayment of the  borrowings  and letters of credit,  the  revolving  bank
credit facility  terminated,  and any assets  previously held as collateral were
released.  The  additional  secured term loan proceeds of  approximately  $104.7
million will be used for general  corporate  purposes.  The secured term loan is
subject to certain  restrictive  covenants  and is  collateralized  primarily by
certain  receivables,  certain aircraft,  spare engines,  and rotable parts. The
receivables had a carrying amount of approximately  $44.2 million as of December
31,  2002.  The  aircraft,  spare  engines and parts  consist of three  Lockheed
L-1011-500  aircraft,  nine Lockheed  L-1011-50 and 100 aircraft,  two Saab 340B
aircraft, 24 Rolls Royce RB211 spare engines and Boeing 757-200,  Boeing 757-300
and Boeing  737-800  rotable  parts,  which have a combined  carrying  amount of
approximately  $95.6  million as of  December  31,  2002.  In  conjunction  with
obtaining  the secured  term loan,  the Company  issued a warrant to the Federal
Government  to  purchase  up to 1.5  million  shares of its  common  stock,  and
additional  warrants  to other loan  participants  to purchase up to 0.2 million
shares of its common stock, in each case at an exercise price of $3.53 per share
over a term of ten years.  The Company has  allocated  $7.4 million as the total
value of warrants issued.  (See "Note 9 - Shareholders'  Equity (Deficit).") The
effective  rate on the secured term loan,  due to the issuance of the  warrants,
was 3.2% as of December 31, 2002.

In July  1997,  the  Company  sold  $100.0  million  principal  amount  of 10.5%
unsecured senior notes.  The Company sold an additional $75.0 million  principal
amount of these  notes in December  1999.  Interest on these notes is payable on
February 1 and August 1 of each year.  Effective August 1, 2002, the Company may
redeem the notes,  in whole or in part,  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.

In December  1998, the Company sold $125.0  million  principal  amount of 9.625%
unsecured  senior  notes.  Interest  on these  notes is  payable  on June 15 and
December 15 of each year. The Company may redeem the notes, in whole or in part,
at any time on or after June 15, 2003,  initially at 104.81% of their  principal
amount plus accrued  interest,  declining to 102.41% of their  principal  amount
plus accrued interest on June 15, 2004, then to 100.0% of their principal amount
plus accrued interest at maturity.

In June 1999,  the Company  obtained an $8.0 million loan at 8.30%  secured by a
15-year mortgage on the new Maintenance and Operations Center. This building has
a carrying amount of $7.8 million as of December 31, 2002.

In March and October 2000,  the Company  issued two $11.5 million  variable rate
five-year notes, each  collateralized by one Lockheed L-1011-500  aircraft.  The
related aircraft have a combined carrying amount of $22.6 million as of December
31, 2002.

In September 2000, the Company obtained a $10.0 million,  14-year loan at 8.75%,
secured  by  a  mortgage  on  its  maintenance   facility  at  the  Indianapolis
International  Airport. The building has a carrying amount of $8.2 million as of
December 31, 2002.

In December  2000,  the Company  entered into three  finance  facilities to fund
pre-delivery deposits on the new Boeing 757-300 and Boeing 737-800 aircraft. The

                                       60
<PAGE>

Company  obtained  the first  facility  from Banca  Commerciale  Italiana  which
provided up to $75.0  million in  pre-delivery  deposit  funding that matured on
December  31,  2002.  The  Company  obtained a second  facility  from GE Capital
Aviation Services,  Inc. which provided for up to approximately $58.2 million in
pre-delivery  deposit  funding  that  matured on December  31,  2002.  The third
facility,  obtained  from  Rolls-Royce  Plc.,  provides  up to $40.0  million in
pre-delivery  deposits and matures on August 31,  2003.  As of December 31, 2002
and 2001, the Company had borrowed $8.4 and $118.2 million on these  facilities.
This debt has been  classified as current in the  accompanying  balance  sheets,
because it will be repaid through the return of related pre-delivery deposits on
aircraft  scheduled for delivery within 12 months of each balance sheet date, as
the aircraft  will be acquired and paid for by third parties who will lease them
to the Company. Interest on these facilities is payable monthly.

Although  the Company  typically  finances  aircraft  with  long-term  operating
leases, it has a bridge financing facility which provides for maximum borrowings
of $200.0 million to finance new Boeing 737-800  aircraft and new Boeing 757-300
aircraft.  Borrowings under the facility bear interest, at the option of ATA, at
LIBOR plus a margin,  which  depends on the  percentage  of the  purchase  price
borrowed  and whether the  borrowing  matures 18 or 24 months after the aircraft
delivery  date.  During 2001,  the Company  borrowed  against  this  facility to
temporarily  finance three 757-300  aircraft.  These  aircraft were  permanently
financed with long-term  operating leases in the fourth quarter of 2001.  During
2002,  the Company  borrowed  against this facility to  temporarily  finance one
737-800  aircraft and three 757-300  aircraft.  These aircraft were  permanently
financed with  long-term  operating  leases in the first and second  quarters of
2002. The company had no borrowings against this bridge financing facility as of
December 31, 2002 and 2001.

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

Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>

                                          December 31, 2002
                                          -----------------
                                           (in thousands)
<S>                                          <C>
2003                                         $ 22,575

2004                                          208,545

2005                                          162,674

2006                                           30,451

2007                                           30,026

Thereafter                                     62,557
                                             --------
    Total cash payments                       516,828
Less amount representing discount               7,400
                                             --------
    Total balance outstanding
    at December 31, 2002                     $509,428
                                             ========
</TABLE>

                                       61
<PAGE>

Interest  capitalized in connection with long-term asset purchase agreements and
construction projects was $7.8 million, $29.0 million and $15.3 million in 2002,
2001, and 2000,  respectively.  The capitalized  interest includes $1.4 million,
$14.7 million and $7.9 million in 2002, 2001 and 2000, respectively, of interest
to be paid to Boeing upon delivery of certain  Boeing 737-800 and Boeing 757-300
aircraft in lieu of the Company  making  additional  pre-delivery  deposits,  as
allowed by the purchase agreement.

