Exhibit 10.17
                             Southwest Airlines Co.
                               2702 Love Field Dr.
                                Dallas, TX 76235


December 15, 2004

ATA Holdings Corp.
7337 West Washington Street
Indianapolis, IN 46231-1300

          Re: Bid Proposal to Purchase  Assets from, Provide a DIP Facility and
              Exit Facility to, and Codeshare with, ATA Holdings Corp.

Ladies and Gentlemen:

     Southwest  Airlines Co.  ("Southwest") is pleased to make the following bid
proposal (this "Bid Proposal")in  connection with ATA Holdings  Corp."Holdings")
and its debtor  affiliates  and  subsidiaries'(collectively,"Debtors")filing  of
petitions that are  administrativelyconsolidated  as In re ATA Holdings Corp. et
al., Case  No.04-19866  (Bankr.  S.D.  Ind.)(the  "Cases")for  protection  under
chapter  11 of title 11 of the United  States  Code (the  "Bankruptcy  Code") to
enable such  Debtors to be  restructured  pursuant to a Plan of  Reorganization,
including  the terms and  conditions  set forth in Annex F attached  hereto (the
"Plan")

         Southwest hereby commits to:

          A. purchase for $40,000,000 certain of Debtors' assets  (collectively,
     the  "Transferred  Assets"),  consisting  of  Debtors'  rights  to six  (6)
     specified gates (the "Midway Gates") at Chicago Midway Airport  ("Midway"),
     Debtors'  rights in that  certain  hangar  facility at Midway (the  "Midway
     Hangar") and  miscellaneous  other assets  related to the  foregoing on the
     terms and subject to the  conditions  contained  herein and as set forth in
     Annex A attached hereto (the "Asset Acquisition Agreement");

          B. provide Debtors with a debtor-in-possession  loan facility of up to
     $47,000,000  (the "DIP Facility") for general  working capital  purposes on
     the terms and subject to the conditions  contained  herein and as set forth
     in Annex B attached hereto (the "DIP Facility Term Sheet");

          C. provide Debtors with  post-bankruptcy  financing  through long-term
     debt refinancing of up to $47,000,000 for amounts outstanding under the DIP
     Facility upon the  effective  date (the  "Effective  Date") of the Plan and
     Debtors' exit from chapter 11 protection (the "Exit Facility" and, together
     with the DIP Facility,  the  "Facilities")  on the terms and subject to the
     conditions  contained  herein and as set forth in Annex C  attached  hereto
     (the "Exit Facility Term Sheet");

<PAGE>

          D.  purchase  an  additional  $30,000,000  in  non-voting  (except  on
     default)  convertible  preferred equity (the "Equity  Investment")  upon or
     after  the  Effective  Date on the  terms  and  subject  to the  conditions
     contained  herein  and as  set  forth  in  Annex  D  attached  hereto  (the
     "Investment Term Sheet"); and

          E.  codeshare  with  Debtors out of Midway and such other  airports as
     Southwest  and Debtors shall  mutually  agree as set forth in the Codeshare
     Agreement as soon as Debtors' gates have been relocated to facilities which
     will reasonably  accommodate  passenger  connections  and baggage  handling
     between  the two  carriers,  on the terms  and  subject  to the  conditions
     contained  herein  and as  set  forth  in  Annex  E  attached  hereto  (the
     "Codeshare Term Sheet").

          1. Key Terms and  Conditions.  Southwest's  commitment to purchase the
     Transferred  Assets,  make the loans under the Facilities,  make the Equity
     Investment and enter into the codeshare arrangement shall be on and subject
     to the following terms and conditions:

          A. Asset Acquisition.  In furtherance of Debtors' restructuring of its
     operations  pursuant  to the Plan,  Southwest  agrees to buy the  following
     Transferred  Assets  from  Debtors  for the  aggregate  purchase  price  of
     $40,000,000  (the  "Acquisition   Price"):  (a)  all  of  Debtors'  rights,
     privileges  and  interests in the Midway Gates  through the  assumption  of
     Debtors'  leasehold  interest  with  respect to such Midway Gates under the
     Chicago  Midway  Airport   Amended  and  Restated   Airport  Use  Agreement
     Facilities Lease (the  "Facilities  Lease") between the City of Chicago and
     ATA Airlines,  Inc.  ("ATA");  (b) all of Debtors'  rights,  privileges and
     interests in the Midway Hangar through the assumption of Debtors' leasehold
     interest under the Lease of Hangar  Facilities (the "Hangar Lease") between
     the City of Chicago and ATA; and (c) miscellaneous  other assets related to
     the foregoing as set forth in the Asset Acquisition Agreement, in each case
     free and clear of all pledges,  liens,  security  interests,  encumbrances,
     claims,  charges,  options and interests  thereon and there against (except
     for  the   terms  of  the   Facilities   Lease   and  the   Hangar   Lease)
     ("Encumbrances")  in accordance with Sections 363 and 365 of the Bankruptcy
     Code.  The  purchase of the  Transferred  Assets  shall be on the terms and
     subject to the  conditions  contained  herein and as set forth in the Asset
     Acquisition Agreement.

          B. DIP  Facility  Amount.  Southwest  will  provide a DIP  Facility to
     Debtors  of up to  $47,000,000  in the  aggregate.  The DIP  Facility  will
     provide up to $40,000,000 in cash plus a guaranty of up to $7,000,000  (the
     "Chicago  Guaranty")  for  amounts  outstanding  under  that  certain  Loan
     Agreement  for Funding ATA  Expansion  Gates,  dated March 17, 2003, by and
     among the City of Chicago and ATA (the "Chicago  Construction Loan") on the
     terms and subject to the  conditions  contained  herein and as set forth in
     the DIP Facility Term Sheet.  The base interest rate on amounts borrowed by
     Debtors  under the DIP Facility will be the greater of: (a) 8.0% per annum,
     and (b) the  3-month  LIBOR rate plus 5.0% per  annum,  paid  monthly.  The
     Chicago  Guaranty  fee will be 3.0%  per  annum on  undrawn  amounts,  paid
     monthly.

                                       2
<PAGE>

          C. Exit  Facility.  Upon the  Effective  Date of the Plan,  which Plan
     shall  include  the terms set forth in Annex F attached  hereto  (the "Plan
     Term Sheet"),  Southwest  will provide an Exit Facility to the  reorganized
     Holdings ("New ATA") of up to  $47,000,000.  The Exit Facility will provide
     for  long-term  financing  consisting  of one or  more  5-year  notes  (the
     "Notes") to  refinance  up to  $40,000,000  under the DIP  Facility  plus a
     replacement  guaranty of up to $7,000,000 of the amounts  outstanding under
     the Chicago Construction Loan (the "New Chicago Guaranty") on the terms and
     subject  to the  conditions  contained  herein and as set forth in the Exit
     Facility Term Sheet.  The base interest rate on the amounts borrowed by New
     ATA under the Exit Facility will be 9.5% per annum, paid semi-annually. The
     New Chicago  Guaranty fee will be 3.0% per annum on undrawn  amounts,  paid
     monthly.

          D. Equity Investment. Upon or after the Effective Date, Southwest will
     purchase,  through an additional cash investment of $30,000,000,  shares of
     non-voting senior convertible  preferred equity (the "Preferred Equity") of
     New ATA on the terms and subject to the conditions  contained herein and as
     set forth in the  Investment  Term  Sheet.  The  Preferred  Equity  will be
     convertible into 27.5% of the fully diluted economic  ownership of New ATA,
     subject to pro rata dilution for management interests. The Preferred Equity
     will have voting rights only upon certain events of default, will be senior
     to the  common  equity  (the  "Common  Equity")  of New  ATA  and  will  be
     convertible  into Common Equity,  at Southwest's  option,  upon Southwest's
     sale or  transfer  of such  Preferred  Equity to a third  party and certain
     other specified major liquidity events.

          E. Codeshare and Other Support Agreements.  In furtherance of Debtors'
     restructuring of their operations, Southwest and Debtors will codeshare out
     of Midway and such other  airports as Southwest and Debtors shall  mutually
     agree, as specified in the Codeshare Agreement,  not later than thirty (30)
     days after  Debtors'  gates have been  relocated to  facilities  which will
     reasonably  accommodate  passenger connections and baggage handling between
     the two  carriers  which  shall be at least  thirty  (30)  days  after  the
     implementation  of the  Midway  Codeshare  on the terms and  subject to the
     conditions  contained  herein and as set forth in the Codeshare  Term Sheet
     and subject to applicable regulatory requirements. In addition, Debtors and
     Southwest will consider entering into various  agreements in support of the
     codeshare  arrangement  and  other  transactions  contemplated  by this Bid
     Proposal,  including  with  respect  to  reservation  and  ground  handling
     services and sharing frequent flier programs.

                                       3
<PAGE>

          2.  Credit  Support  Option.  Southwest  may opt to  satisfy  all or a
     portion of its commitment  hereunder to provide the Facilities by arranging
     for  third-party  funding thereof (the entity  providing such funding,  the
     "Southwest Substitute Lender"), and, if necessary, providing credit support
     for the Debtors'  obligations in respect of such Facilities;  provided that
     the  all-in-cost  to the  Debtors of such  third-party  funding  and credit
     support  does not  exceed  the  all-in-cost  that the  Debtors  would  have
     incurred had Southwest funded its commitment directly.

          3.  Payment of Expenses.  Debtors  shall  reimburse  Southwest up to a
     maximum aggregate amount of $1,000,000 for all reasonable fees and expenses
     incurred by or on behalf of Southwest in connection  with the  negotiation,
     preparation,  execution and delivery of this Bid Proposal,  the  Definitive
     Documents and the transactions contemplated hereby and thereby,  including,
     but not limited to, fees and expenses of counsel and financial  advisors to
     Southwest and fees and expenses  incurred by Southwest in  connection  with
     any  due  diligence,   collateral   reviews  and  field  examinations  (the
     "Expenses").  On the funding date of the Equity  Investment,  Debtors shall
     pay to Southwest or its designated affiliate in immediately available funds
     an amount equal to the reasonably documented Expenses incurred by Southwest
     prior to the date thereof up to an aggregate  amount of $1,000,000.  If not
     otherwise paid, expenses reimbursable  hereunder shall be credited against,
     and shall reduce the balance due under, such Equity Investment.

          4.  Payment of  Arrangement  Fees.  In  consideration  of  Southwest's
     commitment to provide the  Facilities  and the Equity  Investment,  Debtors
     shall pay to Southwest:  a closing fee of 2.5% for each of the DIP Facility
     (including the Chicago Guaranty) and the Equity Investment. The closing fee
     for the DIP  Facility  will be accrued to the  principal  amount of the DIP
     Facility.  The Debtors  will also pay  Southwest a guaranty fee of 3.0% per
     annum, paid monthly, for any amounts guaranteed but not drawn under each of
     the Chicago Guaranty and the New Chicago Guaranty.

          5.  Covenants;  Definitive  Documents.  If Southwest is the Successful
     Bidder under the Debtors' Bid Procedures  approved by the Bankruptcy  Court
     on November 19, 2004 (the "Bid Procedures"), Debtors and Southwest agree to
     cooperate with one another and to use  commercially  reasonable  efforts to
     prepare and  negotiate  in good faith the  agreements  and other  documents
     necessary to consummate the transactions  contemplated by this Bid Proposal
     on the terms and  subject  to the  conditions  contained  herein and as set
     forth in the Annexes attached hereto, in form and substance satisfactory to
     Southwest (the "Definitive  Documents") and the documents  ancillary to the
     Definitive  Documents as contemplated  herein and to take such action as is
     reasonably   necessary  to  obtain   Bankruptcy   Court   approval  of  the
     transactions  contemplated hereby.  Southwest's  obligations under this Bid
     Proposal  shall  be  subject  to the  Debtors  and  Southwest  successfully
     negotiating,  executing and delivering legally valid and binding Definitive
     Documents.

                                       4
<PAGE>

          6.  Intention  to Bid at  Auction.  In the event  there is an  Auction
     pursuant to the Bid Procedures, Southwest intends to bid at such Auction.

