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, 2003.

[ ]  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, 2003) was approximately $25.8
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 - 11,823,864 shares outstanding as of February
29, 2004.
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 - 2003
                       ATA HOLDINGS CORP. AND SUBSIDIARIES

                                                                          Page #
PART I
         Item 1.     Business..................................................3
         Item 2.     Properties...............................................10
         Item 3.     Legal Proceedings........................................12
         Item 4.     Submission of Matters to a Vote of Security Holders......12
PART II
         Item 5.     Market for the Registrant's Common Stock and Related
                     Security Holder Matters..................................13
         Item 6.     Selected Consolidated Financial Data.....................14
         Item 7.     Management's Discussion and Analysis of Financial Condition
                     and Results of Operations................................15
         Item 7a.    Quantitative and Qualitative Disclosures About Market
                     Risk.....................................................43
         Item 8.     Financial Statements and Supplementary Data..............45
         Item 9.     Changes in and Disagreements with Accountants on Accounting
                     and Financial Disclosure.................................76
         Item 9a.    Controls and Procedures..................................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.    Principal Accountant Fees and Services...................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. (the "Company") owns ATA Airlines,  Inc.  ("ATA"),  the tenth
largest  passenger  airline in the United  States,  based upon 2003 capacity and
traffic.  The  Company  is a leading  provider  of  low-cost  scheduled  airline
services,  is the largest  commercial charter airline in the United States based
upon revenues for the twelve months ended  September 30, 2003, and is one of the
largest providers of passenger airline services to the U.S. military, based upon
2003 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,

                                                 2003           2002           2001           2000           1999
                                             ---------      --------      ---------     ----------      ---------
                                                                       (Dollars in millions)

<S>                                          <C>            <C>           <C>           <C>             <C>
Scheduled Service                            $ 1,085.4      $  886.6      $   820.7     $    753.3      $   624.6
                                             ---------      --------      ---------     ----------      ---------
Military Charter                                 296.9         177.9          167.5          188.6          126.2

Commercial Charter                                69.3         131.3          192.2          246.7          263.8
                                             ---------      --------      ---------     ----------      ---------
      Total Charter Service                      366.2         309.2          359.7          435.3          390.0

                                             ---------      --------      ---------     ----------      ---------
Other                                             66.9          81.6           95.1          103.0          107.8
                                             ---------      --------      ---------     ----------      ---------
      Total                                  $ 1,518.5      $1,277.4      $ 1,275.5     $  1,291.6      $ 1,122.4
                                             =========      ========      =========     ==========      =========


Percentage of Consolidated Revenues:
     Scheduled Service                            71.5%         69.4%          64.3%          58.3%          55.7%
     Military Charter                             19.6%         13.9%          13.1%          14.6%          11.2%
     Commercial Charter                            4.6%         10.3%          15.1%          19.1%          23.5%

</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.  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, Charlotte and
Pittsburgh.  The Company also provides  transpacific service between the Western
United  States and Hawaii.  The Company had  provided  transcontinental  service
between San Francisco and New Jersey beginning in October 2003, but that service
ended in March 2004.

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.  The Company has subsequently announced that
effective May 31, 2004 it will end service to Cedar Rapids and Lexington, and it
will begin service to Ft. Wayne on June 1.

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
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.


                                       3
<PAGE>


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 two 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. It is expected that one L-1011 aircraft
will be retired from  service in the second half of 2004.  The Company also uses
several Boeing 757 aircraft in its military charter services, and expects to add
several more Boeing 757 aircraft to its military business in 2004.

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 2003.

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 in recent years has been 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 some 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.

Beginning  in 2001,  commercial  charter  revenue  has  declined  significantly,
primarily due to the  retirement of certain  Lockheed  L-1011 and Boeing 727-200
aircraft that the Company had traditionally  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.  In  addition,  decreases in general
airline  fare levels  throughout  the United  States since 2000 have reduced the
opportunity to operate commercial charter flights profitably.  Consequently, the
Company  expects future  commercial  charter  revenue to continue to represent a
declining percentage of total revenue.

Industry Overview and Recent Developments

The  terrorist  attacks of  September  11, 2001,  and  generally  weak  economic
conditions of the past several years have adversely affected the Company and the
airline  industry.  The  industry as a whole,  and the  Company,  suffered  very
significant  financial  losses in the years ended  December 31, 2002,  and 2001.
While the Company realized net income for the year ended December 31, 2003, that
net income was favorably impacted by the Company's receipt in the second quarter
of 2003 of  $37.2  million  in U.S.  Government  funds in  conjunction  with the
Emergency Wartime  Supplemental  Appropriations  Act  ("Supplemental  Act"). The
Supplemental  Act was signed into law in April  2003,  and made  available  $2.3
billion in reimbursements to U.S. air carriers for expenses incurred and revenue
foregone related to federally mandated enhanced aviation security  subsequent to
September 11, 2001.

During 2002, two major air carriers, US Airways Group and UAL Corporation, filed
for  reorganization  under Chapter 11 of the United States  Bankruptcy  Code. US
Airways Group emerged from  bankruptcy  protection in March 2003.  Historically,
air carriers involved in reorganizations have substantially reduced their fares,
which could reduce  airline  yields  further from  current  levels.  Certain air
carriers have sought to reduce financial losses, at least partially, by reducing
their seat capacity.  As this has been accomplished by eliminating aircraft from
operating fleets,  the fair value of aircraft,  including  aircraft owned by the
Company,  has been  adversely  affected.  The Company has  recorded  substantial
charges to earnings  resulting from fleet  retirements and impairments  over the
past three years.  However,  during this period,  the Company has  substantially
replaced its fleet of aging aircraft with new fuel-efficient Boeing aircraft.

                                       4
<PAGE>

In addition to the funds received in the second quarter of 2003, the Company has
benefited from some of the U.S. Government's other 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  of  U.S.   Government  grant
compensation  under the Act,  of which the final  payment  of $6.2  million  was
received  in the first  quarter  of 2003.  The  Company  also  obtained a $168.0
million  secured  term  loan in  November  2002,  of  which  $148.5  million  is
guaranteed by the ATSB. See "Financial Statements and Supplementary Data - Notes
to Consolidated  Financial Statements - Note 6 - Debt" and "Financial Statements
and Supplementary Data - Notes to Consolidated  Financial Statements - Note 10 -
Shareholders' Deficit" for additional information about the ATSB loan.

The terrorist  attacks of September 11, 2001 and the generally weak economy have
also had a negative impact on the Company's liquidity.  The Company's new Boeing
aircraft  are all leased and have  higher  fixed-ownership  costs than the older
fleets that they replaced.  The terms of many of these aircraft operating leases
were  determined  before  September  11, 2001,  and were  structured  to require
significant  cash  payments  in the first  few  years of each  lease in order to
reduce the total  rental cost over the related  lease terms.  Consequently,  the
Company made large cash lease payments on many of its aircraft in the year ended
December 31, 2003, which resulted in a substantial use of the Company's cash. As
of December 31, 2003,  the Company was also  scheduled to repay the $175 million
outstanding  principal of its 10 1/2% Senior Notes ("2004 Notes") in August 2004
and the $125  million  outstanding  principal  of its 9 5/8% Senior Notes ("2005
Notes" and, together with the 2004 Notes, "Existing Notes") in December 2005.

On January 30, 2004,  the Company  successfully  completed  exchange  offers and
issued new Senior  Notes due 2009  ("2009  Notes")  and cash  consideration  for
certain of its 2004 Notes and issued  new Senior  Notes due 2010  ("2010  Notes"
and,  together  with the 2009 Notes,  "New  Notes") and cash  consideration  for
certain of its 2005  Notes.  In  completing  the  exchange  offers,  the Company
accepted $260.3 million of Existing Notes tendered for exchange,  issuing $163.1
million in aggregate  principal amount of 2009 Notes and delivering $7.8 million
in cash in exchange  for $155.3  million in aggregate  principal  amount of 2004
Notes tendered, and issuing $110.2 million in aggregate principal amount of 2010
Notes and  delivering  $5.2  million in cash in exchange  for $105.0  million in
aggregate  principal  amount of 2005 Notes. In addition to the New Notes issued,
$19.7 million in aggregate  principal amount of the 2004 Notes and $20.0 million
in aggregate  principal  amount of the 2005 Notes remain  outstanding  after the
completion of the exchange offers.  In connection with the exchange offers,  the
Company also obtained the consent of the holders of the Existing  Notes to amend
or eliminate all of the  restrictive  operating  covenants  and certain  default
provisions  of the  indentures  governing  the Existing  Notes.  See  "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 6 - Debt" for additional information about the exchange offers.

On January 30,  2004,  the Company  also  completed  the  amendments  of certain
aircraft operating leases with its three major lessors,  Boeing Capital Services
Corporation  ("BCSC"),  General Electric Capital Aviation Services ("GECAS") and
International  Lease  Finance  Corporation  ("ILFC").  The  effect  of the lease
amendments  was to delay the  payment of portions of the amounts due under those
operating  leases  primarily  between June 30,  2003,  and March 31, 2005 and to
extend the leases  generally for two years.  Most of the payments delayed during
this time period  will be  subsequently  paid at various  times  throughout  the
remaining life of the leases.

                                       5
<PAGE>

The Company  received a refund of $29.8  million on January 30, 2004  related to
payments made in 2003 under the original terms of certain  retroactively amended
leases. The amendments will also result in approximately  $69.6 million in lower
cash payments during 2004 under these operating  leases, as compared to payments
which would have been due under the original  terms.  See "Financial  Statements
and Supplementary Data - Notes to Consolidated  Financial  Statements - Note 7 -
Lease  Commitments"  for additional  information  about the Company's  operating
leases.

While the  Company  expects  that  adverse  industry  conditions  are  likely to
continue  throughout  2004,  the  Company's  management  believes  that with the
completion of the exchange offers and operating lease amendments the Company has
a viable  plan to provide  sufficient  cash to fund  operations  for the next 12
months.  The Company's plan continues to require  focused  marketing  efforts on
those  businesses  and markets  where the  Company  believes it can be a leading
provider  and the  implementation  of  additional  cost-saving  initiatives  the
Company  believes  will  maintain its low-cost  advantage.  Although the Company
believes  the  assumptions   underlying  its  2004  financial   projections  are
reasonable,  there are  significant  risks that could cause the  Company's  2004
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  consequences of the major airline bankruptcies,  the
possibility  of other airline  bankruptcy  filings and the ongoing  geopolitical
impact of the conflicts 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  onmarkets 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  satisfactory  financial
returns.

Maintain Low-Cost Position and Maximize Aircraft Utilization
For 2003, 2002 and 2001, the Company's consolidated operating cost per available
seat mile ("CASM") of 6.82(cent),  8.17(cent) and 8.45(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.

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.
                                       6
<PAGE>

o    Chicago-Midway,   the  Company's   largest  and  fastest  growing  gateway,
     represented  approximately  67.1% of the Company's total scheduled  service
     capacity in 2003.  The Company is the number one carrier in terms of market
     share,  based upon  third  quarter  2003  origin  and  destination  revenue
     passengers,   on  18  of  the  24  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    Indianapolis  represented   approximately  13.3%  of  the  Company's  total
     scheduled  service  capacity in 2003. 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 third quarter 2003 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.

o    Hawaii  represented  approximately  12.9% of the Company's  total scheduled
     service  capacity  in 2003.  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.

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.

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.

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
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
1,000  employees  supporting its aircraft  maintenance  operations and currently
maintains 17 permanent  maintenance  facilities,  including its Indianapolis and
Chicago facilities.
                                      7
<PAGE>
Fuel Price Risk Management

The  Company has fuel  reimbursement  clauses and  guarantees  which  applied to
approximately 29.0%, 29.4%, and 32.0%, respectively, of consolidated revenues in
2003, 2002 and 2001. The Company occasionally enters into fuel-hedging contracts
to reduce  volatility of fuel prices for a portion of its scheduled service fuel
needs.  However,  the Company did not enter into any  fuel-hedging  contracts in
2003 and as of December  31,  2003,  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.

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 will continue through 2004. 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,  2003,  the Company had  approximately  7,900  full-time  and
part-time  employees,   approximately  2,900  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  October  2004.  The  Company's  cockpit  crews  are
represented by the Air Line Pilots Association ("ALPA").  The current collective
bargaining  agreement with the 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.
                                       8
<PAGE>
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 fee on ticket sales 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.  In May 2003,  the Company  received a refund of
$37.2 million in security fees and infrastructure  fees paid prior to that date,
and collection of the security fees was temporarily  suspended from June through
September 2003.

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
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 that
is 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

The Company's operations are subject to comprehensive federal,  state, and local
laws  and   regulations   relating  to  pollution  and  the  protection  of  the
environment,   including  those  governing  aircraft  noise,  the  discharge  of
pollutants  into the air and water,  the  management  and  disposal of hazardous
substances  and  wastes,  and the  cleanup of  contaminated  sites.  Some of the
Company's  operations  require  environmental  permits and  controls,  and these
permits  are  subject  to  modification,   renewal  and  revocation  by  issuing
authorities.  Although the Company  believes it is in compliance in all material
respects with applicable environmental laws, the Company could incur substantial
costs,  including  cleanup  costs,  fines,  civil  or  criminal  penalties,   or
third-party  property damage or personal injury claims as a result of violations
of,  or  liabilities  under,   environmental  laws  or  noncompliance  with  the
environmental  permits required for the Company's operations.  In addition,  the
adoption of new or more  stringent  requirements  could increase the cost of the
Company's  operations,  require significant capital  expenditures,  or result in
material restrictions on the Company's operations.

                                       9
<PAGE>

At the Company's  aircraft  maintenance  facilities and the airports the Company
serves, materials are used such as aircraft deicing fluids, fuel, oils and other
materials 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  wastes
generated by the use of these materials in compliance with applicable  laws. The
Environmental  Protection  Agency  regulates  operations,  including air carrier
operations,  which affect the quality of air in the United  States,  such as the
regulation of the discharge of aircraft  emissions exhaust into the environment.
The Company  believes it has made all necessary  modifications  to its operating
fleet  to meet  fuel-venting  requirements  and  smoke-emissions  standards.  In
addition,  noise generated by aircraft is subject to regulation by the FAA under
the Airport Noise and Capacity Act of 1990 and its implementing regulations.  As
a result,  the  Company  has been and may  continue to be required to reduce its
hours of operation at particular airports,  to install noise abatement equipment
on its aircraft or to change operational  procedures during takeoff and landing.
At the present time,  the Company  believes its airline  equipment and scheduled
flights are in material  compliance  with these and other local noise  abatement
requirements, and the Company does not believe any such restrictions will have a
material  adverse  effect on the  Company's  business,  financial  condition  or
results of operations.

Item 2.    Properties

Aircraft Fleet

At December 31, 2003, ATA and Chicago  Express were certified to operate a fleet
of 82 aircraft. The following table summarizes the ownership  characteristics of
each aircraft type as of the end of 2003.
<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               1                      -                    1                  2

Lockheed L-1011-500                      4                      -                    -                  4

Boeing 737-800                           -                      18                  14                 32

Boeing 757-200                           -                      14                   1                 15

Boeing 757-300                           -                      12                   -                 12

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

             TOTAL                       7                      59                  16                 82
                                     =========               =========          =========          =========


</TABLE>
                                       10
<PAGE>
Lockheed L-1011-50 and 100 Aircraft
The  Company's two Lockheed  L-1011-50 and 100 aircraft are wide-body  aircraft.
The L-1011-50 has a range of 2,971 nautical miles and the L-1011-100 has a range
of 3,425  nautical  miles.  These aircraft have a low ownership cost relative to
other wide-body aircraft types. The fleet has an average age of approximately 26
years.

Lockheed L-1011-500 Aircraft
The Company's four Lockheed  L-1011-500 aircraft are wide-body aircraft and have
a range of 5,577  nautical  miles.  These  aircraft  have a low  ownership  cost
relative  to other  wide-body  aircraft  types.  The fleet has an average age of
approximately 22 years.

Boeing 737-800 Aircraft
The Company's 32 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  and lower  maintenance  and cockpit  crew costs,  and
improved operating reliability.  The fleet has an average age of approximately 2
years,  and the leases on these aircraft have terms that expire between May 2017
and December 2024.

Boeing 757-200 Aircraft
The Company's 15 Boeing 757-200 aircraft are narrow-body aircraft,  all of which
have a range of 3,679 nautical miles.  These aircraft 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 terms that expire  between April
2008 and May 2022.

Boeing 757-300 Aircraft
The Company's 12 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
Company's  Boeing  757-300s have the  capability to operate on extended  flights
over  water.  The fleet has an average  age of  approximately  2 years,  and the
leases on these  aircraft have terms that expire on various dates between August
2023 and September  2024.

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 12.5 years
and the leases on 15 of these  aircraft  have 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,  under  leases that expire in 2007.  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 expiring in 2005,  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.
                                       11
<PAGE>
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. The
Company's  management  does not expect  that the  outcome of its  current  legal
proceedings,  individually or collectively,  will have a material adverse effect
on the Company's  financial  condition,  results of operations or cash flows. To
the  knowledge  of  management,  there are also no  material  proceedings  under
federal or state environmental laws, nor are there any environmental proceedings
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, 2003.


                                       12
<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  281  and  280   registered   shareholders,
respectively, at December 31, 2003 and 2002.
<TABLE>
<CAPTION>



                                   Market Prices of Common Stock
                                   Year Ended December 31, 2003
                                       (Amounts in dollars)


                   First Quarter       Second Quarter        Third Quarter       Fourth Quarter
                   -------------       --------------        -------------       --------------
<S>                    <C>                 <C>                   <C>                  <C>
High                    5.98                7.79                 10.95                10.45

Low                     3.42                3.45                  6.07                 6.37

Close                   3.75                7.36                  7.00                 9.65


                                   Market Prices of Common Stock
                                   Year Ended December 31, 2002
                                     (Amounts in dollars)

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


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>

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.

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 11 -
Redeemable  Preferred  Stock."

                                       13
<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)               2003          2002          2001          2000          1999
------------------------------------------------------------------------------------------------------------------------

Statement of Operations Data:
<S>                                                     <C>           <C>           <C>           <C>           <C>
 Operating revenues                                     $ 1,518,533   $ 1,277,370   $ 1,275,484   $ 1,291,553   $ 1,122,366
 Operating expenses (1)                                   1,440,992     1,437,407     1,367,354     1,288,983     1,032,339
 Operating income (loss) (1)                                 77,541      (160,037)      (91,870)        2,570        90,027
 Income (loss) before taxes                                  21,745      (194,214)     (116,067)      (19,931)       77,797
 Net income (loss) available to common shareholders(2)       15,792      (174,984)      (81,885)      (15,699)       47,342
 Net income (loss) per share - basic                           1.34        (14.94)        (7.14)        (1.31)         3.86
 Net income (loss) per share - diluted                         1.27        (14.94)        (7.14)        (1.31)         3.51

Balance Sheet Data (at end of period):
 Property and equipment, net                            $   253,482   $   265,627   $   314,943   $   522,119   $   511,832
 Total assets                                               869,987       848,136     1,002,962     1,032,430       815,281
 Total debt                                                 494,696       509,428       497,592       457,949       347,871
 Redeemable preferred stock                                  56,330        52,110        50,000        50,000          -
 Convertible redeemable preferred stock                      32,907        30,375        30,000        30,000          -
 Shareholders' equity (deficit)                            (104,007)     (120,009)       44,132       124,654       151,376

Selected Consolidated Operating Statistics:
 Revenue passengers carried (thousands)                    11,226.9      10,046.7       8,635.2       8,006.1       7,044.6
 Revenue passenger miles (millions)                        14,358.7      12,384.2      11,675.7      11,816.8      10,949.0
 Available seat miles (millions)                           21,125.9      17,600.0      16,187.7      16,390.1      15,082.6
 Passenger load factor                                         68.0%         70.4%         72.1%         72.1%         72.6%

</TABLE>


(1)  Operating  results for the years ended  December  31,  2003,  2002 and 2001
include the following items:
<TABLE>
<CAPTION>



                                                                2003          2002           2001
                                                                ---------------------------------

<S>                                                          <C>          <C>            <C>
Aircraft impairments and retirements                         $ (5,288)    $ (66,787)     $ (118,868)

U.S. Government grants                                         37,156       (16,221)         66,318

Goodwill impairments                                                -        (6,893)              -

Special charges                                                     -             -         (21,525)
                                                             --------     ---------      ----------
Total - income (loss)                                        $ 31,868     $ (89,901)     $  (74,075)
                                                             ========     =========      ==========


</TABLE>

For more  information  on special  charges,  see  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations - Year Ended December
31, 2002,  Versus Year Ended December 31, 2001 - Special Charges."

