SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, DC 20549

                              FORM 10-K

   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                        EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

Commission file number 0-21976

               ATLANTIC COAST AIRLINES HOLDINGS, INC.
       (Exact name of registrant as specified in its charter)

                      Delaware                 13-3621051
               (State of incorporation)      (IRS Employer
                                           Identification No.)

             45200 Business Court, Dulles, Virginia         20166
            (Address of principal executive offices)     (Zip Code)

Registrant's telephone number, including area code:(703)650-6000

Securities registered pursuant to Section 12(b) of the Act:
None.

Securities registered pursuant to Section 12(g) of the Act:
        Common Stock par value $ .02
              (Title of Class)


Indicate  by  check mark whether the registrant (1)  has  filed  all
reports  required  to  be  filed by  Section  13  or  15(d)  of  the
Securities Act of 1934 during the preceding 12 months (or  for  such
shorter  period  that  the  registrant was  required  to  file  such
reports),  and (2) has been subject to such filing requirements  for
the past 90 days.
                    Yes   X        No__

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2).

                    Yes   X        No__

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

The aggregate market value of voting stock held by nonaffiliates of
the registrant as of June 30, 2002 was approximately $962 million.

As  of March 3, 2003 there were 50,305,878 shares of common stock of
the  registrant  issued and 45,234,908 shares of common  stock  were
outstanding.

                 Documents Incorporated by Reference

Certain portions of the document listed below have been incorporated
by reference into the indicated part of this Form 10-K.

Documents Incorporated by Reference                    Part of Form
10-K
Proxy Statement for 2003 Annual Meeting of Shareholders
Part III, Items 10-13
                     (to be filed subsequently)








                          Table of Contents

Forward Looking Statement Disclosure

PART  I

Item 1.    Business
              General
              Marketing Agreement
              Charter Operations
              Markets
              Fleet Description
              Employees
              Industry Regulation and Airport Access
              Risk Factors Relating to the Company
              Risk Factors Relating to the Airline Industry

Item 2.    Properties
Item 3.    Legal Proceedings
Item 4.    Submission of Matters to a Vote of Security Holders

PART  II

Item  5.  Market  for  Registrant's  Common  Equity  and  Related
          Stockholder Matters
Item 6.   Selected Financial Data
Item 7.   Management's  Discussion  and  Analysis  of  Results  of
          Operations and Financial Condition
              General
              Results of Operations
              Recent Developments and Outlook
              Liquidity and Capital Resources
              Critical Accounting Policies and Estimates
              Recent Accounting Pronouncements
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.  Consolidated Financial Statements
              Independent Auditors' Report
              Consolidated Balance Sheets
              Consolidated Statements of Operations
              Consolidated Statements of Stockholders' Equity
              Consolidated Statements of Cash Flows
              Notes to Consolidated Financial Statements
Item 9.  Changes  In  and  Disagreements  With  Accountants On
         Accounting and Financial Disclosures

PART  III

Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security  Ownership  of Certain Beneficial Owners and
         Management
Item 13. Certain Relationships and Related Transactions
Item 14. Controls and Procedures


PART  IV

Item 15. Exhibits, Financial Statement Schedules and Reports on
         Form 8-K
              Signatures
              Certifications



 Forward Looking Statements

          This  Annual  Report on Form 10-K contains forward-looking
statements.  Statements in the Business and Management's  Discussion
and  Analysis of Operations and Financial Condition sections of this
filing, together with other statements beginning with such words  as
"believes",  "intends",  "plans",  and  "expects"  include  forward-
looking statements that are based on management's expectations given
facts  as  currently known by management on the date this Form  10-K
was first filed with the SEC.  Actual results may differ materially.
Factors  that  could cause the Company's future  results  to  differ
materially  from  the expectations described here include:  United's
ability  to  successfully reorganize in bankruptcy; the  ability  to
replace United with other carriers in the event United liquidates or
for  the  Company to implement other contingency plans; the  ability
and  timing  of agreeing upon 2003 rates with United; the  Company's
ability to collect pre-petition obligations from United or to offset
pre-petition obligations due to United; United's decision to  either
affirm all of the terms of the Company's existing UA Agreement or to
reject  the agreement in its entirety; the timing of such  decision;
efforts  by United to negotiate changes as a condition to  affirming
the  Company's existing UA Agreement; unexpected costs arising  from
the  insolvency of United; the effects of the United bankruptcy  and
of  the  economic  conditions  in the air  travel  industry  on  the
Company's  ability to obtain aircraft financing; Delta's ability  to
successfully  avoid bankruptcy; the ability of United and  Delta  to
manage  their  operations  and cash flow,  continue  to  deploy  the
Company's aircraft, and to utilize and pay for scheduled service  at
rates established under existing contracts with the Company; changes
in levels of service agreed to by the Company with United and Delta;
extent  to  which the Company accepts regional jet deliveries  under
its agreement with Bombardier, and ability to delay deliveries or to
settle  arrangements with Bombardier regarding undelivered aircraft;
satisfactory  resolution  of  union  contracts  with  the  Company's
aviation  maintenance technicians/ground service equipment mechanics
and  flight attendants; potential service disruptions due  to  labor
actions  by  employees of the Company, Delta  Air  Lines  or  United
Airlines; ability to successfully retire turboprop aircraft  and  to
remarket them at anticipated rates; availability and cost of product
support for the Company's 328JET aircraft; ability of the Company to
recover  or  realize  its claims against Fairchild  Dornier  in  its
insolvency  proceedings or to offset certain of its  obligations  to
Fairchild  against these claims, and unexpected costs  arising  from
the  insolvency of Fairchild Dornier; the costs and other effects of
enhanced  security  measures and other possible  government  orders;
changes  in  and  satisfaction of regulatory requirements  including
requirements   relating   to  maintenance   and   fleet   expansion;
willingness of the U.S. government to continue to provide  war  risk
insurance  at  favorable  rates,  or  increased  cost  and   reduced
availability  of insurance; the effects of high fuel prices  on  the
Company   and  on  its  major  airline  partners;  adverse   weather
conditions;  additional acts of war or terrorism; any  actions  that
may  be  taken by the Company's suppliers and competitors,  and  the
effects  on  the economy in general and the air travel  industry  in
particular  of U.S. involvement in a war or in military  or  warlike
operations.   The statements in this Annual Report are  made  as  of
March  29,  2003 and the Company undertakes no obligation to  update
any  of  the  forward-looking information included in this  release,
whether  as  a result of new information, future events, changes  in
expectations or otherwise.


                               PART I

Item 1.                                 Business


General

          Atlantic  Coast  Airlines Holdings, Inc.  ("ACAI"),  is  a
holding  company  with its primary subsidiary being  Atlantic  Coast
Airlines ("ACA"), a regional airline serving 84 destinations  in  30
states in the Eastern and Midwestern United States and Canada as  of
March  1, 2003 with 850 scheduled non-stop flights system-wide every
weekday.   ACA  operates under its marketing agreements  as  both  a
United Express carrier with United Airlines, Inc. ("United") and  as
a  Delta  Connection carrier with Delta Air Lines,  Inc.  ("Delta").
ACA's  United Express and Delta Connection operations are  conducted
throughout  the  Eastern and Midwestern United  States  as  well  as
Canada.   Unless  the context indicates otherwise,  the  terms  "the
Company",  "we",  "us",  or  "our" refer herein  to  Atlantic  Coast
Airlines  Holdings, Inc.  As of March 15, 2003, the Company operated
a  fleet  of  142  aircraft  (112 regional  jets  and  30  turboprop
aircraft) having an average age of approximately 3.6 years.

          The   Company  is  subject  to  a  number  of  risks   and
uncertainties as a result of conditions that are adversely affecting
the  domestic air travel industry and causing a number of  corporate
restructurings and bankruptcies.  Among other factors affecting  the
Company,  one  of its code share partners, United, is  currently  in
bankruptcy.   Revenue from United represented approximately  82%  of
the  Company's total revenue for the year ended December  31,  2002.
These   and  other  matters  are  discussed  below  under  Item   7,
Management's  Discussion and Analysis of Results of  Operations  and
Financial  Condition.   The discussion appearing  in  this  Item  1,
"Business", addresses the Company's current operations.

Marketing Agreements

          The  Company  derives substantially all  of  its  revenues
through  its  marketing agreements with United and Delta,  operating
under   their   United   Express  and   Delta   Connection   brands,
respectively.

     United Express

          The  Company's United Express Agreements ("UA Agreements")
define  the  Company's relationship with United.  In November  2000,
the  Company  and  United amended and restated  the  UA  Agreements,
effectively changing from a revenue sharing arrangement to a fee-per-
departure arrangement.  Under the UA Agreements in effect  prior  to
November 2000, the Company was responsible for scheduling, marketing
and  pricing  its flights, in coordination with United's operations,
and  paid a portion of the revenue it received from passenger  fares
to  United.  Under the fee-per-departure structure in effect  as  of
December  1, 2000, the Company operates a flight schedule designated
by  United,  for which United pays the Company an agreed amount  per
departure regardless of the number of passengers carried,  with  the
Company being able to receive additional incentive payments based on
operational  performance.   The Company thereby  assumes  the  risks
associated with operating the flight schedule and United assumes the
risk  of  scheduling, marketing, and selling seats to the  traveling
public.   The  restated UA Agreements are for a term of  ten  years.
The  restated  UA Agreements, as amended, give ACA the authority  to
operate  up to 121 regional jets in the United Express operation  if
delivered  by April 30, 2004.  By operating under the UA Agreements,
the  Company is able to use United's "UA" flight designator code  to
identify the Company's flights and fares in the major airline global
distribution   systems,  including  United's  "Apollo"   reservation
system,  and  to  use the United Express logo and exterior  aircraft
paint schemes and uniforms similar to those of United.

          Pursuant to the restated UA Agreements, United, at its own
expense,  provides  a number of additional services  to  ACA.  These
include    customer   reservations,   customer   service,   pricing,
scheduling,  revenue accounting, revenue management, frequent  flyer
administration,  advertising, provision of ticket handling  services
at  United's  ticketing locations, and provision of airport  signage
and  ground support services at most of the airports where both  ACA
and  United  operate  flights.  Under the  restated  agreement,  the
Company  remains  responsible for fees associated  with  the  global
distribution systems.  The UA Agreements do not prohibit United from
serving,  or  from entering into agreements with other airlines  who
would serve, routes served by the Company, but state that United may
terminate  the  UA Agreements if ACAI or ACA enter  into  a  similar
arrangement with any other carrier other than Delta or a replacement
for   Delta  without  United's  prior  written  approval.   The   UA
Agreements  limit the ability of ACAI and ACA to merge with  another
company  or  dispose of certain assets or aircraft without  offering
United  a  right  of first refusal to acquire the  Company  or  such
assets or aircraft, and provide United the right to terminate the UA
Agreements  if ACAI or ACA merge with or are controlled or  acquired
by  another carrier. The UA agreements provide United with the right
to  assume ACA's ownership or leasehold interest in certain aircraft
in the event ACA breaches specified provisions of the UA agreements,
or fails to meet specified performance standards.  The UA Agreements
call for the resetting of fee-per-departure rates annually based  on
the  Company  and  United's  planned level  of  operations  for  the
upcoming  year.  The Company and United are in discussions regarding
the  fee-per-departure rates to be utilized during 2003.  Until  new
rates  are established for 2003, United is paying the Company  based
on  2002  rates and the Company is recording 2003 revenue using  the
rates established for 2002.

          On  December  9,  2002,  UAL, Inc. and  its  subsidiaries,
including  United,  filed for protection under  Chapter  11  of  the
United  States  Bankruptcy  Code.  UAL is  currently  operating  and
managing  its  business and affairs as a debtor in possession.    As
part  of its first day filings in the bankruptcy proceeding,  United
requested  and  was  granted  a  court  order  permitting,  but  not
requiring it to continue to honor the UA Agreements while United  is
in bankruptcy. As such, the Company continues to operate as a United
Express  carrier pursuant to its UA agreement.  UAL,  Inc.  and  its
subsidiaries have been granted the exclusive right until October  6,
2003, to file a plan of reorganization and the exclusive right until
December  5, 2003, to seek acceptances of any such plan.  The  Court
has  set  May 12, 2003 as the deadline for the filing of  proofs  of
claim, although this deadline does not apply to claims arising under
executory  contracts  and  unexpired leases  that  have  yet  to  be
rejected  by  UAL, Inc. and its subsidiaries.   It is possible  that
any  or  all  of  the  foregoing  deadlines  may  be  extended.   In
bankruptcy,  United  also  has the right to  assume  or  reject  the
Company's  UA  Agreements, as described in  Recent  Development  and
Outlook  below.  No deadline has been set for United  to  assume  or
reject the Company's UA Agreements.