          7.  Hart-Scott-Rodino;  Regulatory Approvals.  Other than the consents
     required to be obtained  from the City of Chicago as described in Section 9
     hereof,  Southwest does not anticipate  additional  requests for regulatory
     approval (including under the Hart-Scott-Rodino  Antitrust Improvements Act
     of 1976 ("HSR")) with respect to the asset acquisition or the DIP Facility.
     Southwest  is prepared to initiate  immediately  all actions  necessary  to
     obtain all applicable approvals set forth in this Bid Proposal or as may be
     otherwise identified as necessary.

          8. Good Faith  Deposit;  Financing.  Simultaneous  with,  or prior to,
     Southwest's  submission of this Bid Proposal,  Southwest wired  $10,000,000
     (the maximum amount required by the Bid Procedures) to Debtors'  account in
     accordance  with  instructions  received  from  Debtors.  Southwest has the
     financial ability to purchase the Transferred  Assets, make the loans under
     the Facilities and make the Equity Investment using cash on hand,  evidence
     of which is contained in Southwest's  quarterly report on Form 10-Q for the
     period ending September 30, 2004,  included as Exhibit A hereto (showing in
     excess  of  $1,800,000,000  in cash  and  cash  equivalents  as of the date
     thereof).

          9.  City  of  Chicago  Leases;  Performance.   Southwest  shall  fully
     cooperate with the Debtors (a) by complying with the applicable  procedures
     and  information  requests of the City of Chicago under Section 4.03 of the
     Facilities  Lease, and (b) in seeking the prior written consent of the City
     of Chicago for the  assignment  and  transfer of the  Facilities  Lease and
     Debtors'  rights  thereunder  with respect to the Midway  Gates.  Southwest
     shall also cooperate with the Debtors with respect to the assignment of the
     Hangar  Lease  and  shall  seek the prior  written  consent  of the City of
     Chicago for the  assignment  and  transfer of the Hangar Lease and Debtors'
     rights  thereunder.  Attached  as  Exhibit  B are the Terms  Applicable  to
     Assignment of Facilities Lease and the Economic  Disclosure  Statement that
     were  submitted to the City of Chicago on November  30, 2004 in  accordance
     with  the Bid  Procedures.  Given  the  financial  capacity  of  Southwest,
     Southwest's provision of outstanding service at Midway for 18 years and its
     history as a legacy airline at Midway,  Southwest  believes that it will be
     fully and  adequately  capable  of  performing  its  obligations  under any
     contracts or  unexpired  leases,  including  the  Facilities  Lease and the
     Hangar Lease, it may assume pursuant to the Asset Acquisition Agreement.

          10. Company Employees.  To the extent Southwest requires any employees
     in addition to those  already  employed by  Southwest  (and  related to its
     acquisition  of the  Transferred  Assets),  Southwest  agrees to  interview
     qualified  employees  of  Debtors  who were  displaced  as a result  of the
     transactions contemplated by this Bid Proposal on a first-priority basis.

                                       5
<PAGE>

          11.  Termination.  The proposals  made by Southwest in this letter are
     irrevocable  until  the  earlier  of (i) two (2)  business  days  after the
     closing  of the  Transaction(s)  by which  all of the  Assets  that are the
     subject of this Bid Proposal have been transferred or disposed of to one or
     more Qualified  Bidders pursuant to the Bid Procedures and (ii) ninety (90)
     days after the entry of an order of the Court  approving a Transaction  for
     the  transfer  of such  Assets.  Upon  such  time,  the  proposals  made by
     Southwest in this letter shall expire, unless otherwise agreed by Southwest
     in writing.

          12. Definitions. Capitalized terms used, but not defined, herein shall
     have the meanings given to such terms in the Bid Procedures.

          13. Closings.

               A.  Asset  Acquisition.  The  closing  of the  asset  acquisition
          pursuant to the Asset  Acquisition  Agreement shall occur  immediately
          following the  fulfillment  of the following two  conditions:  (i) the
          entry of the Bankruptcy Court's enforceable order confirming Southwest
          as the Successful  Bidder with respect to the  Transferred  Assets and
          approving  the terms and  conditions of this Bid Proposal with respect
          to such Transferred  Assets and the Asset Acquisition  Agreement,  and
          (ii) the Debtors'  compliance with the conditions  precedent set forth
          in  the  Asset   Acquisition   Agreement,   including   requiring  the
          Transferred Assets to be transferred to Southwest (with the consent of
          the City of Chicago) free and clear of all Encumbrances except for the
          terms of the Facilities Lease and the Hangar Lease.

               B. DIP Facility.  The closing and the initial  funding of the DIP
          Facility  shall occur  immediately  following the  fulfillment  of the
          following  two  conditions:  (i) the entry of the  Bankruptcy  Court's
          enforceable  order confirming  Southwest as the Successful  Bidder and
          approving  the  terms  and  conditions  of this Bid  Proposal  and the
          Definitive  Documents,  and  (ii)  the  Debtors'  compliance  with the
          conditions  precedent  set forth in the DIP  Facility  Term  Sheet and
          Definitive  Documents,   including,   without  limitation,   that  (a)
          Southwest   and  the  Debtors   shall  have  entered  into  the  Asset
          Acquisition  Agreement,  and (b) Southwest shall have a super-priority
          security  interest in the assets  which are to secure the DIP Facility
          pursuant  to an order of the  Bankruptcy  Court in form and  substance
          acceptable to Southwest in its sole discretion.

               C. Codeshare. The initial loading of the codeshare schedule shall
          occur  as  soon  as  practicable  following  the  fulfillment  of  the
          following three  conditions:  (i) the entry of the Bankruptcy  Court's
          enforceable  order confirming  Southwest as the Successful  Bidder and
          approving  the  terms  and  conditions  of this Bid  Proposal  and the
          Definitive  Documents,  (ii)  Southwest  and the  Debtors  shall  have
          entered into the Asset Acquisition Agreement and (iii) Southwest shall
          have a  super-priority  security  interest in the assets  which are to
          secure the DIP Facility  pursuant to an order of the Bankruptcy  Court
          in form and substance  acceptable to Southwest in its sole  discretion
          and the funding of the DIP Facility  shall have occurred in accordance
          with the DIP Facility Term Sheet and Definitive Documents.

                                       6
<PAGE>

     The obligations of Southwest to make the loans under the  Facilities,  make
the Equity Investment and enter into the codeshare  arrangement shall be subject
to the absence of a Material Adverse Change.  A "Material  Adverse Change" shall
be deemed  to occur  upon the  occurrence  of, or  Southwest's  knowledge  of, a
material  adverse  change in the business,  condition  (financial or otherwise),
operations,  performance,  properties  or prospects  of the Debtors,  taken as a
whole,  since  October  26,  2004  other  than any  change (i) of the type which
customarily  occurs  as a result  of  events  leading  up to and  following  the
commencement  of a proceeding  under Chapter 11 of the  Bankruptcy  Code and the
commencement  of the Cases or (ii)  disclosed in the annual  report on Form 10-K
for the fiscal year ended  December  31, 2003 filed by Holdings,  the  quarterly
report on Form 10-Q for the periods  ending  March 31,  2004,  June 30, 2004 and
September  30, 2004 filed by Holdings or any filing made by Holdings on Form 8-K
following  December  31,  2003  and  prior  to the date  hereof;  provided  that
deferrals  of payments to aircraft  lessors or lenders  with respect to grounded
aircraft and other  aircraft and engines in Debtors'  fleet (and any  associated
ratings downgrade) shall not in and of themselves  constitute a Material Adverse
Change.

     The Debtors shall use their best reasonable efforts to obtain  confirmation
of the Plan on or before June 30,  2005.  Southwest  shall not be  obligated  to
consummate the other transactions  contemplated by the Plan if no order has been
entered by the Bankruptcy  Court  confirming the Plan on or before September 30,
2005,  in which  event the  closings  set forth above  shall be  unaffected  and
Southwest  shall be entitled to exercise  any of the rights set forth in the DIP
Facility.

     14.  Comparison of Asset  Acquisition  Agreement to  Definitive  Agreement.
Attached as Annex G is an executed Asset  Acquisition  Agreement  marked to show
modifications to the Definitive Agreement attached to the Bid Procedures.

     This letter (1) supercedes all prior discussions,  agreements, commitments,
arrangements,  negotiations or understandings,  whether oral or written,  of the
parties with respect thereto,  (2) shall be governed by the laws of the State of
New York,  without  giving  effect to the conflict of laws  provisions  thereof,
except to the extent  superceded by the  Bankruptcy  Code,  (3) shall be binding
upon the parties and their respective  successors and assigns as provided in the
Bid  Procedures,  (4) may not be relied upon or enforced by any other  person or
entity,  (5)  shall  not be  assignable  (and  no  obligation  hereunder  may be
delegated  and no right  hereunder  may be assigned) by either party without the
written consent of the other party (except as provided  herein),  and (6) may be
signed in multiple  counterparts,  each of which shall be deemed an original and
all of which together  shall  constitute  one and the same  instrument.  If this
letter  becomes the  subject of a dispute,  each of the  parties  hereto  hereby
waives trial by jury.

                                       7
<PAGE>

                                   * * * * *

                         [Signatures on following page]

                                       8
<PAGE>

     This letter may be amended,  modified or waived only in a writing signed by
the parties hereto.

                                    Very truly yours,

                                    SOUTHWEST AIRLINES CO.


                                    By: /s/ Gary C. Kelly
                                        -----------------
                                        Name: Gary C. Kelly
                                        Title:   Chief Executive Officer


Agreed and accepted on this
 __ day of December, 2004


ATA HOLDINGS CORP.

By: /s/ Gilbert F. Viets
    ----------------------------
    Name: Gilbert F. Viets
    Title:
<PAGE>

                        Annex B - DIP Facility Term Sheet
<PAGE>
                                     ANNEX B

                             SOUTHWEST AIRLINES CO.

                   Summary of Indicative Terms and Conditions
            Up to $47,000,000 Secured Super-Priority Credit Facility
                 to ATA Airlines, Inc., as Debtor-in-Possession
                                December 15, 2004

THIS TERM SHEET IS DELIVERED PURSUANT TO THE BID PROPOSAL,  DATED AS OF DECEMBER
15, 2004 (THE "BID  PROPOSAL")  BETWEEN THE LENDER AND THE  BORROWER (AS DEFINED
BELOW).

BORROWER:

     ATA Airlines,  Inc., an Indiana  corporation (the "Borrower"),  as a debtor
and  a  chapter   11   debtor-in-possession   in   bankruptcy   cases  that  are
administratively  consolidated  as In re ATA  Holdings  Corp.  et al.,  Case No.
04-19866  (Bankr.  S.D. Ind.) (the "Cases") under chapter 11 of title 11, United
States Code (the "Bankruptcy  Code") filed in the United States Bankruptcy Court
for the  Southern  District  of  Indiana on October  26,  2004 (the  "Bankruptcy
Court").

GUARANTORS:

     ATA Holdings Corp., Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber
Travel,  Inc.,  American Trans Air ExecuJet,  Inc., ATA Cargo, Inc., and Chicago
Express  Airlines,   Inc.  and  any  other  subsidiary  of  ATA  Holdings  Corp.
(collectively,  the "Guarantors" and, together with the Borrower, the "Obligated
Parties"). All guaranteesshall be full and unconditional guarantees of payment
and collection.

LENDER:

     Southwest Airlines Co., any of its affiliates,  assignees or designees (the
"Lender").

DIP FACILITY:

     The Lender shall provide to the Borrower a  post-petition  credit  facility
(the "DIP  Facility"),  of up to $47,000,000  (the "Maximum Loan  Amount"),  and
providing  for a loan in an amount  equal to the lesser of (a) the Maximum  Loan
Amount and (b) the amount specified in the Interim Order (as defined below). The
DIP Facility  will consist of a term loan  facility in the  aggregate  principal
amount of $40,000,000  (the "Loan Facility") and a guaranty by the Lender of the
Borrower's  obligations under the Loan Agreement for Funding ATA Expansion Gates
between the Borrower  and the City of Chicago,  dated as of March 17, 2003 in an
amount not to exceed  $7,000,000  (the "Chicago  Guaranty").  Assuming all other
conditions  precedent  set forth herein have been met, the DIP Facility  will be
funded upon the execution and delivery, or as soon as practical  thereafter,  of
the Asset  Acquisition  Agreement  (the  "Asset  Acquisition  Agreement")  to be
entered into between the Lender and the Borrower and the Chicago  Guaranty  will
be  issued  upon  the  closing  of the  transaction  contemplated  by the  Asset
Acquisition Agreement.