6. Lease Commitments

At December 31, 2002, the Company had the following operating aircraft leases:

<TABLE>
<CAPTION>

                                        Total Leased     Initial Lease Expirations     Initial Lease Terms
                                        ------------     -------------------------     -------------------
<S>                                          <C>           <C>                           <C>
Lockheed L-1011-100                           1                     2003                    60 months
Boeing 727-200 (1)                            1                     2003                    72 months
Boeing 757-200                               16            Between 2003 and 2022          1 to 22 years
Boeing 757-300                               10                2021 and 2022                20 years
Boeing 737-800                               30            Between 2016 and 2022         15 to 20 years
SAAB 340B                                    15                2009 and 2012                9.5 years
Engines - Lockheed L-1011-500                 6                2006 and 2007                 7 years
Engines - Boeing 757-200                      5            Between 2008 and 2011          9 to 15 years
Engines - Boeing 757-300                      2                     2024                   22.5 years
Engines - Boeing 737-800                      2                     2021                    20 years
</TABLE>

(1) As of December  31,  2002,  this  aircraft  has been  retired  from  revenue
service, but the Company remains obligated on the lease.

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

As of December  31,  2002,  the Company had other  long-term  leases  related to
certain ground facilities,  including terminal space and maintenance  facilities
and certain ground equipment,  with lease terms that vary from 2 to 45 years and
expire at various  dates  through  2040.  The lease  agreements  relating to the
ground   facilities,   which  are  primarily  owned  by  governmental  units  or
authorities,  generally  do not provide for transfer of  ownership,  nor do they
contain options to purchase.

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

                                       62
<PAGE>

Future minimum lease payments at December 31, 2002, for noncancelable  operating
leases with initial terms of more than one year are as follows:

<TABLE>
<CAPTION>

                                        Facilities
                          Flight        and Ground
                         Equipment       Equipment       Total
                     ----------------------------------------------
                                     (in thousands)

<C>                  <C>              <C>              <C>
2003                 $   279,554      $   13,565       $    293,119


2004                     266,809          12,987            279,796


2005                     258,172          10,629            268,801


2006                     247,723           9,589            257,312


2007                     251,292           9,286            260,578


Thereafter             2,245,812          29,205          2,275,017
                     -----------       ---------       ------------
                     $ 3,549,362       $  85,261       $  3,634,623
                     ===========       =========       ============

</TABLE>

Rental  expense  for all  operating  leases  in 2002,  2001 and 2000 was  $212.8
million, $119.2 million and $88.0 million, respectively.

7. Income Taxes

The provision for income tax credit consisted of the following:

<TABLE>
<CAPTION>

                                                                    December 31,
                                                        2002            2001            2000
                                                    -------------------------------------------
                                                                   (In thousands)
<S>                                                  <C>             <C>             <C>
Federal:
    Current                                          $  (15,743)     $    4,070      $       -
    Deferred                                             (6,888)        (40,546)        (4,278)
                                                      ----------      ----------      ---------
                                                        (22,631)        (36,476)        (4,278)
State:
    Current                                                 306             510            328
    Deferred                                             (2,625)         (3,784)          (657)
                                                      ----------      ----------      ---------
                                                         (2,319)         (3,274)          (329)
                                                      ----------      ----------      ---------
Income tax credit                                    $  (24,950)     $  (39,750)     $  (4,607)
                                                     ==========      ==========      =========

</TABLE>

                                       63
<PAGE>


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

<TABLE>
<CAPTION>

                                                                           December 31,
                                                            2002               2001                 2000
                                                      ----------------------------------------------------
                                                                             (In thousands)

<S>                                                   <C>                  <C>                 <C>
Federal income tax credit at statutory rate           $  (67,975)          $  (40,626)         $   (6,841)

State income tax credit net of federal benefit            (4,108)              (2,328)               (143)

Non-deductible expenses                                    2,393                2,041               1,872

Valuation allowance                                       43,324                    -                   -

Other, net                                                 1,416                1,163                 505
                                                       ----------           ----------          ----------
Income tax credit                                     $  (24,950)          $  (39,750)         $   (4,607)
                                                       ==========           ==========          ==========

</TABLE>

Deferred income taxes arise from temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
Deferred tax liability and asset components are as follows:

<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                                2002              2001
                                                                                     (In thousands)
Deferred tax liabilities:

<S>                                                                         <C>                 <C>
     Property and equipment                                                 $  15,353           $ 35,031

     Other taxable temporary differences                                            -                342
                                                                             ---------           --------
         Deferred tax liabilities                                              15,353             35,373
                                                                             ---------           --------
Deferred tax assets:

     Tax benefit of net operating loss carryforwards                           40,766                383

     Alternative minimum tax and other tax credit carryforwards                 1,261             19,528

     Vacation pay accrual                                                       6,526              4,723

     Deferred rent expense                                                      3,985                  -

     Other deductible temporary differences                                     6,139              2,042
                                                                             ---------           --------
         Deferred tax assets                                                   58,677             26,676
                                                                             ---------           --------
Valuation allowance                                                           (43,324)                 -
                                                                             ---------           --------
         Net deferred tax liability                                         $       -           $  8,697
                                                                             =========           ========

Deferred taxes classified as:

     Current asset                                                          $        -          $  4,958

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

                                       64

<PAGE>

As of December 31, 2002, the Company had incurred a three-year  cumulative loss.
Because of this cumulative loss and the presumption under accounting  principles
generally  accepted in the United  States that net deferred tax assets should be
fully  reserved  if it is more  likely  than not that they will not be  realized
through  carrybacks  or other tax  strategies,  the Company has  recorded a full
valuation allowance against its net deferred asset of $43.3 million.  Also as of
December  31,  2002,  the  Company has a income tax refund  receivable  of $15.8
million. Payment for this refund was received in March 2003.

Approximately  $108.6  million of net  operating  loss  carryover  remains as of
December 31, 2002.  Its use is limited to future  taxable income of the Company.
The carryover will expire starting in 2020.

8. Retirement Plan

The Company has a defined  contribution  401(k)  savings plan which provides for
participation  by  substantially  all the Company's  employees  immediately upon
hire.  The Company has elected to  contribute  an amount equal to 60.0% in 2002,
55.0% in 2001 and 50.0% in 2000, of the amount  contributed by each  participant
up  to  the  first  six  percent  of  eligible  compensation.  Company  matching
contributions  expensed in 2002,  2001 and 2000 were $5.2 million,  $4.7 million
and $3.9 million, respectively.

Effective January 1, 2003, the Company will have a defined  contribution pension
plan for cockpit crewmember  employees that will be fully funded by the Company.
In the 2003 plan year,  the Company will  contribute  between 4.0% and 6.5% of a
cockpit crewmember's  eligible earnings,  depending on years of service with the
Company. The contribution percentages increase in future plan years. New cockpit
crewmembers   will  be  eligible  for  the  plan   immediately  upon  hire,  but
contributions  vest after five years of  service.  The  Company  estimates  that
contribution expense for this plan in 2003 will be approximately $5.2 million.