     Delta Connection

          In   September  1999,  the  Company  reached  a   ten-year
agreement with Delta to operate regional jet aircraft as part of the
Delta Connection program. The Company began Delta Connection revenue
service on August 1, 2000.  The Company's Delta Connection Agreement
("DL Agreement") defines the Company's relationship with Delta.  The
Company  is  compensated  by  Delta on a fee-per-block  hour  basis.
Under   the   fee-per-block  hour  arrangement,   the   Company   is
contractually  obligated to operate a flight schedule designated  by
Delta,  for which Delta pays the Company an agreed amount per  block
hour  flown  regardless  of the number of passengers  carried,  with
incentive  payments based on operational performance.   The  Company
thereby  assumes  the  risks associated with  operating  the  flight
schedule  and Delta assumes the risks of scheduling, marketing,  and
selling seats to the traveling public.  By operating as part of  the
Delta  Connection program, the Company is able to use  Delta's  "DL"
flight  designator  to identify ACA's flights and  fares  in  global
distribution  systems,  including Delta's  "Deltamatic"  reservation
system,  and to use the Delta Connection logo and exterior  aircraft
paint schemes and uniforms similar to those of Delta.

          Pursuant  to  the  DL Agreement, Delta,  at  its  expense,
provides  a  number  of  support services  to  ACA.   These  include
customer  reservations, customer service, ground  handling,  station
operations,  a  maintenance hangar facility in Cincinnati,  pricing,
scheduling,  revenue accounting, revenue management, frequent  flyer
administration,  advertising  and  other  passenger,  aircraft   and
traffic  servicing functions in connection with the  ACA  operation.
Delta  may  terminate the DL Agreement at any time  if  the  Company
fails  to meet certain performance standards and, subject to certain
rights  of  the  Company and by providing 180  days  notice  to  the
Company, may terminate without cause.  If Delta terminates the Delta
agreement  without cause prior to March 2010, the  Company  has  the
right  to put all or some of the Delta Connection aircraft to Delta.
The DL Agreement requires the Company to obtain Delta's approval  if
it  chooses  to enter into a code-sharing arrangement  with  another
carrier  other  than  in  connection  with  termination  of  the  UA
Agreements, to list its flights under any other code, or to  operate
flights  for  any  other  carrier,  except  with  respect  to   such
arrangements with United or non-U.S. code-share partners  of  United
or  in  certain  other  circumstances.  The DL  Agreement  does  not
prohibit  Delta from serving, or from entering into agreements  with
other  airlines that would serve, routes flown by the Company.   The
DL Agreement also restricts the ability of the Company to dispose of
aircraft subject to the agreement without offering Delta a right  of
first refusal to acquire such aircraft, and provides that Delta  may
extend  or  terminate  the  agreement if, among  other  things,  the
Company  merges  with  or sells its assets  to  another  entity,  is
acquired  by  another entity or if any person acquires more  than  a
specified percentage of its stock.

          In  January  2003, the Company and Delta  agreed  to  2003
rates, consistent with the rate setting process contained in the  DL
Agreement.

     Agreements with Other Airlines

          As  of  March  1,  2003 the Company has implemented  code-
sharing  arrangements with Lufthansa German Airlines  ("Lufthansa"),
Air  Canada,  Scandinavian Airlines, British  Midland/BMI,  Austrian
Airlines  and  All Nippon Airways involving certain  United  Express
flights.  Such international code-sharing arrangements permit  these
foreign  air  carriers to place their respective  airline  codes  on
certain  flights  operated  by ACA, and  provide  a  wide  range  of
benefits  for  passengers including schedule  coordination,  through
ticketing  and  frequent flyer participation. The  revenue  benefits
from  these arrangements accrue to United, and any such arrangements
as  may  be  made in the future with respect to the Company's  Delta
Connection flights would accrue to Delta, due to the nature  of  the
Company's agreements with these two airlines.  The Company's primary
role under these arrangements is to obtain regulatory approvals  for
the relationships and to operate the flights.

Charter Operations

          The  Company  established a charter operation in  February
2002.   The  charter  business,  which  operates  32-seat  Fairchild
Dornier  328JETs, utilizes the Company's operations and  maintenance
services.   The  Company  is  presently  providing  regular  private
shuttle  service  pursuant to an agreement with a major  corporation
and  is  performing ad hoc charter services secured through  brokers
and other means.  In March 2003, the Company decided to continue  to
service its existing clients but to de-emphasize the solicitation of
new  charter business due to uncertainties regarding the  bankruptcy
of the 328JET manufacturer.  The Company recently made some of these
charter assets available to support its code share operations.

Markets

           The Company's United Express operation is centered around
Washington's  Dulles  and Chicago's O'Hare airports.   Beginning  in
2001  and  continuing throughout 2002, the Company greatly increased
its  Chicago  operation  such that as of  March  2003,  65%  of  the
Company's  United  Express capacity (as measured in  available  seat
miles)  is  flown to/from Chicago's O'Hare airport.  The  growth  in
Chicago results from the combination of adding complementary service
to  United  mainline  service  in 17 markets  and  replacing  United
mainline service completely in 14 markets since June 2001.

          The  Delta  Connection operation is  focused  at  Boston's
Logan  airport  and  Cincinnati's  Northern  Kentucky  International
airport.  At Delta's request, the Company moved its remaining 328JET
aircraft  from New York's LaGuardia airport to Cincinnati's Northern
Kentucky  International airport effective November 1, 2002.   As  of
March  2003,  32%  of  the Company's Delta Connection  capacity  (as
measured  in  available  seat miles) was  to/from  Boston,  67%  was
to/from  Cincinnati, with the remaining capacity  to/from  New  York
Kennedy.


          The following tables set forth the destinations served  by
the Company as of March 1, 2003:
<TABLE>
<CAPTION>
                        United Express Service
                     Washington-Dulles (To/From)
                (Regional Jet and Turboprop Service)
<S>                                  <C>
Albany, NY                           Manchester, NH
Allentown, PA                        Nashville, TN
Binghamton, NY                       New York, NY (Kennedy)
Buffalo, NY                          New York, NY (LaGuardia)
Burlington, VT                       Newark, NJ
Charleston, SC                       Norfolk, VA
Charleston, WV                       Philadelphia, PA
Charlottesville, VA                  Pittsburgh, PA
Cleveland, OH                        Portland, ME
Columbia, SC                         Providence, RI
Columbus, OH                         Raleigh-Durham, NC
Dayton, OH                           Richmond, VA
Detroit, MI                          Roanoke, VA
Greensboro, NC                       Rochester, NY
Greenville/Spartanburg, SC           Savannah, GA
Harrisburg, PA                       State College, PA
Hartford/Springfield, CT             Syracuse, NY
Indianapolis, IN                     Toronto, ON Canada
Jacksonville, FL                     White Plains, NY
Knoxville, TN
</TABLE>
<TABLE>
<CAPTION>
                      Chicago-O'Hare (To/From)
                       (Regional Jet Service)
<S>                              <C>
Akron/Canton, OH                 Knoxville, TN
Albany, NY                       Lansing, MI
Allentown, PA                    Lexington, KY
Birmingham, AL                   Memphis, TN
Bloomington, IL                  Moline, IL
Buffalo, NY                      Nashville, TN
Burlington, VT                   Norfolk/Virginia Beach, VA
Cedar Rapids/Iowa City, IA       Oklahoma City, OK
Charleston, SC                   Peoria, IL
Charleston, WV                   Portland, ME
Charlotte, NC                    Raleigh/Durham, NC
Cleveland, OH                    Richmond, VA
Colorado Springs, CO             Roanoke, VA
Columbia, SC                     Rochester, NY
Dayton, OH                       Saginaw, MI
Des Moines, IA                   Savannah, GA
Detroit, MI                      Sioux Falls, SD
Fargo, ND                        South Bend, IN
Ft. Wayne, IN                    Springfield/Branson, MO
Grand Rapids, MI                 St. Louis, MO
Greenville/Spartanburg, SC       Syracuse, NY
Greensboro/High Point, NC        Tulsa, OK
Harrisburg, PA                   White Plains, NY
Indianapolis, IN                 Wichita, KS
Jacksonville, FL                 Wilkes-Barre/Scranton, PA
</TABLE>

<TABLE>
<CAPTION>
                      Delta Connection Service
                     New York Kennedy (To/From)
                          (Regional Jet Service)
<S>                                  <C>
Raleigh/Durham, NC                   Washington Reagan, VA
</TABLE>
<TABLE>
<CAPTION>
                       Boston Logan (To/From)
                       (Regional Jet Service)
<S>                                  <C>
Atlantic City, NJ                    New York, NY (Kennedy)
Bangor, ME                           Newark, NJ
Burlington, VT                       Philadelphia, PA
Columbia, SC                         Portland, ME
Halifax, NS Canada                   Raleigh-Durham, NC
Montreal, Quebec Canada
</TABLE>
<TABLE>
<CAPTION>
               Cincinnati-Northern Kentucky (To/From)
                       (Regional Jet Service)
<S>                                  <C>
Albany, NY                           Greenville/Spartanburg, SC
Appleton, WI                         Indianapolis, IN
Asheville, NC                        Kalamazoo, MI
Cedar Rapids, IA                     Knoxville, TN
Charleston, WV                       Lansing, MI
Charlotte, NC                        Lexington, KY
Charlottesville, VA                  Louisville, KY
Chattanooga, TN                      Madison, WY
Chicago Midway, IL                   Memphis, TN
Cleveland, OH                        Milwaukee, WI
Columbia, SC                         Nashville, TN
Columbus, OH                         Philadelphia, PA
Dayton, OH                           Pittsburgh, PA
Evansville, IN                       Raleigh-Durham, NC
Flint, MI                            Roanoke, VA
Ft. Wayne, IN                        South Bend, IN
Grand Rapids, MI                     Toledo, OH
Greensboro/High Point, NC            Tri-Cities, TN
</TABLE>


Fleet Description

          Fleet  Expansion:     As of March 15,  2003,  the  Company
operated  a  fleet of 79 Bombardier CRJ200s ("CRJs"),  33  Fairchild
Dornier  328  regional  jets ("328JETs"), and 30  British  Aerospace
Jetstream-41 ("J-41s") turboprop aircraft.  Thirty-one  328JETs  are
operated  in the Delta Connection program, 79 CRJs and 30 J-41s  are
operated  in  the  United  Express  program,  and  two  328JETs  are
currently flown in  charter operations.

          As  of March 15, 2003, the Company had a total of 42  CRJs
on  firm  order from Bombardier, Inc., in addition to the 79 already
delivered, and held options for 80 additional CRJs.    The  42  firm
ordered  aircraft  include 25 CRJs that were ordered  in  July  2002
after Fairchild Dornier GmbH ("Fairchild"), the manufacturer of  the
32-seat 328JET, opened formal insolvency proceedings in Germany  and
rejected  the  Company's  purchase agreement  covering  328JETs  the
Company had on firm order and under option.  The Company's agreement
with  Bombardier  provides for 30 CRJs to be  delivered  during  the
remainder of 2003 and an additional 12 CRJs to be delivered by April
30,  2004.   Due  to  a  number  of factors,  including  the  United
bankruptcy, the effect on the operations of the airline industry  of
the  war  with  Iraq,  and the state of the financing  markets,  the
Company  and  Bombardier  have agreed to  delay  by  two  weeks  the
scheduled  delivery  date of two aircraft originally  scheduled  for
March  deliveries.  The Company is considering the delay  of  future
deliveries  and is engaged in discussions with Bombardier  regarding
financing  and  the aircraft delivery schedule.   See  risk  factors
relating to the Company below.


Employees

            As of March 1, 2003, the Company had 4,311 full-time and
504 part-time employees, classified as follows:

<TABLE>
<CAPTION>
           Classification            Full-Time   Part-Time
           <S>                          <C>        <C>
           Pilots                       1,488        -
           Flight attendants              621        -
           Station personnel            1,047      468
           Maintenance personnel          635        5
           Management,
           administrative and
             clerical personnel           520       31
           Total employees              4,311      504
</TABLE>

          The Company's pilots are represented by the Airline Pilots
Association  ("ALPA"),  flight attendants  are  represented  by  the
Association  of Flight Attendants ("AFA"), and aviation  maintenance
technicians  and ground service equipment mechanics are  represented
by the Aircraft Mechanics Fraternal Association ("AMFA").