<PAGE>

EXIT FACILITY; EQUITY INVESTMENT:

     The Lender shall also  provide to the  reorganized  Borrower  ("New ATA") a
post-reorganization  credit  facility  in the amount of up to  $47,000,000  (the
"Exit  Facility")  and an equity  investment  (the "Equity  Investment")  in the
amount of $30,000,000,  upon the effective date of a plan of reorganization that
is confirmed pursuant to a final, non-appealable order entered by the Bankruptcy
Court or any other  court  having  jurisdiction  in the Cases  (the  "Plan")  in
substantially  the form  described in the Plan Term Sheet  enclosed with the Bid
Proposal.  The Exit Facility  will be made in  accordance  with the terms of the
Exit  Facility  Term  Sheet  enclosed  with  the Bid  Proposal  and  the  Equity
Investment will be made in accordance with the terms of the Investment Agreement
Term Sheet enclosed with the Bid Proposal.

     The Exit Facility  would permit the Obligated  Parties to  restructure  the
airplane lease agreements,  labor contracts,  the ATSB Loan,  unsecured debt and
other liabilities in accordance with the Plan. The definitive  documentation for
the Exit Facility would include, but not be limited to, the terms and conditions
(including  the  representations,  warranties and covenants) of the DIP Facility
set forth in this Term Sheet with such changes and  modifications  as the Lender
may require in its sole discretion.

AVAILABILITY:

     The DIP  Facility  and the Chicago  Guaranty  shall be  available  upon the
satisfaction  of the conditions set forth below under  "Conditions  Precedent to
Closing" and as  specified  in the "DIP  Facility"  above.  Any amount  borrowed
pursuant to the immediately preceding sentence shall be immediately deposited in
an accounts  with a bank  acceptable  to the Lender and such amount may not with
withdrawn by the Borrower until the Borrower has satisfied its obligations under
"Deposit Accounts" below.

PURPOSE:

     To provide general working capital and to pay ordinary  operating costs and
expenses of the Obligated Parties during the term of the DIP Facility, including
payments to third  parties that are  necessary to cure  defaults,  to the extent
permitted by the Bankruptcy Code or the Bankruptcy Court.

CLOSING DATE:

     The date of  satisfaction  of all  conditions  precedent  to  closing  (the
"Closing Date") is expected to be as soon as practicable  after the entry of the
Approval  Order but not later than  December 23, 2004,  or as otherwise  agreed,
subject to entry of an appropriate  enforceable  order of the court  authorizing
all of the terms and  conditions  of the DIP Facility  and the  execution of the
Asset Acquisition  Agreement,  such order to be in form and substance acceptable
to the Lender.

MATURITY:

     The DIP Facility  will  terminate  and all amounts  outstanding  thereunder
shall be due and  payable  (unless  accelerated  earlier  following  an Event of
Default) on the  earliest of (i) January 31, 2005 if the Lender does not receive
a consent  from the City of Chicago to the  transfer  of assets  pursuant to the
terms of the Asset Purchase  Agreement,  (ii) the effective date of the Plan, or
(iii)  September 30,  2005(the  "Maturity  Date"),  subject to extension of such
Maturity Date upon terms and conditions to be agreed upon by the Lender.

<PAGE>

INTEREST RATE:

     Outstanding  obligations  under the DIP Facility  and the Chicago  Guaranty
shall bear  interest at the greater of 8.0% per annum or the 3-month  LIBOR rate
plus 5.0% per annum ("Base Rate") and such interest shall be payable monthly.

DEFAULT RATE:

     During the  continuance  of an Event of Default  (as  defined  below),  all
outstanding obligations shall bear interest at 3.0% above the Base Rate. Overdue
interest,  fees and other amounts  shall (to the extent  permitted by applicable
law) bear interest at 3.0% above the Base Rate.

FEES:

     Lender shall  receive the following  fees:  (i) a closing fee in the amount
equal to 2.5% of DIP Facility  commitment  (including the Chicago Guaranty) (the
"Closing  Fee")  which  shall be  accrued  to the  principal  amount  of the DIP
Facility,  and (ii) a guaranty fee in the amount  equal to 3.0% per annum,  paid
monthly, of the Chicago Guaranty (the "Guaranty Fee") for any amounts guaranteed
but not drawn under the Chicago Guaranty.  All fees shall be deemed fully earned
upon the  disbursement of the DIP Facility and the delivery of the Guaranty,  as
applicable,  and  shall  accrue  to  principal  on the  disbursement  of the DIP
Facility.

DEPOSIT ACCOUNTS:

     The  Borrower  shall  maintain  all  cash  in  accounts  maintained  with a
depository  bank  acceptable  to  the  Lender  (collectively,   the  "Controlled
Accounts");  provided  that (i) the  Obligated  Parties  shall be  permitted  to
maintain  up to an  aggregate  amount of  $1,000,000  in  accounts  that are not
Controlled  Accounts  but that  have  been  disclosed  to the  Lender;  (ii) the
Obligated  Parties  shall be  permitted to maintain  cash in Trust  Accounts (as
defined below),  to the extent consistent with current  practices;  and (iii) to
the extent  consistent  with  agreements  with any credit  card  companies,  the
Obligated Parties shall be permitted to hold accounts with such entities so long
as the  amounts  on  deposit  in  such  accounts  are  intended  solely  to cash
collateralize holdback obligations.

COLLATERAL/PRIORITY:

     All loans, advances and other obligations,  liabilities and indebtedness to
the Lender,  including interest,  fees and expenses (the "Obligations") shall be
secured by (i) pursuant to section 364(c)(2) of the Bankruptcy Code, and subject
to the Carve-out (as defined as below),  valid,  perfected and enforceable first
priority  liens and  security  interests in the Primary  Collateral  (as defined
below) and all proceeds  thereof,  other than Excluded Assets (as defined below)
that are not subject to valid  perfected  liens on the Petition Date or to valid
liens in existence on the Petition Date that are subsequently perfected pursuant
to section 546(b) of the Bankruptcy Code and (ii) pursuant to section  364(c)(3)
of the  Bankruptcy  Code,  and subject to the  Carve-out,  valid,  perfected and
enforceable  best  priority  available  liens  and  security  interests  in  all
encumbered  present and future assets of the Borrower and all proceeds  thereof,
other than Excluded Assets and any Section 1110 Assets (as defined below) to the
extent the underlying lease,  security  agreement  mortgage,  trust agreement or
other applicable  instrument would prohibit the Borrower's granting of a lien to
the  Lender  (the  "Secondary   Collateral"  and,   together  with  the  Primary
Collateral, the "Collateral").
<PAGE>
     "Primary Collateral" shall mean:

          (i) (A) All property owned or leased (except as provided below in this
     clause (i) (A)) by any of the Obligated  Parties as of December 22, 2004 at
     the Chicago  Midway  Airport in which the Lender  does not  already  hold a
     valid, enforceable and perfected lien or security interest and the proceeds
     therefrom;  provided,  however,  that the Lender  shall not receive  liens,
     security interests or operational rights in, or any reversionary  interests
     or any  right  to  control  or use  the  Chicago  Midway  Airport  terminal
     facilities  which are the subject of the Chicago Midway Airport Amended and
     Restated Use Agreement and Facilities Lease (the "Lease")  themselves or in
     the Lease for such airport  terminal  facilities and, (B) any interests the
     Obligated  Parties have in the right to receive the proceeds,  if any, from
     any  assumption  and   assignment,   to  any  person  engaged  in  the  air
     transportation  business and no other person,  of the Lease for any Chicago
     Midway Airport terminal  facilities as approved by the Court and subject to
     any and all City of Chicago  consents as are required;  provided,  however,
     that any such required City of Chicago consent shall be absolute, exclusive
     and not  subject  to  challenge  by the  Lender  or the  Obligated  Parties
     regardless of any adverse  effect that the lack of, or  conditions  to, any
     such  consent  may have or be claimed on the amount of  proceeds  resulting
     from lack of  consent  to such an  assumption  and  assignment.  The Lender
     waives any and all purported legal or equitable  claims or causes of action
     it may have against the  Obligated  Parties and any third party,  including
     but not limited to the City of Chicago,  whose consent is required  arising
     from any lack of, or  conditions  to, such a consent,  including any claims
     based upon  assignment  under 11 U.S.C.  365, and  covenants  not to sue in
     furtherance thereof;

          (ii) any assets of the Obligated Parties, other than assets identified
     in clause (i) above,  constituting  the collateral  pledged to the State of
     Indiana  pursuant to the Indiana DIP, if such  financing has been repaid at
     any time and such collateral has been released;

          (iii)  all of  the  rights  of the  Obligated  Parties  under  airport
     facility leases at all out-stations of the Obligated Parties except for (A)
     the  out-stations at Honolulu  International  Airport,  (B) out-stations at
     airports  outside of the United States and (C) assets  identified in clause
     (i) above,  provided,  however,  that if any such airport  facility  leases
     prohibit  the  granting of security  interest in any such  facilities,  the
     Lender's  interest  shall be  limited  to the  proceeds  thereof  until the
     Obligated  Parties  (using  commercially  reasonable  efforts)  shall  have
     obtained  appropriate  consents  to pledge  and  assignment  from  relevant
     lessors of facilities; and

<PAGE>

          (iv) a blanket lien (and/or second lien) on all other assets that have
     not  otherwise  been  pledged  or which  do not  constitute  the  Secondary
     Collateral, except for assets identified in clause (i) above.

     For the purposes  hereof,  the term  "Excluded  Assets"  shall mean (i) any
retainers paid or deposited before October 26, 2004 (the "Petition Date") by the
Obligated Parties to or with their  professionals for professional  services and
expense reimbursement in connection with the Cases; provided,  however, that the
security interests attach automatically to any reversionary or residual interest
any  Obligated  Party may have in such  retainer;  (ii) any Trust Funds (as such
term is defined the Obligated Parties' Cash Collateral  Order);  (iii) Obligated
Parties'  avoidance  actions and proceeds  thereof under Sections 544-550 of the
Bankruptcy Court or similar applicable State law, and (iv) card receivables, but
only to the extent the ATSB Lender  Parties (as such term is defined in the ATSB
Cash Use Order (Docket No. 718)), do not hold a security interest therein).


     The  Obligations  shall at all times,  subject to the Carve-out (as defined
below),  have priority,  pursuant to Section  364(c)(1) of the Bankruptcy  Code,
over any and all  administrative  expenses specified in Section 503(b) or 507(b)
of the Bankruptcy Code.

     The  Collateral  shall  not  include:  (i) any  assets or  property  of the
Obligated  Parties  pledged  pre-petition  to the ATSB to secure  the  Obligated
Parties' indebtedness under the ATSB Loan and (ii) any assets or property of the
Obligated Parties upon which the Bankruptcy Court shall have granted to the ATSB
a  replacement  lien pursuant to the ATSB Cash Use Order to secure the Obligated
Parties' use of cash  collateral  under section 363 of the Bankruptcy  Code (the
"ATSB  Collateral"),  provided,  however,  that  in  the  event  that  any  ATSB
Collateral  shall be released by ATSB,  the Lender shall have the best  priority
interest in such released ATSB  Collateral  (subject only to any continuing lien
granted to the State of Indiana under the Indiana DIP Orders).

     "Section 1110  Agreement"  shall mean any agreement of any Obligated  Party
related  to  Section  1110  Assets,  including,  without  limitation,   security
agreements,  mortgages,  trusts,  leases,  conditional  sale agreements or other
instruments applicable to such Section 1110 Assets.

     "Section  1110  Assets"  means,  (i)  any  "aircraft",  "aircraft  engine",
"propeller",  "appliance" or "spare part" of any Obligated  Party (as defined in
Section  40102 of Title 49) as those terms are used in Section  1110(a)(3)(A)(i)
of the Bankruptcy Code, (ii) all parts substitutions,  renewals and replacements
of, improvements,  accessions and accumulations  incident to each such aircraft,
aircraft engine, appliance or spare part and all documents related to any of the
foregoing to the extent any such asset constitutes equipment within the scope of
section 1110(a) of the Bankruptcy  Code;  (iii) any other assets with respect to
which  the  granting  of any such  security  interests  would  cause a  default,
directly or  indirectly,  of any Section  1110  Agreement,  other than a default
arising  from a negative  pledge or similar  provision  in any such Section 1110
Agreement with respect to otherwise  unencumbered property, and (iv) any deposit
or reserve  delivered  by a Obligated  Party to a Section 1110  Beneficiary  (as
defined below) in connection with the purchase,  financing or lease of a Section
1110 Asset; or reserve upon the satisfaction of the obligations secured thereby.