                                       14
<PAGE>

(2) Preferred  stock dividends of $4.6 million,  $5.7 million,  and $5.6 million
were recorded in 2003,  2002 and 2001,  respectively.  No common stock dividends
were paid in any period presented.

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

Overview

The Company is a leading  provider of scheduled  airline services to leisure and
other  value-oriented  travelers,  and a leading provider of charter services to
the U.S. military. The Company, through its principal subsidiary,  ATA, has been
operating  for 31 years and is the tenth  largest U.S.  airline in terms of 2003
capacity and traffic.

In the year ended December 31, 2003, the Company  recorded  operating  income of
$77.5  million,  as compared to an operating  loss of $160.0 million in the same
period of 2002.  In the year ended  December  31,  2003,  the  Company had a net
income available to common  shareholders of $15.8 million,  as compared to a net
loss available to common  shareholders of $175.0 million in 2002. The net income
recorded in 2003 includes  $37.2 million  received under the  Supplemental  Act,
which was recorded as a reduction in operating expenses.

Consolidated revenue per available seat mile ("RASM") decreased to 7.19 cents in
the year ended  December  31,  2003,  as  compared  to 7.26  cents in 2002.  The
decrease in 2003 was mainly due to a weak scheduled service pricing  environment
in the first six  months of 2003,  which was  impacted  by the war in the Middle
East. In addition,  the Company's scheduled service unit revenues were adversely
affected by the Company's capacity growth of 20% between the year ended December
31, 2002 and 2003,  due to the addition of new Boeing 737-800 and Boeing 757-300
aircraft to the  Company's  fleet.  The Company was able to utilize  some of the
increased  capacity  in its  military  charter  service  in  order  to meet  the
increased  flying  requirements  due to the Civil  Reserve  Air  Fleet  ("CRAF")
activation  between  February and June 2003,  which  supported  Operation  Iraqi
Freedom.  In 2003, the Company's  military  charter revenue  increased 66.9%, as
compared  to 2002.  The CRAF  program  ended on June 18,  2003,  and the Company
recorded 19.2% less military revenue for the second half of 2003, as compared to
the first half of 2003.

The Company's  unit costs  remained  among the lowest of major airlines in 2003.
Consolidated  cost per available  seat mile ("CASM")  decreased to 6.82 cents in
the year ended  December 31, 2003,  as compared to 8.17 cents in 2002.  The 2003
CASM amount  reflects  the benefit  from the receipt of $37.2  million,  or 0.18
cents per available  seat mile ("ASM"),  in the year ended December 31, 2003, in
U.S.  Government funds from the Supplemental  Act; and a charge of $5.3 million,
or 0.03 cents per ASM, for aircraft  impairments and retirements.  The 2002 CASM
amount reflects a charge of $16.2 million,  or 0.09 cents per ASM, in connection
with the expected reduction of U.S. Government compensation under the Act, and a
charge of $66.8  million,  or 0.38 cents per ASM, for aircraft  impairments  and
retirements.  The  remaining  CASM  declines  in  2003  were  mainly  due to the
Company's continuing efforts to further reduce operating expenses;  the benefits
from increased aircraft, facility and employee utilization; and the cost savings
realized  from the addition of its new fleets  comprised  of Boeing  737-800 and
Boeing 757-300  aircraft.  These CASM improvements were achieved despite a 15.9%
increase  in the  average  cost per  gallon  of jet fuel  consumed  in 2003,  as
compared to 2002.  These fuel price  increases  cost the Company an  incremental
$37.7  million  in  2003,  net of a $7.4  million  increase  in fuel  escalation
revenues.  Fuel  escalation  revenue is recorded when tour operators or the U.S.
Government  reimburse  the Company for certain  fuel cost  increases  as part of
commercial charter, bulk scheduled service or military/government contracts.

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 used
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.

                                       15
<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.  Accrual adjustments resulting from
these comparisons have not been material to the Company's  consolidated revenue.
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 ("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,  including the investment in BATA Leasing, LLC ("BATA") 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,  the
undiscounted  estimated  future cash flows from the expected use of those assets
must be  compared  to  their  net book  value  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  discounted  cash flows and quoted  market prices to estimate the
fair value of the Boeing 727-200 fleet.

Beginning in 2002, the Company has performed impairment analyses on the Lockheed
L-1011-500  fleet  and  related  assets  in  accordance  with FAS  144,  and has
determined  that this fleet is not impaired.  The application of FAS 144 and FAS
121  requires  the  exercise of  significant  judgment  and the  preparation  of
numerous significant estimates. Although the Company believes that its estimates
with regard to future  cash flows are  reasonable  and based upon all  available
information,  they require  substantial  judgments  and are based upon  material
assumptions  about future events.  Such estimates are significant in determining
the amount of the  impairment  charge to be recorded,  if any,  which could have
been materially different under different sets of assumptions and estimates.

                                       16
<PAGE>

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 requires companies to perform annual goodwill  impairment  reviews.  The
annual  impairment tests are required to be completed in the same fiscal quarter
each year. The Company  performed its annual tests in the fourth quarter of both
2002 and 2003. The Company's  goodwill  relates to ATA Leisure Corp.  ("ATALC"),
Chicago Express and ATA Cargo, all of which are subsidiaries  that were acquired
in 1999. The Company identified two FAS 142 reporting units for ATALC. The ATALC
brands whose  management  was outsourced to Mark Travel  Corporation  ("MTC") in
July 2003 were one reporting  unit. The other  reporting unit related to the Key
Tours brands ("KTI") that sold Canadian rail packages and ground packages in Las
Vegas. In the 2002 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,  on the
total  goodwill  balance for KTI, was recorded in the fourth quarter of 2002. As
of December 31, 2003,  the Company no longer  markets any of the KTI brands.  In
the 2003 goodwill  impairment  review,  the Company determined that the goodwill
related  to  Chicago  Express,  ATA  Cargo  and the MTC  reporting  unit was not
impaired.

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.

                                       17
<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.
<TABLE>
<CAPTION>


                                                                        Cents per ASM
                                                                   Year Ended December 31,
                                                                   -----------------------
                                                          2003              2002              2001
                                                          ----              ----              ----
<S>                                                    <C>               <C>               <C>
Consolidated operating revenues                           7.19              7.26              7.88

Consolidated operating expenses:
    Salaries, wages and benefits                          1.89              2.02              2.01
    Fuel and oil                                          1.31              1.17              1.55
    Aircraft rentals                                      1.07              1.08              0.61
    Handling, landing and navigation fees                 0.54              0.63              0.55
    Crew and other employee travel                        0.30              0.31              0.37
    Depreciation and amortization                         0.27              0.44              0.75
    Other selling expenses                                0.24              0.25              0.26
    Aircraft maintenance, materials and repairs           0.22              0.30              0.38
    Passenger service                                     0.19              0.22              0.27
    Advertising                                           0.18              0.23              0.16
    Insurance                                             0.14              0.19              0.07
    Facilities and other rentals                          0.11              0.13              0.13
    Commissions                                           0.11              0.13              0.21
    Ground package cost                                   0.06              0.16              0.26
    Special charges                                         -                 -               0.13
    Aircraft impairments and retirements                  0.03              0.38              0.73
    Goodwill impairment                                     -               0.04                -
    U.S. Government grant                                (0.18)             0.09             (0.41)
    Other                                                 0.34              0.40              0.42
                                                          ----             -----             -----
Total consolidated operating expenses                     6.82              8.17              8.45
                                                          ----             -----             -----
Consolidated operating income (loss)                      0.37             (0.91)            (0.57)
                                                          ====             =====             =====

ASMs (in thousands)                                    21,125,905        17,599,968        16,187,687



</TABLE>
                                       18
<PAGE>
Year Ended December 31, 2003, Versus Year Ended December 31, 2002

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  "SAAB"
operations  include the  operations of SAAB 340B  propeller  aircraft by Chicago
Express as the ATA Connection. Data for subservice operations is not included.
<TABLE>
<CAPTION>



                                                      Twelve Months Ended December 31,
                                                      --------------------------------
                                             2003           2002         Inc (Dec)       % Inc (Dec)
                                             ----           ----         ---------       -----------
<S>                                     <C>            <C>             <C>                  <C>
Departures Jet                              79,790         66,903         12,887            19.26
Departures SAAB                             52,071         42,105          9,966            23.67
                                        ----------     ----------      ---------           ------
    Total Departures                       131,861        109,008         22,853            20.96
                                        ----------     ----------      ---------           ------
Block Hours Jet                            246,951        199,290         47,661            23.92
Block Hours SAAB                            51,256         40,008         11,248            28.11
                                        ----------     ----------      ---------           ------
    Total Block Hours                      298,207        239,298         58,909            24.62
                                        ----------     ----------      ---------           ------
RPMs Jet (000s)                         14,166,987     12,231,661      1,935,326            15.82
RPMs SAAB (000s)                           191,712        152,576         39,136            25.65
                                        ----------     ----------      ---------           ------
    Total RPMs (000s) (a)               14,358,699     12,384,237      1,974,462            15.94
                                        ----------     ----------      ---------           ------
ASMs Jet (000s)                         20,815,681     17,362,835      3,452,846            19.89
ASMs SAAB (000s)                           310,224        237,133         73,091            30.82
                                        ----------     ----------      ---------           ------
    Total ASMs (000s) (b)               21,125,905     17,599,968      3,525,937            20.03
                                        ----------     ----------      ---------           ------
Load Factor Jet                              68.06          70.45          (2.39)           (3.39)
Load Factor SAAB                             61.80          64.34          (2.54)           (3.95)
                                        ----------     ----------      ---------           ------
    Total Load Factor (c)                    67.97          70.37          (2.40)           (3.41)
                                        ----------     ----------      ---------           ------
Passengers Enplaned Jet                 10,138,487      9,139,770        998,717            10.93
Passengers Enplaned SAAB                 1,088,388        906,909        181,479            20.01
                                        ----------     ----------      ---------           ------
     Total Passengers Enplaned (d)      11,226,875     10,046,679      1,180,196            11.75
                                        ----------     ----------      ---------           ------

Revenue $ (000s)                         1,518,533      1,277,370        241,163            18.88
RASM in cents (e)                             7.19           7.26          (0.07)           (0.96)
CASM in cents (f)                             6.82           8.17          (1.35)          (16.52)
Yield in cents (g)                           10.58          10.31           0.27             2.62

Average Aircraft in Service
  Lockheed  L-1011                            7.63          10.54          (2.91)          (27.61)
  Boeing 737-800                             30.68          22.37           8.31            37.15
  Boeing 757-200                             15.17          15.96          (0.79)           (4.95)
  Boeing 757-300                             10.94           7.96           2.98            37.44
  SAAB 340B                                  16.10          13.33           2.77            20.78

Average Block Hours Flown per day
  Lockheed  L-1011                            7.73           5.86           1.87            31.91
  Boeing 737-800                             10.60           9.84           0.76             7.72
  Boeing 757-200                             11.55          10.73           0.82             7.62
  Boeing 757-300                             10.98           9.82           1.16            11.81
  SAAB 340B                                   8.72           8.22           0.50             6.08

</TABLE>


See footnotes (a) through (g) on page 20.

                                       19
<PAGE>


(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.

(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 2003 increased 19.0% to $1.519 billion,  as compared
to $1.277 billion in 2002. This increase was due to a $198.8 million increase in
scheduled  service  revenue,  a $119.0 million  increase in  military/government
charter revenues and a $6.4 million increase in other revenues, partially offset
by a $62.0 million  decrease in commercial  charter revenues and a $21.0 million
decrease in ground package revenues.

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

                                       20
<PAGE>

<TABLE>
<CAPTION>


                                                           Twelve Months Ended December 31,
                                                           --------------------------------
                                                2003             2002         Inc (Dec)       % Inc (Dec)
                                                ---------------------------------------------------------
Scheduled Service
 <S>                                      <C>              <C>              <C>                 <C>
     Departures                              122,628           98,877          23,751            24.02
     Block Hours                             258,021          201,077          56,944            28.32
     RPMs (000s)   (a)                    12,079,272        9,911,884       2,167,388            21.87
     ASMs  (000s)   (b)                   16,735,500       13,608,326       3,127,174            22.98
     Load Factor  (c)                          72.18            72.84           (0.66)           (0.91)
     Passengers Enplaned (d)              10,464,348        8,859,044       1,605,304            18.12
     Revenue $ (000s)                      1,085,420          886,579         198,841            22.43
     RASM in cents  (e)                         6.49             6.51           (0.02)           (0.31)
     Yield in cents  (g)                        8.99             8.94            0.05             0.56
     Revenue per segment $  (h)               103.73           100.08            3.65             3.65

Military/Government Charter
     Departures                                5,721            3,650           2,071            56.74
     Block Hours                              27,689           15,975          11,714            73.33
     ASMs  (000s)   (b)                    3,426,275        2,103,874       1,322,401            62.86
     Revenue $ (000s)                        296,893          177,901         118,992            66.89
     RASM in cents  (e)                         8.67             8.46            0.21             2.48
     RASM excluding fuel escalation  (j)        8.56             8.48            0.08             0.94

Commercial Charter
     Departures                                3,473            6,459          (2,986)          (46.23)
     Block Hours                              12,368           22,159          (9,791)          (44.19)
     ASMs  (000s)   (b)                      949,375        1,875,885        (926,510)          (49.39)
     Revenue $ (000s)                         69,314          131,341         (62,027)          (47.23)
     RASM in cents  (e)                         7.30             7.00            0.30             4.29
     RASM excluding fuel escalation  (i)        6.97             6.89            0.08             1.16

Percentage of Consolidated Revenues:
     Scheduled Service                         71.5%            69.4%            2.1%             3.03
     Military Charter                          19.6%            13.9%            5.7%            41.01
     Commercial Charter                         4.6%            10.3%           (5.7%)          (55.34)


</TABLE>

See footnotes (a) through (g) on page 20.

(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.
                                       21
<PAGE>
Scheduled Service  Revenues.  Scheduled service revenues in 2003 increased 22.4%
to $1.085 billion from $886.6  million in 2002.  This increase was due primarily
to increases in scheduled  service  capacity and a small increase in revenue per
segment flown.

Approximately 67.1% of the Company's scheduled service capacity was generated by
flights either originating or terminating at Chicago-Midway in 2003, as compared
to 71.2% in 2002. The Hawaiian  market  generated  approximately  12.9% of total
scheduled service capacity in 2003, as compared to 13.7% in 2002.  Another 13.3%
of total scheduled service capacity was generated in the Indianapolis  market in
2003, as compared to 10.5% in 2002.

Although  the  scheduled  service  RASM for the  entire  year 2003 was down only
slightly as compared to 2002, the Company noted significant fluctuations in unit
revenue  performance  during  the  course of 2003.  Unit  revenues  in the first
quarter of 2003 were down almost 8%, as  compared to the first  quarter of 2002.
The Company  believes  that the first  quarter  2003  traffic was  significantly
affected by the elevated risk of terrorist  attack noted before the beginning of
Operation Iraqi Freedom in February 2003, and by the war itself,  which began in
March 2003.  Unit revenues in the second quarter of 2003 were down slightly more
than 2%, as compared to the second quarter of 2002,  which the Company  believes
was  affected by the speedy end of the Iraqi  invasion  and by  seasonal  spring
travel demand. In the third quarter of 2003, unit revenues were almost 7% higher
than in the third quarter of 2002, which the Company  believes  reflected a very
strong summer travel season rebound from the first half of 2003. However, in the
fourth  quarter of 2003 unit  revenues  were only  slightly  higher  than in the
fourth  quarter  of 2002,  and the  Company  noted in  particular  a decline  in
year-over-year RASM performance in November and December of 2003.

This late-2003  scheduled  service RASM decline continued into the first quarter
of 2004,  with a significant  year-over-year  decline in unit revenue in January
2004. Although some improvement in RASM was experienced in February and March as
compared to January,  the Company expects to report a year-over-year  decline in
overall scheduled service unit revenue performance in the first quarter of 2004,
as  compared  to the  first  quarter  of 2003.  The  scheduled  service  revenue
environment  is expected to continue to be very  volatile and  uncertain for the
remainder of 2004, and the Company  expects it will be challenged by competitive
price and capacity actions in all of the Company's scheduled service markets for
the remainder of the year.

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
mid-2004,  the Company  expects to occupy at least 14 jet gates and one commuter
aircraft  gate at the new airport  concourses,  as compared to ten jet gates and
one commuter gate as of December 31, 2003.  Also  contributing  to the growth at
Chicago-Midway is Chicago Express,  which has been performing well as a commuter
feeder of passengers to ATA's jet system.

Military/Government   Charter  Revenues.   Military/government  charter  revenue
increased  66.9% to $296.9  million in 2003 from  $177.9  million  in 2002.  The
increase in  military/government  charter revenues in 2003 was mainly due to the
activation  of CRAF in  February  2003,  which  required  ATA to pledge up to 13
aircraft to military/government  charter use to support Operation Iraqi Freedom.
The CRAF program  allowed the Company to increase its Lockheed  L-1011  aircraft
utilization  (number of  productive  hours of flying per aircraft per day) to an
average of 7.7 daily hours in 2003, as compared to 5.9 daily hours in 2002.  The
increased  utilization  allowed the  Company to operate its  military/government
charter  service more  efficiently  between  periods.  Although the CRAF program
ended on June 18, 2003, the Company still  experienced a high volume of military
flying,  recording  only 19.2% less  revenue  for the  second  half of 2003,  as
compared to the first half 2003.
                                       22
<PAGE>
Commercial  Charter  Revenues.  Commercial  charter revenues  decreased 47.2% to
$69.3 million in 2003 from $131.3  million in 2002.  The majority of the decline
in commercial  charter  revenues  continues to reflect the retirement of certain
Lockheed L-1011 and Boeing 727-200  aircraft in prior years that the Company had
traditionally used in commercial charter flying.  Since aircraft  utilization 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. In addition, decreases in
general airline fare levels throughout the United States since 2000 have reduced
the opportunity to operate commercial charter flights profitably.  Consequently,
the Company  expects its commercial  charter  revenues to continue to decline as
the fleet supporting this business continues to be retired.

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   offers
tour-guide-accompanied  vacation packages to its approximately 32,000 individual
and family members.

In 2003,  ground package revenues  decreased 58.9% to $14.7 million,  from $35.7
million in 2002.  This decline was due primarily 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.

The net fee earned by the  Company on these sales  through  the MTC  outsourcing
agreement has been recorded in other revenues since the third quarter of 2002.

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  13.7% to $52.2  million in 2003 from $45.9
million in 2002 primarily due to increases in cargo revenue.

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  increased 12.5% to $399.6 million in 2003
from $355.2 million in 2002.

The increases in salaries,  wages and benefits between years primarily  reflects
the impact of the Company's amended collective  bargaining  agreement (which was
ratified  in  July  2002)  with  the  Company's  cockpit  crewmembers,  who  are
represented by ALPA. Initial cockpit  crewmember  contract salary rate increases
became  effective July 1, 2002, and cockpit  crewmembers  received an additional
salary rate increase in July 2003 per this contract.  Additionally,  the amended
contract  provides  for  expanded   defined-contribution  benefits  for  cockpit
crewmembers  effective  January 1, 2003, which resulted in additional  salaries,
wages and benefits expense between periods. 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,  of which 40% was realized  between  July 2002 and the end of 2003.  The
next  scheduled  rate  increase  for  cockpit  crewmembers  is July 1, 2004.  In
addition,  the Company  incurred  higher  salary  costs as a result of employing
additional  crewmembers and other  operations  employees to handle its increased
capacity in 2003 as compared to 2002. The Company also incurred increasing costs
in 2003 for employee medical and workers' compensation benefits.
                                       23
<PAGE>
Fuel and Oil. Fuel and oil expense increased 33.6% to $276.1 million in 2003, as
compared to $206.6 million in 2002.  During 2003, the average cost per gallon of
jet fuel consumed increased by 15.9% compared to 2002,  resulting in an increase
in fuel and oil expense of  approximately  $37.7 million  between those periods.
Although  jet block hours  increased  23.9% in 2003,  as  compared to 2002,  the
Company only consumed 17.5% more gallons of fuel due to the continuing impact of
the Company replacing its aging, less-fuel-efficient Boeing 727-200 and Lockheed
L-1011  aircraft  with new Boeing  737-800  and  Boeing  757-300  aircraft.  The
increase in gallons consumed  resulted in an increase in fuel and oil expense of
approximately $34.9 million in 2003, as compared to 2002.