9. Shareholders' Equity (Deficit)

Since 1994,  the Company's  Board of Directors has approved the repurchase of up
to 1,900,000  shares of the Company's common stock. As of December 31, 2002, the
Company had repurchased 1,711,440 common shares at a cost of $24.8 million.

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

                                       65
<PAGE>

A summary of common stock option changes follows:

<TABLE>
<CAPTION>

                                                      Number        Weighted-Average
                                                     of Shares       Exercise Price
                                                     ---------     -----------------
<S>                                                 <C>           <C>
Outstanding at December 31, 1999                     2,493,160     $          13.41
                                                    ---------     -----------------
     Granted                                           638,550                15.69

     Exercised                                        (183,906)                8.61

     Canceled                                          (37,331)               17.88
                                                     ---------     -----------------
Outstanding at December 31, 2000                     2,910,473                14.19
                                                     ---------     -----------------
     Granted                                           106,600                12.21

     Exercised                                        (181,949)                9.18

     Canceled                                         (121,075)               21.60
                                                     ---------     -----------------
Outstanding at December 31, 2001                     2,714,049                14.14
                                                     ---------     -----------------
     Granted                                                 -                    -

     Exercised                                         (54,261)                8.27

     Canceled                                         (272,013)               19.13

Outstanding at December 31, 2002                     2,387,775     $          13.71
                                                     =========     ================

Options exercisable at December 31, 2000             1,741,092     $          11.51
                                                     =========     ================

Options exercisable at December 31, 2001             2,528,633     $          13.80
                                                     =========     ================

Options exercisable at December 31, 2002             2,329,076     $          13.69
                                                     =========     ================
</TABLE>

Options outstanding at December 31, 2002 expire from January 2003 to November
2011. A total of 3,112,671 shares are reserved for future grants as of December
31, 2002,  under the 1993, 1996 and 2000 Plans.  The following table  summarizes
information concerning outstanding and exercisable options at December 31, 2002:

<TABLE>
<CAPTION>
Range of Exercise Prices                                     $6 - 8             $9 - 14             $15 - 19           $20 - 27
------------------------                                     ------             -------             --------           --------
<S>                                                        <C>                 <C>                 <C>                <C>
Options outstanding:
  Weighted-Average Remaining Contractual Life              5.1 years           4.6 years           5.6 years          6.0 years
  Weighted-Average Exercise Price                          $    7.97           $    9.47           $   15.80          $   26.04
  Number                                                     196,000           1,207,925             575,700            408,150

Options exercisable:
  Weighted-Average Exercise Price                          $    7.97           $    9.44           $   15.82          $   26.07
  Number                                                     196,000           1,190,592             536,334            406,150
</TABLE>

In November  2002, in connection  with the  guaranteed  term loan agreement (See
"Note 5 - Debt"),  the  Company  issued  1,478,059  warrants  to the Air Traffic
Stabilization  Board  and  194,089  warrants  to other  loan  participants.  The

                                       66
<PAGE>

warrants  provide for the purchase of shares of the Company's common stock at an
exercise price of $3.53 per share and a term of ten years.  Upon valid exercise,
the holders of the warrants are entitled to the  representative  shares assigned
to the warrants  which expire in November 2012.  For  accounting  purposes,  the
warrants were valued at $7.4 million, or $4.44 per share. This estimate was made
using   the   Black-Scholes   warrant   pricing   model   with   the   following
weighted-average  assumptions  for  2002:  risk-free  interest  rate  of  3.32%;
expected market price volatility of 0.68; weighted-average expected warrant life
of 10 years; and no dividends.

The  Black-Scholes  warrant  valuation model was developed for use in estimating
the fair value of traded  warrants  which have no vesting  restrictions  and are
fully transferable.  In addition, warrant valuation models use highly subjective
assumptions,   including  the  expected  stock  price  volatility.  Because  the
Company's warrants have  characteristics  significantly  different from those of
traded  warrants,  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 warrants.

As of December 31, 2002, the Company has 6,699,305  common stock shares reserved
for  issuance  in relation  to its  outstanding  stock  options,  warrants,  and
convertible  redeemable  preferred stock.  (See "Note 10 - Redeemable  Preferred
Stock.")

10.  Redeemable Preferred Stock

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

Also, in the last half of 2000, the Company issued and sold 500 shares of Series
A redeemable  preferred  stock,  without par value ("Series A Preferred"),  at a
price of $100,000 per share. The purchaser of the Series A Preferred is entitled
to cumulative semiannual dividends at an annual rate of 8.44% on the liquidation
amount ($100,000 per share) of the Series A Preferred. The Series A Preferred is
optionally  redeemable by the Company under certain conditions,  but the Company
must  redeem the  Series A  Preferred  in equal  semiannual  payments  beginning
December 28, 2010,  and ending  December 28, 2015.  Optional  redemption  by the
Company  may  occur  at a  redemption  premium  of 50.0%  of the  dividend  rate
beginning December 28, 2003,  decreasing 10.0% per year to 20.0% of the dividend

                                       67
<PAGE>

rate  commencing  December  28,  2006,  and to 0.0% after the seventh year after
issuance  plus  cumulative  unpaid  dividends,   if  any.  Prior  to  the  third
anniversary of issuance,  the Company may redeem the Series A Preferred with net
proceeds of a public offering of the Company's common stock.  Shares of Series A
Preferred have the right to vote on or consent to only the following matters (in
addition to any voting rights otherwise  required by law): (1) amendments to the
Company's Articles of Incorporation which are adverse to the holders of Series A
Preferred;  (2) if three semiannual  dividends go unpaid,  the owner of Series A
Preferred,  together  with the owner of Series B Preferred and the owners of any
other preferred  stock ranking equal to Series A Preferred,  will be entitled to
elect at the next annual  shareholders'  meeting,  25% of the Company's Board of
Directors,  but no less than three directors; (3) approval of (a) an acquisition
by the Company or one of its subsidiaries of assets and liabilities from a third
party the net asset value of which equals 10% of the Company's net  consolidated
assets in its most recent publicly  available  balance sheet, or (b) a merger by
the  Company  or  one of  its  subsidiaries  with a  third  party  involving  an
acquisition or disposition  of more than 10% of the Company's  consolidated  net
assets  in its most  recent  publicly  available  balance  sheet  (other  than a
disposition of all the Company's  L-1011 or Boeing 727 aircraft) that, in either
case,  results in a downgrade of the Company's  credit rating by Moody's to "C1"
or by Standard & Poor's to "C+," unless the Company  offers to redeem the Series
A Preferred prior to that transaction at a price equal to the liquidation amount
plus accrued and unpaid  dividends to the redemption  date; and (4) increases in
the number of  authorized  shares of Series A Preferred  and  authorizations  of
preferred  stock ranking  senior to Series A Preferred.  Votes will be allocated
among holders of preferred stock based on the percentage owned by each holder of
the total  liquidation  amount of all series of preferred stock. The Company has
the right on any date on which  dividends  are  payable to exchange in whole but
not in part subordinated  notes for shares of Series A Preferred;  the principal
amount of any exchanged  subordinated notes will equal the liquidation amount of
the shares of Series A Preferred, plus any accrued and unpaid dividends.