<PAGE>

     "Section 1110 Beneficiary"  shall mean all  counterparties  with any of the
Obligated Parties to any such Section 1110 Agreements.


CARVE-OUT:

     The  superpriority  claim status and liens  granted  under the DIP Facility
shall be subject only to a carve-out (the  "Carve-out")  which shall mean claims
of the  following  parties  for  payment  of the  following  amounts  arising in
connection with the Cases:  (i) quarterly fees required to be paid to the United
States Trustee pursuant to 28 U.S.C. ss.  1930(a)(6) and any fees payable to the
Clerk of the  Bankruptcy  Court,  (ii)  prior to the  occurrence  of an Event of
Default (a) the reasonable  expenses of any member of the  creditors'  committee
(the  "Committee")  which are  allowed  by the  Bankruptcy  Court and (b) unpaid
professional fees and disbursements incurred prior to the occurrence of an Event
of Default by the professionals retained, pursuant to Sections 327 or 1103(a) of
the Bankruptcy  Code, by the Obligated  Parties or the Committee  which shall be
allowed  by the  Bankruptcy  Court  (before  or after  the  Event  of  Default);
provided,  that such fees and disbursements payable after an Event of Default do
not exceed the amounts  included in the  Borrower's  Projections  (as defined in
Exhibit A hereto)  for the term of the DIP  Facility,  and (iii)  following  the
occurrence of an Event of Default,  the reasonable expenses of any member of the
Committee and unpaid  professional  fees and  disbursements by the professionals
retained  pursuant to Sections  327 or 1103(a) of the  Bankruptcy  Code,  by the
Obligated Parties and the Committee incurred after the occurrence of an Event of
Default which shall be allowed by the Bankruptcy Court not to exceed $500,000 in
the aggregate;  provided, however, that the Carve-out shall not include any fees
or  expenses  incurred  by  any  party  in  connection  with  the  investigation
(including  discovery  proceedings),  initiation or  prosecution  of any claims,
causes of action, adversary proceedings or other litigation against the Lender.

REPAYMENT:

         All Obligations shall be payable upon the Maturity Date. Interest shall
be payable as specified under "Interest Rate" and "Default Rate" above. Fees
shall be payable as specified under "Fees" above.

OPTIONAL PREPAYMENT:

     The DIP  Facility  may be  repaid  at any time in whole or in part  without
premium or penalty.

CONDITIONS PRECEDENT TO CLOSING:

     The closing of the DIP Facility  and the  issuance of the Chicago  Guaranty
will be  subject  to  satisfaction  of the  condition  precedent  customary  for
financings  of this type  generally  and  appropriate  for this  transaction  in
particular, including, but not limited to, the following:

               (i) The Bid Proposal  shall have been approved by the  Bankruptcy
          Court.

               (ii) The Asset Acquisition  Agreement shall have been executed by
          all parties thereto.

<PAGE>

               (iii) The Lender  shall have  received  satisfactory  opinions of
          counsel to the  Obligated  Parties  (which  shall  cover,  among other
          things,    authority,     legality,    validity,    binding    effect,
          unenforceability  of the loan documents and the granting of a security
          interest and perfection of the Collateral).

               (iv)  No  material  adverse  change  in the  business,  condition
          (financial  or  otherwise),  operations,  performance,  properties  or
          prospects  of the  Borrower  and its  subsidiaries,  taken as a whole,
          since  October  26,  2004  other than any change (x) of the type which
          customarily  occurs as a result of events  leading up to and following
          the  commencement  of a proceeding  under chapter 11 of the Bankruptcy
          Code and the  commencement  of the Cases or (y)  disclosed  in (A) the
          annual report on Form 10-K for the year ended  December 31, 2003 filed
          by the  Borrower;  (B) in the  quarterly  report  on Form 10-Q for the
          quarters ended March 31, June 30 and September 30, 2004,  filed by the
          Borrower or (C) in any report on Form 8-K filed by the Borrower  after
          December  31,  2003  and  prior  to the  date  hereof;  provided  that
          deferrals  of  payments to aircraft  lessors/lenders  with  respect to
          grounded  aircraft and other aircraft in the Obligated  Parties' fleet
          (and any associated  ratings downgrade) shall not in and of themselves
          constitute a material adverse change.

               (v) The Lender shall have received satisfactory evidence that the
          Obligated  Parties  shall  have  complied  in full with the notice and
          other  requirements of the Bankruptcy  Code in a manner  acceptable to
          the Lender and its counsel.

               (vi) The entry of an enforceable order of the Court approving the
          terms  and   conditions  of  the  DIP  Facility   (including   without
          limitation,  (a) the finding that the Lender is  extending  the credit
          under the DIP Facility in "good  faith"  within the meaning of Section
          364(e) of the Bankruptcy Code, (b) pursuant to Sections  364(c)(2) and
          (c)(3) of the Bankruptcy  Code,  authorizing and granting the security
          interests and liens upon all property of the Borrower's estate defined
          under  Section  541 of the  Bankruptcy  Code and  otherwise  described
          above,  (c) pursuant to Section  364(c)(1) of the Bankruptcy Code, the
          granting of the superpriority status and liens referred to herein, and
          (d) the  automatic  perfection  of all liens  referred to herein,  the
          payment  of all fees  referred  to  herein,  the first  priority  lien
          referred to herein and the approval of the Escrow  Arrangement),  such
          order to be in the form and  substance  satisfactory  to the Lender in
          its sole discretion and which shall not have been reversed,  modified,
          amended or stayed without the prior written consent of the Lender (the
          "Interim  Order").  Such order shall also (a)  approve  the  Obligated
          Parties' waiver of any and all claims and causes of action against the
          Lender (and its  respective  affiliates)  directly  related to the DIP
          Facility or the  negotiation  of the terms  thereof,  and (b) prohibit
          subsequent  granting of liens or priority  status superior to, or pari
          passu with, those provided in connection with the DIP Facility.

<PAGE>

               (vii) The  Lender's  reasonable  determination  that all motions,
          orders,  and  other  pleadings  or  related  documents  to be filed or
          submitted to the Bankruptcy  Court in connection with the DIP Facility
          shall be consistent with the terms of the proposed DIP Facility.

               (viii)  The  Lender's  reasonable  determination  that all  other
          related orders entered by the Bankruptcy Court in the Cases, including
          without  limitation  any and all cash  collateral  orders and  related
          orders, are not inconsistent with the terms of the DIP Facility.

               (ix) The Obligated Parties shall have paid to the Lender all fees
          due and payable on the Closing Date.

               (x) No  material  lien shall exist in  connection  with any ERISA
          plan of the Obligated Parties.

               (xi) The  Obligated  Parties  shall have  obtained all  necessary
          third party approvals  (other than the approval of the City of Chicago
          which  shall be  obtained  by January  21,  2005 and which  shall be a
          condition precedent to the issuance of the Chicago Guaranty).

               (xii)  The  completion  of  searches  for  existing  liens on the
          Obligated Parties' assets.

     The DIP Facility and the Chicago  Guaranty will be subject to  satisfaction
of the  following  conditions  precedent:  (a)  all of the  representations  and
warranties in the loan  documentation  shall be true and correct in all material
respects;  (b) no material work  disruptions or stoppages by employees of any of
the Obligated Parties shall have occurred and be continuing; and (c) the Interim
Order or the DIP Order,  as applicable,  shall be in full force and effect,  and
shall  not have  been  reversed,  amended,  supplemented,  modified,  stayed  or
vacated.

     There will be additional  terms and conditions  satisfactory to the Lender,
in its sole  discretion,  to any funding  under the Exit Facility and the Equity
Investment.

REPRESENTATIONS AND WARRANTIES:

     The DIP Facility shall contain representations and warranties customary for
a facility of this type, including but not limited to the following items:

<PAGE>

               (i)  organization,  qualification  and due  authorization  of the
          Obligated  Parties;   (ii)  no  breach  of  charter,   by-laws,   law,
          regulation,   judgments,   or  other  post-petition   agreements,   as
          applicable;   (iii)  no  material  adverse  change  in  the  business,
          condition   (financial   or   otherwise),   operations,   performance,
          properties or prospects of the Borrower and its subsidiaries, taken as
          a whole,  since the date of this Term Sheet  (other  than those  which
          customarily  occur as a result of events following the commencement of
          a proceeding under chapter 11 of the Bankruptcy  Code);  provided that
          deferrals  of payments to aircraft  and engines  lessors/lenders  with
          respect to grounded and other  aircraft and engines in the  Borrower's
          fleet  and  other  leased   equipment  (and  any  associated   ratings
          downgrade)  shall  not in  and of  themselves  constitute  a  material
          adverse change; (iv) enforceability of DIP Facility documentation; (v)
          no material litigation or contingent obligations, except as disclosed;
          (vi)  compliance  with  laws,  including  air  carrier  status;  (vii)
          licenses,  title to property, and related matters;  (viii) outstanding
          debt; (ix) filing and payments of all taxes, except where contested in
          good faith by appropriate  proceedings;  (x) material  compliance with
          ERISA,  environmental  laws,  and  all  other  applicable  laws;  (xi)
          utilization  of  slots  in  a  manner   consistent   with   applicable
          regulations and contracts in order to preserve the collateral value of
          the slots,  taking into account any waivers or other relief granted to
          the Borrower by the Federal Aviation Administration;  (xii) receipt of
          all necessary  third party  consents;  and (xiii) status of bankruptcy
          proceedings and perfection of the Lender's  security  interests in the
          Collateral.

OPERATIONAL, COMPLIANCE AND REPORTING COVENANTS:

     The DIP Facility shall contain  covenants  customary for a facility of this
type, including but not limited to the following items:

          (i) preservation of existence and franchise;  (ii) compliance with and
     maintenance  of  all  material  licenses  and  material  agreements;  (iii)
     compliance  with laws;  (iv)  maintenance of insurance  (including  without
     limitation  casualty insurance on the aircraft as required by the DOT or as
     customary for major U.S. carriers);  (v) delivery of financial  statements,
     projections,  and cash flow statements; (vi) payment of all taxes and other
     post-petition  obligations  as and when due except where  contested in good
     faith and by appropriate  proceedings if reserves maintained;  (vii) at the
     Borrower's expense, monitoring of collateral and, with respect to parts, in
     the discretion of the Lender, and the quarterly field exams and appraisals;
     (viii)  access to and  maintenance  of  records  and books of  account  and

<PAGE>

     visitation rights;  (ix) maintenance of properties  expected to be material
     to the  reorganized  business  of the  Obligated  Parties;  (x)  conducting
     transactions  with affiliates on terms equivalent to those obtainable on an
     arm's-length  basis; (xi) further  assurances as to perfection and priority
     of  security  interests;  (xii)  maintenance  of a cash  management  system
     acceptable  to the Lender;  (xiii)  financial  and  reporting  requirements
     including  weekly  13-week  cash  flow   forecast/reconciliation   reports,
     reporting  against the  business  plan within 20 days  against the business
     plan and the development of flash reporting  satisfactory to the Lender and
     the  Committee;  (xiv)  maintenance of perfected lien on all Collateral and
     prohibition of any other liens on such Collateral; (xv) material compliance
     with ERISA;  (xvi) material  compliance  with  environmental  laws;  (xvii)
     capital  expenditures  in an amount to be agreed upon based on the business
     plan; (xviii) the preservation of all Non-Air 21 slots at LaGuardia Airport
     and Ronald  Reagan  Washington  National  Airport;  (xix)  compliance  with
     requests for  additional  information  from ATSB in connection  with ATSB's
     commitment to guarantee the ATSB Loan;  (xx)  utilization  of airport gates
     sufficient to comply with applicable gate lease provisions; (xxiii) loading
     of  the  Lender's  code  sharing  schedule  into  the  Obligated   Parties'
     reservation  system;  (xxiv)  obtaining from the Bankruptcy  Court entry of
     enforceable   order   approving  a   disclosure   statement   and  plan  of
     reorganization  for the Cases,  in each case on terms  consistent  with the
     Plan Term Sheet enclosed with the Bid Proposal, no later than September 30,
     2005;  (xxv)  compliance with leasehold  terms;  (xxvi)  maintenance of air
     carrier status and U.S.  citizenship;  (xxvii) upon an Event of Default (as
     defined  below),  use best  efforts to obtain,  and to  cooperate  with the
     Lender in obtaining, all authorizations,  consents, orders and approvals of
     any Governmental  Authority in connection with the DIP Facility,  including
     the exercise of remedies upon an Event of Default; and (xxviii) limitations
     on (A) debt,  guaranties and other contingent  liabilities;  (B) liens; (C)
     investments;  provided  that  investments  in the  Trust  Accounts  will be
     permitted  to  the  extent  consistent  with  the  current  practices;  (D)
     disposition  of  assets  constituting  Collateral  for  the  DIP  Facility,
     preserving  the Obligated  Parties'  ability to consummate one for one slot
     trades,  understanding  that the slot received as a result of such trade is
     subject  in  all  respects  to  the  loan  documentation;   (E)  dividends,
     distributions redemptions and repurchases; (F) mergers,  consolidations and
     acquisitions;  (G)  changes  in  fiscal  year  or  accounting  method;  (H)
     amendments of constituent documents or material agreements; and (I) changes
     in conduct of business or capital structure.