The Company  periodically  has entered into fuel price hedge contracts to reduce
the risk of fuel rice  increases.  Although  the  Company did not have any hedge
contracts  in place in 2003,  the Company did  benefit  from fuel  reimbursement
clauses and guarantees in its bulk  scheduled  service,  commercial  charter and
military/government   contracts.  The  benefit  of  these  price  guarantees  is
accounted for as revenue when realized.  The Company has continued to experience
increases in the cost per gallon of jet fuel in the first quarter of 2004, which
will  adversely  affect  reported  earnings  for  that  period,  and any  future
increases  in the cost of fuel may continue to  adversely  affect the  Company's
earnings. See "Item 7a. - Quantitative and Qualitative  Disclosures About Market
Risk" for more information.

Aircraft Rentals.  The Company's operating leases require periodic cash payments
that vary in amount and  frequency.  Many of the  Company's  aircraft  operating
leases were originally  structured to require very significant cash in the early
years of the lease in order to obtain more overall  favorable  lease rates.  The
Company  accounts for aircraft rentals expense in equal monthly amounts over the
life of each operating lease because  straight-line  expense recognition is most
representative of the time pattern from which benefit is derived from use of the
aircraft. The amount of the cash payments in excess of the aircraft rent expense
in these early years has resulted in a significant  prepaid aircraft rent amount
on the Company's balance sheet. Aircraft rentals expense in 2003 increased 19.2%
to $226.6  million  from $190.1  million in 2002.  These  increases  were mainly
attributable  to the  delivery of seven  leased  Boeing  737-800s,  three leased
Boeing 757-300s and one leased 757-200  aircraft  between late 2002 and December
2003.

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

Handling,  landing and  navigation  fees  increased by 3.0% to $113.8 million in
2003,  as compared to $110.5  million in 2002.  This increase was due to a 21.0%
increase in system-wide jet departures,  as compared to 2002,  which resulted in
an increase in handling  and landing  fees of $17.4  million.  The Company  also
incurred $5.0 million more in navigation  fees in 2003, as compared to 2002, due
to the increase in international military/government flying between periods. The
increase was offset by a decrease in the cost of handling per  departure  due to
the  negotiation  of more favorable  terms in new contracts,  resulting in $15.7
million less  expense in 2003,  as compared to 2002.  The Company also  operated
relatively fewer flights to higher-cost international  destinations in 2003 than
in the prior year.  This expense was also  favorably  affected by the  temporary
suspension  of the payment of the aviation  security  infrastructure  fee by the
Company from June 1, 2003, to September 30, 2003,  pursuant to the  Supplemental
Act, which resulted in savings of $1.4 million in 2003.

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
increased  17.0% to $64.1 million in 2003, as compared to $54.8 million in 2002,
primarily  due to the increase in  military/government  flying.  Since  military
flights often  operate to and from points remote from the Company's  crew bases,
the Company incurs significant travel expenses on other airlines for positioning
of those crews.
                                       24
<PAGE>
Depreciation and Amortization.  Depreciation  reflects the periodic expensing of
the recorded cost of owned  airframes and engines,  leasehold  improvements  and
rotable parts for all fleet types,  together  with other  property and equipment
owned by the Company.  Depreciation and amortization  expense decreased 26.1% to
$56.7 million in 2003, as compared to $76.7 million in 2002.

The decrease in depreciation and amortization  expense is mainly attributable to
the L-1011-50  and 100 fleet.  The Company  retired four of these  aircraft from
revenue service in 2002 and four more from revenue service in 2003. In addition,
the Company  recorded a reduction in the carrying value of the L-1011-50 and 100
aircraft and related  assets in the fourth  quarter of 2002, in accordance  with
FAS  144.  Due  to the  reduced-cost  basis  of the  remaining  assets  and  the
retirements  in 2002 and  2003,  the  Company  recorded  $13.8  million  less in
depreciation  and  amortization  in 2003,  as compared to 2002.  The decrease in
depreciation and amortization is also due to fluctuations  associated with other
fleet owned  airframes and owned engines,  along with  fluctuations  in expenses
related  to  other  property  and  equipment,  none of  which  are  individually
significant.

Other  Selling  Expenses.  Other  selling  expenses are  comprised  primarily of
booking fees paid to computer reservation systems, 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  14.4% to $50.2 million in 2003, as compared to $43.9 million in 2002.
The Company experienced  increases in all areas of other selling expenses due to
the increase in  scheduled  service  passengers  enplaned in 2003 as compared to
2002.

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
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 12.6% to $45.7
million in 2003, as compared to $52.3 million in 2002.

In 2004,  the  Company  expects to incur  significantly  higher  costs under its
hourly engine maintenance agreements. These agreements generally provide for the
escalation  of hourly  rates as the related  power  plants age,  which  reflects
higher  costs  to  maintain  them.  The  Company   currently  expects  to  incur
approximately $30 million in such higher costs in 2004, as compared to 2003.

The  decrease  was mainly  attributable  to the  retirement  by  mid-2002 of the
Company's  entire Boeing  727-200 fleet and the  retirement of certain  Lockheed
L-1011 aircraft,  all of which were replaced with new Boeing 737-800 and 757-300
aircraft.

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  2003  and  2002,  catering  represented  82.4%  and  82.1%,
respectively, of total passenger service expense.

The total cost of passenger  service increased 7.0% to $41.0 million in 2003, as
compared to $38.3 million in 2002.  The increase was mainly  attributable  to an
increase in  military/government  flying  which  requires a  significantly  more
expensive catering product than scheduled service.
                                       25
<PAGE>
Advertising.  Advertising  expense  decreased  5.3% to $37.9 million in 2003, as
compared  to $40.0  million  in  2002.  The  Company  incurs  advertising  costs
primarily to support single-seat  scheduled service sales. The relative decrease
in 2003 is primarily  attributable  to more sales  promotions  in 2002 to regain
customers  after the September 11, 2001,  terrorist  attacks.  In addition,  the
Company  placed its creative  advertising  contract with a new agency in 2003 on
more economical terms than the prior contract.

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 and claims handling fees. The
total cost of insurance decreased 11.2% to $30.2 million in 2003, as compared to
$34.0  million  in  2002.  The  decrease  is  mainly  attributable  to the  U.S.
Government  providing  increased  war-risk  coverage in 2003.  This coverage was
provided  at higher  rates by the  commercial  insurance  markets  in 2002.  The
Company also completed the placement of its hull and liability insurance for the
new policy year beginning  October 1, 2003, at rates which will be approximately
20% lower as compared to the policy year ended September 30, 2003.

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 7.1% to $24.2 million in 2003, as compared to $22.6 million in
2002. The growth in facilities  costs is due to added airport  locations in 2003
to support new scheduled service  destinations and expanded services at existing
locations.

Commissions. The Company incurs commissions expense in association with the sale
by  travel   agents  of  single  seats  on  scheduled   service  and  to  secure
military/government  charter  revenues  using a teaming  arrangement  with other
cargo  and  passenger  carriers.  Commissions  expense  decreased  3.9% to $22.4
million in 2003, as compared to $23.3 million in 2002.

Scheduled service commissions decreased $5.8 million between years mainly due to
the elimination of standard travel agency commissions for sales made after March
21, 2002 and the continued  increase of ticket  purchases  made on the Company's
own website at the expense of travel agent sales.  The Company  continues to pay
special travel agency  commissions  targeted to specific  markets and periods of
the year. In addition,  the Company experienced a decrease in commission expense
for ATALC of  approximately  $3.4 million in 2003, as compared to 2002, which is
consistent with the decrease in related revenue.  These decreases were partially
offset by an increase in commission expense of $7.9 million in 2003, as compared
to 2002, attributable to growth in military revenue.

Ground  Package  Cost.  Ground  package cost is incurred by the Company  through
hotels,  car rental  companies,  cruise  lines and  similar  vendors who provide
ground and cruise  accommodations to Ambassadair.  Ground package cost decreased
56.6%  to  $12.1  million  in  2003,  as  compared  to  $27.9  million  in 2002,
approximately  proportional  to the  decrease in ground  package  revenues.  See
"Ground Package Revenues" above for an explanation of the decline in both ground
package sales and related costs for the period.

Aircraft  Impairments  and  Retirements.  Following  the events of September 11,
2001, the airline industry began experiencing excess capacity as consumer demand
for  scheduled  service  declined.  At the same  time,  the  Company  was taking
delivery of a  significant  number of new Boeing  737-800 and 757-300  aircraft,
which it  planned to utilize in its  scheduled  service  markets.  To adjust its
capacity to new market demands, the Company decided to retire its Boeing 727-200
fleet earlier than originally  planned.  Before  September 11, 2001, the Company
had a plan in place to gradually  retire  these  aircraft  between  mid-2001 and
mid-2002.  As the Company  retired the Boeing 727-200  aircraft,  it contributed
them  to BATA  to  re-market  these  aircraft  to  third  parties.  The  Company
accelerated  this plan by retiring  certain  individual  aircraft  earlier  than
planned and the Company  retired all of these  aircraft  from service by May 31,
2002. In accordance with FAS 121, the Company  recorded an impairment  charge of
$44.5  million in 2001.  In  accordance  with FAS 121, the Company  continues to
monitor current fair market values of previously  impaired assets.  In 2003, the
Company recorded an additional  asset impairment  charge of $5.3 million against
its  remaining  net book  value  of  Boeing  727-200  aircraft,  recorded  as an
investment in the BATA joint venture,  as compared to $35.9 million  recorded in
2002. The current  estimate of this fleet's fair market value is based on quoted
market prices and estimated  salvage  values.  The carrying amount of one Boeing
727-200 that was not contributed to BATA, with related assets,  is classified as
long-term assets held for sale in the  accompanying  balance sheet in accordance
with FAS 121.
                                       26
<PAGE>
Also in 2001, for reasons similar to those described  above, the Company retired
certain Lockheed  L-1011-50 and 100 aircraft,  and determined that the remaining
Lockheed  L-1011-50 and 100 fleet and related  rotable parts and inventory  were
impaired  under FAS 121.  The  Company  recorded an  impairment  charge of $67.8
million relating to this fleet in 2001. In 2002, the Company retired three owned
L-1011-50  aircraft by removing them from revenue  service,  which resulted in a
charge of $9.0 million,  and recorded an additional asset  impairment  charge of
$7.6 million against its remaining net book value of Lockheed  L-1011-50 and 100
aircraft and related parts. No such charges were recorded in 2003. In accordance
with FAS 144, the Company  continues to monitor the fair market  values of these
assets.

The Company  estimates this fleet's fair market value using discounted cash flow
analysis.  The carrying  amount of these assets is classified as assets held for
use and  appears in the  property  and  equipment  section  of the  accompanying
consolidated  balance sheets, since the Company is still flying certain of these
aircraft. The assets are being depreciated in conjunction with the planned fleet
retirement schedule.

In  2002,  the  Company  recorded  a  charge  of $14.2  million  related  to the
retirement  of one owned  L-1011-500  aircraft.  As a result,  the Company began
evaluating  that fleet and related parts and inventory for impairment  under FAS
144.  Through  2003,  the  Company's   analysis  continues  to  show  the  fleet
unimpaired.

The  following   tables  summarize  the  Company's   aircraft   impairments  and
retirements expense in 2003 and 2002:
<TABLE>
<CAPTION>


                                                          2003        2002
                                                          ----------------

<S>                                                    <C>          <C>
Boeing 727-200 impairment charge                       $  5,288     $ 35,871

Lockheed L-1011-50 and 100 impairment charge                  -        7,638

Lockheed L-1011-50 retirement                                 -        9,029

Lockheed L-1011-500 retirement                                -       14,249
                                                       --------     --------
Aircraft impairments and retirements                   $  5,288     $ 66,787
                                                       ========     ========


</TABLE>

Goodwill Impairment.  The Company began annual goodwill impairment reviews under
FAS 142 in 2002.  In  accordance  with FAS 142, the Company  determined  that no
goodwill impairment had occurred in 2003.

U.S  Government  Grants.  On April 16, 2003,  President Bush signed into law the
Supplemental Act, which made available $2.3 billion in reimbursement to U.S. air
carriers for expenses incurred and revenue foregone related to enhanced aviation
security  subsequent to September 11, 2001.  Pursuant to this  legislation,  the
Company  received  $37.2  million in cash in May 2003,  which was  recorded as a
credit to operating expenses.

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.  carriers  for direct and
incremental losses resulting from the September 11, 2001, terrorist attacks. The
Company had recorded $66.3 million in U.S.  Government grant  compensation as of
December  31,  2001,  based on  guidance  available  from the DOT at the time of
identifying those expenses it deemed reimbursable.  As of December 31, 2001, the
Company had received $44.5 million in cash under the Act and had a receivable of
$21.8 million for the remaining  amount.  Throughout 2002, the Company discussed
the  reimbursement  with the DOT,  and,  as a result of those  discussions,  the
Company recorded a reserve of approximately $15.2 million against its receivable
in the second quarter of 2002. The Company subsequently finalized its discussion
with  the  DOT in the  first  quarter  of  2003  and  received  the  final  cash
compensation of $6.2 million under the Act.
                                       27
<PAGE>
The Company does not expect to receive any further material  compensatory  funds
from the U.S. Government.

Interest  Income  and  Expense.  Interest  expense  in 2003  increased  to $56.3
million,  as  compared to $35.7  million in 2002.  The  Company  recorded  $12.1
million in interest expense in 2003 related to the secured term loan acquired in
November 2002. In accordance  with Statement of Financial  Accounting  Standards
No. 150,  Accounting for Certain Financial  Instruments with  Characteristics of
Both Liabilities and Equity ("FAS 150"),  the Company  reclassified its Series A
Preferred as a liability on the Company's  balance sheet beginning July 1, 2003,
and the related dividends of $2.1 million recognized thereafter were recorded as
interest expense.

Income Tax Expense.  The Company  recorded $1.3 million in income tax expense in
2003 applicable to $21.7 million in pre-tax  income,  while in 2002, the Company
recorded  income tax benefit of $25.0 million  applicable  to $194.2  million in
pre-tax loss. The effective tax rates  applicable to 2003 and 2002 were 6.0% and
12.8%, respectively.

As of December 31, 2003, the Company had incurred a three-year  cumulative loss.
Because of this cumulative loss and the presumption under GAAP 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 strategies,  the Company recorded a
full  valuation  allowance  against its net deferred tax asset of $33.5 million.

The Company  utilized a portion of its net operating  loss  carryovers to offset
taxable  income in 2003.  As a result,  in 2003 the  Company  paid $0.4  million
alternative  minimum tax and recorded  this as a current tax  expense,  together
with $0.9 million in state and local income taxes.

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

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  "SAAB"
operations  include the  operations of SAAB 340B  propeller  aircraft by Chicago
Express as the ATA Connection.

                                       28
<PAGE>

<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)

Average Aircraft in Service
  Lockheed  L-1011                         10.54          15.67            (5.13)          (32.74)
  Boeing 737-800                           22.37           5.78            16.59           287.02
  Boeing 757-200                           15.96          15.04             0.92             6.12
  Boeing 757-300                            7.96           3.08             4.88           158.44
  SAAB 340B                                13.33           8.33             5.00            60.02

Average Block Hours Flown per day
  Lockheed  L-1011                          5.86           6.65            (0.79)          (11.88)
  Boeing 737-800                            9.84           5.95             3.89            65.38
  Boeing 757-200                           10.73          11.28            (0.55)           (4.88)
  Boeing 757-300                            9.82           5.06             4.76            94.07
  SAAB 340B                                 8.22           8.17             0.05             0.61

</TABLE>
See footnotes (a) through (g) on page 20.



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.

                                       29
<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.  Data for  subservice
operations is not included.
<TABLE>
<CAPTION>



                                                          Twelve Months Ended December 31,
                                                          --------------------------------
                                               2002            2001         Inc (Dec)       % Inc (Dec)
                                               --------------------------------------------------------
Scheduled Service
<S>                                       <C>             <C>              <C>                <C>
     Departures                               98,877          72,787          26,090           35.84
     Block Hours                             201,077         156,331          44,746           28.62
     RPMs (000s)   (a)                     9,911,884       8,694,323       1,217,561           14.00
     ASMs  (000s)   (b)                   13,608,326      11,443,304       2,165,022           18.92
     Load Factor  (c)                          72.84           75.98           (3.14)          (4.13)
     Passengers Enplaned (d)               8,859,044       7,279,489       1,579,555           21.70
     Revenue $ (000s)                        886,579         820,666          65,913            8.03
     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  (000s)   (b)                    1,875,885       2,588,780        (712,895)         (27.54)
     Revenue $ (000s)                        131,341         192,246         (60,905)         (31.68)
     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/Government Charter
     Departures                                3,650           3,702             (52)          (1.40)
     Block Hours                              15,975          16,159            (184)          (1.14)
     ASMs  (000s)   (b)                    2,103,874       2,147,248         (43,374)          (2.02)
     Revenue $ (000s)                        177,901         167,524          10,377            6.19
     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

Percentage of Consolidated Revenues:
     Scheduled Service                         69.4%           64.3%            5.1%            7.93
     Commercial Charter                        10.3%           15.1%           (4.8%)         (31.79)
     Military Charter                          13.9%           13.1%            0.8%            6.11

</TABLE>
See footnotes (a) through (j) on pages 20 - 21.

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 a
slowing pace of economic activity in the United States.

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  accommodates only 34 passengers and operates on short stage length
flights, the increase in ASMs was not as great as departures.

                                       30
<PAGE>

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  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 was 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. 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.

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.

Ground Package  Revenues.  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.

Other  Revenues.  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.

                                       31
<PAGE>

Operating Expenses

Salaries,  Wages and  Benefits.  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.

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.

Aircraft  Rentals.  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,  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.

Crew and  Other  Employee  Travel.  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.

Depreciation and Amortization.  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.

                                       32
<PAGE>

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, a 50/50 joint
venture  with  Boeing  Capital   Corporation  -  Equipment  Leasing  Corporation
("BCC-ELC"),  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.

Other Selling Expenses.  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.

Aircraft Maintenance, Materials and Repairs. 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.

Passenger  Service.  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.

Advertising.  Advertising  expense  increased 51.5% to $40.0 million in 2002, as
compared to $26.4  million in 2001.  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."

                                       33
<PAGE>

Insurance.  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.

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.

Facilities and Other Rentals. 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.

Commissions.  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.

Ground Package Cost.  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.

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 decision  shortly after  September 11, 2001 to remove early
from service the  Company's  Boeing  727-200  fleet,  some of which were leased;
costs associated with the Company's  proposed  transaction in which ATA Holdings
Corp. would have been taken private, which was substantially complete just prior
to September 11, 2001 attacks,  as a result of which the Company lost financing;
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. The special charges for 2001 are summarized in the
following table:

                                       34
<PAGE>

<TABLE>
<CAPTION>


                                                           Amount
                                                       (in thousands)
                                                       --------------

<S>                                                     <C>
Boeing 727-200 exit costs                               $   3,764

Privatization costs                                         3,313

Costs due to FAA mandated suspension of flights               929

Increased hull and liability insurance costs                2,964

Increased advertising costs                                 6,316

Increased interest expense                                    762

Other expenses                                              3,477
                                                         --------
Total Special Charges for 2001                           $ 21,525
                                                         ========


</TABLE>

By December 31, 2002, all but an immaterial  amount of these special charges had
been paid.

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.
The  following  table   summarizes  the  Company's   aircraft   impairments  and
retirements in 2002 and 2001:
<TABLE>
<CAPTION>


                                                         2002        2001
                                                         ----------------

<S>                                                    <C>        <C>
Boeing 727-200 impairment charge                       $ 35,871   $  44,484

Lockheed L-1011-50 and 100 impairment charge              7,638      67,820

Lockheed L-1011-50 retirements                            9,029       6,564

Lockheed L-1011-500 retirement                           14,249           -
                                                       --------   ---------
Aircraft impairments and retirements                   $ 66,787   $ 118,868
                                                       ========   =========


</TABLE>

Goodwill Impairment. 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  Grants.  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  to revise 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.

