Exhibit 10.39

                         SEVENTH SUPPLEMENTAL INDENTURE

      SEVENTH  SUPPLEMENTAL  INDENTURE,  dated as of February  26,  2002,  among
Atlantic Express  Transportation Corp., a New York corporation (the "Company"),
the  Guarantors  named  herein  and The Bank of New  York,  a New  York  banking
corporation, as trustee (the "Trustee").

      WHEREAS,  the Company has duly issued its 10 3/4% Senior Secured Notes Due
2004 (the "Notes"),  in the aggregate principal amount of $150,000,000  pursuant
to an Indenture dated as of February 4, 1997, among the Company,  the Guarantors
named therein and the Trustee,  as amended by the First  Supplemental  Indenture
dated as of August 14,  1997,  the  Second  Supplemental  Indenture  dated as of
December  12, 1997,  the Third  Supplemental  Indenture  dated as of October 28,
1998, the Fourth  Supplemental  Indenture  dated as of April 28, 1999, the Fifth
Supplemental Indenture dated as of December 20, 2000, and the Sixth Supplemental
Indenture  dated as of August 15, 2001,  each among the Company,  the Guarantors
named therein and the Trustee (as amended,  the  "Indenture"),  and the Notes in
the principal amount of $120,000,000 are outstanding on the date hereof; and

      WHEREAS,  the Company has acquired Atlantic  Paratrans of NYC, Inc., a New
York corporation;

      WHEREAS, Section 10.12 of the Indenture provides, among other things, that
the Company shall cause each  Restricted  Subsidiary  that is formed or acquired
after the date of the Indenture to become a Guarantor thereunder and execute and
deliver a supplemental indenture pursuant to which such Restricted  Subsidiaries
shall unconditionally guarantee all of the Company's Obligations as set forth in
Section 10.7 of the Indenture; and

      WHEREAS,  Section 9.1 of the Indenture provides,  among other things, that
the  Company,  the  Guarantors  and the  Trustee  may  amend or  supplement  the
Indenture without the consent of any Holder to comply with Article 10.12 thereof
and execute a supplemental indenture; and

      WHEREAS,   it  is  provided  in  Section  9.4  of  the  Indenture  that  a
supplemental  indenture  becomes  effective  in  accordance  with its  terms and
thereafter binds every Holder; and

      NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1 DEFINITIONS.

      Capitalized terms not defined herein shall have the meanings given to such
terms in the Indenture.

<PAGE>

SECTION 2 GUARANTEE BY RESTRICTED SUBSIDIARIES.

      Atlantic   Paratrans   of   NYC,   Inc.   (the   "Additional   Guarantor")
unconditionally  guarantees  all of the  Company's  Obligations  as set forth in
Section 10.7 of the Indenture in the same manner and to the same extent as if it
had  executed  the  Indenture  as one  of the  parties  thereto  defined  as the
"Guarantors" therein.

SECTION 3 MISCELLANEOUS.

Section 3.1 Governing Law.

      THIS SEVENTH  SUPPLEMENTAL  INDENTURE SHALL BE CONSTRUED,  INTERPRETED AND
THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK,  AS APPLIED TO CONTRACTS  MADE AND  PERFORMED  WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE ADDITIONAL GUARANTOR
HEREBY  IRREVOCABLY  SUBMITS TO THE  JURISDICTION  OF ANY NEW YORK  STATE  COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE  BOROUGH OF  MANHATTAN  IN THE CITY OF NEW YORK IN RESPECT OR ANY
SUIT,  ACTION OR  PROCEEDING  ARISING OUT OF OR RELATING OF ANY SUIT,  ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS
FOR  ITSELF  AND IN  RESPECT OR ITS  PROPERTY,  GENERALLY  AND  UNCONDITIONALLY,
JURISDICTION  OF THE AFORESAID  COURTS.  THE  ADDITIONAL  GUARANTOR  IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT IT MAY  EFFECTIVELY DO SO UNDER  APPLICABLE  LAW,
TRIAL BY JURY AND ANY OBJECTION  THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT,  ACTION OR  PROCEEDING  BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE ADDITIONAL GUARANTOR  IRREVOCABLY
CONSENTS,  TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER  APPLICABLE LAW,
TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED  MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH IN THE INDENTURE,  SUCH
SERVICE TO BECOME  EFFECTIVE 30 DAYS AFTER SUCH  MAILING.  NOTHING  HEREIN SHALL
AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO  COMMENCE  LEGAL  PROCEEDINGS  OR  OTHERWISE  PROCEED  AGAINST  THE
ADDITIONAL GUARANTOR IN ANY OTHER JURISDICTION.