The Company's  unsecured senior notes contain certain financial  covenants which
limit the Company's ability to pay preferred stock dividends. As of December 31,
2002, the Company was restricted from paying preferred stock dividends under the
covenant.  Therefore,  accrued  preferred  dividends  of  $2.485  million  as of
December  31,  2002  have  been  combined  with  the  preferred   stock  in  the
accompanying balance sheets.

                                       68
<PAGE>

11.   Earnings per Share

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

<TABLE>
<CAPTION>


                                                            2002                    2001                  2000
                                                     --------------------------------------------------------------
<S>                                                  <C>                    <C>                   <C>
Numerator:
    Net loss                                         $    (169,264,000)     $    (76,317,000)     $    (15,324,000)
    Preferred stock dividends                               (5,720,000)           (5,568,000)             (375,000)
                                                     -----------------      ----------------      ----------------

    Loss available to common shareholders -
    numerator for basic and diluted earnings per
    share                                            $    (174,984,000)     $    (81,885,000)     $   ( 15,699,000)
                                                     =================      ================      ===== ==========


Denominator:
    Denominator for basic and diluted earnings
    per share - adjusted weighted average shares           11,711,906             11,464,125            11,956,532
                                                     =================      ================      ================

Basic loss per share                                  $         (14.94)     $          (7.14)     $          (1.31)
                                                      =================      ================      ================

Diluted loss per share                               $          (14.94)     $          (7.14)     $          (1.31)
                                                     =================      ================      ================

</TABLE>

In accordance  with FASB  Statement of Financial  Accounting  Standards No. 128,
"Earnings Per Share," 1,914,486,  1,914,486, and 533,545 common stock equivalent
shares upon conversion of convertible  redeemable preferred stock in 2002, 2001,
and 2000,  respectively,  have been  excluded  from the  computation  of diluted
earnings per share because their effect would be antidilutive.  In addition, the
impact of 59,400, 553,025, and 626,521 employee stock options in 2002, 2001, and
2000, respectively,  was not included in the computation of diluted earnings per
share  because  their  effect would be  antidilutive.  In 2002 the impact of the
1,672,148  incremental  shares from the assumed  exercise of warrants  issued in
conjunction  with the guaranteed  term loan were not included in the computation
of diluted earnings per share because their effect would be antidilutive.

12.  Commitments and Contingencies

In 2000, the Company  entered into a purchase  agreement with the Boeing Company
to  purchase  directly  from  Boeing 10 new  Boeing  757-300s  and 20 new Boeing
737-800s. The Boeing 737-800 aircraft are powered by General Electric CFM56-7B27
engines,  and the Boeing 757-300  aircraft are powered by Rolls-Royce  RB211-535
E4C engines.  The Company also  received  purchase  rights for an  additional 50
aircraft.  The  manufacturer's  list price is $73.6 million for each 757-300 and
$52.4 million for each 737-800,  subject to escalation.  The Company's  purchase
price for each aircraft is subject to various discounts. To fulfill its purchase
obligations,  the Company has arranged for each of these aircraft, including the
engines,  to be  purchased  by third  parties  that  will,  in turn,  enter into
long-term  operating  leases with the  Company.  As of December  31,  2002,  the
Company had taken delivery of 13 Boeing 737-800s and 10 Boeing 757-300s obtained
directly  from Boeing.  All  remaining  aircraft to be purchased  directly  from
Boeing are scheduled for delivery between July 2004 and December 2004.  Aircraft
pre-delivery  deposits  are required  for these  purchases,  and the Company has
funded these deposits  using  operating  cash and primarily  short-term  deposit
finance  facilities.  As of December 31, 2002,  the Company had $21.2 million in
pre-delivery  deposits outstanding for these aircraft, of which $8.4 million was
provided  by  deposit  finance  facilities.   Upon  delivery  of  the  aircraft,
pre-delivery  deposits  funded  with  operating  cash  will be  returned  to the
Company,  and those funded with deposit  facilities  will be used to repay those
facilities.

                                       69
<PAGE>

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

The  Company  has  operating  lease  agreements  in place to lease 14 new Boeing
737-800s from International Lease Finance Corporation  ("ILFC").  As of December
31, 2002,  the Company had taken  delivery of 12 Boeing  737-800s that are being
leased from ILFC. The remaining  aircraft under these operating lease agreements
are currently scheduled for delivery in June 2003 and November 2003.

The Company  has an  agreement  with  General  Electric  to purchase  four spare
engines, which are scheduled for delivery between 2003 and 2006.

The  Company  intends  to  finance  all of  these  future  aircraft  and  engine
deliveries with operating  leases.  However,  no such leases are in place as the
Company has not received the aircraft or engines.  The Company derived  payments
for these expected future lease obligations using leases for comparable aircraft
currently in place. These estimated future payments follow:

<TABLE>
<CAPTION>

                   Expected
                    Future
                    Lease
                  Obligations
                  -----------
                 (in thousands)


<S>              <C>
2003             $   5,155

2004                33,716

2005                56,440

2006                60,708

2007                56,011

Thereafter         604,780
                 ---------
                 $ 816,810
                 =========

</TABLE>

In 2001, the Company entered into short-term operating leases with BATA to lease
back nine Boeing 727-200 aircraft, all of which have terminated.  The Company is
subject to lease return  conditions on these nine operating leases upon delivery
of any related  aircraft to a  third-party  by BATA.  On January 31, 2003,  BATA
entered  into a lease  agreement  with a third  party  lessee on one of the nine
aircraft. The return conditions set forth in the short-term operating lease were
satisfied by the completion of a cargo configuration on the aircraft. Management
believes it is reasonably possible that a lessee or buyer will be identified for
the  remaining  eight  aircraft.  The  Company  estimates  that it  could  incur
approximately  $6.0  million of expense  to meet the return  conditions,  if all
eight of the aircraft were leased by BATA to third parties.  If the aircraft are
leased as cargo  carriers,  it is likely  the lease  return  conditions  will be
satisfied by completing the cargo  configuration  on the aircraft.  No liability

                                       70
<PAGE>

was recorded for these  return  conditions  as of December 31, 2002 as it is not
probable that it will be paid.