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.

                                       35
<PAGE>

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.

Liquidity and Capital Resources

The Company ended 2003 with unrestricted cash of $160.6 million and a restricted
cash  balance  of $48.3  million,  primarily  securing  letters  of  credit.  In
addition,  $57.5  million of cash on advanced  ticket sales had been withheld by
the  Company's  bank card  processor  and was  recorded as a  receivable  on the
Company's balance sheet as of December 31, 2003. The Company had $4.6 million in
aircraft  pre-delivery deposits at the end of 2003. The Company had no revolving
credit  facility  and had no funds  available  through  other  unused  financing
options.

Due to lower scheduled  service  revenues and higher fuel prices incurred in the
first  quarter  of  2004  than  expected,  and due to the  significance  of cash
required in the first quarter of 2004 to meet scheduled aircraft lease payments,
the Company expects to report less  unrestricted  cash on hand at March 31, 2004
than it reported at December 31, 2003.

Cash  Flows.  In 2003,  net cash  provided  by  operating  activities  was $93.8
million,  as compared to net cash used in operating  activities in 2002 of $59.0
million and net cash provided by operating activities of $144.4 million in 2001.
The change in cash provided by or used in operating  activities between 2003 and
2002  primarily  resulted  from an  increase in  earnings,  the receipt of $37.2
million  under  the  Supplemental  Act in May 2003,  and  favorable  changes  in
operating  assets and  liabilities,  including  the  receipt of a $15.8  million
federal income tax refund in March 2003.

Net cash used in investing  activities was $98.7 million in 2003, while net cash
provided  by  investing  activities  was  $88.9  million  and net  cash  used in
investing  activities  was  $129.8  million,  respectively,  in the years  ended
December  31, 2002 and 2001.  Such amounts  included an increase in  non-current
prepaid aircraft rent of $75.3 million in 2003, as compared to $12.3 million and
$17.2 million in 2002 and 2001, respectively,  reflecting significant cash rents
paid in 2003 for prior aircraft deliveries. In 2003 and 2002, respectively,  the
Company  had $16.6  million  and  $149.5  million of net  aircraft  pre-delivery
deposits returned upon delivery of the related aircraft.  In contrast,  in 2001,
the  Company  paid  $30.8  million in net  aircraft  pre-delivery  deposits.  In
addition,  the Company had capital  expenditures  totaling $42.5 million,  $59.3
million and $119.8 million in 2003, 2002 and 2001,  respectively.  The declining
trend in capital  expenditures  is due  primarily  to the  replacement  of older
aircraft  with new  aircraft,  which  require less  maintenance-related  capital
spending than the aging fleets they replaced.

                                       36
<PAGE>

Net cash used in financing  activities was $34.6 million in 2003, while net cash
used in  financing  activities  was  $14.2  million,  and net cash  provided  by
financing  activities was $40.7  million,  for the years ended December 31, 2002
and 2001,  respectively.  In all years,  borrowings and repayments on short-term
and long-term debt impacted cash used in or provided by financing activities. In
2003 and 2002, respectively, the Company made net repayments of $8.4 million and
$109.9 million on pre-delivery  deposit  facilities related to deposits returned
on  aircraft  deliveries,  net of  borrowings.  In  2001,  the  Company  had net
borrowings  of $28.4  million  under  these  facilities.  In 2002,  the  Company
obtained $168.0 million under a federally guaranteed loan. In 2002 and 2001, the
Company borrowed and repaid $192.5 million and $153.4 million in temporary debt,
respectively,  related to the  purchase  of certain  Boeing  737-800  and Boeing
757-300 aircraft. The Company provided $17.9 million to collateralize additional
letters of credit which was recorded as an increase in restricted cash in 2003.

Bond Exchange and Lease Amendments

The terrorist attacks of September 11, 2001, and the generally weak economy have
had a negative  impact on the  Company's  liquidity.  The  Company's  new Boeing
aircraft  are all leased and have higher  fixed  ownership  costs than the older
fleets that they replaced.  The terms of many of these aircraft operating leases
were  determined  before  September  11, 2001,  and were  structured  to require
significant  cash  payments  in the first  few  years of each  lease in order to
reduce the total  rental cost over the related  lease terms.  Consequently,  the
Company made large cash lease payments on many of its aircraft in the year ended
December 31, 2003, which resulted in a substantial use of the Company's cash. As
of December 31, 2003,  the Company was also scheduled to repay its 2004 Notes in
August 2004 and its 2005 Notes in December 2005.

On January 30, 2004,  the Company  successfully  completed  exchange  offers and
issued  2009  Notes and cash  consideration  for  certain  of its 2004 Notes and
issued  2010 Notes and cash  consideration  for  certain of its 2005  Notes.  In
completing the exchange offers,  the Company accepted $260.3 million of Existing
Notes  tendered for  exchange,  issuing  $163.1  million in aggregate  principal
amount of 2009 Notes and delivering  $7.8 million in cash in exchange for $155.3
million in aggregate principal amount of 2004 Notes tendered, and issuing $110.2
million in aggregate  principal amount of 2010 Notes and delivering $5.2 million
in cash in exchange  for $105.0  million in aggregate  principal  amount of 2005
Notes. In addition to the New Notes issued, $19.7 million in aggregate principal
amount of the 2004 Notes and $20.0 million in aggregate  principal amount of the
2005 Notes remain  outstanding  after the completion of the exchange offers.  In
connection  with the exchange  offers,  the Company also obtained the consent of
the holders of the Existing  Notes to amend or eliminate all of the  restrictive
operating  covenants and certain default provisions of the indentures  governing
the Existing Notes. See "Financial  Statements and Supplementary Data - Notes to
Consolidated  Financial  Statements - Note 6 - Debt" for additional  information
about the exchange offers.

On January 30,  2004,  the Company  also  completed  the  amendments  of certain
aircraft  operating  leases with its three major lessors,  BCSC, GECAS and ILFC.
The effect of the lease  amendments  was to delay the payment of portions of the
amounts due under those  operating  leases  primarily  between June 30, 2003 and
March 31,  2005 and to extend the leases  generally  for two years.  Most of the
payments  delayed during this time period will be  subsequently  paid at various
times throughout the remaining life of the leases. The Company received a refund
of $29.8  million on January 30, 2004 related to payments made in 2003 under the
original terms of certain retroactively amended leases. The amendments will also
result in  approximately  $69.6 million in lower cash payments during 2004 under
these operating  leases, as compared to payments which would have been due under
the original lease terms.  See "Financial  Statements and  Supplementary  Data -
Notes to Consolidated  Financial  Statements - Note 7 - Lease  Commitments"  for
additional information about the Company's operating leases.
                                       37
<PAGE>
The table below  summarizes the significant  items that will affect liquidity in
the year  ending  December  31,  2004,  as a result of the  exchange  offers and
operating  lease  amendments in addition to deferring  $155.3 million dollars of
the senior indebtedness previously due in August 2004:

<TABLE>
<CAPTION>

                                                                               Cash savings  (outflows)
                                                                                    (in thousands)
                                                                                    --------------


<S>                                                                                   <C>
Refund of certain 2003 aircraft operating lease payments                              $  29,806

Reduction in aircraft operating lease payments in 2004                                   69,546

Payment of cash consideration for 2004 Notes                                             (7,765)

Payment of cash consideration for 2005 Notes                                             (5,250)

Payment of preferred dividends accrued at December 31, 2003                              (9,237)

Payment of fees related to exchange offers and lease amendments in 2004                  (7,777)

Additional interest costs related to Exchange Offers                                    (12,910)
                                                                                      ---------
Total Net Cash Savings                                                                $  56,413
                                                                                      =========



</TABLE>

While the  Company  expects  that  adverse  industry  conditions  are  likely to
continue  throughout  2004,  the Company's  management  believes,  that with the
completion of the exchange  offers and operating lease  amendments,  the Company
has a viable plan to provide  sufficient cash to fund operations for the next 12
months.  The Company's plan continues to require  focused  marketing  efforts on
those  businesses  and markets  where the  Company  believes it can be a leading
provider,  and the  implementation  of additional  cost-saving  initiatives  the
Company  believes  will  maintain its low-cost  advantage.  Although the Company
believes  the  assumptions   underlying  its  2004  financial   projections  are
reasonable,  there are  significant  risks that could cause the  Company's  2004
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  consequences of the major airline bankruptcies,  the
possibility  of other airline  bankruptcy  filings and the ongoing  geopolitical
impacts of the conflicts in the Middle East.

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 does not guarantee the debt of any other party.  The
following table summarizes the Company's contractual debt principal payments and
operating  lease  obligations  after giving  effect to the  exchange  offers and
operating lease  amendments and the effect such obligations are expected to have
on its liquidity and cash flows in future periods.
<TABLE>
<CAPTION>


                                                                  Cash Payments Currently Scheduled
                                                                  ---------------------------------
                                                                                                     2007-            After
                                           Total            2004          2005         2006           2008            2008
                                           -----            ----          ----         ----           ----            ----
                                                                            (in thousands)

<S>                                   <C>               <C>            <C>         <C>            <C>            <C>
Current and long-term debt            $   526,076        $ 66,355      $  70,712   $  30,456      $  81,180      $   277,373

Lease obligations (1)                   3,879,581         207,303        266,017     316,285        627,993        2,461,983

Expected future lease obligations (2)     642,224           3,101         18,893      42,527         94,323          483,380

Redeemable preferred stock (3)             50,000               -              -           -              -           50,000
                                      -----------       ---------      ---------   ---------      ---------      -----------
Total contractual cash obligations    $ 5,097,881       $ 276,759      $ 355,622   $ 389,268      $ 803,496      $ 3,272,736
                                      ===========       =========      =========   =========      =========      ===========


</TABLE>

                                       38
<PAGE>

(1) 2004  lease  obligations  include a refund of  approximately  $29.8  million
related to lease payments made in 2003 due to completion of the lease amendments
on January 30, 2004. For further discussion,  see "Financial  Statements - Notes
to  Consolidated  Financial  Statements - Note 2 - State of the Industry and Its
Effects on the Company."

(2)  Represents  estimated  payments  on nine new Boeing  737-800  aircraft  the
Company is  committed  to taking  delivery  of in 2004 and 2005,  and four spare
engines the Company is committed to taking delivery of in 2005 through 2008. The
Company  intends to finance these  aircraft and engines with  operating  leases.
However, no such leases are in place as of December 31, 2003, as the Company has
not  received the  aircraft  and  engines.  Payments  for expected  future lease
obligations  were  estimated  using leases for  comparable  aircraft and engines
currently in place. For further discussion, see "Financial Statements - Notes to
Consolidated Financial Statements - Note 13 - Commitments and Contingencies."

(3) Represents the mandatory  redemption of the 500 shares of Series A Preferred
in equal  semiannual  installments  between 2010 and 2015.  Amount  excludes the
mandatory  redemption of the 300 shares of Series B convertible  preferred stock
in 2015,  as these shares can be  converted  into common stock at any time up to
the mandatory redemption date.

Aircraft  and Fleet  Transactions.  The  Company has a purchase  agreement  with
Boeing to purchase  directly  from Boeing seven new Boeing  737-800s,  which are
currently  scheduled  for delivery  between July 2005 and December  2005.  These
aircraft are powered by General Electric CFM56-7B27 engines.  The manufacturer's
list  price is $52.4  million  for each  737-800,  subject  to  escalation.  The
Company's  purchase  price for each  aircraft  is subject to various  discounts.
According  to a 2004  amendment to the purchase  agreement  with Boeing,  if the
Company does not have  permanent  financing for these  aircraft  suitable to the
Company,  and does not have  suitable  pre-delivery  deposit  financing,  and if
Boeing does not elect to provide such financing  suitable to the Company,  these
deliveries  can be delayed for one year  periods  annually for up to five years.
Aircraft pre-delivery deposits are required for these aircraft,  and the Company
has  historically  funded these  deposits  for past  aircraft  deliveries  using
operating cash and  pre-delivery  deposit  finance  facilities.  The Company can
provide no assurance that it will be able to secure pre-delivery deposit finance
facilities  or permanent  financing  for any future  aircraft  purchases.  As of
December  31,  2003,  the Company  had $4.6  million in  long-term  pre-delivery
deposits  outstanding  for future  aircraft  deliveries  which were  funded with
operating cash. Upon delivery of the aircraft, pre-delivery deposits funded with
operating  cash are expected to be returned to the  Company.  As of December 31,
2003,  the Company  also has purchase  rights with Boeing for 40 Boeing  737-800
aircraft.

The Company has an agreement to lease one  additional  Boeing  737-800  under an
operating  lease from ILFC,  which is  currently  scheduled  for delivery in May
2004.

The Company  also has an  agreement  with GECAS to lease one  additional  Boeing
737-800 currently scheduled for delivery in November 2004.

The Company  has an  agreement  with  General  Electric  to purchase  four spare
engines CFM56-7B27  engines,  which are currently scheduled for delivery between
2005 and 2008.

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.  The Company took  delivery of all six SAAB 340B  aircraft  under this
agreement in 2002.

The Company has a limited liability agreement with BCC-ELC forming BATA, a 50/50
joint  venture.  BATA is  remarketing  the  Company's  fleet of  Boeing  727-200
aircraft in cargo  configurations.  In exchange for  supplying  the aircraft and
certain  operating  services to BATA, the Company has and expects to continue to
receive  both cash and equity in the income or loss of BATA.  As of December 31,
2003, the Company had transferred 23 of its fleet of Boeing 727-200  aircraft to
BATA.

                                       39
<PAGE>

Significant Financings.  In November 2002, the Company obtained a $168.0 million
secured term loan, of which $148.5  million is guaranteed by the ATSB.  Interest
is payable monthly at LIBOR plus a margin. Guarantee fees payable quarterly were
5.5% of the outstanding guaranteed principal balance in 2003, escalating to 9.5%
on the outstanding  guaranteed  principal  balance in 2004 through 2008. 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 additional
secured term loan proceeds of approximately $104.7 million were used for general
corporate purposes.

The  secured  term loan is  subject  to  certain  restrictive  covenants  and is
collateralized  primarily by certain receivables,  aircraft,  spare engines, and
rotable parts.  The  receivables had a carrying  amount of  approximately  $39.3
million as of December 31, 2003.  The aircraft,  spare engines and parts consist
of two Lockheed L-1011-500 aircraft,  one Lockheed L-1011-50 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 had a combined  carrying amount
of approximately $67.5 million as of December 31, 2003.

In  conjunction  with  obtaining  the secured  term loan,  the Company  issued a
warrant to the Federal  Government  to purchase  up to  1,478,059  shares of its
common stock, and additional  warrants to other loan participants to purchase up
to 194,089  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  allocated $7.4 million to
the total value of warrants  issued giving rise to a discount on the loan.  (See
"Financial  Statements - Notes to Consolidated  Financial Statements - Note 10 -
Shareholders'  Deficit.")  The  amortization  of  the  discount  resulted  in an
increase in the effective  rate of interest on the secured term loan,  which was
3.4% as of December 31, 2003 and 3.2% as of December 31, 2002.

Card Agreement. The Company accepts charges to most major credit and debit cards
("cards") as payment from its customers.  Approximately 90% of scheduled service
and vacation  package sales are purchased  using these cards.  More than half of
these card sales are made using MasterCard or Visa cards. The Company  maintains
an agreement  with a bank for the  processing and collection of charges to these
cards. Under this agreement,  a sale is normally charged to the purchaser's card
account  and is paid to the  Company  in cash  within  a few days of the date of
purchase, although the Company may provide the purchased services days, weeks or
months later.  In 2003, the Company  processed  approximately  $753.8 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, 2003, the bank had withheld $57.5
million in cash. As of December 31, 2002, the bank had withheld $30.0 million in
cash.  The deposits as of December 31, 2003,  and December 31, 2002  constituted
approximately  100%  and  60%,  respectively,  of  the  Company's  total  future
obligations to provide services  purchased by charges to MasterCard or Visa card
accounts as of those  dates.  The bank's  right to  maintain a deposit  does not
terminate  unless,  in its reasonable  judgment and at its sole  discretion,  it
determines  that a deposit is no longer  required.

The  Company  has the  right to  terminate  its  agreement  with  the bank  upon
providing 90 days' 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.
                                       40
<PAGE>
On October 10,  2003,  the Company  amended its  agreement  with its credit card
processing  bank to reflect an extension for the  processing  and  collection of
sales charged on MasterCard  and Visa cards until December 31, 2004. In order to
secure this  extension,  the Company  agreed to increase  the amount of pre-paid
sales that the bank holds on deposit from 60% to 100%.  The effect of increasing
this percentage was to reduce the Company's cash balance by approximately  $23.0
million  between  September 30, 2003, and December 31, 2003, as compared to what
the Company  estimates  its cash balance  would have been with a 60% holdback of
prepaid sales.

On March 1, 2004,  the  Company  amended  its  agreement  with its  credit  card
processing  bank to  reflect a further  extension  for the  processing  of sales
charges on  MasterCard  and Visa cards  until  March 31,  2005.  The credit card
processing  bank agreed to reduce the holdback  percentage  for sales for future
travel to 75%  effective  with the  execution  of the  amendment.  The effect of
decreasing the holdback percentage from 100% to 75% increased the Company's cash
balance by  approximately  $21 million based on the holdback balance at March 1,
2004. The amended agreement provides quarterly  financial  covenants under which
the  Company may  maintain a holdback at 75% or 50% of sales for future  travel,
but at no time during the life of the amendment  will the holdback be lower than
50% of sales for future travel.  However,  the Company can provide no assurances
that it will be able to maintain the percentage of holdback below 100% in future
periods under this amendment.

Although the Company continues to process  significant  dollar amounts of ticket
sales using  credit  cards other than  MasterCard  and Visa,  as of December 31,
2003,  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  requires  the  Company to provide a surety  bond or an
escrow to secure  potential  refund  claims of charter  customers  who have made
prepayments to the Company for future transportation.

The Company has also historically provided both escrow arrangements and a surety
bond to the DOT,  but  most  recently  has  used a  surety  bond to meet its DOT
charter  obligations.  Prior to the terrorist attacks of September 11, 2001, the
Company  had  provided  a letter of credit of $1.5  million as  security  to its
surety bond issuer for its total estimated  surety bond  obligations,  including
the DOT charter obligations.  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 at that date. The Company's
letter of credit was adjusted  accordingly,  and the Company has been subject to
further adjustments of its letter of credit, based upon further revisions to the
estimated  liability  for total  surety bonds  outstanding.  The cash pledged to
secure the  Company's  letter of credit is  included in  restricted  cash on the
accompanying  balance sheets. On December 15, 2003, upon cancellation of the DOT
charter obligation surety bond by the issuer, the Company entered into an escrow
arrangement  which  requires the Company to place  advance  receipts for certain
charter  flights into escrow until the flight  operates.  Once the flight occurs
the Company is paid from the escrow account those advance  deposits  specific to
that completed  flight. As of December 31, 2003, the Company has $6.9 million in
advance charter receipts  deposited in escrow,  which was included in restricted
cash on the  Company's  balance  sheet as of that date. As of December 31, 2003,
the Company  also  continued  to  maintain a letter of credit for $15.2  million
securing the DOT charter  obligations  surety bond,  pending formal release from
those  obligations of the issuer of the surety bond by the DOT. This release was
provided by the DOT in February 2004, and the letter of credit was  subsequently
cancelled,  and the restricted  cash securing that letter of credit was returned
to the Company.

As of December 31, 2003,  the  Company's  restricted  cash pledged to secure its
letters of credit for all surety bonds,  including its DOT charter  obligations,
was $41.4  million,  and cash  deposited  in escrow for DOT charter  obligations
totaled $6.9 million.

                                       41
<PAGE>

Future Accounting Changes

In  January  2003,  the FASB  issued  Interpretation  No. 46,  Consolidation  of
Variable Interest Entities ("FIN 46"). The FASB amended FIN 46 in December 2003.
FIN 46, as amended,  requires  that  companies  ("primary  beneficiaries")  that
absorb a majority of a variable  interest  entity's ("VIE") losses, or receive a
majority of a VIEs residual  returns,  consolidate  the entity.  The  accounting
provisions of FIN 46 are required to be applied to VIEs within the first quarter
ending after March 15, 2004. The related disclosure  requirements were effective
upon  issuance of FIN 46. The Company  does not expect FIN 46 to have a material
impact on the Company.