<PAGE>

     The Obligated  Parties also shall use their best efforts to obtain entry of
an  enforceable  order  confirming  the Plan for the Cases on or before June 30,
2005,  but in no event later than  September 30, 2005,  in a form  substantially
similar to the terms of the Plan Term Sheet.

MANAGEMENT COVENANTS:

     The DIP Facility  shall  contain the  following  covenants  relating to the
management of the Borrower:

          (i) by no later than  December 31, 2004,  the Borrower  shall retain a
     Co-Chief   Restructuring   Officer  whose   retention   shall  be  made  in
     consultation with the Lender; and

          (ii) by no later than July 31, 2005, the Borrower shall retain a Chief
     Executive  Officer whose employment shall be subject to the approval of the
     Committee and the ATSB.



FINANCIAL COVENANTS:

     The DIP Facility shall contain  financial  covenants set forth in Exhibit A
to this Term Sheet.

DEFAULTS:

     The DIP Facility shall contain  defaults and events of default (the "Events
of Default") customary for a facility of this type, including but not limited to
the following items  applicable to the Obligated  Parties (subject to reasonable
grace periods and materiality qualifiers to be agreed upon):

          (i) failure to pay principal, interest or fees when due; (ii) material
     inaccuracy of representations or warranties;  (iii) violation of covenants;
     (iv) change of control (as defined in the Codeshare Agreement), including a
     change in Board of Directors of Borrower;  (v)  customary  ERISA  defaults;
     (vi) the Obligated Parties allegation in any pleading or other writing,  or
     the  finding  or  conclusion  by the  Bankruptcy  Court,  that  any loan or
     security document  pertaining to the DIP Facility is not valid,  binding or
     forceable,  or any other event  occurs or  circumstance  exists which cause
     such loan or security  document to be impaired or to not be valid,  binding
     and  enforceable;  (vii)  dismissal of chapter 11 cases or  conversion,  to
     chapter 7 cases; (viii) appointment of a chapter 11 trustee or any examiner
     for the Obligated  Parties;  (ix) granting of relief from automatic stay to
     permit  foreclosure on any material assets of Obligated Parties (other than
     Section 1110 Assets);  (x) entry of any order,  without the Lender's  prior
     consent,  reversing,  amending,  supplementing,  staying  or  vacating  the
     Interim Order or the DIP Order; (xi) unstayed monetary judgment defaults in
     an amount to be agreed and material non-monetary  judgment defaults;  (xii)

<PAGE>

     payment of  pre-petition  debt (other than debt in respect of Section  1110
     Assets),  other than as  approved by the Lender and the  Bankruptcy  Court;
     (xiii) the existence of any material lien in connection with any ERISA plan
     of the  Obligated  Parties,  excluding any lien arising after the filing of
     the Cases that is  unperfected  and wholly junior to the liens securing the
     DIP Facility;  (xiv) the occurrence of any event or circumstance that would
     constitute a material adverse change in the business,  condition (financial
     or  otherwise),  operations,  performance,  properties  or prospects of the
     Borrower  and its  subsidiaries,  taken as a whole  (other than those which
     customarily  occur as a result of events  following the  commencement  of a
     proceeding under chapter 11 of the Bankruptcy Code); (xv) the submission by
     the  Obligated  Parties  of any  motion  or other  pleading  attacking  the
     validity or enforceability  of any of the documents  executed in connection
     with the DIP Facility;  (xvi) any default under any cash collateral  order;
     and (xvii) cross-defaults under material documents.

          For  the  purposes  hereof,   the  term  "DIP  Order"  shall  mean  an
     enforceable  order of the Court  approving the terms and  conditions of the
     DIP  Facility  substantially  in the form of and  containing,  among  other
     things,  the provisions  present in the Interim Order  (including,  without
     limitation,  the granting of liens and the  superiority  status referred to
     herein) and a  prohibition  of any claims  against the Lender's  collateral
     pursuant to section 506(c) of the  Bankruptcy  Code. The DIP Order shall be
     in form and substance satisfactory to the Lender in its sole discretion and
     shall not have been reversed, modified, amended or stayed without the prior
     written consent of the Lender.

          Upon the  occurrence  of an Event of  Default,  the Lender may, at its
     option,  terminate  the DIP  Facility  and declare all amounts  outstanding
     immediately  due and payable,  and upon giving of a notice  required in the
     Interim  Order,  to the Obligated  Parties,  the United States Trustee (the
     "Trustee")  and any  Committee,  shall be  entitled  to relief from stay to
     exercise remedies against any collateral  (including without limitation the
     ability to set off amounts held in any deposit accounts with, or subject to
     the control of, the Lender and apply against amounts  outstanding under the
     DIP Facility and then ability to require all collected funds to be tendered
     to the Lender for application against such outstanding amounts).

     The  Obligated  Parties  shall  waive  any right to seek  relief  under the
Bankruptcy  Code,  including,  without  limitation,  under  section  105  of the
Bankruptcy  Code, to the extent such relief would  restrict or impair the rights
and remedies of the Lender set forth in the Interim Order,  the DIP Order and in
the definitive DIP Facility documentation.  In the event that any party requests
a hearing  seeking to prevent the Lender form  exercising  any of its rights and
remedies  that arise after an Event of Default,  the sole issue before the Court
at such  hearing  shall be whether an Event of Default has  occurred and has not
been cured.  No other issue or argument  shall be relevant to any  opposition to
enforcement of the Lender's rights.

     The Obligated Parties further shall waive any and all defenses in the event
the Lender seeks relief under the Bankruptcy Code, including but not limited to,
relief under sections 362, 1112, 1104, and 1121, to (i) lift the automatic stay;
(ii) convert the Cases to a case under chapter 7 of the Bankruptcy  Code;  (iii)
seek the  appointment  of a trustee  or  examiner;  and/or  (iv)  terminate  the
exclusive period for the Obligated Parties to file the Plan.

<PAGE>

INDEMNITY:

     The DIP Facility shall contain appropriate  indemnification  provisions, in
form and substance similar to the following:

     Each Obligated  Party shall defend (with counsel  satisfactory  to Lender),
protect,  indemnify and hold harmless  Lender,  each  affiliate or subsidiary of
Lender, and each of their respective shareholders, members, officers, directors,
managers,  employees,  attorneys,  advisors  and  agents  (each an  "Indemnified
Party") from and against any and all liabilities,  obligations, losses, damages,
penalties,  actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature (including,  without limitation, the disbursements and the
reasonable  fees of counsel for each  Indemnified  Party in connection  with any
investigative,  administrative  or  judicial  proceeding,  whether  or  not  the
Indemnified Party shall be designated a party thereto), which may be imposed on,
incurred  by, or  asserted  against,  any  Indemnified  Party  (whether  direct,
indirect or consequential and whether based on any federal,  state or local laws
or regulations,  including, without limitation, securities laws and regulations,
environmental  laws and commercial laws and regulations,  under common law or in
equity,  or based on contract or otherwise) in any manner relating to or arising
out of the DIP Facility,  or any act, event or transaction  related or attendant
thereto,  the making or issuance and the  management  of the DIP Facility or the
use or intended  use of the proceeds of the DIP  Facility;  except to the extent
that direct damages (as opposed to special) indirect,  consequential or punitive
damages  (including,  without  limitation,  any loss of  products,  business  or
anticipated  savings) are  determined  in a final  non-appealable  judgment by a
court of competent  jurisdiction  to have result from the willful  misconduct or
gross negligence of such  Indemnified  Party. To the extent that the undertaking
to indemnify set forth in the preceding sentence may be unenforceable because it
is  violative  of  any  law  or  public  policy,  Borrower  shall  satisfy  such
undertaking  to the maximum extent  permitted by applicable  law. Any liability,
obligation,  loss,  damage,  penalty,  cost or expense covered by this indemnity
shall be paid to each Indemnified Party on demand,  and, failing prompt payment,
shall,  together  with interest  thereon at the highest rate then  applicable to
Loans hereunder from the date incurred by each  Indemnified  Party until paid by
Borrower,  be  added  to the  Liabilities  of  Borrower  and be  secured  by the
Collateral.  The  indemnification  provisions shall survive the satisfaction and
payment of the other  obligations  under the DIP Facility and the termination of
this the DIP Facility conclusive agreements.

EXPENSES:

     The  Obligated  Parties shall jointly and severally pay upon the funding of
the  Equity  Investment  all (i)  reasonable  costs and  expenses  of the Lender
(including all reasonable  fees,  expenses and  disbursements of outside counsel
and any appraiser  retained by the Lender;  provided that the Obligated  Parties
shall not pay or be responsible for more than one primary counsel for the Lender
and one specialty and local  counsel  retained by the Lender in connection  with
the  preparation,  execution  and  delivery  of the loan  documentation  and the
funding of all loans under the DIP Facility,  including, but not limited to, all
due diligence fees and reasonable  expenses  incurred or sustained by the Lender
in connection with this transaction or the  administration,  amendment or waiver
of the loan documentation, (ii) costs and expenses of the Lenders (including all

<PAGE>

reasonable fees,  expenses and  disbursements  of outside  counsel,  appraisers,
field  auditors  and  any  financial  consultant  retained  by  the  Lender)  in
connection with the administration of the DIP Facility after the Closing Date up
to $1,000,000 in the  aggregate for all costs and expenses in  connections  with
all transactions contemplated by the Bid Proposal in accordance with paragraph 3
of the Bid  Proposal  and in clause  (i) and (ii)  hereof,  and (iii)  costs and
expenses  incurred by the Lender in connection  with the  enforcement  of any of
their rights and remedies under any of the loan documentation.

MISCELLANEOUS:

     This  Indicative  Summary of Terms and Conditions is intended as an outline
only  and  does  not  purport  to  summarize  all  the  conditions,   covenants,
representations,  warranties  and other  provisions  which would be contained in
loan  documentation  for  the DIP  Financing  and for  the  Exit  Facility.  The
definitive DIP Facility  documentation will be governed by New York Law, subject
to  applicable  bankruptcy  law and each of the parties  thereto shall waive its
right to a trial by jury.

<PAGE>

                                    EXHIBIT A
                   TO SOUTHWEST / ATA DIP-FINANCING TERM SHEET

                        DIP Facility Financial Covenants


MINIMUM EBITDARR

For the period from January 1, 2005 though and including September 30, 2005, the
Borrower  shall  maintain  a  minimum  monthly   EBITDARR  (as  defined  below),
calculated  in the same manner as in the business  plan provided to and approved
by the  Lender  (the  "Business  Plan"),  at 75% of the  EBITDARR  stated in the
Borrowers' projections dated December 22, 2004 (the "Borrower's Projections").