In  the  Company's   aircraft  financing   agreements,   the  Company  typically
indemnifies  the financing  parties,  trustees  acting on their behalf and other
related parties against  liabilities  that arise from the  manufacture,  design,
ownership,  financing,  use,  operation and  maintenance of the aircraft and for
tort liability,  whether or not these  liabilities arise out of or relate to the
negligence of these  indemnified  parties,  except for their gross negligence or
willful  misconduct.  The Company  expects that it would be covered by insurance
(subject to deductibles) for most tort liabilities and related indemnities under
these aircraft leases.

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.    Segment Disclosures

The  Company  identifies  its  segments  on the basis of  similar  products  and
services.  Through the first half of 2002, the Company identified two reportable
segments.  The airline segment  derived its revenues  primarily from the sale of
scheduled  service or charter air  transportation  and the ATALC segment derived
its revenues from the sale of vacation packages,  including air  transportation,
hotels and other ground arrangements.

On July 1, 2002, the Company outsourced the management  operations of two of its
ATALC  brands,  ATA  Vacations  and Travel  Charter  International  ("TCI"),  to
Milwaukee-based The Mark Travel Corporation  ("MTC").  MTC creates,  advertises,
takes  reservations  and  delivers the  services of ATA  Vacations  and TCI. MTC
receives  revenue from the package sales, and the Company receives a royalty fee
from MTC. As a result of the  outsourcing  arrangement,  this segment has a less
material  effect  on the  consolidated  financial  statements,  and is no longer
considered a reportable segment as of December 31, 2002.

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

The U.S.  Government is the only customer that  accounted for more than 10.0% of
consolidated  revenues.  U.S. Government revenues accounted for 13.9%, 13.1% and
14.6% of consolidated revenues for 2002, 2001 and 2000, respectively.

14. Fuel Price Risk Management

During 2002,  2001, and 2000, the Company  entered into fuel hedge  contracts to
minimize the risk of fuel price  fluctuation.  During  these years,  the Company
hedged fuel using heating oil swap  agreements,  which  establish  specific swap
prices for designated periods.

                                       71
<PAGE>


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

In  accordance  with FAS 133,  the  Company  accounted  for its heating oil swap
agreements as cash flow hedges.  Upon the adoption of FAS 133, the fair value of
the Company's fuel hedging  contracts  representing the amount the Company would
pay if the agreements  were  terminated was $0.6 million.  The Company  recorded
this  amount,  net of income  taxes of $0.2  million,  in other assets and other
current  liabilities,  respectively,  with a corresponding entry of the net fair
value in accumulated  other  comprehensive  income on the  consolidated  balance
sheet. All changes in fair value of the heating oil swap agreements  during 2002
and 2001 were effective for purposes of FAS 133, so these valuation changes were
recognized  throughout these years in other comprehensive loss and were included
in  earnings  as a  component  of fuel  expense  only  upon  settlement  of each
agreement.  During 2002, the Company recognized hedging gains of $0.5 million on
settled contracts in fuel expense. During 2001, the Company recognized losses on
settled contracts in fuel expense of $2.6 million.

15. Fleet Impairment

Effective  January 1, 2002,  the Company  adopted  FASB  Statement  of Financial
Accounting  Standard  No.  144,  Accounting  for the  Impairment  or Disposal of
Long-Lived  Assets ("FAS 144"),  which  superseded  FASB  Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived  Assets to Be Disposed of ("FAS 121").  However,  the Company
continues to account for the fleet and related  assets that were impaired  prior
to January 1, 2002 and classified as held for sale under FAS 121, as required by
FAS 144.

In 2001,  the Company  decided to retire its Boeing  727-200  fleet earlier than
originally planned,  and all of these aircraft were removed from revenue service
by the middle of 2002. In 2001, the Company  performed an impairment  review and
determined  that this  fleet  and  related  rotable  parts  and  inventory  were
impaired.  In 2001,  the Company  recorded an asset  impairment  charge of $44.5
million  ($35.2  million  in the third  quarter  and $9.3  million in the fourth
quarter)  to reduce the  carrying  amount of the  Boeing  727-200  aircraft  and
related  assets  to  their  estimated  fair  value,   including  those  aircraft
underlying  the  investment  in BATA.  During  2002,  the  Company  recorded  an
additional  impairment  charge of $35.9  million  ($14.8  million  in the second
quarter,  $18.8  million in the third  quarter,  and $2.3  million in the fourth
quarter) to further  reduce the  carrying  amount of these  assets.  The current
estimate  of this  fleet's  fair  value is based on quoted  market  prices.  The
carrying  amount of one Boeing 727-200  aircraft not yet transferred to BATA and
related  assets  are  classified  as  long-term  assets  held  for  sale  in the
accompanying balance sheet in accordance with FAS 121.

In 2001, the Company also determined  that the Lockheed  L-1011-50 and 100 fleet
and  related  rotable  parts and  inventory  were  impaired  under FAS 121,  and
recorded an impairment charge of $67.8 million in the fourth quarter of 2001. In
the fourth quarter of 2002, the Company recorded an additional impairment charge
of $7.6 million in accordance with FAS 144 to further reduce the carrying amount
of the  Lockheed  L-1011-50  and 100 aircraft  and related  assets.  The Company
estimated  this  fleet's fair value using  discounted  cash flow  analysis.  The
carrying amount of these assets is classified as assets held for use and appears

                                       72
<PAGE>

in the property and equipment section of the accompanying  consolidated  balance
sheets.  The assets are being  depreciated in conjunction with the planned fleet
retirement schedule.

16.   Goodwill and Other Intangible Assets

The Company has no material intangible assets other than goodwill. The Company's
goodwill  is related to its ATALC,  ATA Cargo and Chicago  Express  subsidiaries
acquired in 1999.  Prior to the  adoption of FAS 142 by the Company in the first
quarter of 2002, the Company amortized goodwill on a straight-line basis over 20
years in accordance with APB 17. The Company  recorded no goodwill  amortization
expense in 2002 and $1.3 million in both 2001 and 2000.

As  required  by FAS 142,  the  Company  performed  its  first  annual  goodwill
impairment  test in the fourth  quarter of 2002.  By this time,  the Company had
outsourced  the  management  of two of its  ATALC  brands  to MTC.  The  Company
continues to manage the other ATALC brands including the Key Tours Canadian Rail
programs,  Key Tours Las Vegas  ground  operations  and the Kodiak  Call  Center
(collectively  "KTI  brands").  (See  further  discussion  in Note 13,  "Segment
Disclosures.") Based on guidance provided in FAS 142, the Company identified two
FAS  142  reporting  units.  In the  goodwill  impairment  review,  the  Company
determined that the goodwill related to Chicago  Express,  ATA Cargo and the MTC
reporting  unit was not impaired.  However,  the estimated fair value of the KTI
reporting unit was lower than the carrying amount and an impairment loss of $6.9
million was  recorded in the fourth  quarter of 2002.  The fair values of all of
the Company's reporting units were estimated using discounted future cash flows,
since market quotes were not readily available.