The Company has identified BATA as a VIE under FIN 46 in which the Company has a
significant  variable  interest.  The Company has determined  that it is not the
primary  beneficiary  of BATA under FIN 46 and is not  required  to  consolidate
BATA.  As of  December  31,  2003,  the  investment  in  BATA  on the  Company's
consolidated balance sheet was $14.7 million.

See  "Financial  Statements  and  Supplementary  Data -  Notes  to  Consolidated
Financial Statements - Note 19 - Recently Issued Accounting  Pronouncements" for
a discussion of recently issued accounting pronouncements impacting the Company.

Forward-Looking Information and Risk Factors

Information contained within "Management's  Discussion and Analysis of Financial
Condition and Results of Operations" includes forward-looking  information which
can be identified by forward-looking  terminology such as "believes," "expects,"
"may,"  "will,"  "should,"  "anticipates,"  or the  negative  thereof,  or other
variations in comparable terminology.  Such forward-looking information is based
upon management's current knowledge of factors affecting the Company's business.
The differences  between  expected  outcomes and actual results can be material,
depending upon the circumstances.  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. Such
factors include, but are not limited to, the following:

o        economic conditions;
o        threat of future terrorist attacks;
o        labor costs;
o        aviation fuel costs;
o        competitive pressures on schedules and pricing;
o        weather conditions;
o        governmental legislation and regulation;
o        consumer perceptions of the Company's products;
o        demand for air transportation overall 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
         ("SEC").

                                       42
<PAGE>

The Company is under no obligation to update,  and will not undertake to update,
its   forward-looking   statements  to  reflect  future  events  or  changes  in
circumstances.

Related Party Transactions

For  information  on the Company's  related party  transactions  see  "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 18 - Related Party Transactions."

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 2003,  aircraft fuel
accounted  for  approximately  19.2% of the  Company's  operating  expenses,  as
compared to 14.4% in 2002. The Company obtains fuel price fluctuation protection
from escalation clauses in certain commercial charter, military charter and bulk
scheduled  service.  During 2002 and 2001,  the Company  entered into fuel hedge
contracts  to reduce the  volatility  of fuel  prices,  using  heating  oil swap
agreements.  Using these contracts, the Company hedged approximately 12% and 30%
of its total gallons consumed in 2002 and 2001, respectively. As of December 31,
2003, the Company had no outstanding fuel hedge agreements.

Market risk is  estimated  as a  hypothetical  10%  increase in the December 31,
2003,  cost per gallon of fuel.  Based on projected  2004 fuel usage,  excluding
anticipated protection from escalation clauses, such a change would result in an
increase in aircraft fuel expense of approximately $26.5 million. As of December
31, 2002, that risk was $19.4 million.

Interest Rates. The Company's results of operations are affected by fluctuations
in market interest rates. As of December 31, 2003, the majority of the Company's
variable-rate   debt  was   comprised  of   approximately   $161.0   million  of
variable-rate  debt through the secured term loan. 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. If interest
rates average 100 basis points more on  variable-rate  debt in 2004, as compared
to 2003  average  rates,  the  Company's  interest  expense  would  increase  by
approximately $1.6 million. In comparison,  if interest rates averaged 100 basis
points more on  variable-rate  debt in 2003, as compared to 2002 average  rates,
the  Company's  interest  expense  would have  increased by  approximately  $1.8
million.

As of December 31, 2003 and 2002, 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, 2003, of this  fixed-rate  debt is estimated to be
approximately  $306.0  million.  After giving effect to the exchange offers that
were  completed on January 30,  2004,  the fair value of this  fixed-rated  debt
including the additional notes is estimated to be approximately  $406.0 million.
See  "Financial  Statements  and  Supplementary  Data -  Notes  to  Consolidated
Financial  Statements  - Note 2 - State of the  Industry  and Its  Effect on the
Company"  for  additional  information  on the  exchange  offers.  Market  risk,
estimated as the potential  increase in fair value resulting from a hypothetical
100 basis point  decrease in market  interest  rates,  was  approximately  $10.0
million  as of  December  31,  2003.  As of  December  31,  2002,  that risk was
approximately $32.5 million.

                                       43
<PAGE>

In 2003, the average rate for the Company's short-term investments was less than
one percent. If average short-term interest rates decreased to zero percent, the
Company's  interest income from short-term  investments  would have decreased by
approximately  $1.4 million as of December 31, 2003. In comparison,  the Company
estimated  that if average  short-term  interest  rates  decreased  by 100 basis
points as compared to 2002 average  rates,  the Company's  interest  income from
short-term  investments would have decreased by approximately $2.0 million as of
December 31, 2002.

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, 2003 and 2002.

                                       44
<PAGE>

Item 8.        Financial Statements and Supplementary Data


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Board of Directors and Shareholders
ATA Holdings Corp. and Subsidiaries

We have audited the  accompanying  consolidated  balance  sheets of ATA Holdings
Corp.  and  Subsidiaries  as of  December  31,  2003 and 2002,  and the  related
consolidated   statements  of  operations,   changes  in  preferred   stock  and
shareholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 2003. 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, 2003 and 2002, and the consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2003, 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 17 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 30, 2004, except for Note 21, as to which the date is March 1, 2004

                                       45
<PAGE>

<TABLE>
<CAPTION>

                       ATA HOLDINGS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

                                                                               December 31,            December 31,
                                                                                  2003                    2002
                                                                               ------------            ------------
                                ASSETS
<S>                                                                        <C>                   <C>
Current assets:
     Cash and cash equivalents                                             $           160,644   $              200,160

     Aircraft pre-delivery deposits                                                          -                   16,768
     Receivables, net of allowance for doubtful accounts
     (2003 - $1,388; 2002 - $2,375)                                                    118,745                   86,377
     Inventories, net                                                                   47,604                   51,233
     Prepaid expenses and other current assets                                          21,406                   39,214
                                                                           -------------------   ----------------------
Total current assets                                                                   348,399                  393,752

Property and equipment:
     Flight equipment                                                                  324,697                  312,652
     Facilities and ground equipment                                                   142,032                  134,355
                                                                           -------------------   ----------------------
                                                                                       466,729                  447,007
     Accumulated depreciation                                                         (213,247)                (181,380)
                                                                           -------------------   ----------------------
                                                                                       253,482                  265,627

Restricted cash                                                                         48,301                   30,360
Goodwill                                                                                14,887                   14,887
Prepaid aircraft rent                                                                  144,088                   68,828
Investment in BATA                                                                      14,672                   22,968
Deposits and other assets                                                               46,158                   51,714
                                                                           -------------------   ----------------------
Total assets                                                               $           869,987   $              848,136
                                                                           ===================   ======================


                 LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
    Current maturities of long-term debt                                   $            51,645   $              14,191

    Short-term debt                                                                          -                   8,384
    Accounts payable                                                                    25,327                  23,688
    Air traffic liabilities                                                            102,831                  94,693
    Accrued expenses                                                                   154,689                 160,924
                                                                           -------------------   ----------------------
Total current liabilities                                                              334,492                 301,880

Long-term debt, less current maturities                                                443,051                 486,853
Deferred gains from sale and leaseback of aircraft                                      55,392                  54,889
Other deferred items                                                                    51,822                  42,038
Redeemable preferred stock; authorized and issued 500 shares                            56,330                       -
                                                                           -------------------   ----------------------
Total liabilities                                                                      941,087                 885,660

Commitments and contingencies

Convertible redeemable preferred stock; authorized and issued 300
shares                                                                                  32,907                 30,375

Redeemable preferred stock; authorized and issued 500 shares                                 -                 52,110

Shareholders' deficit:

    Preferred stock; authorized 9,999,200 shares; none issued                                -                      -
    Common stock, without par value; authorized 30,000,000 shares;
       issued 13,502,593 - 2003; 13,476,193 - 2002                                      65,711                 65,290
    Treasury stock; 1,711,440 shares - 2003; 1,711,440 shares - 2002                   (24,778)               (24,778)
    Additional paid-in capital                                                          18,163                 18,374
    Accumulated deficit                                                               (163,103)              (178,895)
                                                                           -------------------   ----------------------
Total shareholders' deficit                                                           (104,007)              (120,009)
                                                                           -------------------   ----------------------

Total liabilities and shareholders' deficit                                $           869,987   $            848,136
                                                                           ===================   ======================

See accompanying notes.

</TABLE>

                                       46
<PAGE>

<TABLE>
<CAPTION>

                       ATA HOLDINGS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in thousands, except per share data)

                                                                       Year Ended December 31,
                                                                 2003               2002               2001
<S>                                                          <C>                  <C>               <C>
Operating revenues:
   Scheduled service                                         $ 1,085,420          $   886,579        $  820,666
   Charter                                                       366,207              309,242           359,770
   Ground package                                                 14,682               35,687            52,182
   Other                                                          52,224               45,862            42,866
                                                             -----------          -----------        ----------
Total operating revenues                                       1,518,533            1,277,370         1,275,484
                                                             -----------          -----------        ----------
Operating expenses:
   Salaries, wages and benefits                                  399,622              355,201           325,153
   Fuel and oil                                                  276,057              206,574           251,333
   Aircraft rentals                                              226,559              190,148            98,988
   Handling, landing and navigation fees                         113,781              110,528            88,653
   Crew and other employee travel                                 64,055               54,774            59,278
   Depreciation and amortization                                  56,729               76,727           121,327
   Other selling expenses                                         50,150               43,934            41,601
   Aircraft maintenance, materials and repairs                    45,741               52,254            61,394
   Passenger service                                              41,000               38,345            43,856
   Advertising                                                    37,932               40,028            26,421
   Insurance                                                      30,214               33,981            10,675
   Facilities and other rentals                                   24,162               22,624            20,241
   Commissions                                                    22,445               23,326            34,789
   Ground package cost                                            12,089               27,882            42,160
   Special charges                                                     -                    -            21,525
   Aircraft impairments and retirements                            5,288               66,787           118,868
   Goodwill impairment                                                 -                6,893                 -
   U.S. Government grants                                        (37,156)              16,221           (66,318)
   Other                                                          72,324               71,180            67,410
                                                             -----------          -----------        ----------
Total operating expenses                                       1,440,992            1,437,407         1,367,354
                                                             -----------          -----------        ----------
Operating income (loss)                                           77,541            (160,037)          (91,870)

Other income (expense):
   Interest income                                                 2,878                2,829             5,331
   Interest expense                                              (56,324)             (35,746)          (30,082)
   Other                                                          (2,350)              (1,260)              554
                                                             -----------          -----------        ----------
Other expense                                                    (55,796)             (34,177)          (24,197)
                                                             -----------          -----------        ----------
Income (loss) before income taxes                                 21,745             (194,214)         (116,067)
Income taxes (credits)                                             1,311              (24,950)          (39,750)
                                                             -----------          -----------        ----------
Net income (loss)                                                 20,434             (169,264)          (76,317)


Preferred stock dividends                                         (4,642)              (5,720)           (5,568)
                                                             -----------          -----------        ----------
Income (loss) available to common shareholders               $    15,792          $  (174,984)       $  (81,885)
                                                             ===========          ===========        ==========
Basic earnings per common share:
Average shares outstanding                                    11,773,713           11,711,906        11,464,125

Net income (loss) per common share                           $      1.34          $    (14.94)       $    (7.14)
                                                             ===========          ===========        ==========
Diluted earnings per common share:
Average shares outstanding                                    14,468,836           11,711,906        11,464,125

Net income (loss) per common share                           $      1.27          $    (14.94)       $    (7.14)
                                                             ===========          ===========        ==========
See accompanying notes.

</TABLE>

                                       47
<PAGE>

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

                                  Redeemable                           Additional        Other        Retained         Total
                                  Preferred     Common     Treasury      Paid-in     Comprehensive    Earnings     Shareholders'
                                    Stock       Stock       Stock        Capital        Income       (Deficit)   Equity (Deficit)
                                    -----       -----       -----        -------        ------       ---------   ----------------
<S>                                   <C>        <C>       <C>            <C>             <C>          <C>           <C>
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 paid                    -          -            -             -             -        (3,235)           (3,235)

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          -            -             -             -        (2,485)           (2,485)

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

Net income                                  -          -            -             -             -        20,434            20,434

Stock options exercised                     -        421            -         (211)             -             -               210

Reclassification to long-term
debt                                  (54,220)

Accrued preferred stock
dividends                               4,642          -            -             -             -        (4,642)           (4,642)
                                      -------    -------   ---------      ---------       -------       --------      ------------
Balance as of December 31, 2003       $32,907    $65,711   $ (24,778)     $  18,163       $     -   $  (163,103)     $   (104,007)
                                      =======    =======   =========      =========       ========      ========      ============
 See accompanying notes.

</TABLE>

                                       48
<PAGE>

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

                                                                        Year Ended December 31,
                                                                  2003              2002              2001
                                                                  ----------------------------------------
Operating activities:
<S>                                                         <C>                <C>                <C>
Net income (loss)                                           $   20,434         $ (169,264)        $ (76,317)
Adjustments to reconcile net income (loss)
  to net cash provided by (used in) operating
  activities:
     Depreciation and amortization                             56,729              76,727           121,327
     Aircraft impairments and retirements                       5,288              66,787           118,868
     Goodwill impairments                                           -               6,893                 -
     Deferred income tax credit                                     -              (8,697)          (40,848)
     Other non-cash items                                      31,686              39,817             1,843

Changes in operating assets and liabilities:
     U.S. Government grant receivable                           6,158              16,221           (21,861)
     Other receivables                                        (38,526)            (27,552)            3,420
     Inventories                                                   38              (7,411)          (11,586)
     Prepaid expenses and other current assets                 17,808             (24,701)            5,940
     Accounts payable                                           1,639              (3,260)           16,882
     Air traffic liabilities                                    8,138              (6,265)           (6,092)
     Accrued expenses                                         (15,613)            (18,309)           32,848
                                                            ---------          ----------         ---------
   Net cash provided by (used in) operating activities         93,779             (59,014)          144,424
                                                            ---------          ----------         ---------
Investing activities:

Aircraft pre-delivery deposits                                 16,582             149,510           (30,781)
Capital expenditures                                          (42,534)            (59,346)         (119,798)
Noncurrent prepaid aircraft rent                              (75,260)            (12,304)          (17,180)
Investment in BATA                                                  -              18,632            27,343
(Additions) reductions to other assets                          2,206              (7,985)           10,474
Proceeds from sales of property and equipment                     312                 424               151
                                                            ---------          ----------         ---------
   Net cash provided by (used in) investing activities        (98,694)             88,931          (129,791)
                                                            ---------          ----------         ---------
Financing activities:

Preferred stock dividends                                           -              (3,235)           (5,568)
Proceeds from sale/leaseback transactions                           -               2,253             5,229
Proceeds from short-term debt                                       -              56,858            71,537
Payments on short-term debt                                    (8,384)           (167,839)          (44,123)
Proceeds from long-term debt                                    5,729             363,040           219,422
Payments on long-term debt                                    (14,215)           (235,352)         (207,294)
Increase in restricted cash                                   (17,941)            (30,360)                -
Proceeds from stock option exercises                              210                 449             1,670
Purchase of treasury stock                                          -                 (10)             (204)
                                                            ---------          ----------         ---------
   Net cash provided by (used in) financing activities        (34,601)            (14,196)           40,669
                                                            ---------          ----------         ---------
Increase (decrease) in cash and cash equivalents              (39,516)             15,721            55,302
Cash and cash equivalents, beginning of period                200,160             184,439           129,137
                                                            ---------          ----------         ---------
Cash and cash equivalents, end of period                    $ 160,644          $  200,160         $ 184,439
                                                            =========          ==========         =========

Supplemental disclosures:

Cash payments for:
    Interest                                                $  47,088          $   42,102         $  44,839
    Income taxes (refunds), net                             $ (10,992)         $    1,572         $  (9,721)

Financing and investing activities not affecting cash:
    Accrued capitalized interest                            $     343          $  (10,487)        $   7,465
    Notes payable                                           $       -          $    2,427         $       -
    Issuance of warrants                                    $       -          $    7,424         $       -
    Accrued preferred stock dividends                       $   4,642          $    2,485         $       -

See accompanying notes.

</TABLE>

                                       49
<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.  For additional information,  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, 2003 and 2002 was $21.2  million and $14.7  million,
respectively. Inventories are charged to expense when consumed.

Investment in BATA Leasing, LLC

The Company has a limited liability  agreement with Boeing Capital Corporation -
Equipment Leasing Corporation  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  remarketing  the
Company's fleet of Boeing 727-200 aircraft in cargo configurations.  In exchange
for supplying the aircraft and certain  operating  services to BATA, the Company
has and expects to continue to receive  both cash and its share of the income or
loss of BATA. As of December 31, 2003,  the Company  transferred 23 of its fleet
of Boeing 727-200 aircraft to BATA.

Travel Awards Program

The Company  instituted a travel  award  program in October  2002,  which allows
customers to earn points for travel  purchased on ATA.  Once they  accumulate to
certain  values,  the points can be redeemed for free future  travel on ATA. The
Company records a liability based on the estimated incremental cost of providing
travel when the customer has earned  points which can be redeemed for the lowest
award level.  The  liability is relieved as customers  complete  travel for free
trips or when unused points or awards expire. The liability was $0.7 million and
$0.1 million at December 31, 2003 and 2002, respectively.

                                       50
<PAGE>

Prepaid Aircraft Rent

The  Company's  operating  leases  require  periodic  cash payments that vary in
amount and  frequency.  Many of the  Company's  aircraft  operating  leases were
originally structured to require very significant cash in the early years of the
lease in order to  obtain  more  overall  favorable  lease  rates.  The  Company
accounts for aircraft  rentals expense in equal monthly amounts over the term of
each  operating  lease  because   straight-line   expense  recognition  is  most
representative  of the time pattern from which  benefit from use of the aircraft
is  derived.  The amount of the cash  payments  in excess of the  aircraft  rent
expense in these early years has created a  significant  prepaid  aircraft  rent
amount on the Company's  balance sheet.  See "Note 2 - State of the Industry and
Its Effect on the Company" with respect to renegotiation of aircraft lease terms
as of January 30, 2004.

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  is
included  in  prepaid  expenses  and other  current  assets in the  accompanying
consolidated balance sheets.

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:

                                       51
<PAGE>

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

 Lockheed L-1011 (Series 50 and 100)                Depreciating to individual aircraft retirement date
                                                    (2004) (See "Note 16 - 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 assemblies        Life of equipment or lease to which applicable
                                                    (generally ranging from 5-18 years)

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

Other property and equipment                        3-7 years

</TABLE>


Aircraft Lease Return Conditions

The  Company  finances  substantially  all  of its of  aircraft  through  leases
accounted  for as  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 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.

                                       52
<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, 2003 and 2002,
deposits and other assets  included  advanced  payments for future  aircraft and
engine deliveries totaling $4.6 million and $4.4 million, respectively.

Restricted Cash

Restricted cash consists of deposits held to secure outstanding stand-by letters
of credit currently  provided by the Company.  Also included is cash received as
prepayment  for certain  charter  flights paid into an escrow  account until the
future  flight  occurs.  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
consolidated balance sheets.

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 for  impairment  goodwill and other  intangible  assets deemed to
have indefinite  lives. 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.  For additional  information,  see "Note 6 - 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
$261.0  million and $124.5 million based upon  dealer-quoted  prices at December
31,  2003,  and  December 31,  2002,  respectively.  After giving  effect to the
exchange  offers on  January  30,  2004,  the  carrying  value of the  Company's
unsecured  senior notes had an aggregate  estimated fair value of $304.6 million
based upon dealer  quoted  prices.  See "Note 2 - State of the  Industry and Its
Effect on the Company" for additional information on the exchange offers.

Advertising

The Company expenses advertising costs in the period incurred.