           In  January 2001, the Company agreed to a new four-and-a-
half  year collective bargaining agreement with its pilot union that
was  subsequently ratified and became effective on February 9, 2001.
The  collective  bargaining agreement covers pilots flying  for  the
United  Express,  Delta  Connection, and  charter  operations.   The
agreement  provided for overall pilot costs that were, at the  time,
comparable  to  other  similarly  situated  regional  carriers  with
recently  negotiated  contracts who  were  operating  under  similar
agreements  with  major airlines.  However, due to  changes  in  the
regional  airline  industry, the Company believes that  its  overall
pilot costs are presently at the high end of pilot costs relative to
other regional carriers operating today.  The Company has approached
its  pilot  union with the intent to negotiate wage  reductions  and
work  rule changes through voluntary concessions, with the  goal  of
bringing  its pilot costs in line with other regional carriers  that
compete with the Company for its existing and new business.

          The  Company's collective bargaining agreement with  AMFA,
which was ratified in June 1998, became amendable in June 2002,  and
its collective bargaining agreement with the AFA, which was ratified
in  October 1998, became amendable in October 2002.  The Company has
entered   into   negotiations  with  AMFA  and  AFA  regarding   new
agreements.   The  Company  is continuing  to  negotiate  with  both
unions,  and  management does not anticipate that there  will  be  a
material  effect  on  the Company's operations for  the  foreseeable
future as a result of these discussions.

          In  the airline industry, labor relations are regulated by
the Railway Labor Act ("RLA").  Under the RLA, collective bargaining
agreements  do not expire but, rather, become amendable.   The  wage
rates,  benefits  and work rules contained in a  contract  that  has
become amendable remain in place and represent the status quo  until
a  successor agreement is in place.  The parties may not  resort  to
self-help, such as strikes or lockouts, until the RLA processes  for
collective  bargaining have been exhausted.   It  is  impossible  to
predict  how  long  the RLA processes will take,  but  if  an  early
agreement cannot be reached it is not unusual for these processes to
last 18 months or more.

          Certain  of  the Company's unrepresented labor groups  are
from  time  to time approached by unions seeking to represent  them.
In  2002,  the International Association of Machinists and Aerospace
Workers ("IAM") attempted to organize the Company's customer service
employees.  The Company was informed by the National Mediation Board
("NMB")  that  the  IAM  did not receive  a  sufficient  showing  of
interest  from  customer  service  employees  to  merit  holding  an
election.   Because of this, the NMB will not accept any application
seeking  representation of the Company's customer service  employees
prior to March 2004.

          In February 2003, the Company was informed by the National
Mediation Board that the Transport Workers Union ("TWU") was seeking
election  to  represent  the  Company's  dispatch  employees.    The
election will take place in early April.

          The  Company  is in the process of implementing  a  hiring
freeze,  wage  reductions  for salaried employees,  and  bonus  plan
reductions for all employees as a part of its cost-cutting measures,
as  more fully detailed in "Management's Discussion and Analysis  of
Results of Operations and Financial Condition - Outlook and Business
Risks" below.

Pilot Training

          The  Company  has  entered into  agreements  with  Pan  Am
International Flight Academy ("PAIFA"), which allow the  Company  to
train  CRJ,  J-41  and  328JET  pilots  at  PAIFA's  facility   near
Washington-Dulles.   In 2001, PAIFA relocated its  Washington-Dulles
operations to a new training facility near the Company's Washington-
Dulles  headquarters.   This  facility currently  houses  three  CRJ
simulators,  a 328JET simulator, and a J-41 simulator.  The  Company
has agreements to purchase an annual minimum number of CRJ simulator
training hours at agreed rates through 2010.  The Company's  payment
obligations for CRJ simulator usage over the remaining years of  the
agreements total approximately $10.1 million.

            In 2001, PAIFA, CAE Schreiner and the Company executed a
simulator  provision  and  service agreement  providing  for  328JET
training  at the PAIFA facility.  Under this agreement, the  Company
has  committed  to  purchase all of its 328JET simulator  time  from
PAIFA  at  agreed  upon rates, with no minimum number  of  simulator
hours guaranteed.


Internet Website

          The   Company's   internet  website  can   be   found   at
www.atlanticcoast.com.  The Company makes available free  of  charge
on   or  through  its  internet  website  under  the  heading   "for
investors",  access  to its annual report on  Form  10-K,  quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to
those  reports  filed  pursuant to Section 13(a)  or  15(d)  of  the
Exchange  Act as soon as reasonably practicable after such  material
is filed, or furnished, to the Securities and Exchange Commission.



Industry Regulation and Airport Access

     Economic

        The Department of Transportation  ("DOT")  has
extensive  authority to issue certificates authorizing  carriers  to
engage   in   air  transportation,  establish  consumer   protection
regulations,  prohibit  certain unfair or  anti-competitive  pricing
practices,   mandate  conditions  of  carriage  and   make   ongoing
determinations  of a carrier's fitness, willingness and  ability  to
provide  air transportation.  The DOT can bring proceedings for  the
enforcement  of  its regulations under applicable federal  statutes,
which  proceedings  may  result in civil  penalties,  revocation  of
operating authority or criminal sanctions.

          The Company's ACA subsidiary holds a certificate of public
convenience and necessity, issued by the DOT, that authorizes it  to
conduct   scheduled  and  charter  air  transportation  of  persons,
property  and  mail  between all points in the  United  States,  its
territories and possessions.  In addition, ACA may conduct scheduled
and  charter air transportation to points outside the United States,
subject  to  obtaining  any  necessary authority  from  any  foreign
country to be so served.  The certificate requires that ACA maintain
DOT-prescribed  minimum  levels  of  insurance,  comply   with   all
applicable statutes and regulations and remain continuously "fit" to
engage in air transportation.  In addition to this authority, ACA is
authorized to engage in air transportation between the United States
and Canada.

          The Company's ACJet subsidiary also holds a certificate of
public convenience and necessity, issued by the DOT, that authorizes
it  to  conduct scheduled and charter air transportation of persons,
property  and  mail  between all points in the  United  States,  its
territories and possessions.    ACJet is now a dormant company.  The
only  assets  of  ACJet  are its DOT and FAA air  carrier  operating
certificates.   In the first quarter of 2003, the  Company  paid  $1
million to Delta in order to remove all contractual restrictions  to
the  use,  sale  or  transfer of ACJet and its certificates.   These
certificates are subject to revocation for non-use.  The Company has
requested and obtained a waiver from the DOT and FAA to permit it to
continue to possess these certificates for a limited period of  time
even  though they are not being utilized at this time.  The  Company
has  advised  the  DOT  of its plans to make  future  use  of  these
certificates  and, based on its statement of intent, has  asked  the
DOT to extend the waiver until June 2004.

          Based  on  conditions in the industry, or as a  result  of
Congressional  directives or statutes, the DOT  from  time  to  time
proposes  and adopts new regulations or amends existing  regulations
that  may  impose  additional regulatory burdens and  costs  on  the
Company.   In addition, air carriers may volunteer to impose new  or
additional  requirements  on  themselves  to  address  Congressional
concerns  or  concerns expressed by the public,  such  as  passenger
rights  initiatives.  Imposition of new laws and regulations on  air
carriers  or  agreement on voluntary initiatives could increase  the
cost of operation and or limit carrier management discretion.

     Safety

            The FAA extensively regulates the safety-related
activities  of air carriers.  The Company is subject  to  the  FAA's
jurisdiction  with respect to aircraft maintenance  and  operations,
equipment,   ground  facilities,  flight  dispatch,  communications,
training,  weather observation, flight personnel, airport  security,
the   transportation  of  hazardous  materials  and  other   matters
affecting  air  safety.  To ensure compliance with its  regulations,
the  FAA  requires  that airlines under its jurisdiction  obtain  an
operating   certificate  and  operations  specifications   for   the
particular  aircraft  and  types of  operations  conducted  by  such
airlines.   The  Company's  ACA subsidiary  possesses  an  operating
certificate and related authorities issued by the FAA authorizing it
to  conduct  operations with turboprop and turbojet equipment.   The
Company's ACJet subsidiary possesses an operating certificate by the
FAA  and  related  authorities authorizing it to conduct  operations
with  turbojet equipment.  The Company, like all carriers,  requires
specific  FAA  authority  to  add  aircraft  to  its  fleet.   ACA's
authority   to   conduct  operations  is  subject   to   suspension,
modification  or  revocation for cause.  The FAA  has  authority  to
bring proceedings to enforce its regulations, which proceedings  may
result  in  civil or criminal penalties or revocation  of  operating
authority.

           From  time  to  the  time  and with  varying  degrees  of
intensity,  the  FAA  conducts inspections of  air  carriers.   Such
inspections may be scheduled or unscheduled and may be triggered  by
specific   events  involving  either  the  specific  carrier   being
inspected  or other air carriers.  In addition, the FAA may  require
airlines  to  demonstrate that they have the  capacity  to  properly
manage growth and safely operate increasing numbers of aircraft.

          In  order  to  ensure the highest level of safety  in  air
transportation,   the  FAA  has  authority  to   issue   maintenance
directives and other mandatory orders.  These relate to, among other
things,  the  inspection of aircraft and the mandatory  removal  and
replacement of parts or structures.  In addition, the FAA from  time
to  time  amends  its regulations and such amended  regulations  may
impose  additional regulatory burdens on the Company,  such  as  the
required  installation of new safety-related items.  Depending  upon
the  scope  of  the  FAA's  orders and  amended  regulations,  these
requirements   may   cause  the  Company   to   incur   substantial,
unanticipated  expenses  that  may not  be  reimbursable  under  the
Company's  marketing  agreements. The FAA enforces  its  maintenance
regulations  by  the  imposition of civil penalties,  which  can  be
substantial.

          On  November  19, 2001 the President signed into  law  the
Aviation and Transportation Security Act (the "Security Act").   The
Security  Act  requires  heightened  passenger,  baggage  and  cargo
security measures to be adopted as well as enhanced airport security
procedures.   The  Security Act created the Transportation  Security
Administration  ("TSA") that has taken over the  responsibility  for
conducting  the  screening of passengers and their  baggage  at  the
nation's  airports as of February 17, 2002.  The activities  of  the
TSA  are funded in part by the application of a $2.50  per passenger
enplanement security fee (subject to a maximum of $5.00 per one  way
trip)  and  payment by all passenger carriers of a sum not exceeding
each  carrier's  passenger and baggage screening  cost  incurred  in
calendar  year  2000.   The TSA was charged  to  have  equipment  in
operation by the end of 2002 to be able to electronically screen all
checked passenger baggage with explosive detection systems.  The TSA
is  also  required to deploy federal air marshals  on  an  increased
number of passenger flights.

          The  Security  Act imposes new and increased  requirements
for  air  carrier employee background checks and additional security
training  of flight and cabin crew personnel.  These additional  and
new  requirements  may increase the security related  costs  of  the
Company.  The Security Act also mandates and the FAA has adopted new
rules  requiring  the strengthening of cockpit doors,  some  of  the
costs  of which may be reimbursed by the FAA.  The Company completed
Level  One fortification of its cockpit doors on all of its aircraft
as   of   November  15,  2001,  and  began  installing   Level   Two
fortifications  in  December 2002.  As of  December  31,  2002,  the
Company has received $1.9 million in reimbursements from the FAA for
the mandated cockpit door modifications.  There is no guarantee that
the  Company  will  be  reimbursed in full for  the  cost  of  these
modifications.   The  modifications are  expected  to  be  completed
during 2003.  New passenger and baggage screening requirements  have
caused disruptions in the flow of passengers through airports and in
some  cases  delayed airline operations.  The Company may experience
security-related  disruptions  in  the  future,  including   reduced
passenger  demand for air travel, but believes that its exposure  to
such disruptions is no greater than that faced by other providers of
regional air carrier services.

          Although    the   TSA   has   taken   over   the    former
responsibilities  of  the  air carriers for  the  screening  of  all
passengers and baggage, the TSA, as with the FAA before it, requires
air  carriers to adopt and enforce procedures designed to  safeguard
property,  and  to  protect airport and aircraft  against  terrorist
acts.   The  TSA, from time to time, may impose additional  security
requirements  on  air  carriers  and airport  authorities  based  on
specific threats or world conditions or as otherwise required.   The
TSA   has  issued  a  number  of  security  directives  and  altered
procedures   upon  changes  in  the  Office  of  Homeland   Security
announcements  of  heightened threat levels,  and  the  Company  has
adjusted  its security procedures on numerous occasions in  response
to  these  directives.  The Company incurred substantial expense  in
complying  with current security requirements and it cannot  predict
what  additional security requirements may be imposed in the  future
or the cost of complying with such requirements.