17.    Related Party Transactions

J. George Mikelsons,  the Company's Chairman and Chief Executive Officer, is the
sole owner of Betaco, Inc., a Delaware corporation ("Betaco").  Betaco currently
owns two airplanes,  a Cessna Citation II and a Lear Jet, and three helicopters,
a Bell 206B Jet Ranger  III, an  Aerospatiale  355F2 Twin Star and a Bell 206L-3
LongRanger.  The two  airplanes  and the Twin  Star  helicopter  are  leased  or
subleased to ATA. The Jet Ranger III and  LongRanger  helicopters  are leased to
American Trans Air ExecuJet, Inc. ("ExecuJet"). Execujet used the Jet Ranger III
for  third-party  charter flying and subleases the LongRanger to an Indianapolis
television station.

The lease for the  Cessna  Citation  currently  requires  a monthly  payment  of
$37,500 for a term  beginning  July 25, 1999,  and ending on July 24, 2004.  The
lease  for the Lear  Jet  requires  a  monthly  payment  of  $33,600  for a term
beginning  December 24, 2001,  and ending  December 23, 2003.  The lease for the
JetRanger  III  currently  requires  a  monthly  payment  of  $3,500  for a term
beginning  June 15,  1993,  and  ending  November  1,  2005.  The  lease for the
LongRanger  requires a monthly  payment of $7,350 for a term beginning  December
11, 2001,  and ending  October 31, 2005.  The Company  believes that the current
terms of the leases and  subleases  with Betaco for this  equipment  are no less
favorable to the Company than those that could be obtained from third parties.

The lease for the  Aerospatiale  355F2 Twin Star  requires a monthly  payment of
$9,000 for a term beginning  January 1, 2002, and ending October 31, 2005. Lease
payments  under this lease were  suspended  on February  13,  2003,  and will be
reinstated only upon the Twin Star being certificated for commercial use with an
operational  plan that  demonstrates  significant  operational  revenue  for the
Company.

Since 1996, the Company and Mr.  Mikelsons  have had an arrangement  pursuant to
which the Company  provides  certain  domestic  employees of Mr.  Mikelsons with
salary, health insurance and other non-cash benefits. Every quarter, the Company
invoices Mr. Mikelsons for the full amount of such benefits.  Historically,  the
timing of payments  from Mr.  Mikelsons  to the  Company has been  inconsistent.
Beginning in 2003,  Mr.  Mikelsons  reimburses the Company prior to the pay date
for these employees.

                                       73
<PAGE>

The Company pays approximately $269,000 in annual compensation,  plus associated
non-cash  benefits,  to five employees who serve as the crew for two boats owned
by Betaco and another company owned by Mr.  Mikelsons.  Under an agreement dated
as of July 1, 2002,  the Company  agreed to pay for these  employees in exchange
for its use of the boats for  business  purposes  (e.g.,  the  entertainment  of
clients,  customers  and vendors of the  Company).  To the extent that,  for any
fiscal year, the crew's compensation, plus associated non-cash benefits, exceeds
75% of the amount that would have been charged by an outside third party under a
fair market  rental  contract  for the  Company's  actual use of the boats,  Mr.
Mikelsons shall be responsible for paying the difference.

As of December 31, 2002, Mr.  Mikelsons owes $685,451 to the Company pursuant to
the  arrangements  relating to the domestic  employees  and the crew for the two
boats.  In 2002, the Company has also paid Mr.  Mikelsons a total of $120,000 in
connection  with  the  use of the  boats  by ATA  prior  to the  July  1,  2002,
agreement.  While  there  have been  other  business  uses by the  Company,  Mr.
Mikelsons has determined not to seek reimbursement for them.

18.  Recently Issued Accounting Pronouncements

In April 2002, the FASB issued Statement of Financial  Accounting  Standards No.
145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No.  13 and  Technical  Corrections  ("FAS  145").  FAS 145  rescinds  both FASB
Statements of Financial  Accounting  Standards No. 4, Reporting Gains and Losses
from  Extinguishment  of  Debt,  ("FAS  4"),  and an  amendment  to FAS 4,  FASB
Statement of Financial Accounting Standards No. 64, Extinguishments of Debt Made
to Satisfy Sinking Fund  Requirements  ("FAS 64"). FAS 4 required that all gains
and losses from the  extinguishment  of debt be aggregated and, if material,  be
classified as an extraordinary  item, net of the related income tax effect. Upon
the adoption of FAS 145, all gains and losses on the  extinguishment of debt for
periods   presented  in  the   financial   statements   will  be  classified  as
extraordinary  items only if they meet the criteria of APB Opinion 30, Reporting
the Results of  Operations  - Reporting  the Effects of Disposal of a Segment of
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions  ("APB 30"). The provisions of FAS 145 related to the rescission of
FAS 4 and FAS 64 shall be applied for fiscal years beginning after May 15, 2002.
Upon  adoption  in January  2003,  the  Company  expects it will be  required to
classify any material gains or losses on debt  extinguishment as a separate line
item before income from  continuing  operations for all periods  presented.  The
provisions of FAS 145 also relate to the  rescission  of FASB  Statement No. 44,
Accounting for Intangible Assets of Motor Carriers, ("FAS 44"), the amendment of
FASB  Statement  No. 13,  Accounting  for  Leases,  ("FAS  13"),  and  Technical
Corrections,  which became  effective as of May 15, 2002 and are not expected to
have a material impact on the Company.

In June 2002, the FASB issued  Statement of Financial  Accounting  Standards No.
146,  Accounting for Costs  Associated with Exit or Disposal  Activities,  ("FAS
146").  FAS 146 nullifies  Emerging  Issues Task Force  ("EITF") Issue No. 94-3,
Liability  Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (Including Certain Costs Incurred in a Restructuring).  FAS
146  generally  requires  companies  to  recognize  costs  associated  with exit
activities  when they are incurred rather than at the date of a commitment to an
exit or  disposal  plan and is to be applied  prospectively  to exit or disposal
activities  initiated  after December 31, 2002. The Company does not expect this
standard to have a material  impact on the Company.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of

                                       74
<PAGE>

Indebtedness of Others" ("FIN 45"). FIN 45 requires a guarantor to recognize, at
the inception of a guarantee,  a liability for the fair value of the  obligation
undertaken in issuing the guarantee. FIN 45 also expands the disclosure required
to be made by a guarantor about its obligations under certain guarantees that it
has  issued.  Initial  recognition  and  measurement  provisions  of  FIN 45 are
applicable  on a  prospective  basis  to  guarantees  issued  or  modified.  The
disclosure  requirements are effective immediately.  The Company does not expect
this interpretation to have a material impact on the Company.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  ("FIN 46").  FIN 46 requires that  companies that
control  another entity through  interests  other than voting  interests  should
consolidate the controlled  entity. FIN 46 applies to variable interest entities
created after January 31, 2003,  and to variable  interest  entities in which an
enterprise   obtains  an  interest  after  that  date.  The  related  disclosure
requirements  are  effective  immediately.  The  Company  does not  expect  this
interpretation to have a material impact on the Company.