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 or
2003. The 2001 special charges were comprised primarily of costs associated with
the decision  shortly after  September 11, 2001 to remove early from service the
Company's Boeing 727-200 fleet, some of which were leased; costs associated with
the Company's  proposed  transaction in which ATA Holdings Corp. would have been
taken private,  which was substantially complete just prior to the September 11,
2001 terrorist  attacks,  as a result of which the Company lost  financing;  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. The special charges for 2001 are summarized in the
following table:
                                      53
<PAGE>

<TABLE>
<CAPTION>

                                                             Amount
                                                          (in thousands)
                                                          --------------

<S>                                                         <C>
Boeing 727-200 exit costs                                   $  3,764

Privatization costs                                            3,313

Costs due to FAA-mandated suspension of flights                  929

Increased hull and liability insurance costs                   2,964

Increased advertising costs                                    6,316

Increased interest expense                                       762

Other expenses                                                 3,477
                                                            --------
Total Special Charges for 2001                              $ 21,525
                                                            ========

</TABLE>

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  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 the years ended  December  31,
2003 and 2002. The weighted-average fair value of options granted during 2001 is
estimated  at $5.44 on the grant  date.  These  estimates  were  made  using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions for 2001:  risk-free  interest rate of 3.59%;  expected market price
volatility  of  0.62;  weighted-average  expected  option  life of  1.04  years;
estimated forfeitures of 10.8%; 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:
                                       54
<PAGE>

<TABLE>
<CAPTION>


                                                             2003               2002              2001
                                                             -----------------------------------------
                                                               (In thousands, except per share data)
<S>                                                      <C>              <C>                <C>
Net income (loss) available to common shareholders
as reported                                              $  15,792        $  (174,984)       $  (81,885)
Deduct:  Total stock-based employee compensation
expense determined under fair value based method,
net of related tax effects                                     (17)              (140)           (1,188)
                                                         ---------        -----------        ----------
Net income (loss) available to common shareholders
pro forma                                                $  15,775        $  (175,124)       $  (83,073)

Basic income (loss) per share as reported                $    1.34        $    (14.94)       $    (7.14)

Basic income (loss) per share pro forma                  $    1.34        $    (14.95)       $    (7.25)

Diluted income (loss) per share as reported              $    1.27        $    (14.94)       $    (7.14)

Diluted income (loss) per share pro forma                $    1.27        $    (14.95)       $    (7.25)

</TABLE>

2. State of the Industry and Its Effect on the Company

The  terrorist  attacks of  September  11, 2001,  and  generally  weak  economic
conditions of the past several years have adversely affected the Company and the
airline  industry.  The  industry as a whole,  and the  Company,  suffered  very
significant  financial  losses in the years ended  December 31, 2002,  and 2001.
While the Company realized net income for the year ended December 31, 2003, that
net income was favorably impacted by the Company's receipt in the second quarter
of 2003 of  $37.2  million  in U.S.  Government  funds in  conjunction  with the
Emergency Wartime  Supplemental  Appropriations  Act  ("Supplemental  Act"). The
Supplemental  Act was signed into law in April  2003,  and made  available  $2.3
billion in reimbursements to U.S. air carriers for expenses incurred and revenue
foregone related to federally mandated enhanced aviation security  subsequent to
September 11, 2001.

During 2002, two major air carriers, US Airways Group and UAL Corporation, filed
for  reorganization  under Chapter 11 of the United States  Bankruptcy  Code. US
Airways Group emerged from  bankruptcy  protection in March 2003.  Historically,
air carriers involved in reorganizations have substantially reduced their fares,
which could reduce  airline  yields  further from  current  levels.  Certain air
carriers have sought to reduce financial losses, at least partially, by reducing
their seat capacity.  As this has been accomplished by eliminating aircraft from
operating fleets,  the fair value of aircraft,  including  aircraft owned by the
Company,  has been  adversely  affected.  The Company has  recorded  substantial
charges to earnings  resulting from fleet  retirements and impairments  over the
past three  years.  However,  during this  period the Company has  substantially
replaced its fleet of aging aircraft with new fuel-efficient Boeing aircraft.

In addition to the funds received in the second quarter of 2003, the Company has
benefited from some of the U.S. Government's other 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  of  U.S.   Government  grant
compensation  under the Act,  of which the final  payment  of $6.2  million  was
received  in the first  quarter  of 2003.  The  Company  also  obtained a $168.0
million  secured  term  loan in  November  2002,  of  which  $148.5  million  is
guaranteed  by the  ATSB.  See  "Note 6 - Debt"  and  "Note  10 -  Shareholder's
Deficit" for additional information about the ATSB loan.

                                       55
<PAGE>

The terrorist  attacks of September 11, 2001 and the generally weak economy have
also had a negative impact on the Company's liquidity.  The Company's new Boeing
aircraft  are all leased and have  higher  fixed-ownership  costs than the older
fleets that they replaced.  The terms of many of these aircraft operating leases
were  determined  before  September  11, 2001,  and were  structured  to require
significant  cash  payments  in the first  few  years of each  lease in order to
reduce the total  rental cost over the related  lease terms.  Consequently,  the
Company made large cash lease payments on many of its aircraft in the year ended
December 31, 2003, which resulted in a substantial use of the Company's cash. As
of December 31, 2003,  the Company was also  scheduled to repay the $175 million
outstanding principal of its 10 1/2 % Senior Notes ("2004 Notes") in August 2004
and the $125  million  outstanding  principal of its 9 5/8% Senior Notes ( "2005
Notes" and, together with the 2004 Notes, "Existing Notes") in December 2005.

On January 30, 2004,  the Company  successfully  completed  exchange  offers and
issued Senior Notes due 2009 ("2009 Notes") and cash  consideration  for certain
of its 2004 Notes and issued Senior Notes due 2010 ("2010  Notes" and,  together
with the 2009 Notes, "New Notes") and cash consideration for certain of its 2005
Notes. In completing the exchange offers, the Company accepted $260.3 million of
Existing  Notes  tendered  for  exchange,  issuing  $163.1  million in aggregate
principal  amount of 2009 Notes and delivering  $7.8 million in cash in exchange
for $155.3 million in aggregate  principal  amount of 2004 Notes  tendered,  and
issuing  $110.2  million  in  aggregate  principal  amount  of  2010  Notes  and
delivering  $5.2  million in cash in exchange  for $105.0  million in  aggregate
principal  amount of 2005  Notes.  In addition  to the New Notes  issued,  $19.7
million in  aggregate  principal  amount of the 2004 Notes and $20.0  million in
aggregate  principal  amount  of the 2005  Notes  remain  outstanding  after the
completion of the exchange offers.  In connection with the exchange offers,  the
Company also obtained the consent of the holders of the Existing  Notes to amend
or eliminate all of the  restrictive  operating  covenants  and certain  default
provisions of the indentures  governing the Existing Notes.  See "Note 6 - Debt"
for additional information about the exchange offers.

On January 30,  2004,  the Company  also  completed  the  amendments  of certain
aircraft operating leases with its three major lessors,  Boeing Capital Services
Corporation  ("BCSC"),  General Electric Capital Aviation Services ("GECAS") and
International  Lease  Finance  Corporation  ("ILFC").  The  effect  of the lease
amendments  was to delay the  payment of portions of the amounts due under those
operating  leases  primarily  between  June 30,  2003 and March 31,  2005 and to
extend the leases  generally for two years.  Most of the payments delayed during
this time period  will be  subsequently  paid at various  times  throughout  the
remaining life of the leases.  The Company received a refund of $29.8 million on
January 30, 2004 related to payments  made in 2003 under the  original  terms of
certain  retroactively  amended  leases.  The  amendments  will  also  result in
approximately  $69.6  million in lower cash  payments  during  2004 under  these
operating  leases,  as compared to payments  which would have been due under the
original  lease  terms.  See  "Note  7  -  Lease   Commitments"  for  additional
information about the Company's operating leases.

While the  Company  expects  that  adverse  industry  conditions  are  likely to
continue  throughout  2004, the Company's  management  believes  that,  with the
completion of the exchange  offers and operating lease  amendments,  the Company
has a viable plan to provide  sufficient cash to fund operations for the next 12
months.  The Company's plan continues to require  focused  marketing  efforts on
those  businesses  and markets  where the  Company  believes it can be a leading
provider,  and the  implementation  of additional  cost-saving  initiatives  the
Company  believes  will  maintain its low-cost  advantage.  Although the Company
believes  the  assumptions   underlying  its  2004  financial   projections  are
reasonable,  there are  significant  risks that could cause the  Company's  2004
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  consequences of the major airline bankruptcies,  the
possibility  of other airline  bankruptcy  filings and the ongoing  geopolitical
impacts of the conflicts in the Middle East.

                                       56
<PAGE>

3. Cash and Cash Equivalents

Cash and cash equivalents consist of the following:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                             2003           2002
                                                                            ---------------------
                                                                               (in thousands)

<S>                                                                     <C>               <C>
Cash and money market funds                                             $   158,100       $ 176,404
U.S. Treasury repurchase agreements                                           2,544          23,756
                                                                         ----------       ---------
                                                                         $  160,644       $ 200,160
                                                                         ==========       =========


</TABLE>

4. Property and Equipment

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

                                                                                        December 31,
                                                                                   2003             2002
                                                                                   ---------------------
                                                                                       (in thousands)

<S>                                                                            <C>              <C>
Flight equipment, including airframes, engines and other                       $  324,697       $  312,652
Less accumulated depreciation                                                    (112,912)         (94,173)
                                                                               ----------       ----------
                                                                                  211,785          218,479
                                                                               ----------       ----------
Facilities and ground equipment                                                   142,032          134,355
Less accumulated depreciation                                                    (100,335)         (87,207)
                                                                               ----------       ----------
                                                                                   41,697           47,148
                                                                               ----------       ----------
                                                                               $  253,482       $  265,627
                                                                               ==========       ==========


</TABLE>

Depreciation  and  amortization  expense was $56.7  million,  $76.7  million and
$121.3 million for 2003, 2002 and 2001, respectively.

5.       Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>

                                                                                                   December 31,
                                                                                              2003             2002
                                                                                              ---------------------
                                                                                                  (in thousands)

<S>                                                                                       <C>              <C>
Accrued salaries                                                                          $  12,990        $  18,543
Accrued vacation pay                                                                         19,899           17,543
Other accrued expenses (individually less than 5% of total current liabilities)             121,800          124,838
                                                                                          ---------        ---------
                                                                                          $ 154,689        $ 160,924
                                                                                          =========        =========

                                       57
<PAGE>


</TABLE>

6.       Debt
Debt consists of the following:

<TABLE>
<CAPTION>



                                                                                         December 31,
                                                                                   2003                 2002
                                                                                   -------------------------
                                                                                        (in thousands)

<S>                                                                           <C>                  <C>
Partially guaranteed term loan, variable rate of LIBOR plus a margin,         $  161,000           $  168,000
averaging 2.2% in 2003 and 2.8% in 2002, payable in varying
installments from November 2003 through November 2008

Unamortized discount on partially guaranteed term loan                            (5,350)              (7,400)

Unsecured Senior Notes, fixed rate of 10.5%, partially refinanced in             175,000              175,000
2004

Unsecured Senior Notes, fixed rate of 9.625%, partially refinanced in            125,000              125,000
2004

Secured note payable to institutional lender, variable rate of LIBOR               5,975                7,675
plus 2.0%, averaging 3.5% in 2003 and 5.0% in 2002, payable in varying
installments through October 2005

Secured note payable to institutional lender, variable rate of LIBOR               4,983                6,683
plus 2.0%, averaging 3.5% in 2003 and 5.0% in 2002, payable in varying
installments through March 2005

Mortgage note payable to institutional lender, fixed rate of 8.75%,                8,322                9,080
payable in varying installments through June 2014

Mortgage note payable to institutional lender, fixed rate of 8.30%,                6,260                6,915
payable in varying installments through June 2014

City of Chicago variable rate (averaging 1.7% in 2003 and 1.5% in 2002)            6,000                6,000
special facility revenue bonds, payable in December 2020


City of Chicago construction financing agreement, rate averaging 5.75%,            5,673                    -
payable monthly

Aircraft pre-delivery deposit finance facilities                                       -                8,384

Other                                                                              1,833                4,091
                                                                              ----------           ----------
                                                                                 494,696              509,428


Less current maturities and short-term debt                                       51,645               22,575
                                                                              ----------           ----------
                                                                              $  443,051           $  486,853
                                                                              ==========           ==========



</TABLE>

                                       58
<PAGE>

In November  2002, the Company  obtained a $168.0 million  secured term loan, of
which $148.5 million is guaranteed by the ATSB.  Interest is payable  monthly at
LIBOR  plus  a  margin.  Guarantee  fees  payable  quarterly  were  5.5%  of the
outstanding  guaranteed  principal  balance in 2003,  escalating  to 9.5% on the
outstanding  guaranteed principal balance in 2004 through 2008. 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 additional  secured term
loan proceeds of  approximately  $104.7 million were used for general  corporate
purposes.  The secured term loan is subject to certain restrictive covenants and
is collateralized primarily by certain receivables, aircraft, spare engines, and
rotable parts.  The  receivables had a carrying  amount of  approximately  $39.3
million as of December 31, 2003.  The aircraft,  spare engines and parts consist
of two Lockheed L-1011-500 aircraft,  one Lockheed L-1011-50 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 had a combined  carrying amount
of  approximately  $67.5  million as of December 31, 2003. In  conjunction  with
obtaining  the secured  term loan,  the Company  issued a warrant to the Federal
Government  to  purchase  up to  1,478,059  shares  of  its  common  stock,  and
additional  warrants to other loan participants to purchase up to 194,089 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  allocated  $7.4  million to the total value of
warrants  issued,  accounted  for as a  discount  on the loan.  (See  "Note 10 -
Shareholders'  Deficit.")  The  amortization  of  the  discount  resulted  in an
increase in the effective  rate of interest on the secured term loan,  which was
3.4% as of December 31, 2003 and 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.  In  completing  the  exchange  offers on
January 30, 2004,  the Company  issued  $163.1  million in  aggregate  principal
amount of 2009 Notes and  delivered  $7.8 million in cash in exchange for $155.3
million in aggregate  principal  amount of 2004 Notes  tendered.  The 2009 Notes
mature  February 1, 2009,  with a payment of $7.8 million due on August 1, 2005,
bearing  interest  at 13%  through  July  31,  2006 and 14%  thereafter  through
maturity.  The $19.7 million  principal  amount of the original  notes  remained
outstanding  after the  exchange and is due  according to the original  terms in
August 2004. In accordance with FASB Statement of Financial Accounting Standards
No.  6 ("FAS  6"),  Classification  of Short  Term  Obligations  Expected  to be
Refinanced,  since the  agreement  was entered  into prior to the balance  sheet
being issued,  the $155.3  million of tendered  notes has been  reclassified  as
non-current as of December 31, 2003. See "Note 2 - State of the Industry and Its
Effect on the Company" for additional information on the exchange of the notes.

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. In completing the exchange offers on January 30, 2004,
the Company  issued $110.2 million in aggregate  principal  amount of 2010 Notes
and delivered  $5.2 million in cash in exchange for $105.0  million in aggregate
principal  amount of the 2005 Notes  tendered.  The 2010 Notes  mature  June 15,
2010, with a payment of $5.3 million due on June 15, 2005,  bearing  interest at
12 1/8% through June 14, 2006 and 13 1/8% thereafter through maturity. The $20.0
million  principal amount of the original notes remained  outstanding  after the
exchange and is due according to the original  terms in December 2005. See "Note
2 - State  of the  Industry  and  Its  Effect  on the  Company"  for  additional
information on the exchange of the notes.

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 $7.6 million as of December 31, 2003.

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 $19.9 million as of December
31, 2003.

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 $8.0 million as of
December 31, 2003.

                                       59
<PAGE>

In March 2003,  the Company  entered into an agreement  with the City of Chicago
who agreed to lend the Company up to $8.9 million for  construction  costs for a
gate extension at Midway Airport. As of

December 31, 2003,  the Company had borrowed $5.7 million under this  agreement.
The interest rate for this loan averaged 5.75% in 2003.

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;  new aircraft
acquisitions;  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 minimum cash balances and
specified  financial  ratios  to be  maintained.  The  guaranteed  term loan and
certain other loans contain cross-default provisions.

The  guaranteed  term loan has three  financial  covenants  that the  Company is
required or soon will be required to meet. The first covenant currently requires
the Company to maintain a minimum  unrestricted  cash  balance of $40 million at
all times. The second covenant,  which is measured quarterly,  becomes effective
September 30, 2004, and will require the Company to maintain a ratio of at least
1.00  of   consolidated   earnings   before   interest,   taxes,   depreciation,
amortization,  and aircraft rent ("EBITDAR") to consolidated  fixed charges,  as
defined in the agreement.  The third covenant,  which is also measured quarterly
and becomes  effective  March 31,  2005,  will require the Company to maintain a
ratio less than 7.00 of consolidated indebtedness,  as defined in the agreement,
to EBITDAR.

Future  maturities of long-term  debt are as follows as of December 31, 2003 and
as adjusted to reflect the issuance of the New Notes:

<TABLE>
<CAPTION>

                                              Unamortized               Total Debt
                Cash Obligations at           Discount at           per Balance Sheet          Total Debt,
                 December 31, 2003         December 31, 2003        December 31, 2003          As Adjusted
                 -----------------         -----------------        -----------------          -----------
                                            (in thousands)

<C>               <C>                         <C>                      <C>                     <C>
2004              $   53,340                  $ (1,695)                $   51,645              $  64,660

2005                  57,697                    (1,399)                    56,298                 69,313

2006                  30,456                    (1,094)                    29,362                 29,362

2007                  30,008                      (776)                    29,232                 29,232

2008                  51,172                      (386)                    50,786                 50,786

Thereafter           277,373                         -                    277,373                277,373
                  ----------                  --------                 ----------              ---------
                  $  500,046                  $ (5,350)                $  494,696              $ 520,726
                  ==========                  ========                 ==========              =========



</TABLE>

Interest  capitalized in connection with long-term asset purchase agreements and
construction  projects was $2.8 million, $7.8 million and $29.0 million in 2003,
2002 and 2001,  respectively.  The capitalized  interest  includes $1.9 million,
$1.4 million and $14.7 million in 2003, 2002 and 2001, respectively, of interest
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.

                                       60
<PAGE>

7.       Lease Commitments

At December 31, 2003, the Company had the following operating aircraft leases:
<TABLE>
<CAPTION>

                                        Total Leased          Lease Expirations            Lease Terms
                                        ------------          -----------------            -----------
<S>                                          <C>           <C>                           <C>
Lockheed L-1011-100                           1                     2005                    60 months
Boeing 727-200 (1)                            1                     2004                    72 months
Boeing 757-200 (2)                           16            Between 2008 and 2022          1 to 22 years
Boeing 757-300                               12                2023 and 2024                22 years
Boeing 737-800                               32            Between 2017 and 2024         15 to 22 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,  2003,  this  aircraft  has been  retired  from  revenue
service,  but the  Company  remains  obligated  on the lease.  Accordingly,  the
Company has accrued the remaining rent payments due to the lessor.

(2) As of December 31, 2003, one newly delivered 757-200 aircraft was not yet on
the Company's operating certificate.

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,  2003,  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.

On January  30,  2004,  the Company  completed  amendments  of certain  aircraft
operating  leases that were entered into in 2001, 2002 and 2003 with BCSC, GECAS
and ILFC.  The  effect  of the lease  amendments  was to delay  the  payment  of
portions of the amounts due under those operating leases primarily  between June
30, 2003, and March 31, 2005. The payments  delayed during this time period will
be  subsequently  paid at various times  throughout  the  remaining  life of the
leases.  See "Note 2 - State of the Industry and Its Effects on the Company" for
further  information  on the  lease  amendments.  After  giving  effect to these
amendments,  the Company's  future  minimum lease payments at December 31, 2003,
for noncancelable  operating leases with initial terms of more than one year are
as follows:

                                       61
<PAGE>

<TABLE>
<CAPTION>


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

<S>              <C>                 <C>                <C>
2004 (1)         $   194,730         $   12,573         $   207,303

2005                 255,832             10,185             266,017

2006                 307,166              9,119             316,285

2007                 308,887              9,270             318,157

2008                 302,942              6,894             309,836

Thereafter         2,440,899             21,084           2,461,983
                 -----------         ----------         -----------
                 $ 3,810,456         $   69,125         $ 3,879,581
                 ===========         ==========         ===========


</TABLE>

(1) 2004  lease  obligations  include a refund of  approximately  $29.8  million
related to lease payments made in 2003 due to completion of certain  retroactive
lease  amendments  on January 30, 2004.  For further  discussion,  see "Note 2 -
State of the Industry and Its Effects on the Company."