Section 3.2 Continuing Agreement.

      Except as herein  amended,  all terms,  provisions  and  conditions of the
Indenture,  all  Exhibits  thereto  and all  documents  executed  in  connection
therewith  shall continue in full force and effect and shall remain  enforceable
and binding in accordance with their terms.


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<PAGE>

Section 3.3 Conflicts.

      In the  event of a  conflict  between  the  terms  and  conditions  of the
Indenture and the terms and conditions of this Seventh  Supplemental  Indenture,
then the terms and  conditions  of this  Seventh  Supplemental  Indenture  shall
prevail.

Section 3.4 Counterpart Originals.

      The  parties  may sign any number of copies of this  Seventh  Supplemental
Indenture.  Each  signed  copy shall be an  original,  but all of them  together
represent the same agreement.

Section 3.5 Headings, etc.

      The Headings of the Sections of this Seventh  Supplemental  Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way  modify or  restrict  any of the terms or  provisions
hereof.

                         [signatures on following page]


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<PAGE>

                                   SIGNATURES

      IN WITNESS  WHEREOF,  the parties  hereto have executed and delivered this
Supplemental Indenture as of the date first written above.

                                       ATLANTIC EXPRESS
                                       TRANSPORTATION CORP.

                                       By:    /s/ Domenic Gatto
                                              ----------------------------
                                       Name:  Domenic Gatto
                                       Title: President

Attest:

       /s/ Alan Rubinfeld
------------------------------
Name:  Alan Rubinfeld
Title: Chief Financial Officer


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<PAGE>

                                   GUARANTORS

AIRPORT SERVICES, INC.                        COURTESY BUS CO., INC.
AMBOY BUS CO., INC.                           FIORE BUS SERVICE, INC.
ATLANTIC-CHITTENANGO REAL                     GROOM TRANSPORTATION, INC.
   PROPERTY CORP.                             G.V.D. LEASING CO., INC.
ATLANTIC-CONN TRANSIT, INC.                   JAMES MCCARTY LIMO SERVICE, INC.
ATLANTIC EXPRESS COACHWAYS, INC.              JERSEY BUS SALES, INC.
ATLANTIC EXPRESS NEW ENGLAND, INC.            JERSEY BUSINESS LAND CO., INC.
ATLANTIC EXPRESS OF CALIFORNIA, INC.          K. CORR, INC.
ATLANTIC EXPRESS OF ILLINOIS, INC.            MCINTIRE TRANSPORTATION, INC.
ATLANTIC EXPRESS OF L.A., INC.                METRO AFFILIATES, INC.
ATLANTIC EXPRESS OF MISSOURI, INC.            METROPOLITAN ESCORT SERVICE, INC.
ATLANTIC EXPRESS OF NEW JERSEY, INC.          MERIT TRANSPORTATION CORP.
ATLANTIC EXPRESS OF                           MIDWAY LEASING INC.
   PENNSYLVANIA, INC.                         MOUNTAIN TRANSIT, INC.
ATLANTIC EXPRESS OF SOUTH                     RAYBERN BUS SERVICE, INC.
   CAROLINA, INC.                             RAYBERN CAPITAL CORP.
ATLANTIC-HUDSON, INC.                         RAYBERN EQUITY CORP.
ATLANTIC MEDFORD, INC.                        R. FIORE BUS SERVICE, INC.
ATLANTIC PARATRANS, INC.                      ROBERT L. MCCARTHY & SON, INC.
ATLANTIC PARATRANS OF ARIZONA, INC.           STATEN ISLAND BUS, INC.
ATLANTIC PARATRANS OF COLORADO, INC.          TEMPORARY TRANSIT SERVICE, INC.
ATLANTIC PARATRANS OF KENTUCKY, INC.          T-NT BUS SERVICE, INC.
ATLANTIC PARATRANS OF NYC, INC.               TRANSCOMM, INC.
ATLANTIC PARATRANS OF                         WINSALE, INC.
   PENNSYLVANIA, INC.                         WRIGHTHOLM BUS LINE, INC.
ATLANTIC TRANSIT, CORP.                       180 JAMAICA CORP.
BLOCK 7932, INC.                              201 WEST SOTELLO REALTY, INC.
BROOKFIELD TRANSIT INC.
CENTRAL NEW YORK COACH SALES &
   SERVICE, INC.

                                       By:    /s/ Domenic Gatto
                                              ----------------------------
                                       Name:  Domenic Gatto
                                       Title: President

                                       THE BANK OF NEW YORK, as Trustee

                                       By:    /s/ Julie Salovitch-Miller
                                              ----------------------------
                                       Name:  Julie Salovitch-Miller
                                       Title: Vice President


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