19. Selected Supplemental Quarterly Data (Unaudited)

<TABLE>
<CAPTION>

                                 Financial Statements and Supplementary Data
                                     ATA Holdings Corp. and Subsidiaries
                                       2002 Quarterly Financial Summary
                                                 (Unaudited)
-------------------------------------------------------------------------------------------------------
(In thousands,  except per share data)                 3/31        6/30 (1)      9/30 (1)     12/31 (1)
-------------------------------------------------------------------------------------------------------

<S>                                                <C>           <C>          <C>           <C>
Operating revenues                                 $ 330,570     $  318,541   $  317,289    $   310,970

Operating expenses                                   320,512        377,834      376,933        362,128

Operating income (loss)                               10,058        (59,293)     (59,644)       (51,158)

Other expenses                                        (7,416)        (9,690)      (7,723)        (9,348)

Income (loss) before income taxes                      2,642        (68,983)     (67,367)       (60,506)

Income taxes (credits)                                   762        (13,585)      (6,746)        (5,381)

Preferred stock dividends                                375          2,485          375          2,485

Income (loss) available to common shareholders    $    1,505     $  (57,883)  $  (60,996)   $   (57,610)

Net income (loss) per common share - basic        $     0.13     $    (4.92)  $    (5.18)   $     (4.90)

Net income (loss) per common share - diluted      $     0.12     $    (4.92)  $    (5.18)   $     (4.90)
</TABLE>

                                       75
<PAGE>

<TABLE>
<CAPTION>

                                    Financial Statements and Supplementary Data
                                        ATA Holdings Corp. and Subsidiaries
                                         2001 Quarterly Financial Summary
                                                    (Unaudited)
-------------------------------------------------------------------------------------------------------
(In thousands,  except per share data)                 3/31        6/30          9/30 (1)     12/31 (1)
-------------------------------------------------------------------------------------------------------
<S>                                                <C>           <C>          <C>           <C>
Operating revenues                                 $  347,485    $  358,895   $  321,469    $  247,635

Operating expenses                                    349,719       342,336      317,017       358,282

Operating income (loss)                                (2,234)       16,559        4,452      (110,647)

Other expenses                                         (5,459)       (5,828)      (4,048)       (8,862)

Income (loss) before income taxes                      (7,693)       10,731          404      (119,509)

Income taxes (credits)                                 (3,309)        4,200           16       (40,657)

Preferred stock dividends                                 375         2,333          375         2,485

Income (loss) available to common shareholders     $   (4,759)   $    4,198   $       13    $  (81,337)

Net income (loss) per common share - basic         $    (0.42)   $     0.37   $      0.00   $    (7.05)

Net income (loss) per common share - diluted       $    (0.42)   $     0.33   $      0.00   $    (7.05)
</TABLE>

(1)  Operating  results for the years ended  December  31, 2002 and 2001 include
several   non-recurring  or  unusual  charges.  See  "Financial  Statements  and
Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - State
of the Industry and the Company;" "Financial Statements and Supplementary Data -
Notes to Consolidated  Financial  Statements - Note 15 - Fleet  Impairment;" and
"Financial  Statements and Supplementary Data - Notes to Consolidated  Financial
Statements - Note 16 - Goodwill and Other Intangible Assets."

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.

                                       76
<PAGE>

PART III

Item 10. Directors and Officers of the Registrant

Incorporated herein by reference to the Company's proxy statement for the annual
meeting of stockholders to be held on May 12, 2003.

Item 11. Executive Compensation

Incorporated herein by reference to the Company's proxy statement for the annual
meeting of stockholders to be held on May 12, 2003.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Incorporated herein by reference to the Company's proxy statement for the annual
meeting of stockholders to be held on May 12, 2003.

Item 13. Certain Relationships and Related Transactions

Incorporated herein by reference to the Company's proxy statement for the annual
meeting of stockholders to be held on May 12, 2003.

Item 14. Controls and Procedures

On March 21, 2003, the Company  conducted an evaluation  (under the  supervision
and with the  participation  of the  Company's  management,  including the Chief
Executive  Officer  and  Chief  Financial  Officer),  pursuant  to  Rule  13a-15
promulgated  under the  Securities  Exchange  Act of 1934,  as  amended,  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures.  Based on this evaluation, the Company's Chief Executive Officer
and Chief  Financial  Officer  concluded that the controls and  procedures  were
effective.

Since  March  21,  2003,  there  have not been any  significant  changes  in the
internal  controls  or in other  factors  that  could  significantly  affect the
internal controls.

                                       77
<PAGE>

PART IV

Item 15.   Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a)    (1) Financial Statements

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

               o    Consolidated Balance Sheets for the years ended December 31,
                    2002 and 2001

               o    Consolidated  Statements of  Operations  for the years ended
                    December 31, 2002, 2001 and 2000

               o    Consolidated  Statements of Changes in Redeemable  Preferred
                    Stock,   Common   Stock  and  Other   Shareholders'   Equity
                    (Deficit)for  the years ended  December 31,  2002,  2001 and
                    2000

               o    Consolidated  Statements  of Cash Flows for the years  ended
                    December 31, 2002, 2001 and 2000

               o    Notes to Consolidated Financial Statements

       (2) Financial Statement Schedule

          The following  consolidated  financial information for the years 2002,
          2001 and 2000 is included in Item 15d:

               o       Schedule II - Valuation and Qualifying Accounts

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

       (3) Exhibits

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

(b)    Reports on Form 8-K filed during the quarter ending December 31, 2002:

          Report  filed on October  29,  2002,  furnishing  items  under Item 9.
          Regulation FD Disclosure.

          Report  filed on November  14,  2002,  furnishing  items under Item 7.
          Financial   Statements   and  Exhibits  and  Item  9.   Regulation  FD
          Disclosure.

          Report  filed on November  18,  2002,  furnishing  items under Item 5.
          Other Events and Item 7. Financial Statements and Exhibits.