          Associated with the FAA's security responsibility  is  its
program   to   ensure   compliance   with   rules   regulating   the
transportation  of  hazardous materials.  The Company  has  policies
against  accepting hazardous materials or other dangerous goods  for
transportation.   Employees  of  the  Company  are  trained  in  the
recognition  of hazardous materials and dangerous goods  through  an
FAA  approved  training course.  The Company may ship  aircraft  and
other  parts  and  equipment, some of which  may  be  classified  as
hazardous  materials,  using the services of third  party  carriers,
both  ground  and air.  In acting in the capacity of  a  shipper  of
hazardous   materials,  the  Company  must  comply  with  applicable
regulations.  The FAA enforces its hazardous material regulations by
the imposition of civil penalties, which can be substantial.

    Other  Regulation.

          In the maintenance  of  its  aircraft
fleet  and  ground  equipment, the Company  handles  and  uses  many
materials  that  are  classified as  hazardous.   The  Environmental
Protection Agency and similar local agencies have jurisdiction  over
the handling and processing of these materials.  The Company is also
subject  to  the  oversight of the Occupational  Safety  and  Health
Administration concerning employee safety and health  matters.   The
Company  is  subject  to  the  Federal  Communications  Commission's
jurisdiction regarding the use of radio frequencies.

          Federal   law  establishes  maximum  aircraft  noise   and
emissions limits.  At the present time, all of the aircraft operated
by  the  Company  comply  with  all  applicable  federal  noise  and
emissions regulations.  Federal law generally preempts airports from
imposing  unreasonable local noise rules that restrict  air  carrier
operations.  However, under certain circumstances airport  operators
may implement reasonable and nondiscriminatory local noise abatement
procedures, which procedures could impact the ability of the Company
to serve certain airports, particularly in off-peak hours.

     Slots.

          Slots are reservations for takeoffs and landings
at  specified times and are required by governmental authorities  to
operate at certain airports.  The Company has rights to and utilizes
takeoff and landing slots at Chicago-O'Hare and New York-Kennedy and
White  Plains,  New  York  airports.  The  Company  also  uses  slot
exemptions at Chicago-O'Hare, which differ from slots in  that  they
allow service only to designated cities and are not transferable  to
other  airlines  without  the approval of  the  U.S.  Department  of
Transportation ("DOT").  Airlines may acquire slots by  governmental
grant,  by  lease or purchase from other airlines, or by  loan  when
another   airline  does  not  use  a  slot  but  desires  to   avoid
governmental reallocation of a slot for lack of use.  All leased and
loaned slots are subject to renewal and termination provisions.  All
slot  regulation was eliminated at Chicago-O'Hare after July 1, 2002
and,  under  rules presently in effect, is scheduled to end  at  New
York-Kennedy after January 1, 2007.  The rules also provide that, in
addition  to  those slots currently held by carriers,  operators  of
regional   jet  aircraft  may  apply  for,  and  the  Secretary   of
Transportation  must grant, additional slots at New York-Kennedy  in
order to permit the carriers to offer new service, increase existing
service  or  upgrade  to regional jet service in qualifying  smaller
communities.  There is no limit on the number of slots a carrier may
request.

     Risk Factors Affecting the Company

          The  Company's business is subject to numerous  risks  and
uncertainties,  as  described  below  and  in  the  section  titled,
"Management's  Discussion and Analysis of Operations  and  Financial
Condition - Outlook and Business Risks" and "- Liquidity and Capital
Resources."

          Substantially  all  of the Company's  revenue  is  derived
under  contracts with its code share partners. -   The  majority  of
the Company's flights are operated under the United Express or Delta
Connection brand.  As such, the Company must rely on its code  share
partners   to   provide  numerous  services  such  as  reservations,
ticketing, route planning, and customer service and ground  handling
at  certain  stations.  The  Company's revenue  and  operations  are
reliant  on the ability of these partners to manage their operations
and  cash  flow,  and ability and willingness of these  partners  to
continue to deploy the Company's aircraft and to utilize and pay for
scheduled service at agreed upon rates.


          The  code  share partner that accounted for  approximately
82%  of  the  Company's revenue in 2002 is in  bankruptcy.   -   The
Company  devotes  a  substantial portion  of  its  business  to  its
operations with United, and obtains substantial services from United
in  operating  that business.  The Company's future  operations  are
substantially  dependent  on  United's  successful  emergence   from
bankruptcy and on the affirmation or renegotiation of the  Company's
UA  Agreement  by  United on acceptable terms, or on  the  Company's
ability  to  successfully  establish an alternative  to  the  United
business and services.  If United seeks to renegotiate the terms  of
the UA Agreements, a renegotiated agreement is likely to be on terms
that  are  less  favorable to the Company with regard  to  operating
margins  and  could  possibly  result  in  the  deployment  of fewer
aircraft than currently contracted and/or be less  favorable to  the
Company  in  other  respects,  which  would  adversely  affect   the
Company's earnings and/or growth  prospects.  There is no  assurance
that United will successfully emerge from bankruptcy, and United has
said  that  its  liquidation is a possibility.  If United  does  not
succeed in reorganizing its operations and emerging from bankruptcy,
and  instead  files for a liquidation under Chapter 7  of  the  U.S.
Bankruptcy  Code, the Company would be faced with  the  prospect  of
having to quickly find another code share partner or to develop  the
airline-related   infrastructure  necessary   to   operate   as   an
independent airline.  The Company anticipates that there would be an
interruption in its services during a transition period, the  length
of  which  would be dependent on several factors including how  soon
United  liquidates.   The Company has commenced planning  for  these
contingencies  and  will  continue  to  pursue  actions   management
believes  appropriate  in  the event that  United  liquidates  under
Chapter 7.  There are no assurances that the Company will be able to
find  another  code  share  partner or be  able  to  compete  as  an
independent  airline,  and any prolonged stoppage  of  flying  would
materially adversely affect the Company's results of operations  and
financial position.  Any failure to timely or successfully implement
alternative  contingency plans could have a material adverse  effect
on  the  Company  and its viability.  The Company's  agreement  with
Bombardier provides for 30 CRJs to be delivered during the remainder
of 2003 and an additional 12 CRJs to be delivered by April 30, 2004.
All  of  these aircraft were ordered for use in the Company's United
Express operations.  Due to the United bankruptcy and other factors,
including  the adverse effects on the airline industry  of  the  war
with  Iraq  and the state of the financing markets, the Company  and
Bombardier have agreed to delay by two weeks the scheduled  delivery
date of two aircraft originally scheduled for March deliveries.  The
Company is considering the delay of future deliveries and is engaged
in  discussions  with  Bombardier regarding financing  and  aircraft
delivery  schedules. See the discussion below regarding  risks  from
the  Company's dealings with Bombardier.  United's bankruptcy filing
may  affect the Company in other ways that it is not currently  able
to anticipate or plan for.



          The  average utilization of aircraft in the United Express
operation  has  declined  and  the rates  for  2003  have  not  been
adjusted.  -   The UA Agreements call for the resetting of  fee-per-
departure rates annually based on the Company's and United's planned
level  of operations for the upcoming year.  The average utilization
of  aircraft in the United Express operation has declined, and as  a
result, the Company is seeking a rate adjustment for 2003 consistent
with its interpretation of the United Express Agreements that would,
among  other  things,  offset this reduction  in  utilization.   The
Company  and  United  are  in  discussions  regarding  the  fee-per-
departure  rates to be utilized during 2003.  Until  new  rates  are
established  for 2003, United is paying the Company  based  on  2002
rates  and  the Company is recording its revenue in 2003  using  the
rates  established  for 2002.   There can be no assurance  that  the
Company will be able to successfully reset fee-per-departure  rates.
Failure to reset fee-per-departure rates with United for 2003  could
have a material adverse effect on the Company's operating margins in
2003.


          The Company relies on third party financing to pay for the
jets  that  it  has  contractually committed to  purchase.   -   The
Company has contractual commitments with Bombardier for the delivery
of  30 CRJs to be delivered during 2003 and an additional 12 CRJs to
be delivered by April 30, 2004.  The Company has generally relied on
leveraged  lease transactions involving investments by institutional
or  industrial  investors that provide debt and  equity  capital  to
finance the purchase price of aircraft it has committed to purchase.
In  a  leveraged lease, there is an equity source for 20% to 30%  of
the purchase price and a debt source for the remaining 70% to 80% of
the purchase price.  With the uncertainty of United's future and the
continued deterioration in industry conditions, the Company has been
unable to secure equity funding on any terms for its remaining  firm
ordered  aircraft.   The  inability to  finance  aircraft  that  the
Company  desires  to  purchase  may  affect  the  Company's   growth
prospects.   The Company has a contingent commitment  from  Economic
Development Corporation of Canada ("EDC") for debt financing of  its
next  four  aircraft scheduled for delivery.  As  a  result  of  the
bankruptcy  of  United, EDC's debt funding obligation is  contingent
upon  the Company obtaining a waiver from EDC.  The Company may  not
be  able to obtain such waivers in the future and may not be able to
obtain  debt  financing  from EDC or others  once  the  current  EDC
financing  commitment  is  no  longer  available.   The  Company  is
considering the delay of future aircraft deliveries and  is  engaged
in  discussions  with  Bombardier regarding financing  and  aircraft
delivery  schedules.   If the Company is unable to obtain  permanent
aircraft  financing  at the time that it accepts  any  aircraft  for
delivery, it may be required to fund aircraft purchases from its own
cash   or   to  rely  on  temporary  financing  from  the   aircraft
manufacturer.  The Company does not have the financial resources  to
pay  the  full  purchase  price for all  of  the  aircraft  that  it
currently  has  on  order.   If  the  Company  is  unable  to  delay
deliveries  or pay for aircraft on order, Bombardier  may  assert  a
claim for damages.

          The  Company is under pressure to control and  reduce  its
costs.   -  The economic downturn reduced demand for air travel  and
the  success of low-cost carriers has resulted in increased emphasis
in  the airline industry on controlling and reducing expenses.   The
Company  has embarked on a cost reduction program with the  goal  of
reducing   annualized operating expenses by approximately  10%.   As
part  of  this program, the Company has implemented a hiring freeze,
has begun furloughing excess pilots, has eliminated or reduced bonus
programs, and has implemented salary reductions ranging from  5%  to
10% for all salaried employees paid more than $30,000 per year.  The
effect  of  salary reductions and the elimination of and changes  in
bonus  plans for those salaried employees is anticipated  to  reduce
cash  compensation  by  between 10%  and  33%  with  the  reductions
affecting  the  Company's senior management and officers  the  most.
The Company has approached ALPA with the intent to negotiate similar
levels  of  wage reductions and work rule changes through  voluntary
concessions.  In order for the Company to achieve all  of  its  cost
reduction  goals,  it will require cooperation from  its  employees,
major vendors and code share partners.  If the Company is unable  to
control  and  reduce  its costs, it may not be able  to  effectively
compete  against other regional carriers to maintain or  expand  its
existing operations.

          The  Company  has  unexpected costs and possible  exposure
arising  from the bankruptcy of Fairchild Dornier GmbH.  -  In  July
2002, Fairchild Dornier GmbH ("Fairchild"), the manufacturer of  the
32-seat   Fairchild   Dornier  328JET  ("328JET"),   opened   formal
insolvency  proceedings in Germany.  Fairchild  had  been  operating
under  the guidance of a court-appointed interim trustee since April
2002.   At the time of the opening of formal insolvency proceedings,
Fairchild  had  significant current and future  obligations  to  the
Company  in connection with the Company's order of 328JET  aircraft.
Fairchild  subsequently notified the Company that it  was  rejecting
the Company's purchase agreement contract covering the remaining  32
328JETs  the  Company had on firm order, and options to  acquire  81
additional  aircraft.  The Company's costs to  operate  its  current
fleet  of  33 328Jets increased in 2002 and may continue to increase
in  the  future due to Fairchild's failure to provide  warranty  and
product  support and the limited availability of spare  parts.   The
Company  has  filed a claim against Fairchild Dornier GmbH  and  its
subsidiaries for $385 million in damages as a result of  Fairchild's
insolvency proceedings but does not expect funds to be available  to
satisfy  any  of  its  claim.   Dornier Aviation  of  North  America
("DANA"),  one  of the U.S. subsidiaries of Fairchild Dornier  GmbH,
has  filed  a lawsuit against the Company claiming amounts allegedly
due  for certain spare parts, late charges and consignment inventory
carrying  charges.  The Company is claiming the right of offset  for
any  amounts owed.  If the Company loses in its claim to offset,  it
could  be obligated to pay DANA for parts received. At the  time  of
its bankruptcy, Fairchild had significant obligations to the Company
in  connection  with  the  Company's order of  328  Jets,  including
providing  the Company financial support in its retirement  of  J-41
aircraft.  As a result of Fairchild's bankruptcy and its failure  to
satisfy its obligations to the Company, the Company may continue  to
experience  higher  than  expected  or  unexpected  costs   in   its
operations  or may encounter consequences or risks that the  Company
is not able to anticipate or plan for.