In addition,  for the period from January 1, 2005 though and including September
30, 2005, the Borrower shall maintain EBITDARR, calculated in the same manner as
reflected in its Business Plan, at 80% of the cumulative  EBITDARR stated in the
Borrowers'  Projections.  (The  first  such test  shall be for the  period  from
January 1, 2005 through March 31, 2005)


                                  Min. EBITDARR Test       Min. Cumulative
                                                              EBITDARR Test
         Period
         January 2005                      75%                 Not tested
         February 2005                     75%                 Not tested
         March 2005                        75%                    80%
         April 2005                        75%                    80%
         May 2005                          75%                    80%
         June 2005                         75%                    80%
         July 2005                         75%                    80%
         August 2005                       75%                    80%
         September 2005                    75%                    80%

EBITDARR LESS CAPITAL EXPENDITURES TEST

For the period from January 1, 2005 though and including September 30, 2005, the
Borrower shall maintain a minimum monthly EBITDARR less Capital Expenditures (as
defined below), calculated in the same manner as in the Business Plan, at 75% of
the EBITDARR less Capital Expenditures stated in the Borrower's Projections.

In addition,  for the period from January 1, 2005 though and including September
30, 2005,  the Borrower  shall  maintain a EBITDARR  less Capital  Expenditures,
calculated  in the same manner as reflected in the Business  Plan, at 80% of the
cumulative   EBITDARR  less  Capital   Expenditures  stated  in  the  Borrowers'
Projections.  (The first such test shall be for the period from  January 1, 2005
through March 31, 2005)

<PAGE>

                                  Min. EBITDARR Test       Min. Cumulative
                                                              EBITDARR Test
         Period
         January 2005                      75%                 Not tested
         February 2005                     75%                 Not tested
         March 2005                        75%                    80%
         April 2005                        75%                    80%
         May 2005                          75%                    80%
         June 2005                         75%                    80%
         July 2005                         75%                    80%
         August 2005                       75%                    80%
         September 2005                    75%                    80%

"Capital  Expenditures"  means for any period, any expenditure in respect of the
purchase or other  acquisition of any fixed or capital asset  (excluding  normal
replacements and maintenance which are properly charged to current  operations).
For  purposes  of this  definition,  the  purchase  price of  equipment  that is
purchased  simultaneously  with, or within three months  after,  the trade-in of
existing  equipment  or with  insurance  proceeds  shall be  included in Capital
Expenditures only to the extent of the gross amount by which such purchase price
exceeds the credit  granted by the seller of such  equipment  for the  equipment
being traded in at such time or the amount of such  insurance  proceeds,  as the
case may be.

"EBITDARR"  means,  for any period,  for the Borrower and its  Subsidiaries on a
consolidated  basis,  an amount  equal to (i)  Consolidated  Net Income for such
period plus, (ii) without  duplication,  the following to the extent deducted in
calculating such Consolidated Net Income: (a) Consolidated  Interest Charges for
such period,  (b) the provision  for federal,  state,  local and foreign  income
taxes  payable by the Borrower  and its  Subsidiaries  for such period,  (c) the
amount of depreciation and amortization  expense,  (d)  administrative  expenses
(including  restructuring  charges) incurred in connection with the Cases in the
amount provided for in the Business Plan, and (e) rents associated with aircraft
leases.

"Consolidated  Interest Charges" means, for any period, for the Borrower and its
Subsidiaries on a consolidated  basis,  the sum of (a) all interest expense (net
of interest income),  premium payments, debt discount, fees (including,  without
limitation,  amortization  of deferred  financing  costs  related to the Cases),
charges and related  expenses of the Borrower and its Subsidiaries in connection
with borrowed money (including  capitalized  interest) or in connection with the
deferred  purchase  price of  assets,  in each  case to the  extent  treated  as
interest in  accordance  with GAAP,  and (b) the portion of rent  expense of the
Borrower and its  Subsidiaries  with respect to such period under capital leases
that is treated as interest in accordance  with GAAP, it being  understood  that
rent expense that is treated as an operating  expense in accordance with GAAP is
not included this calculation.

"Consolidated  Net Income"  means,  for any  period,  for the  Borrower  and its
Subsidiaries  on a  consolidated  basis,  the net income of the Borrower and its

<PAGE>

Subsidiaries  (excluding  extraordinary gains and extraordinary  losses, in each
case, incurred in connection with the Cases) for that period.

MINIMUM CASH TEST

For the period from January 1, 2005 though and including September 30, 2005, the
Borrower shall maintain a minimum monthly cash, calculated in the same manner as
reflected in the Business Plan, at the following percentages of the level of the
amounts stated in the Borrower's Projections.


        Period                            Min. Cash Test

        January 2005                           75%
        February 2005                          75%
        March 2005                             75%
        April 2005                             75%
        May 2005                               75%
        June 2005                              75%
        July 2005                          $100,000,000
        August 2005                        $100,000,000
        September 2005                     $100,000,000

<PAGE>

                       Annex C - Exit Facility Term Sheet

<PAGE>

                                     ANNEX C



                             SOUTHWEST AIRLINES CO.



                            Exit Facility Term Sheet

                                December 15, 2004



                  Description of Notes to be Issued by New ATA
(Capitalized terms not defined herein have the meanings assigned to such terms
in the Bid Proposal)

   Issuer:                   ATA Holdings Corp., as reorganized pursuant to the
                             Cases ("New ATA").

Guarantors                   All of the debtor affiliates and subsidiaries
                             of New ATA (collectively,"Debtors").


Securities Offered:          9.5% Senior Secured Notes in an aggregate principal
                             amount of $40,000,000 (the "Notes").

Maturity:                    Payable in full 5 years from the issuance date of
                             the Notes (the "Maturity Date").

Interest Payment Dates:      Interest on the Notes shall accrue at the rate of
                             9.5% per annum and shall be payable in cash
                             semiannually starting on the first six month
                             anniversary of the issuance of the note.

Use of Proceeds:             Proceeds from the issuance of the Notes will be
                             used to repay any amounts outstanding under the
                             DIP Facility of ATA Airlines, Inc. ("ATA") and for
                             working capital purposes of New ATA and its
                             subsidiaries. The Notes shall be issued on the
                             Effective Date pursuant to the terms of  the
                             Bid Proposal.

Ranking:                     The Notes shall rank senior to all other
                             indebtedness of New ATA, other than the New
                             ATSB Loan, the Indiana debtor-in-possession
                             financing (the "Indiana DIP"), up to
                             $30,000,000 of pro forma secured debt of
                             New ATA and its subsidiaries and cash
                             secured letter of credit facilities not in
                             excess of $40,000,000 in the aggregate with
                             respect to which the Notes will be pari passu.

<PAGE>

Security:                    Upon issuance and use of the proceeds to
                             repay in full the DIP Facility, the Notes
                             shall be secured by all Collateral (as
                             defined in the DIP Facility Term Sheet)
                             securing the DIP Facility. In the event any
                             of collateral securing the ATSB Loan or the
                             Indiana DIP has been released, the Notes
                             shall be secured by a first lien in such
                             respective collateral (collectively, the
                             "Exit Facility Collateral").

Chicago Guaranty:            The Exit Facility shall include a guaranty of the
                             Chicago Construction Loan of up to $7,000,000 to
                             be provided by Southwest (the "New Chicago
                             Guaranty") which shall replace any existing
                             guaranty provided by Southwest to the City of
                             Chicago.  The obligations of New ATA and ATA
                             arising under the New Chicago Guaranty shall be
                             secured by the Exit Facility Collateral, pari
                             passu with the Notes.  New ATA shall pay to
                             Southwest a guaranty fee in an amount equal to
                             3.0% per annum, paid monthly, of the guaranteed
                             but not drawn obligations under the New Chicago
                             Guaranty.  The New Chicago Guaranty shall expire
                             on the Maturity Date, at which time New ATA or
                             ATA shall repay the Chicago Construction Loan or
                             provide a letter of credit or other form of
                             assurance acceptable to the City of Chicago.  The
                             New Chicago Guaranty may be in the form of a
                             separate agreement from the Notes but shall
                             remain pari passu with respect to the Exit
                             Facility Collateral.

Sinking Fund:                None.

Optional Redemption by       The Notes shall be redeemable in whole or in part,
Issuer :                     at any time, at a price equal to (i) par plus
                             coupon of 9.5%, such coupon reduced ratablyover
                             the term of the Notes, plus (ii) all accrued and
                             unpaid interest on the Notes up to the redemption
                             date (the "Optional Redemption Price").

Change of Control:           Upon a Change of Control(as such term is defined
                             in the Codeshare Agreement), Southwest will have
                             the option to require New ATA to purchase all or a
                             portion of the Notes at the greater of (i)the
                             Optional Redemption Price and (ii) 101% of the
                             principal amount thereof plus accrued and unpaid
                             interest up to the purchase date.

Conditions to Closing:       Southwest's commitment to make the advance under
                             the Note Documents shall be subject to New ATA
                             meeting the conditions to closing in the
                             Investment Agreement.

Events of Default:           The following events, among others, shall
                             constitute events of default under the documents
                             governing the terms of the Notes (the
                             "Note Documents"):

<PAGE>

                             failure to pay interest when due and payable for
                             over 30 days; o failure to pay principal when due
                             for over 5 business days;o failure to comply with
                             or observe any other covenant or warranty in the
                             Note Documents for over 30 days following the
                             receipt of notice of any default; and o certain
                             events of bankruptcy,insolvency or reorganization.

                             In addition, the Note Documents shall contain
                             other events of default normal and customary for
                             facilities of this type (including, but not
                             limited to, the  relevant events of default set
                             forth in the  DIP Facility documentation).

Affirmative Covenants:       Customary and usual for facilities of this type
                             (including, but not limited to, the relevant
                             covenants set forth in the DIP Facility
                             documentation).

<PAGE>

Negative (Restrictive)       The Note Documents shall contain covenants that,
 Covenants:                  among other things, shall limit New ATA's ability
                             to:

                             o        incur (i) additional indebtedness,
                                      (ii) purchase money obligations
                                      and (iii) ordinary course
                                      obligations, which shall be based
                                      on minimum pro forma fixed charge
                                      coverage ratios (and a basket to
                                      provide general operating
                                      flexibility) established to
                                      correspond with the financial
                                      projections for New ATA which are
                                      set forth in the court-approved
                                      disclosure statement;
                             o        during the first three years, pay
                                      dividends on, redeem or repurchase
                                      capital stock, subject to an
                                      initial basket that increases over
                                      time based on net income and
                                      proceeds of equity issuances;
                             o        make restricted investments;
                             o        create or allow certain liens;
                             o        sell assets other than in the ordinary
                                      course without reinvesting the proceeds
                                      in the business or offering to retire
                                      debt at par;
                             o        engage in extraordinary
                                      transactions with affiliates and
                                      consolidate, merge or transfer all
                                      or substantially all of New ATA's
                                      assets without meeting certain
                                      specific obligations; and
                             o        utilize free cash flow other than
                                      in accordance with the Business
                                      Plan (as defined in the DIP
                                      Facility Term Sheet), unless
                                      certain unrestricted cash
                                      parameters and Notes prepayment
                                      obligations are met.

Governing Law:               The Note Documents shall be governed by New York
                             law.

Trustee, Transfer Agent      To be decided, if required.
and Paying Agent:

Registration Rights:         The Notes shall befreely transferable by Southwest
                             subject to applicable securities laws.In addition,
                             Southwest shall be entitled to registration
                             rights with normal and customary terms.

Alternate Provider:          The Issuer shall have the right to obtain
                             alternate financing on the same or better terms
                             in place of the Exit Facility at its option.

<PAGE>

                         Annex D - Investment Term Sheet

<PAGE>

                                    ANNEX D

                             SOUTHWEST AIRLINES CO.