                                       78
<PAGE>

          Report  filed on November  20,  2002,  furnishing  items under Item 5.
          Other Events,  Item 7.  Financial  Statements and Exhibits and Item 9.
          Regulation FD Disclosure.

(c)    Exhibits

             See the Index to Exhibits attached to this report.

(d)    Financial Statement Schedule

             See Schedule II - Valuation and Qualifying Accounts.


                                       79
<PAGE>
<TABLE>
<CAPTION>
Item 15d.  Valuation and Qualifying Accounts                                                                    Schedule II

                                                  (Dollars in thousands)
COLUMN A                                         COLUMN B              COLUMN C               COLUMN D        COLUMN E
--------------------------------------           --------              --------               --------        --------
                                                                       Additions
                                                                       ---------

                                                                             Charged to
                                                Balance at     Charged to       Other
                                               Beginning of    Costs and     Accounts -       Deductions -    Balance at
Description                                       Period        Expenses      Describe         Describe     End of Period
--------------------------------------           --------       --------      --------         --------     -------------
<S>                                             <C>            <C>              <C>          <C>              <C>
Year ended December 31, 2000:
 Deducted from asset accounts:
   Allowance for doubtful accounts                 1,511          2,431             -           2,751 (1)        1,191
   Allowance for obsolescence - Inventory         10,291          3,466             -             645 (2)       13,112
                                                --------       --------         -----        --------         --------
   Totals                                       $ 11,802       $  5,897         $   -        $  3,396         $ 14,303
                                                ========       ========         =====        ========         ========




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


Year ended December 31, 2002:
 Deducted from asset accounts:
   Allowance for doubtful accounts                 1,526          2,605             -           1,756 (1)        2,375
   Allowance for obsolescence - Inventory         10,905          4,258             -             433 (2)       14,730
   Valuation allowance for deferred tax asset          -         43,324             -               -           43,324
                                                --------       --------         -----        --------         --------
   Totals                                       $ 12,431       $ 50,187         $   -        $  2,189         $ 60,429
                                                ========       ========         =====        ========         ========


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

(2)  Reduction of obsolescence  allowance in 2001 of $5.4 million  resulted from
     the FAS 121 impairment  write down of Lockheed  L-1011-50 and 100 inventory
     and Boeing  727-200  inventory.  The  reduction  in 2002 and 2000,  and the
     remainder  of the 2001  reduction  in  obsolescence  allowance,  related to
     inventory items transferred to flight equipment or sold.
</TABLE>



                                       80
<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.


                                                     ATA Holdings Corp.
                                                     (Registrant)


Date:   March 31, 2003        /s/ J. George Mikelsons
                              J. George Mikelsons
                              Chairman and Chief Executive Officer
                              On behalf of the Registrant and as Director

Date:   March 31, 2003        /s/ James W. Hlavacek
                              James W. Hlavacek
                              Executive Vice President and
                              Chief Operating Officer
                              Director

Date:   March 31, 2003        /s/ David M. Wing
                              David M. Wing
                              Executive Vice President and
                              Chief Financial Officer
                              Director

Date:   March 31, 2003        /s/ Robert A. Abel
                              Robert A. Abel
                              Director

Date:   March 31, 2003        /s/ Claude E. Willis
                              Claude E.Willis
                              Director

Date:   March 31, 2003        /s/ Andrejs P. Stipnieks
                              Andrejs P. Stipnieks
                              Director

<PAGE>
                                Index to Exhibits

Exhibit No.

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

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

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

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

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

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

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

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

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

4.5  Pass Through  Trust  Agreement,  dated as of March 28, 2002,  among Amtran,
     Inc.,  American Trans Air, Inc. and Wilmington  Trust Company,  as Trustee,
     made with  respect to the  formation  of American  Trans Air  2002-1A  Pass
     Through Trust and the issuance of 8.328% Initial American Trans Air 2002-1A
     Pass Through  Certificates  and 8.328% Exchange  American Trans Air 2002-1A
     Pass Through Certificates  (incorporated by reference to Exhibit 4.5 to ATA
     Holdings  Corp.'s  Registration  Statement  on Form S-4 dated  November 22,
     2002, File No. 333-101423).

4.6  Pass Through  Trust  Agreement,  dated as of March 28, 2002,  among Amtran,
     Inc.,  American Trans Air, Inc. and Wilmington  Trust Company,  as Trustee,
     made with  respect to the  formation  of American  Trans Air  2002-1B  Pass
     Through Trust and the issuance  10.699% Initial American Trans Air 2002-1 B
     Pass Through  Certificates and 10.699% Exchange  American Trans Air 2002-1B
     Pass Through Certificates  (incorporated by reference to Exhibit 4.6 to ATA
     Holdings  Corp.'s  Registration  Statement  on Form S-4 dated  November 22,
     2002, File No. 333-101423).

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.11$168,000,000  Loan  Agreement  dated as of November 30, 2002 among American
     Trans Air,  Inc.,  as  Borrower,  ATA  Holdings  Corp.,  as  Parent,  GOVCO
     Incorporated,  as Primary  Tranche A Lender,  Citibank,  N.A., as Alternate
     Tranche A Lender,  Citicorp  North America,  Inc., as GOVCO  Administrative
     Agent,  Citibank,  N.A.,  as Tranche B Lender,  BearingPoint,  Inc, as Loan
     Administrator,  Citibank,  N.A., as Collateral  Agent,  Citibank,  N.A., as
     Agent, and the Air Transportation Stabilization Board. *

10.12Mortgage  and  Security  Agreement  dated as of  November  20, 2002 made by
     American  Trans Air,  Inc. in favor of Citibank,  N.A.,  as the  Collateral
     Agent.

21   Subsidiaries of Amtran, Inc.

23   Consent of Independent Auditors.

99.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
<PAGE>

99.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

99.3 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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

Exhibit 23


                         CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Registration Statement (Form
S-3 No.  333-52655) of ATA Holdings  Corp. and  Subsidiaries  and in the related
Prospectus,  in the Registration Statement (Form S-8 No. 33-65708) pertaining to
the 1993  Incentive  Stock Plan for Key  Employees  of ATA  Holdings  Corp.  and
Subsidiaries and in the Registration  Statement (Form S-3 No.  333-86791) of ATA
Holdings  Corp.  and  Subsidiaries  and in the related  Prospectus of our report
dated January 24, 2003, with respect to the  consolidated  financial  statements
and  schedule of ATA Holdings  Corp.  and  Subsidiaries,  included in the Annual
Report (Form 10-K) for the year ended December 31, 2002.




                                                               ERNST & YOUNG LLP
 Indianapolis, Indiana
 March 25, 2003