          The  Company's current operations benefit from  government
support  for insurance costs. - Following the September 11 terrorist
attacks,   the  aviation  insurance  industry  imposed  a  worldwide
surcharge  on  aviation insurance rates as well as  a  reduction  in
coverage  for  certain war risks.  In response to the  reduction  in
coverage, the Air Transportation Safety and System Stabilization Act
provides  U.S. air carriers with the option to purchase certain  war
risk  liability  insurance from the United States government  on  an
interim  basis at rates that are more favorable than those available
from  the  private  market.   Prior to December  2002,  the  Company
purchased  hull  war  risk coverage through  the  private  insurance
market,  and  purchased  liability  war  risk  coverage  through   a
combination  of  U.S.  government  provided  insurance  and  private
insurance.  In December 2002, the U.S. government offered to provide
additional  war risk coverage that included certain risks previously
covered  by private insurance.  The Company has purchased, at  rates
that are significantly lower than those charged by private insurance
carriers,  hull  and  liability war  risk  coverage  from  the  U.S.
government through April 14, 2003.  These savings are passed through
to  the Company's code share partners pursuant to its current UA and
DL  Agreements.   The Company anticipates that  it  will  renew  the
government  insurance for as long as the coverage is available,  and
then  obtain  this  coverage through the private  insurance  market.
Under the Company's UA and DL Agreements, the Company passes through
the  cost  of insurance to its partners.  However, the inability  to
obtain  insurance at any cost or the availability of insurance  only
at excessive rates, could affect the Company's ability to operate.

          The  Company's contracts with two of its unions  currently
are  amendable.  -   The Company's contract with Aircraft  Mechanics
Fraternal  Association ("AMFA"), which was ratified  in  June  1998,
became amendable in June 2002, and its contract with the Association
of  Flight  Attendants ("AFA"), which was ratified in October  1998,
became  amendable  in  October 2002.  The AMFA contract  covers  all
aviation   maintenance  technicians  and  ground  service  equipment
mechanics  working for the Company and the AFA contract  covers  all
flight  attendants working for the Company.  The Company has entered
into  initial  discussions  with AMFA and  with  AFA  regarding  new
agreements.   Although there can be no assurances as to the  outcome
of these negotiations, the Company anticipates ultimately being able
to  reach  agreement  with  both  unions  on  mutually  satisfactory
contracts  with no material effect on its results of  operations  or
financial   position.   However,  the  failure  to   resolve   these
negotiations on appropriate terms could affect the Company's ability
to compete effectively.

          The  U.S.  airline  industry is  experiencing  significant
restructurings  and  bankruptcies.   -  The  current  U.S.   airline
industry   environment  is  probably  the  worst  in  its   history.
Beginning  in  early  2001, the industry has  experienced  depressed
demand   and  shifts  in  passenger  demand,  lower  unit  revenues,
increased   insurance   costs,  increased  fuel   costs,   increased
government  regulations  and taxes, and  tightened  credit  markets,
evidenced  by higher credit spreads and reduced capacity to  borrow.
These  factors  are directly affecting the operations and  financial
condition of participants in the industry including the Company, its
code  share  partners,  and aircraft manufacturers.   The  Company's
contractual relationships with others may continue to be affected by
other  companies'  bankruptcies or by concerns  regarding  potential
bankruptcies.  The bankruptcy or prospect of bankruptcy among  other
companies  with  which  the Company deals or which  operate  in  the
Company's  industry  may result in unexpected  expenses  and  create
other  risks  or  uncertainties that the  Company  is  not  able  to
anticipate or plan around.

          The travel industry has been materially adversely affected
by  the September 11, 2001 terrorist attacks and the conflict in the
Middle  East.   -   The  terrorist attacks  of  September  11,  2001
adversely   affected  the  Company  and  the  airline  industry   by
significantly  increasing  the  costs  of  security  screening   and
insurance,  while  reducing overall demand for  air  transportation.
Instability  in  the Middle East and the start of the  U.S.-led  war
with Iraq has increased the risk that the industry will continue  to
be  adversely affected by reduced demand, increased security  costs,
increased  fuel costs, and other factors.  While the Company's  code
share agreements allow it to recover these additional expenses  from
its partners, the effects of any new terrorist attacks and/or a long
term  U.S.-led  war  in  the Middle East could materially  adversely
affect  the  Company and its code share partners in  ways  that  the
Company is not able to anticipate or plan around.

Item 2.        Properties

          Fleet  Composition:   The following  table  describes  the
Company's  fleet of aircraft, scheduled firm deliveries and  options
as of March 15, 2003:

<TABLE>
<CAPTION>
                 Total    Number   Number           Average
                 Number     of       of               Age
                   of    Aircraft Aircraft Passenger  In    Firm
                Aircraft  Leased   Owned    Capacity Years Orders Options
<S>               <C>     <C>      <C>        <C>     <C>    <C>    <C>
Bombardier CRJ200  79      75       4         50      2.4    42     80
Fairchild Dornier
 328JET            33      32       1         32      2.0     -     -
British Aerospace
 J-41              30      25       5         29      8.2     -     -
Total             142     132      10                 3.6    42     80
</TABLE>

          The  Company  has a plan to early retire its  thirty  (30)
British  Aerospace J-41 turboprop aircraft ("J-41s") in  the  fleet.
Under  the plan, J-41s would be removed from service by the  end  of
April  2004.  The J-41 retirement plan is based on and tied  to  the
continued delivery of firm ordered CRJs and actual retirement  could
be delayed if CRJ deliveries are delayed.

          Leased Facilities

          Airports

           The  Company  enters  into  agreements  for  the  use  of
passenger  terminals at most of the airports ACA serves  and  leases
ticket  counter and office space at those locations where  ticketing
and  the  Company's  aircraft  are  handled  by  Company  personnel.
Payments  to airport authorities for ground facilities are generally
based  on a number of factors, including space occupied as  well  as
flight  and passenger volume.  The Company occupies a 69,000  square
foot  passenger concourse at Washington-Dulles dedicated  solely  to
regional  airline  operations.  The 36-gate concourse,  designed  to
support  the  Company's United Express operation, is  owned  by  the
Metropolitan Washington Airports Authority and leased to the Company
under a lease with a termination date of September 30, 2014.

          Corporate Offices

          The Company's executive, administrative and system control
departments   are   located   in  a  three-story   office   building
encompassing  77,000 square feet of space under an  operating  lease
ending  December 2010.  The Company's employee training and services
center  is located in a nearby 79,000 square foot building  under  a
lease ending December 31, 2007.  A lease for additional office space
in  Chicago,  Illinois was entered into in October 2002  which  ends
December 2007.  The facility encompasses approximately 9,300  square
feet  and  provides  space to support the Company's  Chicago  O'Hare
operations.   Together,  these  properties  provide  the   necessary
administrative facilities for the Company's operations.

          Maintenance Facilities

           The  FAA's safety regulations mandate periodic inspection
and  maintenance of commercial aircraft.  The Company performs  most
line maintenance, service and inspection of its aircraft and engines
at its own maintenance facilities using its own personnel.

          The  Company performs maintenance functions at  a  112,000
square  foot  aircraft  maintenance  facility  at  Washington-Dulles
airport, a 34,000 square foot hangar facility in Columbia, SC, and a
53,000 square foot hangar at Chicago O'Hare airport.  The Washington-
Dulles  aircraft maintenance facility is comprised of 60,000  square
feet  of  hangar  space  and  52,000  square  feet  of  support  and
administrative  space.   The  lease term for  the  Washington-Dulles
aircraft maintenance facility expires December 24, 2024.  The  lease
term for the Columbia facility expires on June 1, 2005 or earlier on
90  days  notice.   The Chicago O'Hare facility  is  subleased  from
United,  with the Company obligated to pay United's cost related  to
the  operation of the building including ground rent.  This sublease
expires on December 31, 2007 although United has the right to reject
this   lease  in  bankruptcy.   In  addition  to  these  maintenance
facilities,  the  Company performs maintenance  functions  utilizing
hangar space at Cincinnati's Northern Kentucky International Airport
provided by Delta at no cost to the Company.

Item 3.        Legal Proceedings

          The Company has two outstanding legal matters with respect
to  the  Fairchild insolvency.  The Company's balance  sheet  as  of
December  31,  2002  includes a receivable  for  $1.2  million  with
respect  to deposits placed with Fairchild for undelivered aircraft.
The  Company holds a bond from an independent insurance company that
was  delivered  to secure this deposit, and has made  a  demand  for
payment under this bond.  Fairchild's insolvency trustee has made  a
claim for the collateral posted with the insurance company, and  the
insurance  company has withheld payment of the bond.  The matter  is
presently with the U.S. Bankruptcy Court for the Western District of
Texas.

          At  the  time  of Fairchild's insolvency, the Company  had
outstanding  invoices  due  to Fairchild  for  various  spare  parts
purchases.   The Company believes it has the right to  offset  these
and  other amounts claimed by Fairchild against obligations due from
Fairchild  that will not be fulfilled as a result of the insolvency.
Fairchild-related  entities dispute this right  of  offset,  and  in
September  2002,  Fairchild's wholly owned U.S. subsidiary,  Dornier
Aviation  of  North  America ("DANA"), filed a lawsuit  against  the
Company  in  the  United  States Bankruptcy Court  for  the  Eastern
District  of  Virginia  (Civil Action No. 02-08181-SSM)  seeking  to
recover payments for certain spare parts, late payment charges,  and
consignment inventory carrying charges.  DANA contends that although
its  German  parent company may not have fulfilled  its  contractual
obligations  to  the Company, DANA sold spare parts to  the  Company
independent of its parent company's activities and that there is  no
right  of  offset.   The Company acknowledges that approximately  $8
million  in outstanding invoices existed, while DANA claims that  an
additional  $3.6  million is due.  The action is  presently  in  the
discovery  stage  and it is anticipated that a trial  will  be  held
during the summer of 2003.

          The  Company  has been named a defendant in  two  lawsuits
arising from the terrorist activities of September 11, 2001.   These
lawsuits,  known  as  Powell v. American  Airlines,  Atlantic  Coast
Airlines, et al. (United States District Court, Southern District of
New  York,  case No. 02 CV 10160), and Gallop v. American  Airlines,
Atlantic  Coast  Airlines,  et al. (United  States  District  Court,
Southern  District of New York, case no. 0 3CV 1016), were commenced
by  or  on behalf of individuals who were injured or killed  on  the
ground  in  the attack on the Pentagon through the hijacking  of  an
American Airlines aircraft originating at Dulles Airport.   In  each
case,  the  plaintiffs have named all airlines operating  at  Dulles
Airport,  including the Company, under the theory that  all  of  the
airlines  are jointly responsible for the alleged security  breaches
by  the  Dulles  security  contractor,  Argenbright  Security.   The
Company  has joined a motion filed on behalf of American  and  other
defendants  seeking  dismissal of all ground victim  claims  on  the
basis  that the airline defendants do not owe a duty as a matter  of
law  to  individuals  injured  or  killed  on  the  ground.   It  is
anticipated  that  the  judge will rule on this  motion  during  the
second  quarter 2003.  If this ruling is not favorable, the  Company
anticipates  that  it  will  raise  other  defenses  including   its
assertion that it is not responsible for the incidents.  The Company
anticipates that other similar lawsuits could be filed on behalf  of
other victims.

          From  time  to time, claims are made against  the  Company
with  respect  to  activities arising from its  airline  operations.
Typically  these involve injuries or damages incurred by  passengers
and  are considered routine to the industry.  On April 1, 2002,  one
of  the  Company's insurers on its comprehensive aviation  liability
policy, Legion Insurance Company, a subsidiary of Mutual Risk Management
Ltd.  ("Legion"), was placed into rehabilitation by the Commonwealth
of  Pennsylvania, its state of incorporation.  During the time  that
Legion  is  in rehabilitation, Pennsylvania has ordered that  Legion
pay no claims, expenses or other items of debt without its approval.
Consequently,  the  Company now directly carries  the  corresponding
exposure related to Legion's contribution percentage for payouts  of
claims  and  expenses that Legion represented on the Company's  all-
risk  hull and liability insurance for the 1999, 2000, 2001 and 2002
policy  years.   Those contribution percentages are 15%  for  claims
arising  from  incidents occurring in 1999, 19% for  2000,  15%  for
2001,  and 8.5% for first quarter of 2002.  Legion ceased to  be  an
insurer  for  the  Company  as  of April  1,  2002,  and  there  is,
therefore,  no  exposure with respect to Legion for  claims  arising
after  that  date.   The insurance held by Legion on  the  Company's
policy  was  fully  covered by reinsurance, which means  that  other
carriers  are contractually obligated to cover all claims  that  are
direct   obligations  of  Legion.   While  there   are   contractual
provisions  to the effect that reinsurance funds are to be  directly
applied  against  the Company's liabilities, it is anticipated  that
Legion's  creditors will attempt to obtain court authority to  apply
these  funds  against Legion's other obligations.  It is anticipated
that Legion ultimately will not be able to cover its obligations  to
the  Company  except to the extent of recovery through  reinsurance.
If Legion's creditors are able to apply reinsurance proceeds against
Legion's  general obligations, the Company will be underinsured  for
these   claims   at   the  percentages  set   forth   above.    This
underinsurance  would  include  the September  11  related  lawsuits
described  above  and any other similar lawsuits  that  are  brought
against   the   Company.   The  Company  has  accrued  reserves   of
approximately  $250,000 for the likely exposure on claims  known  to
date.   No  reserves have been accrued for the September 11  related
claims.