Rental  expense  for all  operating  leases  in 2003,  2002 and 2001 was  $250.7
million, $212.8 million and $119.2 million, respectively.

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  because  straight-line
expense  recognition  is most  representative  of the time  pattern  from  which
benefit  from  use of the  aircraft  is  derived.  Forty-nine  of the  Company's
aircraft operating leases were originally structured to require very significant
cash in the early years of the lease in order to obtain more  overall  favorable
lease  rates.  The amount of the cash  payments in excess of the  aircraft  rent
expense in these early years has created a  significant  prepaid  aircraft  rent
amount on the Company's  balance sheet. The portion of the prepaid aircraft rent
that will be  utilized  in the next  twelve  months is  recorded  as  short-term
prepaid  expense while the remainder is recorded as long-term  prepaid  aircraft
rent.  Twenty-four  of the  Company's  aircraft  operating  leases  require more
significant  cash  payments  later in the lease  term  resulting  in an  accrued
liability for aircraft rents on the Company's  balance sheet. The portion of the
accrued  liability  that will be paid in the next  twelve  months is recorded as
short- term  accrued  expenses  while the  remainder  is  recorded as  long-term
deferred items. Two of the Company's  aircraft  operating leases were structured
whereby  monthly  cash rents and monthly  book rents are equal.  The table below
summarizes the prepaid and accrued  aircraft rents for 2003 and 2002 that result
from this  straight-line  expense  recognition  as reported  under the following
captions on the Company's balance sheet:

                                       62
<PAGE>
<TABLE>
<CAPTION>

                                                                          December 31,
                                                                      2003             2002
                                                                      ----             ----
                                                                         (In thousands)
Assets:


<S>                                                               <C>              <C>
Prepaid expenses and other current assets (short-term)            $   3,879        $  2,280
Prepaid aircraft rent (long-term)                                   144,088          68,828
                                                                  ---------        --------
Total prepaid aircraft rent                                       $ 147,967        $ 71,108
                                                                  =========        ========

Liabilities:

Accrued expenses (short-term)                                     $  11,529        $  2,151
Other deferred items (long-term)                                     27,976          20,105
                                                                  ---------        --------
Total accrued aircraft rent                                       $  39,505        $ 22,256
                                                                  =========        ========
</TABLE>

On January 30, 2004, the Company  received a refund of $29.8 million  related to
payments made in 2003 under the original terms of certain  retroactively amended
leases.  For further  discussion,  see "Note 2 - State of the  Industry  and Its
Effects on the Company."

8. Income Taxes

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

<TABLE>
<CAPTION>


                                                                    December 31,
                                                        2003            2002             2001
                                                        -------------------------------------
                                                                   (In thousands)
<S>                                                     <C>        <C>              <C>
Federal:
    Current                                             $   418    $  (15,743)      $   4,070
    Deferred                                                  -        (6,888)        (40,546)
                                                        -------    ----------       ---------
                                                            418       (22,631)        (36,476)
State:
    Current                                                 893           306             510
    Deferred                                                  -        (2,625)         (3,784)
                                                        -------    ----------       ---------
                                                            893        (2,319)         (3,274)
                                                        -------    ----------       ---------
Income tax expense (credit)                             $ 1,311    $  (24,950)      $ (39,750)
                                                        =======    ==========       =========


</TABLE>

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

                                       63
<PAGE>

<TABLE>
<CAPTION>

                                                                      December 31,
                                                         2003             2002             2001
                                                         --------------------------------------
                                                                     (In thousands)

<S>                                                 <C>              <C>              <C>
Federal income tax (credit) at statutory rate       $    7,611       $   (67,975)     $  (40,626)

State income tax (credit) net of federal benefit           580            (4,108)         (2,328)

Non-deductible expenses                                  3,031             2,393           2,041

Valuation allowance                                     (9,871)           43,324               -

Other, net                                                 (40)            1,416           1,163
                                                    ----------       -----------      ----------
Income tax expense (credit)                         $    1,311       $   (24,950)     $  (39,750)
                                                    ==========       ===========      ==========


</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,
                                                                                     2003                 2002
                                                                                           (In thousands)
Deferred tax liabilities:

<S>                                                                            <C>                  <C>
     Property and equipment                                                    $    22,325          $   15,353
                                                                               -----------          ----------
        Deferred tax liabilities                                                    22,325              15,353
                                                                               -----------          ----------
Deferred tax assets:


     Tax benefit of net operating loss carryforwards                                29,554              40,766


     Alternative minimum tax and other tax credit carryforwards                      1,689               1,261


     Vacation pay accrual                                                            7,418               6,526


     Deferred rent expense                                                           7,549               3,985


     Other deductible temporary differences                                          9,568               6,139
                                                                               -----------          ----------
        Deferred tax assets                                                         55,778              58,677
                                                                               -----------          ----------
Valuation allowance                                                                (33,453)            (43,324)
                                                                               -----------          ----------
        Net deferred tax asset                                                 $         -          $        -
                                                                               ===========          ==========

</TABLE>

As of  December  31,  2003 and 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 recorded
a full  valuation  allowance  against its net deferred asset of $33.5 million at
December 31, 2003 and $43.3 million at December 31, 2002.

The Company  utilized a portion of its net operating  loss  carryovers to offset
taxable  income in 2003.  As a result,  in 2003 the Company paid $0.4 million in
alternative  minimum tax and recorded  this as a current tax  expense,  together
with $0.9 million in state and local income taxes.

Approximately  $76.3  million  of net  operating  loss  carryover  remains as of
December 31, 2003.  Its use is limited to future  taxable income of the Company.
The carryover will expire starting in 2020.
                                       64
<PAGE>
9. 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 2003 and
2002, and 55.0% in 2001, of the amount contributed by each participant up to the
first six  percent of  eligible  compensation.  Company  matching  contributions
expensed  in 2003,  2002 and 2001  were  $6.8  million,  $5.2  million  and $4.7
million, respectively.

Effective January 1, 2003, the Company  implemented a defined  contribution plan
for cockpit  crewmember  employees that will be fully funded by the Company.  In
the 2003  plan  year,  the  Company  contributed  between  4.0% and 6.5% of each
cockpit crewmember's  eligible earnings,  depending on years of service with the
Company. The contribution  percentages increase in future plan years, escalating
to between  5.5% and 12.0% of each  cockpit  crewmember's  eligible  earnings in
2006. New cockpit  crewmembers are eligible for the plan  immediately upon hire.
Contributions  vest after five years of service.  The  contribution  expense for
this plan in 2003 was $6.1 million.

10. Shareholders' 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, 2003, the
Company had  repurchased  1,711,440  common  shares at a cost of $24.8  million.
Currently,  the Company is unable to repurchase common stock due to certain debt
covenants under its Senior Note indentures.

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

A summary of common stock option changes follows:

                                       65
<PAGE>
<TABLE>
<CAPTION>


                                                         Number          Weighted-Average
                                                       of Shares          Exercise Price
                                                       ---------          --------------
<S>                                                    <C>                   <C>
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
                                                       =========            ========
     Granted                                                   -                   -

     Exercised                                           (26,400)               8.01

     Canceled                                           (592,676)              14.88
                                                       ---------             -------
Outstanding at December 31, 2003                       1,768,699            $  13.40
                                                       =========            ========
Options exercisable at December 31, 2001               2,528,633            $  13.80
                                                       =========            ========
Options exercisable at December 31, 2002               2,329,076            $  13.69
                                                       =========            ========
Options exercisable at December 31, 2003               1,761,033            $  13.40
                                                       =========            ========

</TABLE>

Options  outstanding at December 31, 2003,  expire from January 2004 to November
2011. A total of 3,084,997  shares are reserved for future grants as of December
31, 2003,  under the 1993, 1996 and 2000 Plans.  The following table  summarizes
information concerning outstanding and exercisable options at December 31, 2003:

<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               4.1 years           3.5 years          6.0 years           5.0 years
   Weighted-Average Exercise Price                          $    7.96           $    9.28          $   15.64           $   26.04
   Number                                                     150,500             994,924            284,925             338,350
Options exercisable:
   Weighted-Average Exercise Price                          $    7.96           $    9.27          $   15.64           $   26.06
    Number                                                    150,500             988,258            284,925             337,350



</TABLE>

In November  2002, in connection  with the  guaranteed  term loan agreement (See
"Note  6 -  Debt"),  the  Company  issued  1,478,059  warrants  to  the  Federal
Government and 194,089 warrants to other loan participants.

The warrants provide for the purchase of shares of the Company's common stock at
an exercise price of $3.53 per share for a term of ten years.

                                       66
<PAGE>

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 ten 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, 2003, the Company had 6,671,631  common stock shares reserved
for  issuance  in relation  to its  outstanding  stock  options,  warrants,  and
convertible  redeemable  preferred  stock.  See "Note 11 - Redeemable  Preferred
Stock" for additional information.

11.  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 annual  rate is subject to an increase  to 8.44% on the  liquidation  amount
($100,000 per share) if the Company fails to pay any quarterly  dividend  within
ten days of the due date.  Once dividends in arrears have been paid in full, the
rate  returns to the  original  annual rate of 5.0%.  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.
Shares may be converted into shares of the Company's common stock at any time up
to  the  mandatory  redemption  date.  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.

                                       67
<PAGE>

Also, in the last half of 2000, the Company issued and sold 500 shares of Series
A redeemable  preferred  stock,  without par value ("Series A Preferred"),  at a
price of $100,000 per share. The purchaser of the Series A Preferred is entitled
to cumulative semiannual dividends at an annual rate of 8.44% on the liquidation
amount ($100,000 per share) of the Series A Preferred. The Series A Preferred is
optionally  redeemable by the Company under certain conditions,  but the Company
must  redeem the  Series A  Preferred  in equal  semiannual  payments  beginning
December 28, 2010,  and ending  December 28, 2015.  Optional  redemption  by the
Company  may  occur  at a  redemption  premium  of 50.0%  of the  dividend  rate
beginning December 28, 2003,  decreasing 10.0% per year to 20.0% of the dividend
rate  commencing  December  28,  2006,  and to 0.0% after the seventh year after
issuance, plus cumulative unpaid dividends, if any. 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.

Prior to and as of December  31,  2003,  the  Company's  unsecured  senior notes
indentures  relating  to  the  2004  Notes  and  2005  Notes  contained  certain
restricted  payment  covenants  which  limited  the  Company's  ability  to  pay
preferred  stock  dividends.  At the end of the  third  quarter  of  2002,  that
covenant no longer permitted payment of preferred dividends. The Company accrued
preferred  dividends at the appropriate rates plus interest for the payments due
between December 15, 2002 and December 31, 2003. In January 2004, as a result of
completion of the exchange offers, the restricted payment covenants for the 2004
Notes and 2005 Notes were removed. In addition, the restricted payment covenants
in the Senior  Note  indentures  for the 2009 Notes and 2010 Notes  permits  the
Company to pay preferred stock  dividends.  Concurrently  with the completion of
the exchange offers on January 30, 2004, the Company paid all accrued  preferred
dividends in arrears,  including interest,  totaling $9.7 million. See "Note 2 -
State of the Industry and Its Effects on the Company" for more information about
the exchange offer.

                                       68
<PAGE>

12.   Earnings per Share

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

<TABLE>
<CAPTION>


                                                                    2003                    2002                  2001
                                                                    --------------------------------------------------
<S>                                                          <C>                    <C>                    <C>
Numerator:
   Net income (loss)                                         $  20,434,000          $  (169,264,000)       $  (76,317,000)
   Preferred stock dividends                                    (4,642,000)              (5,720,000)           (5,568,000)
                                                             -------------          ---------------        --------------
   Income (loss) available to common shareholders -
   numerator for basic earnings per share                       15,792,000             (174,984,000)          (81,885,000)
                                                             -------------          ---------------        --------------

   Effect of dilutive securities:

     Convertible redeemable preferred stock dividend             2,532,000                        -                     -
                                                             -------------          ---------------        --------------
   Numerator for diluted earnings per share                  $  18,324,000          $  (174,984,000)       $  (81,885,000)
                                                             =============          ===============        ==============

Denominator:
   Denominator for basic earnings per share - adjusted
   weighted average shares                                      11,773,713               11,711,906            11,464,125
                                                             =============          ===============        ==============
   Effect of dilutive securities:

     Employee stock options                                            119                        -                     -

     Warrants                                                      780,518                        -                     -

     Convertible redeemable preferred stock                      1,914,486                        -                     -
                                                              -------------          ---------------        --------------
     Dilutive potential securities                               2,695,123                        -                     -

   Denominator for diluted earnings per share - adjusted
   weighted average shares                                      14,468,836               11,711,906            11,464,125
                                                             =============          ===============        ==============
Basic income (loss) per share                                $        1.34          $        (14.94)       $        (7.14)
                                                             =============          ===============        ==============
Diluted income (loss) per share                              $        1.27          $        (14.94)       $        (7.14)
                                                             =============          ===============        ==============
</TABLE>

In accordance  with FASB  Statement of Financial  Accounting  Standards No. 128,
"Earnings Per Share," 1,914,486 common stock equivalent shares,  upon conversion
of convertible  redeemable  preferred stock in 2002 and 2001, have been excluded
from the computation of diluted earnings per share because their effect would be
antidilutive.  In  addition,  the impact of 59,400 and  553,025  employee  stock
options in 2002 and 2001 was not included in the computation of diluted earnings
per share because their effect would be antidilutive. In 2002, the impact of the
1,002,112  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.

                                       69
<PAGE>

13.  Commitments and Contingencies

The Company  has a purchase  agreement  with the Boeing  Company  ("Boeing")  to
purchase seven new Boeing 737-800s,  which are currently  scheduled for delivery
between  July 2005 and  December  2005.  These  aircraft  are powered by General
Electric CFM56-7B27 engines.  The manufacturer's list price is $52.4 million for
each  737-800,  subject to  escalation.  The Company's  purchase  price for each
aircraft is subject to various  discounts.  According to a 2004 amendment to the
purchase agreement with Boeing, if the Company does not have permanent financing
for  these  aircraft  suitable  to  the  Company  and  does  not  have  suitable
pre-delivery  deposit  financing,  and if Boeing does not elect to provide  such
financing  acceptable to the Company,  these  deliveries  can be delayed for one
year periods annually for up to five years.  Aircraft  pre-delivery deposits are
required  for these  aircraft,  and the Company has  historically  funded  these
deposits for past aircraft  deliveries  using  operating  cash and  pre-delivery
deposit financing facilities.  The Company can provide no assurance that it will
be able  to  secure  pre-delivery  deposit  financing  facilities  or  permanent
financing  for any future  aircraft  purchases.  As of December  31,  2003,  the
Company had $4.6  million in long-term  pre-delivery  deposits  outstanding  for
future aircraft  deliveries which were funded with operating cash. Upon delivery
of the aircraft,  pre-delivery  deposits funded with operating cash are expected
to be returned to the Company.  As of December  31,  2003,  the Company also has
purchase rights with Boeing for 40 Boeing 737-800 aircraft.

The Company has an agreement to lease one  additional  Boeing  737-800  under an
operating  lease from ILFC,  which is  currently  scheduled  for delivery in May
2004.

The Company has an agreement with GECAS to lease one  additional  Boeing 737-800
currently scheduled for delivery in November 2004.

The Company has an agreement with General  Electric to purchase four  CFM56-7827
spare engines, which are currently scheduled for delivery between 2005 and 2008.

The Company intends to finance all future aircraft and engine  deliveries  under
purchase  agreements with leases accounted for as operating leases.  The Company
has  estimated  the  amount  of  payments  for  these   expected   future  lease
obligations,  using the terms of leases for  comparable  aircraft  currently  in
place. The estimated  future payments for these nine future aircraft  deliveries
and four spare engines, which do not include obligations for leases currently in
place, are shown in the following table:

<TABLE>
<CAPTION>


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

<S>               <C>

2004              $    3,101

2005                  18,893

2006                  42,527

2007                  54,507

2008                  39,816

Thereafter           483,380
                  ----------
                  $  642,224
                  ==========

</TABLE>

The Company paid cash  consideration  of $7.8 million related to the exchange of
the 2004 Notes and $5.2  million  related to the exchange of the 2005 Notes upon
the  completion  of the  exchange  offers on January 30,  2004.  Also,  with the
completion of the exchange offers, the Company has additional 2009 Notes of $7.8
million  outstanding and additional 2010 Notes of $5.3 million  outstanding upon
completion of the exchange offers,  which mature in 2005. The cash consideration
paid on  January  30,  2004 and the  additional  notes  were not  recorded  as a
liability on the Company's  balance sheet as of December 31, 2003. See "Note 2 -
State of the Industry and Its Effect on the Company" for additional  information
on the exchange offers.

                                       70
<PAGE>

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.

14.    Segment Reporting

The  Company's  revenues  are  derived  principally  from the sale of  scheduled
service or charter  air  transportation  to  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 19.6%, 13.9% and
13.1% of consolidated revenues for 2003, 2002 and 2001, respectively.

15.   Fuel Price Risk Management

During 2002 and 2001, the Company  entered into fuel hedge contracts to minimize
the risk of fuel price  fluctuations.  The Company hedged fuel using heating oil
swap agreements, which establish swap prices for designated periods. The Company
did not enter into any fuel hedge  contracts in 2003. The Company  accounted for
its fuel  hedge  contracts  in  accordance  with  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.  For  derivatives  that are
hedges,  depending on the nature of the hedge,  changes in the fair value of the
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 is  immediately
recognized in earnings.

In  accordance  with FAS 133,  the  Company  accounted  for its heating oil swap
agreements  as cash flow  hedges.  All  changes in fair value of the heating oil
swap agreements  during 2002 and 2001 were effective for purposes of FAS 133, so
valuation changes were recognized  throughout these years in other comprehensive
income and were  included in earnings as a component  of fuel  expense only upon
settlement of each agreement.  In 2002, the Company  recognized hedging gains of
$0.5 million on settled  contracts in fuel  expense,  and, in 2001,  the Company
recognized losses on settled contracts of $2.6 million in fuel expense.

16.   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.

                                       71
<PAGE>

Following  the  events  of  September  11,  2001,  the  airline  industry  began
experiencing  excess capacity as consumer demand for scheduled service declined.
At the same time, the Company was taking delivery of a significant number of new
Boeing  737-800  and  757-300  aircraft,  which it  planned  to  utilize  in its
scheduled  service  markets.  To adjust its capacity to new market demands,  the
Company  decided to retire its Boeing  727-200  fleet  earlier  than  originally
planned. Before September 11, 2001, the Company had a plan in place to gradually
retire these aircraft  between  mid-2001 and mid-2002.  The Company  accelerated
this plan by retiring certain  individual  aircraft earlier than planned and the
Company  retired all of these  aircraft  from  service by May 31,  2002.  As the
Company  retired the Boeing 727-200  aircraft,  it  contributed  them to BATA to
re-market these aircraft to third parties. See "Note 1 - Significant  Accounting
Policies - Investment  in BATA,  LLC." In  accordance  with FAS 121, the Company
recorded an impairment  charge of $44.5 million in 2001. In accordance  with FAS
121, the Company  continues to monitor  current fair market values of previously
impaired  assets.  In 2003, the Company  recorded an additional asset impairment
charge of $5.3 million  against its remaining  net book value of Boeing  727-200
aircraft  (recorded as an investment in the BATA joint venture),  as compared to
$35.9 million in impairment  charges  recorded in 2002. The current  estimate of
this fleet's fair market value is based on quoted  market  prices and  estimated
salvage  values.  The  carrying  amount  of one  Boeing  727-200  that  was  not
contributed to BATA, with related assets, is classified as long-term assets held
for sale in the accompanying balance sheet in accordance with FAS 121.

Also in 2001, for reasons similar to those described  above, the Company retired
certain Lockheed  L-1011-50 and 100 aircraft,  and determined that the remaining
Lockheed  L-1011-50 and 100 fleet and related  rotable parts and inventory  were
impaired  under FAS 121.  The  Company  recorded an  impairment  charge of $67.8
million relating to this fleet in 2001. In 2002, the Company retired three owned
L-1011-50  aircraft by removing them from revenue  service,  which resulted in a
charge of $9.0 million,  and recorded an additional asset  impairment  charge of
$7.6 million against its remaining net book value of Lockheed  L-1011-50 and 100
aircraft and related parts. No such charges were recorded in 2003. In accordance
with FAS 144, the Company  continues to monitor the fair market  values of these
assets.  The Company  estimates this fleet's fair market value using  discounted
cash flow analysis.  The carrying amount of these assets is classified as assets
held  for  use  and  appears  in  the  property  and  equipment  section  of the
accompanying  consolidated balance sheets, since the Company is still flying two
of these  aircraft.  The assets are being  depreciated in  conjunction  with the
planned fleet retirement schedule.