                         Investment Agreement Term Sheet
                                December 15, 2004

Company:               ATA Holdings Corp. ("Holdings")

Investor:              Southwest Airlines Co. ("Southwest")

Overview:              Southwest will provide ATA Airlines, Inc. with a
                       debtor-in-possession loan facility of up to $47,000,000
                       (the "DIP Facility") for general working capital
                       purposes and provide Holdings with permanent financing
                       (through long-term debt) of up to $47,000,000 (the "Exit
                       Facility" and, together with the DIP Facility,
                       the "Facilities") as outlined in Southwest's Bid
                       Proposal. In connection with such Facilities, Southwest
                       and Holdings will also enter into an investment
                       agreement (the "Investment Agreement") containing the
                       following and other usual and customary terms and
                       conditions.  Pursuant to the Investment Agreement, and
                       immediately following the effective date
                       (the "Effective Date") of the Plan of
                       Reorganization (the "Plan") of Holdings and its debtor
                       subsidiaries(collectively, the "Debtors")under chapter
                       11 of title 11 of the United State Code
                       (the "Bankruptcy Code"),Southwest will purchase
                       through an additional cash investment of $30,000,000
                       (the "Equity Investment") shares of non-voting senior
                       convertible preferred equity (the "Preferred Equity")
                       of reorganized Holdings ("New ATA"). The Preferred
                       Equity will be convertible into 27.5% of
                       the fully diluted economic ownership of New ATA.

<PAGE>

Equity Investment      Pursuant to the Plan, New ATA will issue a total of
Structure:             [?] million shares1 of common equity (the "Common
                       Equity") consisting of:  (i) a total of [ ] million
                       shares* of Common Equity (not including the Common
                       Equity issuable upon the conversion of
                       the Preferred Equity) (the "Constituent Common Equity")
                       and (ii) a total of [ ] million shares* of Common
                       Equity upon conversion of the Preferred Equity.  The
                       Preferred Equity will convert into Common Equity, at
                       Southwest's option, upon Southwest's sale or transfer
                       of the Preferred Equity, in whole or in part, to any
                       party other than Southwest and certain other specified
                       major liquidity events.

                       New ATA's issuance to Southwest of the
                       Preferred Equity shall equal, upon conversion
                       of such Preferred Equity, 27.5% of the Common
                       Equity of New ATA on a fully diluted basis.

                       New ATA will reserve [ ] million shares* of
                       Common Equity for members of senior
                       management ("Management") of New ATA and will
                       adopt a customary incentive program for
                       Management, which will authorize the issuance
                       of options or warrants at the discretion of
                       the compensation committee of the Board of
                       Directors of New ATA, exercisable for such
                       Common Equity at an exercise price of not
                       less than 125.0% of the effective purchase
                       price of the Southwest Preferred Equity. The
                       Management Common Equity will be dilutive to
                       all other Common Equity on a pro rata basis,
                       including that to be issued upon conversion
                       of the Preferred Equity.

Terms of the           The Preferred Equity will: be senior to the Common
Preferred Equity:      Equity and junior to existing and future secured
                       indebtedness; contain customary anti-dilution
                       protection; contain subscription rights to purchase
                       additional equity securities in order to maintain
                       Southwest's ownership percentage; have a liquidation
                       preference equal to its face value plus accrued
                       dividends; and be entitled to vote only upon the
                       occurrence of certain events of default; provided,
                       however, New ATA will need to obtain the consent of
                       Southwest prior to issuing any additional preferred
                       securities while such Preferred Equity is outstanding.
                       The Preferred Equity will earn dividends, payable in
                       kind, in cash or, during the first five years, through
                       the issuance of additional notes under the Exit
                       Facility,at the option of New ATA, at the rate of 4.0%
                       per annum.  The Preferred Equity will be entitled to
                       receive dividends and distributions by New ATA on its
                       Common Equity as if such Preferred Equity had been
                       converted to Common Equity.

                       The Preferred Equity will be convertible into Common
                       Equity, at Southwest's option, upon Southwest's sale or
                       transfer of such Preferred Equity to a third party and
                       certain other specified major liquidity events. If not
                       converted prior thereto, the Preferred Equity shall, at
                       the option of Southwest, either convert into Common
                       Equity or be redeemed at the accrued liquidation
                       value (including accrued dividends) on the tenth (10th)
                       anniversary of the Effective Date. Except as set forth
                       in this paragraph and the preceding paragraph, the
                       Preferred Equity and the Common Equity shall be
                       identical in all other respects.

*Amount to be determined in consultation with the Creditors Committee.

                                       2
<PAGE>

Registration Rights:   The Preferred Equity, including the Common Equity
                       issuable upon conversion thereof, will be freely
                       transferable by Southwest, subject to applicable
                       securities laws. In addition, promptly after the
                       Effective Date, New ATA will file and use its
                       commercially reasonable efforts to cause to be declared
                       effective and maintain the effectiveness of an evergreen
                       resale registration statement permitting free resale of
                       the Preferred Equity and all Common Equity to be issued
                       under the Plan, subject to the conditions and
                       limitations to be mutually agreed and set forth in the
                       Investment Agreement.

Representations        Bring down of representationsand warranties from the
and Warranties:        DIP Facility and other customary representations and
                       warranties, including without limitation, compliance in
                       all material respects with all orders of the Bankruptcy
                       Court and compliance with the applicable statutory,
                       regulatory and interpretive restrictions regarding
                       foreign ownership or control of U.S. air carriers.
                       The representations and warranties shall not survive the
                       Closing Date.

Conditions to Closing: Southwest's commitment to make the Equity Investment
                       shall be subject to, among  other things:

                       o     preparaton, negotiation and execution of
                             definitive legal documents necessary to consummate
                             the transactions contemplated herein (and
                             approval by the Bankruptcy Court of such documents
                             as necessary);

                       o     the concurrent funding of the Exit Facility;

                       o     entry of necessary enforceable orders
                             from the Bankruptcy Court to confirm
                             the Plan containing terms and
                             conditions as set forth in the Plan
                             Term Sheet, attached as Annex F to the
                             Bid Proposal;

                       o     receipt of all necessary material governmental,
                             regulatory and  third-party approvals;

                       o     compliance with the applicable statutory,
                             regulatory and interpretive restrictions
                             regarding foreign ownership or control of U.S.
                             air carriers;

                                       3
<PAGE>

                       o     approval of amendments to New ATA's charter and
                             by-laws as necessary to effectuate the governance
                             and other provisions contemplated hereby;

                       o     execution of a registration rights agreement
                             providing for the filing of an evergreen resale
                             registration statement after the Effective Date
                             permitting free resale of the Preferred
                             Equity and Common Equity to be issued under the
                             Plan in accordance with the conditions and
                             limitations set forth in the Investment Agreement;

                       o     absence of any injunction, stay, restraining order
                             or decree by any court of competent jurisdiction
                             staying the effectiveness of any approvals or
                             the orders confirming the Plan in effect or
                             pending;

                       o     absence of any threatened or pending suit,
                             action, investigation, inquiry or other
                             proceeding by or before any court of competent
                             jurisdiction (excluding the chapter 11 proceeding
                             or any other proceeding disclosed to Southwest
                             prior to the execution of the Investment Agreement
                             and any threatened or pending anti-trust suit,
                             action, investigation or inquiry) which is likely
                             to have a materially adverse effect on Holdings's
                             (or any of its subsidiaries') ability to carry on
                             its business as New ATA or to materially impair
                             Southwest's ability to realize the benefits and
                             value of the Equity Investment; and

                       o     a bring-down of the representations and warranties
                              contained in the Facilities to the Closing Date.

Indemnification:       Southwest (and its affiliates, partners, agents,
                       advisors and representatives) to be indemnified by New
                       ATA for breach of representations, warranties and
                       covenants set forth in the Investment Agreement.

                       Southwest (and its affiliates, partners, agents,
                       advisors and representatives) to be indemnified in
                       connection with the transactions contemplated hereby;
                       provided that New ATA shall not be required to
                       indemnify Southwest for losses arising solely
                       from a decline in the market value of the Preferred
                       Equity or the Common Equity.

Public                 Southwest's consent (as to both form and content) will
Announcements:         be required prior to any public announcement concerning
                       the Investment Agreement or the transactions
                       contemplated herein, except to the extent that such
                       public announcement or other disclosure is
                       required by law.

                                       4
<PAGE>

Fees and Expenses:     New ATA will pay Southwest a closing fee equal to 2.5%
                       of the Equity Investment at closing.

Termination:           Southwest's commitment to make the Equity  Investment
                       shall terminate if the transactions contemplated hereby
                       have not been consummated within a time frame to be
                       specified in the definitive documents which
                       shall not be earlier than September 30, 2005.

                                       5
<PAGE>

Miscellaneous:         This summary of terms is intended as an outline only
                       and does not purport to summarize all the conditions,
                       covenants, representations, warranties or other
                       provisions which would be contained in a definitive
                       Investment Agreement. This document does not constitute
                       a definitive Investment Agreement or a commitment to
                       enter into a definitive Investment Agreement, except as
                       set forth in Southwest's Bid Proposal, and is subject in
                       all respects to the provisions of the definitive
                       Investment Agreement, if any, that may be executed.

Governing Law:         New York

                                       6
<PAGE>

                         Annex E - Codeshare Term Sheet

<PAGE>

                                     ANNEX E

                             SOUTHWEST AIRLINES CO.

                              Codeshare Term Sheet

                                December 15, 2004

1.       Introduction

Southwest  Airlines  Co.  ("Southwest")  and  ATA  Holdings  Corp.  (though  its
subsidiary ATA Airlines,  Inc. ("ATA")) (each hereinafter singularly referred to
as a  "Carrier"  or  collectively  as the  "Carriers")  seek  to  enter  into an
agreement  ("Codeshare  Agreement") to enhance each Carrier's ability to provide
competitive  and cost effective air  transportation  services to and from Midway
International Airport in Chicago,  Illinois (the "Initial Codeshare City"). This
enhancement  would occur by allowing the Carrier marketing and selling the seats
(the  "Marketing  Carrier")  to place its code on the  services  of the  Carrier
operating the flight (the "Operating Carrier") ("Codeshare" or "Codesharing").



2.       Codesharing Initiatives


Base  Codeshare.  Subject to any  regulatory  approval which may be required (as
discussed  in Part III of this Term  Sheet),  the  Carriers  will  Codeshare  on
specific routes into and out of the Initial Codeshare City beginning on or about
February 1, 2005 as provided in the  Codeshare  Agreement  and such other cities
specified in the Codeshare  Agreement  (each,  including  the Initial  Codeshare
City,  a  "Codeshare  City")  will be added no later than thirty (30) days after
ATA's gates have been relocated to facilities which will reasonably  accommodate
passenger  connections and baggage handling between the two Carriers;  provided,
that such  additional  cities shall not be added until at least thirty (30) days
after the  implementation  of the Codeshare in the Initial  Codeshare  City. The
Codeshare  Agreement will outline  procedures the Carriers must follow to add or
delete Codesharing routes,  including specified  operational issues.  Initially,
ATA's  international  service and regional  service  (offered by Chicago Express
Airlines, Inc., dba ATA Connection) will not be included.



Frequent Flyer Program Participation.  Each Carrier has a frequent flyer program
rewarding  its  customers  for  their  loyalty  ("Frequent  Flyer  Program(s)").
Southwest's  Frequent Flyer Program is "Rapid  Rewards" and ATA's Frequent Flyer
Program is "ATA Travel  Awards." The Programs  are not  dissimilar  in that they
award  credits/points  based on trips,  not miles.  The  Carriers  will use best
efforts to find a  mutually  agreeable  relationship  between  their  respective
Frequent  Flyer  Programs  by  February  2006,  which  will be the  subject to a
separate agreement subject to the terms of the Codeshare Agreement.

                                       8
<PAGE>

Inventory Management,  Reservations and Distribution. The Operating Carrier will
determine  independently,  and at its sole discretion,  the number of seats in a
particular fare class on its flights that will be made available for sale by the
Marketing  Carrier and will  communicate  the number and fare class available on
each Codeshare flight daily to the Marketing Carrier. The Carriers will agree to
use  commercially  reasonable  efforts to pursue the best  solution to sell seat
inventory to maximize revenue, maintain the integrity of the Operating Carrier's
inventory system and not compromise the Marketing  Carrier's ability to sell its
product.



Marketing.  Each Carrier will make its own independent  decision on the level of
marketing support to be provided to the Codeshare  Agreement,  and there will be
no contractual  minimums for marketing  support.  Neither Carrier will market or
sell  non-stop  itineraries  on the  other  Carrier,  which  are  not  part of a
Codeshare itinerary.



Codeshare  Revenue  and  Settlement.  The  Carriers  will  negotiate  terms  and
establish settlement procedures.  Those terms will be contained in the Codeshare
Agreement  or a  separate  agreement  subject  to the  terms  of  the  Codeshare
Agreement.