          The  Company is a party to routine litigation and  to  FAA
civil  action proceedings, all of which are viewed to be  incidental
to  its  business, and none of which the Company believes are likely
to have a material effect on the Company's financial position or the
results of its operations.

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

          No matter was submitted during the fiscal quarter ended
December 31, 2002, to a vote of the security holders of the Company
through the solicitation of proxies or otherwise.

                               PART II

Item  5.         Market for Registrant's Common Equity  and  Related
Stockholder Matters

           The Company's common stock, par value $.02 per share (the
"Common   Stock"),   is  traded  on  the  NASDAQ   National   Market
("NASDAQ/NM") under the symbol "ACAI".  Trading of the Common  Stock
commenced on July 21, 1993.

           The following table sets forth the reported high and  low
closing  sale  prices of the Common Stock on the NASDAQ/NM  for  the
periods indicated:
<TABLE>
<CAPTION>
                2001                 High           Low
            <S>                     <C>           <C>
            First quarter           $23.50        $18.25
            Second quarter          $29.99        $20.75
            Third quarter           $29.16        $10.03
            Fourth quarter          $24.94        $13.61
</TABLE>
<TABLE>
<CAPTION>
                2002                 High           Low
            <S>                     <C>           <C>
            First quarter           $29.21        $23.05
            Second quarter          $24.31        $19.57
            Third quarter           $19.61         $8.69
            Fourth quarter          $17.03         $8.30
</TABLE>
<TABLE>
<CAPTION>
                2003                 High           Low
            <S>                     <C>            <C>
            First quarter
           (through March 3, 2003)  $14.54         $6.14
</TABLE>

          As of March 3, 2003, the closing sales price of the Common
Stock  on NASDAQ/NM was $6.49 per share and there were approximately
176 holders of record of Common Stock.

          The  Company has not paid any cash dividends on its Common
Stock  and  does  not anticipate paying any cash  dividends  in  the
foreseeable  future.   The Company intends  to  retain  earnings  to
finance the growth of its operations.  The payment of cash dividends
in  the  future  will depend upon such factors as  earnings  levels,
capital   requirements,  the  Company's  financial  condition,   the
applicability   of  any  restrictions  imposed  upon   the   Company
subsidiaries by certain of its financing agreements, the prohibition
of  dividends  imposed by the Company's line of  credit,  and  other
factors  deemed  relevant by the Board of Directors.   In  addition,
ACAI  is  a  holding company and its only significant asset  is  its
investment in its subsidiary, ACA.

          The   Company's  Board  of  Directors  has  approved   the
repurchase  of  up  to  $40.0 million of the  Company's  outstanding
common stock in open market or private transactions.  As of December
31,  2002 the Company has repurchased 2,171,837 shares of its common
stock  and  has approximately $21.0 million remaining of  the  $40.0
million authorized for repurchase.

 Item 6.       Selected Financial Data

           The  following selected financial data under the captions
"Consolidated Financial Data" and "Consolidated Balance Sheet  Data"
relating to the years ended December 31, 1998, 1999, 2000, 2001  and
2002  have  been  derived from the Company's consolidated  financial
statements.  The following selected operating data under the caption
"Selected  Operating Data" have been derived from  Company  records.
The data should be read in conjunction with "Management's Discussion
and  Analysis of Results of Operations and Financial Condition"  and
the  Consolidated  Financial Statements and Notes  thereto  included
elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
                       SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
                   (Dollars in thousands, except per share amounts and
                                 operating data)

Consolidated Financial Data:           Years  ended December 31,
<S>                           <C>      <C>      <C>      <C>      <C>
                                 1998      1999     2000     2001     2002
Operating revenues:
  Passenger                   $285,243 $342,079 $442,695 $577,604 $749,103
  Other                          4,697    5,286    9,831    5,812   11,421
  Total operating revenues     289,940  347,365  452,526  583,416  760,524
Operating expenses:
  Salaries and related costs    68,135   84,554  107,831  164,446  203,341
  Aircraft fuel                 23,978   34,072   64,433   88,308  115,801
  Aircraft maintenance and
   Materials                    22,730   24,357   36,750   48,478   72,233
  Aircraft rentals              36,683   45,215   59,792   90,323  112,068
  Traffic commissions and
   related fees                 42,429   54,521   56,623   15,589   19,994
  Facility rents and landing
   fees                         13,475   17,875   20,284   32,025   43,805
  Depreciation and
   amortization                  6,472    9,021   11,193   15,353   21,155
  Other                         23,347   28,458   42,537   61,674   85,163
  Aircraft early retirement
   charges  (1)                      -        -   28,996   23,026   24,331
Total operating expenses       237,249  298,073  428,439  539,222  697,891

Operating income                52,691   49,292   24,087   44,194   62,633

Other (expense) income :
 Interest expense               (4,207)  (5,614)  (6,030)  (4,832)  (4,332)
 Interest income                 4,145    3,882    5,033    7,500    4,628
 Debt conversion expense (2)    (1,410)       -        -        -        -
 Government compensation (3)         -        -        -    9,710      944
 Other income (expense), net       326      (85)    (278)     263      552
Total other (expense) income,net(1,146)  (1,817)  (1,275)  12,641    1,792

Income before income tax expense
 and cumulative effect of
 accounting change              51,545   47,475   22,812   56,835   64,425
Income tax provision            21,133   18,319    7,657   22,513   25,139
Income before cumulative
 effect of accounting change    30,412   29,156   15,155   34,322   39,286             6      5
Cumulative effect of
 accounting change, net (4)          -     (888)       -        -        -
Net income                     $30,412  $28,268  $15,155  $34,322  $39,286
</TABLE>

<TABLE>
<CAPTION>
               SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued)
            (Dollars in thousands, except per share amounts and operating data)

                                    Years ended December 31,

                            1998       1999       2000        2001       2002
<S>                     <C>        <C>        <C>         <C>        <C>
Income per share:
 Basic:
  Income before
   cumulative effect of
   accounting change         $.84       $.77       $.38        $.79       $.87
  Cumulative effect of
   accounting change            -      (0.02)         -           -          -
Net income per share (5)     $.84       $.75       $.38        $.79       $.87


 Diluted:
  Income before
   cumulative effect of
   accounting   change       $.71       $.68       $.36        $.76       $.85
  Cumulative effect of
   accounting change            -      (0.02)         -           -          -
Net income per share (5)     $.71       $.66       $.36        $.76       $.85

Weighted average number
 of shares used in
 computation  (in
 thousands) (5)
      Basic                36,256     37,928     40,150      43,434     45,047
      Diluted              44,372     44,030     43,638      45,210     46,019

Selected Operating Data:
  Revenue departures
   (completed)            170,116    186,571    199,050     235,794    283,118
  Revenue passengers
   carried              2,534,077  3,234,713  3,778,811   4,937,208  7,160,480
  Revenue passenger
   miles (000s) (6)       792,934  1,033,912  1,271,273   1,895,152  2,833,155
  Available seat miles
   (000s) (7)           1,410,763  1,778,984  2,203,839   3,292,798  4,345,860
  Passenger load
   factor (8)               56.2%      58.1%      57.7%       57.6%      65.2%
  Revenue per
   available seat mile     $0.206     $0.195     $0.205      $0.177     $0.175
  Cost per available
   seat mile (9)           $0.168     $0.168     $0.181      $0.157     $0.155
  Average yield per
   revenue passenger
   mile (10)               $0.360     $0.331     $0.348      $0.305     $0.264
  Average passenger
   trip length (miles)        313        320        336         384        396
  Revenue per
   departure (11)          $1,694     $1,851     $2,231      $2,452     $2,646
  Aircraft utilization
   (block hours)              8.9        8.6        7.8         8.1        8.8
  Average cost per
   gallon of fuel (cents)    67.4       74.6      111.1        98.4       97.0
  Aircraft in service
   (end of period)             74         84        105         117        137
  Destinations served
   (end of period)             53         51         53          64         84

Consolidated Balance
Sheet Data:
  Working capital         $68,130    $60,440    $72,018    $138,659   $197,631
  Total assets           $227,626   $293,753   $382,700    $452,425   $575,138
  Long-term debt and
   capital leases,
   less current
   portion                $64,735    $92,787    $67,089     $60,643    $54,291
 Total stockholders'
   equity                $110,377   $125,524   $168,173    $221,300   $275,368
</TABLE>
1.   In 2002, the Company recorded an operating charge of $24,539,000
  ($14,822,000 net of income tax benefits) for the non-discounted value of
  future lease and other costs associated with the early retirement of
  18 J-41 turboprop aircraft.  In the second quarter of 2002 the Company
  revised the retirement schedule for its leased J-41s.  Included in the
  operating charge for 2002 was a credit of $4,763,000 ($2,877,000 net of
  income tax benefits) to reverse a portion of the operating charge booked
  in 2001.  In addition, in 2002 the company reversed the remaining portion
  of the original 2000 operating charge of $208,000.  In 2001, the Company
  recorded an operating charge of $23,537,000 ($14,005,000 net of income tax
  benefits) for the non-discounted value of future lease and other costs
  associated with the early retirement of nine J-41 turboprop aircraft.
  In 2000, the Company recorded an operating charge of $28,996,000
  ($17,398,000 net of income tax benefits) for the present value of
  future lease and other costs associated with the early retirement of
  28 J-32 turboprop aircraft.  Upon completion of the J-32 retirement plan
  in 2001, the Company reversed $500,000 of the original 2000 operating
  charge in 2001.

2.   In connection with the induced conversion of a portion of the 7%
  Convertible Subordinated Notes, the Company recorded a non-cash, non-operating
  charge of approximately $1.4 million in 1998.

3.   In 2002 and 2001, the Company recognized $0.9 million and $9.7 million
  respectively as non-operating income for funds received under the Air
  Transportation Safety and System Stabilization Act, signed into law by
  President Bush on September 22, 2001.  In 2001, the Company recognized $9.7
  million as non-operating income under the Air Transportation Safety and
  System Stabilization Act.

4.   In 1999, the Company recorded a charge of $888,000 for the cumulative
  effect, net of income taxes, of a change in accounting for pre-operating costs
  in connection with the implementation of Statement of Position 98-5.

5.   All per share calculations have been restated to reflect 2-for-1 Common
  Stock splits effected as dividends distributed on May 15, 1998 and February
  23, 2001.

6.   "Revenue passenger miles" or "RPMs" represent the number of miles flown by
  revenue passengers.

7.   "Available seat miles" or "ASMs" represent the number of seats available
  for passengers multiplied by the number of scheduled miles the seats are
  flown.

8.   "Passenger load factor" represents the percentage of seats filled by
  revenue passengers and is calculated by dividing revenue passenger miles by
  available seat miles.

9.   "Operating cost per available seat mile" or "CASM" represents total
  operating expenses, excluding aircraft early retirement charges, divided by
  available seat miles.

10.  "Average yield per revenue passenger mile" represents the average passenger
  revenue received for each mile a revenue passenger is carried.

11.   "Revenue per departure" represents the revenue received for each departure
and is calculated by dividing gross passenger revenue by revenue departures.


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

General

           Atlantic Coast Airlines Holdings, Inc. ("ACAI")  operates
through   its  wholly  owned  subsidiary,  Atlantic  Coast  Airlines
("ACA").  In 2002, the Company recorded net income of $39.3  million
compared to $34.3 million for 2001, and $15.2 million for 2000.  For
2002, the Company's available seat miles ("ASM") increased 32%  with
the  addition  of 17 Canadair Regional Jet ("CRJ")  aircraft  and  4
Fairchild  Dornier 328JET ("328JET") aircraft, net of the  reduction
of one J-41 turboprop aircraft during the year.  The number of total
passengers  increased  45.0%, and revenue  passenger  miles  ("RPM")
increased  49.5%.  For 2001, the Company's ASM increased 49.4%  with
the  addition of 19 CRJ aircraft and 15 328JET aircraft, net of  the
reduction of 21 J32 turboprop aircraft during the year.  The  number
of passengers increased 30.7% and RPM increased 49.1%.