In  2002,  the  Company  recorded  a  charge  of $14.2  million  related  to the
retirement  of one owned  L-1011-500  aircraft.  As a result,  the Company began
evaluating  this fleet and related parts and inventory for impairment  under FAS
144. Through the end of 2003, the Company  concluded from its analysis that this
fleet was unimpaired.

17.   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,
which were 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 2003 and 2002,  as  provided  by FAS 142.  The  Company
recorded $1.3 million of goodwill amortization in 2001.

As required by FAS 142, the Company  performed its goodwill  impairment  test in
the fourth quarter of 2002. The Company  identified two FAS 142 reporting  units
for ATALC. The ATALC brands outsourced to MTC were one reporting unit. The other
reporting  unit related to the Key Tours brands  ("KTI") that sold Canadian rail
packages  and ground  packages  in Las Vegas.  In the 2002  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,  reflecting the total goodwill balance for KTI,
was recorded in the fourth quarter of 2002. As of December 31, 2003, the Company
has ceased  marketing the KTI brands.

                                       72
<PAGE>

In  accordance  with FAS 142, the Company
performed its second annual  goodwill  impairment  test in the fourth quarter of
2003 and determined that the goodwill related to Chicago Express,  ATA Cargo and
the MTC reporting unit was not impaired.  In both years,  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.

18.    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 two helicopters,  a
Bell 206B Jet Ranger III and a Bell 206L-3  LongRanger.  The two  airplanes  are
leased or subleased to ATA. The Jet Ranger III and  LongRanger  helicopters  are
leased to ATA ExecuJet,  Inc.  ("ExecuJet"),  a subsidiary of ATA Holdings Corp.
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, 2001,  and ending on July 24, 2004.  The
lease  for the Lear  Jet  required  a  monthly  payment  of  $33,600  for a term
beginning  December 24, 2001,  and ending  December 23, 2003.  The lease for the
Lear  Jet  is  currently  operating  on a  month-to-month  basis  and  is  being
renegotiated.  The lease for the  JetRanger  III  currently  requires  a monthly
payment of $3,500 for a term beginning  November 1, 2002, 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.

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.  The Company invoiced Mr.
Mikelsons  quarterly for the full amount of such  benefits.  Prior to 2003,  the
timing of payments  from Mr.  Mikelsons  to the  Company had been  inconsistent.
Beginning in 2003, Mr. Mikelsons has reimbursed the Company prior to the date of
each salary payment for these employees.

In 2004,  the Company will pay  approximately  $296,000 in annual  compensation,
plus associated  non-cash  benefits,  to six employees who serve as the crew for
one boat owned by Betaco and another  company owned by Mr.  Mikelsons.  In 2003,
the Company paid approximately  $258,000 for five employees.  Under an agreement
dated as of July 1,  2002,  the  Company  agreed to pay for these  employees  in
exchange for its use of the boat 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 business use of the boat,
Mr.  Mikelsons is responsible for paying the difference.  In 2003, the Company's
use of the boat resulted in no payments by Mr. Mikelsons to the Company.

As of December 31, 2003, Mr.  Mikelsons owes $668,029 to the Company pursuant to
the arrangements  relating to the domestic  employees and the crew. In 2002, the
Company has also paid Mr.  Mikelsons a total of $120,000 in connection  with use
of the boat by ATA prior to the July 1, 2002,  agreement.  While there have been
other business uses of the boat by the Company, Mr. Mikelsons has determined not
to seek reimbursement for them.
                                       73
<PAGE>

19.  Recently Issued Accounting Pronouncements

In  January  2003,  the FASB  issued  Interpretation  No. 46,  Consolidation  of
Variable Interest Entities ("FIN 46"). The FASB amended FIN 46 in December 2003.
FIN 46, as amended,  requires  that  companies  ("primary  beneficiaries")  that
absorb a majority of a variable  interest  entity's ("VIE") losses, or receive a
majority of a VIE  residual  returns,  consolidate  the entity.  The  accounting
provisions  of FIN 46 are required to be applied to VIE within the first quarter
ending after March 15, 2004. The related disclosure  requirements were effective
upon  issuance of FIN 46. The Company  does not expect FIN 46 to have a material
impact on the Company.

The Company has identified BATA as a VIE under FIN 46 in which the Company has a
significant  variable  interest.  The Company has determined  that it is not the
primary  beneficiary  of BATA under FIN 46 and is not  required  to  consolidate
BATA.  As of December  31,  2003,  the  Investment  in BATA on the  consolidated
balance sheet was $14.7 million.

On May 15, 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial  Instruments with  Characteristics of both
Liabilities  and  Equity  ("FAS  150").   FAS  150  establishes   standards  for
classifying  and measuring as liabilities  certain  financial  instruments  that
embody  obligations of the issuer and have  characteristics  of both liabilities
and equity. FAS 150 is required to be applied immediately to instruments entered
into  or  modified  after  May 31,  2003  and  applied  to  previously  existing
instruments as of the beginning of the first interim financial  reporting period
beginning after June 15, 2003.

According to the provisions of FAS 150, the Company  reclassified its 500 shares
of Series A Preferred as a liability on the Company's  balance  sheet  effective
July 1, 2003. Per FAS 150, the Series A Preferred has not been  reclassified  on
the  balance  sheet as of  December  31,  2002.  Also  effective  July 1,  2003,
dividends  accrued or paid to the owners of Series A redeemable  preferred stock
are classified as interest  expense on the Company's  consolidated  statement of
operations.  FAS 150 does not  modify  accounting  standards  applicable  to the
Company's 300 shares of Series B Preferred.

20. Subsidiary Guarantees

ATA Holdings Corp. has issued  unsecured  senior note indentures which are fully
and unconditionally  and jointly and severally  guaranteed on an unsecured basis
by the following  subsidiaries:  ATA, Ambassadair Travel Club Inc., ATALC, Amber
Travel Inc., American Trans Air Training Corporation,  ExecuJet, Chicago Express
and ATA Cargo.  The  subsidiary  guarantors  are  100%-owned  subsidiaries.  ATA
Holdings  Corp.  has no  independent  assets  or  operations  and the  guarantor
subsidiaries  generated  99.8% and 100.0% of the  consolidated  revenues and net
profits of the Company,  respectively, for the years ended December 31, 2002 and
2003. Therefore, condensed consolidating financial information is not presented.

21.  Subsequent Event

On March 1, 2004,  the  Company  amended  its  agreement  with its  credit  card
processing  bank to  reflect a further  extension  for the  processing  of sales
charges on  MasterCard  and Visa cards  until  March 31,  2005.  The credit card
processing  bank agreed to reduce the holdback  percentage  for sales for future
travel to 75%  effective  with the  execution  of the  amendment.  The effect of
decreasing the holdback percentage from 100% to 75% increased the Company's cash
balance by  approximately  $21 million based on the holdback balance at March 1,
2004. The amended agreement provides quarterly  financial  covenants under which
the  Company may  maintain a holdback at 75% or 50% of sales for future  travel,
but at no time during the life of the amendment  will the holdback be lower than
50% of sales for future travel.  However,  the Company can provide no assurances
that it will be able to maintain the percentage of holdback below 100% in future
periods under this amendment.

                                       74
<PAGE>

22. Selected Supplemental Quarterly Data (Unaudited)

<TABLE>
<CAPTION>

                                 Financial Statements and Supplementary Data
                                     ATA Holdings Corp. and Subsidiaries
                                       2003 Quarterly Financial Summary
                                                 (Unaudited)
-----------------------------------------------------------------------------------------------------------
(In thousands,  except per share data)                 3/31           6/30 (1)    9/30            12/31 (1)
-----------------------------------------------------------------------------------------------------------

<S>                                                <C>            <C>          <C>             <C>
Operating revenues                                 $ 373,629      $ 388,122    $ 387,703       $ 369,079

Operating expenses                                   372,109        332,177      358,237         378,469

Operating income (loss)                                1,520         55,945       29,466          (9,390)

Other expenses                                       (12,512)       (12,630)     (14,432)        (16,222)

Income (loss) before income taxes                    (10,992)        43,315       15,034         (25,612)

Income taxes (credits)                                     -              -        7,311          (6,000)

Preferred stock dividends                                375          2,485        1,149             633

Income (loss) available to common shareholders     $ (11,367)     $  40,830    $   6,574       $ (20,245)

Net income (loss) per common share - basic         $   (0.97)     $    3.47    $    0.56       $   (1.72)

Net income (loss) per common share - diluted       $   (0.97)     $    2.93    $    0.53       $   (1.72)

</TABLE>

<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>

(1) Operating results for the years ended December 31, 2003 and 2002 include the
following items:

                                       75
<PAGE>
<TABLE>
<CAPTION>

                                                         2003
Quarter Ended                               3/31        6/30         9/30          12/31         Total
                                            ----        ----         ----          -----         -----

<S>                                       <C>        <C>         <C>            <C>          <C>
Aircraft impairments and retirements      $    -     $      -    $      -       $ (5,288)    $  (5,288)

U.S. Government grants                         -       37,156           -              -        37,156
                                            ----      --------    --------       --------     ---------
Total - income (loss)                     $    -     $ 37,156    $      -       $ (5,288)    $  31,868
                                            ====      ========    ========       ========     =========

                                                         2002
Quarter Ended                               3/31        6/30         9/30          12/31         Total
                                            ----        ----         ----          -----         -----
Aircraft impairments and retirements      $    -     $(17,241)   $(34,381)      $(15,165)    $ (66,787)

U.S. Government grants                         -      (15,210)          -         (1,011)      (16,221)

Goodwill impairments                           -            -           -         (6,893)       (6,893)
                                            ----      --------    --------       --------     ---------
Total - income (loss)                     $    -     $(32,451)   $(34,381)      $(23,069)    $ (89,901)
                                            ====      ========    ========       ========     =========


</TABLE>

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

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

Item 9a.  Controls and Procedures

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  ("Exchange  Act"),  as  amended,   of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures as of December 31, 2003. Based on this evaluation,  the Company's
Chief  Executive  Officer and Chief  Financial  Officer  concluded  that,  as of
December  31,  2003,  the  controls  and  procedures  were  effective to provide
reasonable assurance that information required to be disclosed by the Company in
reports it files or  submits  under the  Exchange  Act is  recorded,  processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission.

Since  December 31,  2003,  there have not been any  significant  changes in the
internal  controls  or in other  factors  that  could  significantly  affect the
internal controls.

                                       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 10, 2004.

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 10, 2004.

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 10, 2004.

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 10, 2004.

Item 14.  Principal Accountant Fee and Services

Incorporated herein by reference to the Company's proxy statement for the annual
meeting of stockholders to be held on May 10, 2004.



                                       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, 2003 and 2002

                  o  Consolidated  Statements of Operations for the years ended
                     December 31, 2003, 2002 and 2001

                  o  Consolidated  Statements  of Changes in  Redeemable
                     Preferred Stock, Common Stock and Other  Shareholders'
                     Equity (Deficit) for the years ended December 31, 2003,
                     2002 and 2001 o Consolidated Statementsof Cash Flows for
                     the years ended December 31, 2003, 2002 and 2001

                  o  Notes to Consolidated Financial Statements

         (2)      Financial Statement Schedule

                  The following consolidated financial information for the years
                  2003, 2002 and 2001 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, 2003:

               Report filed on October 14, 2003,  furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

               Report filed on October 20, 2003,  furnishing items under Item 9.
               Regulation FD Disclosure.

               Report filed on October 21, 2003,  furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.



                                       78
<PAGE>


PART IV - Continued

               Report filed on October 27, 2003,  furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

               Report filed on November 10, 2003, furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

               Report filed on November 24, 2003, furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

               Report filed on December 8, 2003,  furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

               Report filed on December 15, 2003, furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

               Report filed on December 22, 2003, furnishing items under Item 5.
               Other Events and Item 7. Financial Statements and Exhibits.

     (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, 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 net deferred tax asset               -          43,324         -                -            43,324
                                                       ---------        --------       ---         --------         ---------
 Totals                                                $  12,431        $ 50,187       $ -         $  2,189         $  60,429
                                                       =========        ========       ===         ========         =========

Year ended December 31, 2003:
 Deducted from asset accounts:

  Allowance for doubtful accounts                          2,375           1,383         -            2,370 (1)         1,388

  Allowance for obsolescence - Inventory                  14,730           6,493         -                -            21,223

  Valuation allowance for net deferred tax asset          43,324               -         -            9,871 (3)        33,453
                                                       ---------        --------       ---         --------         ---------
 Totals                                                $  60,429        $  7,876       $ -         $ 12,241         $  56,064
                                                       =========        ========       ===         ========         =========



(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 the remainder of the 2001 reduction in
obsolescence allowance, related to inventory items transferred to flight equipment or sold.

(3)  The net reduction in the valuation allowance is primarily related to the utilization of net operating losses in 2003.

</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 30, 2004         by /s/ J. George Mikelsons
                               J. George Mikelsons
                               Chairman and Chief Executive Officer
                               On behalf of the Registrant and as Director

Date:   March 30, 2004         /s/ James W. Hlavacek
                               James W. Hlavacek
                               Vice Chairman
                               Director

Date:   March 30, 2004         /s/ David M. Wing
                               David M. Wing
                               Executive Vice President and
                               Chief Financial Officer
                               Director

Date:   March 30, 2004         /s/ Robert A. Abel
                               Robert A. Abel
                               Director

Date:   March 30, 2004         /s/ Claude E. Willis
                               Claude E.Willis
                               Director

Date:   March 30, 2004         /s/ Andrejs P. Stipnieks
                               Andrejs P. Stipnieks
                               Director

Date:   March 30, 2004         /s/ Gilbert F. Viets
                               Gilbert F. Viets
                               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).

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).
<PAGE>

4.5  Indenture  relating to Senior  Notes due 2009 dated as of January 30, 2004,
     among ATA Holdings Corp., as issuer, ATA Airlines, Inc., Ambassadair Travel
     Club,  Inc.,  ATA Leisure  Corp.,  Amber Travel,  Inc.,  American Trans Air
     Training  Corporation,  American Trans Air ExecuJet,  Inc., ATA Cargo, Inc.
     and Chicago  Express  Airlines,  Inc., as guarantors,  and Wells Fargo Bank
     Northwest,  National Association,  as trustee (Incorporated by reference to
     Exhibit 4.1 to ATA Holding Corp.'s Registration Statement on Form S-4 dated
     February 13, 2004, File No. 333-112827).

4.6  Indenture  relating to Senior  Notes due 2010 dated as of January 30, 2004,
     among ATA Holdings Corp., as issuer, ATA Airlines, Inc., Ambassadair Travel
     Club,  Inc.,  ATA Leisure  Corp.,  Amber Travel,  Inc.,  American Trans Air
     Training  Corporation,  American Trans Air ExecuJet,  Inc., ATA Cargo, Inc.
     and Chicago  Express  Airlines,  Inc., as guarantors,  and Wells Fargo Bank
     Northwest,  National Association,  as trustee (Incorporated by reference to
     Exhibit 4.2 to ATA Holding Corp.'s Registration Statement on Form S-4 dated
     February 13, 2004, File No. 333-112827).

4.7  Second  Supplemental  Indenture  relating to 10 1/2% Senior  Notes due 2004
     dated as of January 30, 2004,  among ATA  Holdings  Corp.,  as issuer,  ATA
     Airlines,  Inc.,  Ambassadair  Travel Club, Inc., ATA Leisure Corp.,  Amber
     Travel, Inc., American Trans Air Training  Corporation,  American Trans Air
     ExecuJet,  Inc., ATA Cargo,  Inc. and Chicago  Express  Airlines,  Inc., as
     guarantors,  and Wells  Fargo  Bank  Northwest,  National  Association,  as
     trustee  (Incorporated  by reference to Exhibit 4.3 to ATA Holding  Corp.'s
     Registration  Statement  on Form S-4  dated  February  13,  2004,  File No.
     333-112827).

4.8  Second Supplemental  Indenture relating to 9 5/8% 2005 notes due 2004 dated
     as of January 21, 2004, among ATA Holdings Corp., as issuer,  ATA Airlines,
     Inc., Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber Travel, Inc.,
     American Trans Air Training Corporation, American Trans Air ExecuJet, Inc.,
     ATA Cargo,  Inc. and Chicago  Express  Airlines,  Inc., as guarantors,  and
     Wells Fargo Bank Northwest,  National Association, as trustee (Incorporated
     by reference to Exhibit 4.4 to ATA Holding Corp.'s  Registration  Statement
     on Form S-4 dated February 13, 2004, File No. 333-112827).

4.9  Third Supplemental Indenture relating to 9 5/8% Senior Notes due 2005 dated
     as of January 30, 2004, among ATA Holdings Corp., as issuer,  ATA Airlines,
     Inc., Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber Travel, Inc.,
     American Trans Air Training Corporation, American Trans Air ExecuJet, Inc.,
     ATA Cargo,  Inc. and Chicago  Express  Airlines,  Inc., as guarantors,  and
     Wells Fargo Bank Northwest,  National Association, as trustee (Incorporated
     by reference to Exhibit 4.5 to ATA Holding Corp.'s  Registration  Statement
     on Form S-4 dated February 13, 2004, File No. 333-112827).

4.10 Registration  Rights  Agreement  dated as of January  30,  2004,  among ATA
     Holdings Corp., as issuer,  ATA Airlines,  Inc.,  Ambassadair  Travel Club,
     Inc., ATA Leisure Corp.,  Amber Travel,  Inc.,  American Trans Air Training
     Corporation, American Trans Air ExecuJet, Inc., ATA Cargo, Inc. and Chicago
     Express  Airlines,  Inc., as  guarantors,  and Wells Fargo Bank  Northwest,
     National Association,  as trustee (Incorporated by reference to Exhibit 4.6
     to ATA Holding  Corp.'s  Registration  Statement on Form S-4 dated February
     13, 2004, File No. 333-112827).
<PAGE>

4.11 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).

4.12 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).

4.13 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).

4.14 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).

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

4.16 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).

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

4.18 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).

4.19 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).

4.20 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).

4.21 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).

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

4.23 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).

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

4.25 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).

4.26 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).

4.27 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).

4.28 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).

4.29 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).

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

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

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

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

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

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

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

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

4.38 Form of 2000 Class C American  Trans Air,  Inc.  Pass Through  Certificates
     (included in Exhibit 4.7).
<PAGE>
4.39 Amtran,  Inc.  hereby  agrees to furnish to the  Commission,  upon request,
     copies of certain additional  instruments relating to long-term debt of the
     kind described in Item 601(b)(4)(iii)(A) of Regulation S-K.

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

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

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

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

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

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

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

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

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). *
<PAGE>

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). *

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).
<PAGE>

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.  (incorporated by
     reference to Exhibit  10.11 to ATA  Holdings  Corp.  Annual  Report on 10-K
     dated March 31, 2003, File No. 000-21642).*

10.11(a) Consent,  Waiver and  Amendment  dated as of January 29,  2004,  to the
     $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.  (incorporated by
     reference to Exhibit 10.11 to ATA Holdings Corp. Registration of Securities
     on Form S-4 dated February 13, 2004, File No. 333-112827).

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.  (incorporated  by reference to Exhibit 10.12 to ATA Holdings  Corp.
     Annual Report on 10-K dated March 31, 2003, File No. 000-21642).

14   Code of Ethics.  The Company has adopted a code of ethics which  applies to
     all of its Board  members and employees  including the principal  executive
     officer, principal financial officer and controller. The code of ethics can
     be reviewed at ata.com, the Company's internet website.

21   Subsidiaries of ATA Holdings Corp.

23   Consent of Independent Auditors.

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

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

32.1 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  January30,  2004,  except  for Note 21,  as to which the date is March 1,
2004, 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, 2003.




                                                               ERNST & YOUNG LLP
Indianapolis, Indiana
March 26, 2004