Air Cargo Service.  Through the Codeshare Agreement or supplement  thereto,  the
Carriers  will explore the  possibility  of an air cargo program for each of the
Codeshare Cities,  addressing pro-ration of revenue,  inventory management,  and
other Codesharing issues applicable to air cargo service.



Quality of Customer  Service.  Each Carrier provides its passengers and shippers
with a pledge to provide the highest level of customer  service.  For Southwest,
this pledge takes the form of the Carrier's  "Customer Service  Commitment." For
ATA, this pledge takes the form of the Carrier's  "Customer  Service  Plan." The
Codeshare Agreement will address the integration of these documents in an effort
to provide outstanding customer service on all Codesharing flights. In addition,
the Carriers will develop a system for resolving customer  complaints  regarding
Codeshare flights in an expeditious and fair manner.



Consistency of the Onboard  Experience.  The Carriers agree to use  commercially
reasonable  efforts to identify and resolve material  differences  between their
respective  Contracts of Carriage with respect to Codeshare  passengers  onboard
experience.  In  addition,  the  Carriers'  onboard  experiences  differ in four
significant  ways:  (a) class of service;  (b) seat  assignments;  (c) in-flight
entertainment;  and (d)  meal  service.  To  effectively  implement  Codesharing
between  the  Carriers,  the  Carriers  will  negotiate a solution to these four
differences which will be memorialized in the Codeshare Agreement.


Consistency  of the Airport  Experience.  The Codeshare  Agreement  will outline
initiatives  to provide  seamless  processing of  passengers  and baggage in the
Codeshare City. The Carriers will discuss several issues for possible  placement
in the Codeshare Agreement,  which could include: (a) co-location in a Codeshare
City with  cross-utilization  of each Carriers'  proprietary  check-in equipment
(including  e-ticketing kiosks) and other airport assets; (b) mutual support for
the Carriers' passengers,  baggage, and cargo customers; and (c) coordination of
government-mandated security requirements.

                                       9
<PAGE>

Emergency Procedures Involving Codesharing Flights. The Codeshare Agreement will
outline  procedures  each  Carrier  must  follow in the event of an  accident or
incident  involving a Codeshare  flight,  including the generation of a complete
manifest on Codeshare flights.



3.       Codesharing Ancillary Issues


Term and  Termination.  The initial term of the Codeshare  Agreement will be one
(1) year.  Such initial term will be  automatically  converted into an eight (8)
year term (seven (7) additional  years) upon  confirmation of an acceptable plan
of  reorganization,  such plan to  include  the terms set forth in the Plan Term
Sheet.  The Codeshare  Agreement  will contain  provisions  customary to Airline
Codeshare  Agreements  regarding events of default  including but not limited to
nonpayment,  filing for bankruptcy protection, or the default of the purchase or
financing  agreements.  Each Carrier shall have the sole discretion to terminate
the Codeshare Agreement upon a change of control of the other Carrier (including
a change in the Board of Directors), ATA's entry into a codeshare agreement with
another  party  which is not  permitted  under the  Codeshare  Agreement  or ATA
customer service issues.



Regulatory  Requirements.  The Codeshare  Agreement will state that the Carriers
must  identify and comply with all  relevant  regulatory  requirements  and work
together  to obtain any  applicable  governmental  approvals.  Those  regulatory
requirements  or  approvals  could  include,  but may not be limited  to,  rules
promulgated by the U.S. Department of Homeland Security,  the U.S. Department of
Justice and the U.S.  Department  of  Transportation  ("DOT"),  including  rules
governing the Carriers' advertising.



Safety  Requirements.  The Codeshare  Agreement  will provide for a safety audit
process  whereby the Carriers will have mutual  rights to determine  whether the
other Carrier is meeting or exceeding the minimum safety  requirements  mandated
by any applicable regulatory authority.



Operational  Control  of  Aircraft  and  Crews.  The  Codeshare  Agreement  will
expressly  prohibit any  subcontracting  of a Codeshare  flight.  The  Codeshare
Agreement  will state that only  Southwest's  or ATA's aircraft and crews may be
used for a Codeshare flight.



Liability, Indemnification & Insurance Issues. The Codeshare Agreement will hold
the  Operating  Carrier  liable for  matters  occurring  on or arising  out of a
Codeshare flight. The Operating Carrier will indemnify the Marketing Carrier for
claims or losses  occurring on a Codeshare  flight.  The Marketing  Carrier will
indemnify the Operating  Carrier for claims or losses arising from the Marketing
Carrier's  obligations under the Codeshare  Agreement.  The Codeshare  Agreement
will detail the types and limits of insurance  each  Carrier  must  maintain and
will require full compliance with all legal and regulatory requirements.

                                       10
<PAGE>

Exclusivity.  ATA will  agree in the  Codeshare  Agreement  to obtain  the prior
written  consent of Southwest  which will not be  unreasonably  withheld  before
entering  into a  Codesharing  relationship  or a Frequent  Flyer  Program which
pertains  to the  offering  of  air  transportation  services  of  another  U.S.
certificated or foreign carrier.



Trademark Issues.  The Codeshare  Agreement will limit each Carrier's ability to
use the  trademark,  logo,  copyright,  etc., of the other Carrier  without that
other Carrier's express written consent.



Relationship of Parties. Each Carrier will continue to operate as an independent
company  regarding  all business and  competitive  decisions,  and the Codeshare
Agreement:  (a) will not grant  either  Carrier  the  authority  to  approve  or
disapprove any decisions of the other Carrier relating to advertising,  pricing,
aircraft acquisition,  new market entry and/or capacity decisions, except as may
be necessary to comply with relevant regulatory requirements;  (b) will not make
either Carrier a guarantor of the other Carrier regarding  outstanding financial
obligations,  governmental  penalties,  legal  obligations  or customer  service
disputes; and (c) will not contain any requirement for either Carrier to promote
the other Carrier's service over its own.

                                       11
<PAGE>

                            Annex F - Plan Term Sheet

                                       12
<PAGE>

                                     ANNEX F

                             SOUTHWEST AIRLINES CO.

           ATA Holdings, Inc. Proposed (Joint) Plan of Reorganization
                                December 15, 2004

The following  material terms and  conditions  shall be contained in the Plan of
Reorganization  (the "Plan") of ATA Holdings Corp.  ("Holdings")  and its debtor
affiliates (collectively, "Debtors") confirmed by the Bankruptcy Court:

1.       Treatment of Claims Other than Unsecured Claims

Administrative  expenses (including  administrative priority tax claims) and all
other allowed priority claims,  excluding Section 507(a)(8) priority taxes shall
be  paid in full in cash  on the  effective  date of the  Plan  (the  "Effective
Date").

Section  507(a)(8)  priority  tax  claims  shall  be paid in full in cash on the
Effective  Date or over 6 years  from the date of  assessment  at the  option of
reorganized Holdings ("New ATA").

Except  with  respect to de minimis  secured  claims,  secured  claims  shall be
unimpaired and shall be reinstated or paid in full, together with interest, over
a period of not less than 2 years,  with the  retention of liens,  except as set
for below  relating to the Loan granted  pursuant to that certain Loan Agreement
entered into on November 20, 2002 among American Trans Air, Inc., Holdings,  the
Air Transportation  Stabilization  Board ("ATSB") and lenders party thereto (the
"ATSB Loan").

The ATSB Loan  shall  receive a new  secured  note (the "New ATSB  Loan") on the
terms and subject to the conditions to be determined by the Bankruptcy  Court or
as reasonably agreed pursuant to a settlement  between the Creditors'  Committee
and Debtors, on the one hand, and the ATSB, on the other hand.

2.       General Unsecured Claims

All General Unsecured Claims shall be treated as follows:

o                 100% of the Allowed Unsecured Claims shall be converted into
                  common equity (the "Common Equity") of New ATA; and

o                 a convenience class shall be created to handle claims less
                  than $1,000.Convenience class claims shall be payable in cash
                  at such discount as shall be determined in consultation with
                  the Creditors Committee. Creditors may elect to reduce the
                  entirety of their claims to $1,000 in order to qualify for
                  convenience class treatment.


                            <PAGE>

3.       Existing Equity Securities

As  of  the  Effective  Date,  all  previously  issued  and  outstanding  equity
securities  of Holdings  will be deemed void,  cancelled and of no further force
and effect.

4.       Means for Implementation

Southwest  shall  purchase  (or  obtain a  commitment  of one or more  financial
institutions or accredited  investors to purchase) new long-term debt of New ATA
for up to $47,000,000  on terms and subject to the  conditions  contained in the
Exit Facility Term Sheet, as set forth in Annex C to the Bid Proposal (the "Exit
Facility").  The proceeds  from such Exit Facility will be used to repay the DIP
Facility  (including a replacement  of the guaranty of the Chicago  Construction
Loan) and to provide additional working capital.

Southwest will also purchase non-voting senior convertible preferred equity (the
"Preferred  Equity") of New ATA for  $30,000,000.  The Preferred  Equity will be
convertible  into 27.5% of the fully diluted  Common Equity of New ATA, on terms
and subject to conditions  contained in the Investment  Term Sheet, as set forth
in Annex F to the Bid  Proposal.  The  Preferred  Equity shall convert to Common
Equity,  at  Southwest's  option,  upon  Southwest's  sale or  transfer  of such
Preferred  Equity to a third party and certain other  specified  major liquidity
events.  Pursuant  to such  investment,  Southwest  will own  27.5% of the fully
diluted economic ownership of New ATA on a converted basis.

5.       Other Conditions of the Plan

The following balance sheet characteristics shall also be features of the Plan:

         o        other than the Exit Facility, the New ATSB Loan, the Indiana
                  Facility and cash secured letter of credit facilities not in
                  excess of $40,000,000 in the aggregate, the pro forma secured
                  debt of New ATA outstanding as of the Effective Date shall be
                  limited to $30,000,000;

         o        other than normal payables (including outstanding
                  reorganization professional fees to the extent approved by the
                  Bankruptcy Court) and the Chicago Construction Loan, the
                  unsecured debt of New ATA outstanding as of the Effective Date
                  shall be limited to $1,000,000;

         o        unrestricted cash of New ATA shall be an amount determined in
                  consultation with the Creditors Committee;

         o        aircraft lease/ rentals shall be modified pursuant to
                  negotiations with the lessors of such aircraft;

         o        the 2005 operating budget and capital expenditure plan of New
                  ATA shall be approved by the Board of Directors of New ATA
                  (the "Board") in consultation with Southwest; and

                                       14
<PAGE>

         o        New ATA shall be prohibited for a period of three years from
                  the Effective Date from paying any dividends, other than
                  payment-in-kind or cash dividends on the Preferred Equity, or
                  making any equity redemptions.

6.       Governance

The Board shall include 7 members to be appointed by the Creditors  Committee in
consultation  with Southwest.  The Board shall be responsible for appointing the
senior management of New ATA.

7.       Management Incentive Plan


Options or warrants  exercisable into common equity equal to 10.0% of the Common
Equity of New ATA,  excluding the Common Equity  issuable upon conversion of the
Preferred Equity,  shall be set aside in a management incentive plan for New ATA
management.  The  compensation  committee  of the Board of  Directors of New ATA
shall be responsible  for  determining  the allocation and  distribution  of the
management incentive options or warrants;  provided, that the exercise price for
such options or warrants  shall in no event be less than 125.0% of the effective
purchase price of the Southwest Preferred Equity.

8.       Other Provisions

Procedures for Resolving Disputed Claims: Settlements approved or entered by the
Bankruptcy  Court prior to the  Effective  Date will be binding on all  parties.
During the 180 days (unless extended by the Bankruptcy  Court) commencing on the
Effective Date, New ATA must file any and all objections to claims.  A holder of
a claim  shall not be entitled to receive or recover any amount in excess of the
amount reserved to pay such claim, as further provided in the Plan.

Treatment of Executory Contracts and Unexpired Leases: Executory contracts and
unexpired leases will be assumed, or rejected, as the case may be, as determined
by Holdings in consultation with Southwest.

9.       Amendments or Modifications

The terms and  conditions of this term sheet may be modified or amended with the
mutual consent of the Debtors,  Creditors Committee, ATSB and Southwest Airlines
Co.

                                       15
<PAGE>