Fiscal Year 2001 vs. 2002

     Results of Operations

          For  2002,  the Company's net income was $39.3 million  or
$.85  per  diluted  share, compared to $34.3  million  or  $.76  per
diluted  share for 2001. The Company generated operating  income  of
$62.6  million for 2002, compared to $44.2 million for 2001.   These
results reflect the Company's increased capacity as it expanded  the
number  of  aircraft operated under its agreements with  United  and
Delta as well as the additional items and factors discussed below.

          The  Company's net income for 2002 includes  $0.9  million
(pre-tax)  in government compensation received pursuant to  the  Air
Transportation  Safety and System Stabilization Act  ("Stabilization
Act")  and  net income for 2001 includes $9.7 million (pre-tax)  for
government compensation received  under the Stabilization Act.   The
Company's net income and operating income for 2002 also reflect  the
effects  of  $24.3  (pre-tax)  million  for  J-41  turboprop   early
retirement  charges,  $2.6 million (pre-tax)  in  bad  debt  expense
attributed to the potential write-off of net amounts due from United
Airlines as a result of its bankruptcy filing and $1.8 million (pre-
tax) in credits from the reversal of accruals from prior periods for
estimated  expenses under the Company's code share agreements.   Net
income  and operating income for 2001 also reflects a $23.0  million
(pre-tax) operating charge related to the early retirement  of  J-41
turboprop aircraft.

     Operating Revenues

          The Company's operating revenues increased 30.4% to $760.5
million  in  2002 compared to $583.4 million in 2001.  The  increase
resulted  primarily from a 20.1% increase in revenue  departures  to
283,118  for  2002  as  well  as an 8.0%  increase  in  revenue  per
departure to $2,646.  Revenue in 2002 was recognized primarily under
fee-for-service  agreements.  Revenue  for  2001  also  included  an
additional  $3.8  million attributable to routine subsequent  period
sampling  adjustments to prior billed tickets  under  the  Company's
former  proration-of-fare  arrangement with  United  that  ended  on
November 30, 2000.  The increase in departures reflects the addition
of 17 CRJ aircraft and 4 328JET aircraft in 2002, and the annualized
effect  in  2002  of adding 19 CRJ aircraft and 15  328JET  aircraft
during 2001.  Revenue passengers increased 45.0% in 2002 compared to
2001, resulting in an average load factor for the year of 65.2%.

Operating Expenses

          A  summary  of  operating  expenses  as  a  percentage  of
operating  revenue and operating cost per ASM for  the  years  ended
December 31, 2001 and 2002 is as follows:

<TABLE>
<CAPTION>
                                      Year Ended December 31,
                                      2001                2002
                                Percent             Percent     Cost
                                   of      Cost       of         Per
                               Operating  Per ASM  Operating     ASM
                                Revenue   (cents)  Revenues    (cents)
<S>                              <C>       <C>      <C>         <C>
Salaries and related costs       28.2%      5.0     26.8%        4.7
Aircraft fuel                    15.1%      2.7     15.2%        2.7
Aircraft maintenance and
  materials                       8.3%      1.5      9.5%        1.7
Aircraft rentals                 15.5%      2.7     14.7%        2.6
Traffic commissions and
  related fees                    2.7%       .5      2.6%         .4
Facility rents and
  landing fees                    5.5%      1.0      5.8%        1.0
Depreciation and amortization     2.6%       .4      2.8%         .5
Other                            10.6%      1.9     11.2%        2.0
Aircraft early
  retirement charge               3.9%       .7      3.2%         .5

    Total                        92.4%     16.4     91.8%       16.1
</TABLE>

          The Company's operating expenses increased primarily as  a
result  of  increased  capacity,  as  available  seat  miles  (ASMs)
increased  32% to 4.3 billion in 2002 as compared to 3.3 billion  in
2001.   Operating expenses included $24.3 million and $23.0  million
aircraft  early  retirement charges in 2002 and  2001  respectively.
Operating  expenses for 2002 also included $2.6 million  pre-tax  in
bad  debt  expense  attributed to the  potential  write-off  of  net
amounts  due  from  United Airlines as a result  of  its  bankruptcy
filing  in 2002, and $1.8 million pre-tax credits from the  reversal
in  2002 of accruals from prior periods for estimated expenses under
the  Company's  code  share agreements,  the  net  effect  of  which
increased "Other" operating expense by 0.1 cents.  Before accounting
for these items, the Company's operating expenses increased 30.3% to
$672.8  million  or cost per available seat mile  ("CASM")  of  15.5
cents  in  2002 compared to $516.2 million or CASM of 15.7 cents  in
2001.   As  a  result,  CASM (excluding the items  described  above)
decreased 1.3%.  CASM changes that are not primarily attributable to
the  changes  in  capacity  and the items  described  above  are  as
follows:

          Salaries  and related costs per ASM decreased  6%  to  4.7
cents  in  2002  as  compared to 5.0 cents  in  2001.   The  Company
suspended its cash employee bonus plans during the first quarter  of
2002  due  to  the  events  of  September  11,  2001.   The  Company
reinstated its cash bonus plans effective April 1, 2002.

          The  cost  per  ASM  for maintenance increased  13.3%  due
primarily to increased maintenance costs on the Company's  fleet  of
328JETs  due  to  the  bankruptcy filing of  the  manufacturer,  the
continuing  expiration of manufacturer's warranty on the CRJ  fleet,
and  increased cost accruals for amounts which are being claimed  by
GE  under  a  power-by-the-hour agreement for certain engine  repair
work.

          The cost per ASM for other operating expenses remained  at
1.9  cents  for 2002 and 2001.  In absolute dollars, other operating
expenses, excluding the $2.6 million bad debt expense for United and
the  $1.8 million in credits from accrual reversals, increased 35.3%
from  $61.7 million in 2001 to $84.4 million in 2002.  The increased
dollar costs result primarily from additional property taxes, higher
insurance costs associated with the terrorist acts, increased  legal
costs   related  to  the  Fairchild  Dornier  and  United   Airlines
bankruptcies, and increased training costs.


Other Income (Expense)

          Interest  expense decreased from $4.8 million in  2001  to
$4.3  million  in 2002. The decrease is the result of reductions  of
overall debt levels as the Company pays down existing debt on  owned
aircraft.

          Interest  income decreased 38.3% to $4.6 million  in  2002
from $7.5 million in 2001.  This decrease is primarily the result of
market  rates  earned  on investments made in  accordance  with  the
Company's  investment policies and the decision to invest  in  lower
interest rate tax free securities, partially offset by the Company's
higher cash balances during 2002 as compared to 2001.

          On  September 22, 2001, President Bush signed into law the
Stabilization  Act.  The Stabilization Act provides cash  grants  to
commercial  air  carriers  as compensation  for  (1)  direct  losses
incurred beginning with the terrorist attacks on September 11,  2001
as  a  result  of any FAA mandated ground stop order issued  by  the
Secretary  of  Transportation (and for any  subsequent  order  which
continues  or  renews such a stoppage), and (2)  incremental  losses
incurred  during the period beginning September 11, 2001 and  ending
December  31, 2001 as a direct result of such attacks.  The  Company
was  entitled  to  receive cash grants under these provisions.   The
Company  received  and recorded $0.9 million  and  $9.7  million  in
government  compensation  in 2002 and 2001 respectively,  under  the
provisions of the Stabilization Act.  The Company has recognized the
cash  grants  under these provisions as non-operating  income  under
"government compensation" in 2002 and 2001.  All amounts received as
government compensation are subject to audit and adjustment  by  the
federal government for a period of up to five years.

          The Company recorded a provision for income taxes of $25.1
million for 2002, compared to a provision for income taxes of  $22.5
million in 2001.  The Company's effective tax rate was 39.0% in 2002
and  39.6%  in 2001.  These rates reflect various state  income  tax
credits and continuing changes in apportionment of taxable income to
states in which the Company operates.  The effective tax rates  also
reflect  non-deductible permanent differences  between  taxable  and
book income.

Fiscal Year 2000 vs. 2001

     Results of Operations

          For  2001,  the Company's net income was $34.3 million  or
$.76  per  diluted  share, compared to $15.2  million  or  $.36  per
diluted  share for 2000. The Company generated operating  income  of
$44.2  million for 2001, compared to $24.1 million for 2000.   These
results reflect the Company's increased capacity as it expanded  the
number  of  aircraft operated under its agreements with  United  and
Delta as well as the additional items and factors discussed below.

          The  Company's net income for 2001 includes  $9.7  million
(pre-tax)  for  government  compensation  received  for  2001.   The
Company's net income and operating income for 2001 also reflect  the
effects of a $23.0 million (pre-tax) operating charge related to the
early  retirement of J-41 turboprop aircraft, while net  income  and
operating   income  for  2000  reflect  a  $29.0  million  (pre-tax)
operating  charge related to the early retirement of J-32  turboprop
aircraft.

     Operating Revenues

          The Company's operating revenues increased 28.9% to $583.4
million  in  2001 compared to $452.5 million in 2000.  The  increase
resulted  primarily from a 49.4% increase in ASMs to 3.3 billion  as
well as a 9.9% increase in revenue per departure to $2,452.  Revenue
in 2001 was recognized primarily under fee-for-service agreements as
compared to a combination of a proration-of-fare agreement and a fee-
for-service  agreement in 2000.  Revenue for 2001 also  included  an
additional  $3.8  million attributable to routine subsequent  period
sampling  adjustments to prior billed tickets  under  the  Company's
former proration-of-fare arrangement.  The increase in ASMs reflects
the  addition of 19 CRJ aircraft and 15 328JET aircraft in 2001, and
the full year effect in 2001 of adding 14 CRJ aircraft and 14 328JET
aircraft  during  2000, offset by the removal of  21  J-32  aircraft
during 2001.  Revenue passengers increased 30.7% in 2001 compared to
2000,  which  combined  with the increase in the  average  passenger
stage length resulted in a 49.1% increase in RPMs.

          The  40.8%  decrease  in  other revenues  year  over  year
reflects  a $1.8 million decrease in revenue from package  and  mail
delivery  and  a  $1.4  million decrease in United  employee  ticket
revenue.  The decrease reflects the fact that these revenues are  no
longer  earned by the Company as a result of the restatement of  the
UA Agreement, which went into effect on December 1, 2000.

     Operating Expenses

          A  summary  of  operating  expenses  as  a  percentage  of
operating  revenue and operating cost per ASM for  the  years  ended
December 31, 2000 and 2001 is as follows:
<TABLE>
<CAPTION>
                                     Year Ended December 31,
                                    2000                2001
                              Percent             Percent
                                 of      Cost       of         Cost
                             Operating    per   Operating     Per ASM
                             Revenues   (cents)  Revenues     (cents)
<S>                            <C>       <C>       <C>         <C>
Salaries and related costs     23.8%      4.9      28.2%        5.0
Aircraft fuel                  14.2%      2.9      15.1%        2.7
Aircraft maintenance and
  materials                     8.1%      1.7       8.3%        1.5
Aircraft rentals               13.2%      2.7      15.5%        2.7
Traffic commissions and
  related fees                 12.5%      2.6       2.7%         .5
Facility rents and
  landing fees                  4.5%       .9       5.5%        1.0
Depreciation and amortization   2.5%       .5       2.6%         .4
Other                           9.5%      1.9      10.6%        1.9
Aircraft early retirement
  charge                        6.4%      1.3       3.9%         .7

    Total                      94.7%     19.4      92.4%       16.4
</TABLE>

          The Company's operating expenses increased primarily as  a
result of increased capacity, as ASMs increased 49.4% to 3.3 billion
in 2001 as compared to 2.2 billion in 2000.  Operating expenses also
included  $23  million  and  $29 million aircraft  early  retirement
charge in 2001 and 2000, respectively.  Before accounting for  these
items,  the Company's operating expenses increased 29.2%  to  $516.2
million  in 2001 compared to $399.4 million in 2000.  This  increase
was  due  primarily to: a 52.5% increase in total  salary  costs,  a
51.1%  increase in aircraft rentals and a 57.9% increase in facility
rents.   These  increases reflect the addition of  34  regional  jet
aircraft in 2001, and the retirement of 21 J-32s during 2001.   Cost
per  ASM  changes that are not primarily attributable to the changes
in capacity are as follows:

          Salaries and related costs for 2001 include a $2.9 million
accrual   reflecting   estimated  costs   for   additional   company
contributions  which  may be made to the Company's  401(k)  plan  to
address operational defects found in the plan.

          The  cost per ASM of aircraft fuel decreased to 2.7  cents
in  2001 compared to 2.9 cents in 2000.  The total average price per
gallon of fuel decreased 11.7% to 98 cents in 2001 compared to $1.11
in 2000.  In absolute dollars, aircraft fuel expense increased 37.1%
from  $64.4  million in 2000 to $88.3 million in 2001, reflecting  a
27.3%  increase  in block hours and the higher fuel consumption  per
hour  of  regional  jet  aircraft versus  turboprop  aircraft  which
resulted  in  a  21.6%  increase in the  system  average  burn  rate
(gallons used per block hour flown).

          The  cost per ASM of traffic commissions and related  fees
decreased to 0.5 cents in 2001 as compared to 2.6 cents in 2000.  In
absolute  dollars,  traffic commissions and related  fees  decreased
72.5%  to  $15.6  million in 2001 from $56.6 million  in  2000.  The
decrease  reflects the fact that many of these fees  are  no  longer
borne  by  the  Company  as a result of the restatement  of  the  UA
Agreement,  which went into effect on December 1, 2000.   Under  the
restated  agreement,  the Company is now only responsible  for  fees
associated with the major airline Computer Reservation Systems.

          Other Income (Expense)

          Interest expense decreased from $6 million in 2000 to $4.8
million in 2001. The decrease is the result of the full year  effect
of  the  impact  of the conversion of the Company's  7%  notes  into
equity during the first half of 2000.

          Interest income increased from $5 million in 2000 to  $7.5
million  in  2001.   This is primarily the result of  the  Company's
significantly higher cash balances during 2001 as compared  to  2000
offset  partially by lower rate of return on short-term  investments
in 2001.

          On  September 22, 2001, President Bush signed into law the
Stabilization  Act.  The Stabilization Act provided cash  grants  to
commercial  air  carriers  as compensation  for  (1)  direct  losses
incurred beginning with the terrorist attacks on September 11,  2001
as  a  result  of any FAA mandated ground stop order issued  by  the
Secretary  of  Transportation (and for any  subsequent  order  which
continues  or  renews such a stoppage), and (2)  incremental  losses
incurred  during the period beginning September 11, 2001 and  ending
December  31, 2001 as a direct result of such attacks.  The  Company
was  entitled  to  receive cash grants under these provisions.   The
exact  amount of the Company's compensation was based on the  lesser
of  actual  losses incurred or a statutory limit based on the  total
amount allocable to all airlines.  The Company received $9.7 million
in  government  compensation, in 2001  which  was  the  government's
estimate  of approximately 85% of the Company's allocation based  on
preliminary  data.   The  Company recognized  this  amount  as  non-
operating  income under "government compensation" during  the  third
and  fourth  quarters  2001.   All amounts  received  as  government
compensation  are  subject to audit and adjustment  by  the  federal
government.

          The Company recorded a provision for income taxes of $22.5
million  for 2001, compared to a provision for income taxes of  $7.7
million  in  2000.   The 2001 effective tax rate  was  approximately
39.6%  as  compared to the 2000 effective tax rate of  approximately
33.6%.   This increase is primarily due to a favorable state  income
tax  ruling  in 2000 resulting in the application of one time  state
tax  credits, and the realization of certain tax benefits that  were
previously  reserved, which together reduced income tax  expense  by
approximately  $1.4  million  for 2000.   The  effective  tax  rates
reflect  non-deductible permanent differences  between  taxable  and
book income.

 Recent Developments and Outlook

          This  Recent  Developments and  Outlook  section  and  the
Liquidity  and  Capital  Resources section  below  contain  forward-
looking  statements.  Actual results may differ materially.  Factors
that  could  cause the Company's future results to differ materially
from  the  expectations described here include: United's ability  to
successfully reorganize in bankruptcy; the ability to replace United
with  other  carriers  in the event United liquidates  or   for  the
Company to implement other contingency plans; the ability and timing
of  agreeing upon 2003 rates with United; the Company's  ability  to
collect  pre-petition  obligations from United  or  to  offset  pre-
petition  obligations  due to United; United's  decision  to  either
affirm all of the terms of the Company's existing UA Agreement or to
reject  the agreement in its entirety; the timing of such  decision;
efforts  by United to negotiate changes as a condition to  affirming
the  Company's existing UA Agreement; unexpected costs arising  from
the  insolvency of United; the effects of the United bankruptcy  and
of  the  economic  conditions  in the air  travel  industry  on  the
Company's  ability to obtain aircraft financing; Delta's ability  to
successfully  avoid bankruptcy; the ability of United and  Delta  to
manage  their  operations  and cash flow,  continue  to  deploy  the
Company's aircraft, and to utilize and pay for scheduled service  at
rates established under existing contracts with the Company; changes
in levels of service agreed to by the Company with United and Delta;
extent  to  which the Company accepts regional jet deliveries  under
its agreement with Bombardier, and ability to delay deliveries or to
settle  arrangements with Bombardier regarding undelivered aircraft;
satisfactory  resolution  of  union  contracts  with  the  Company's
aviation  maintenance technicians/ground service equipment mechanics
and  flight attendants; potential service disruptions due  to  labor
actions  by  employees of the Company, Delta  Air  Lines  or  United
Airlines; ability to successfully retire turboprop aircraft  and  to
remarket them at anticipated rates; availability and cost of product
support for the Company's 328JET aircraft; ability of the Company to
recover  or  realize  its claims against Fairchild  Dornier  in  its
insolvency  proceedings or to offset certain of its  obligations  to
Fairchild  against these claims, and unexpected costs  arising  from
the  insolvency of Fairchild Dornier; the costs and other effects of
enhanced  security  measures and other possible  government  orders;
changes  in  and  satisfaction of regulatory requirements  including
requirements   relating   to  maintenance   and   fleet   expansion;
willingness of the U.S. government to continue to provide  war  risk
insurance  at  favorable  rates,  or  increased  cost  and   reduced
availability  of insurance; the effects of high fuel prices  on  the
Company   and  on  its  major  airline  partners;  adverse   weather
conditions;  additional acts of war or terrorism; any  actions  that
may  be  taken by the Company's suppliers and competitors,  and  the
effects  on  the economy in general and the air travel  industry  in
particular  of U.S. involvement in a war or in military  or  warlike
operations.   The statements in this Annual Report are  made  as  of
March  29,  2003 and the Company undertakes no obligation to  update
any  of  the  forward-looking information included in this  release,
whether  as  a result of new information, future events, changes  in
expectations  or  otherwise.  Certain  of  these  risk  factors  are
discussed  more  fully above under "Business Risk Factors  Affecting
the Company.

          The   U.S.   airline  industry  continues  to   experience
depressed demand and shifts in passenger demand, increased insurance
costs,  changing and increased government regulations and  tightened
credit  markets,  evidenced  by higher credit  spreads  and  reduced
capacity.   These factors are directly affecting the operations  and
financial  condition of participants in the industry  including  the
Company,  its  code  share  partners,  and  aircraft  manufacturers.
Although recent steps taken by the major U.S. carriers to return  to
profitability  have  tended to increase the importance  of  regional
jets to the industry, future implementation of regional jet programs
will  depend  on  market  conditions and relative  cost  structures.
Aggressive  cost-cutting  by  major  airlines,  including   United's
actions  in bankruptcy, have reduced the gap between trip costs  for
the  major  airlines' smallest jets relative to regional jets,  thus
putting  increased  pressure  on  regional  jet  operators  to  also
decrease their costs.  Moreover, the ongoing losses incurred by  the
industry continue to raise substantial risks and uncertainties.   As
discussed below, these risks may impact the Company, its code  share
partners, and aircraft manufacturers in ways that the Company is not
currently able to predict.


          In  anticipation of the start of the war with Iraq and the
continued  deterioration of the economics in the  airline  industry,
the  Company embarked on a cost reduction program with the  goal  of
reducing  annualized unit operating expenses by  approximately  10%.
As  part  of this program, the Company implemented a hiring  freeze,
began   furloughing  excess  pilots,  eliminated  or  reduced  bonus
programs, and implemented salary reductions ranging from 5%  to  10%
for all salaried employees.  The elimination of and changes in bonus
plans  and  salaries for those management employees paid  more  than
$30,000  per  year  is  anticipated to reduce cash  compensation  by
between  10%  and  33%  for  salaried  employees  with  the  largest
reductions affecting the Company's officers.  The Company  has  also
approached  ALPA with the intent to negotiate similar pay reductions
and work rule changes where appropriate to assure that the Company's
costs are at market rates.  In order for the Company to achieve  all
of  its  cost reduction goals, it will require cooperation from  its
employees, the unions representing its employees, major vendors  and
code share partners.

          The Company derives substantially all of its revenue under
long-term code share agreements with United and Delta.  In  addition
to  the 79 CRJs, 33 328JETs, and 30 J-41s in service as of March 15,
2003,  the  Company has firm orders for an additional 42  CRJs  from
Bombardier  Inc., with option orders for 80 CRJs.  All of  the  firm
ordered  aircraft  were  ordered for use  in  the  Company's  United
Express   operations.   Under  these  agreements,  the  Company   is
dependent  on United and Delta for substantially all of its  revenue
and   for  providing  support  services  necessary  to  operate  its
aircraft, and is dependent on Bombardier for providing aircraft  and
other  support.   Business  or operational  difficulties,  liquidity
problems  or  bankruptcy of any of these entities  could  materially
impact  the Company's operations and financial condition.   See  the
discussion  below in this "Recent Developments and Outlook"  section
with  respect  to  the  Company's present  considerations  regarding
future deliveries.

          In  response to industry conditions, both United and Delta
are  changing how the Company's regional jet aircraft are  utilized.
In the past, regional jets were primarily deployed to open new long,
thin  routes and to replace some turboprop service in higher traffic
markets.   The Company continues to work closely with its two  major
partners, United Airlines and Delta Air Lines, to provide value  and
cost efficiencies in the current difficult airline environment.  For
United,  the  Company has added CRJs into Chicago's  O'Hare  airport
allowing United to offer all jet United Express service from Chicago
O'Hare as of August 2002.  FAA slot restrictions at Chicago's O'Hare
airport were eliminated effective July 2002, which removed a barrier
to  the  Company's providing additional service there.   At  Delta's
request,  the  Company moved its 328JET flights operating  from  New
York's  LaGuardia airport to Cincinnati, Ohio effective November  1,
2002.   These network changes will allow Delta to more closely match
aircraft  capacity with route demand.  The stage length for  flights
out of Cincinnati are on average shorter than those previously flown
out of New York's LaGuardia airport.    The Company anticipates that
its  overall operating costs at Cincinnati will be lower than  costs
incurred  while  operating at LaGuardia,  however,  its  unit  costs
overall  will be higher as a result of shorter stage lengths coupled
with  an  increase  in  maintenance costs on  the  328  due  to  the
insolvency  filing  by Fairchild.  The Company reset  its  rate  per
block  hour with Delta in January 2003, in accordance with the terms
of  its agreement, and these rates reflect the anticipated impact of
higher unit costs due to Cincinnati based flying.

       On December 9, 2002, UAL, Inc. and its subsidiaries,including
United,  filed for protection under Chapter 11 of the United  States
Bankruptcy  Code.   UAL  is  currently operating  and  managing  its
business  and affairs as a debtor in possession.   As  part  of  its
first day filings in the bankruptcy proceeding, United requested and
was  granted  a  court  order permitting, but not  requiring  it  to
continue  to  honor the UA Agreements while United is in bankruptcy.
As  such,  the  Company continues to operate  as  a  United  Express
carrier   pursuant  to  its  UA  agreement.   UAL,  Inc.   and   its
subsidiaries have been granted the exclusive right until October  6,
2003, to file a plan of reorganization and the exclusive right until
December  5, 2003, to seek acceptances of any such plan.  The  Court
has  set  May 12, 2003 as the deadline for the filing of  proofs  of
claim, although this deadline does not apply to claims arising under
executory  contracts  and  unexpired leases  that  have  yet  to  be
rejected  by  UAL, Inc. and its subsidiaries.   It is possible  that
any  or  all  of  the  foregoing  deadlines  may  be  extended.   In
bankruptcy,  United  also  has the right to  assume  or  reject  the
Company's  UA  Agreements, as described in  Recent  Development  and
Outlook  below.  No deadline has been set for United  to  assume  or
reject  the  Company's UA Agreements. If United seeks to renegotiate
the  terms of the UA Agreements, a renegotiated agreement is  likely
to be on terms that are less favorable to the Company with regard to
operating  margins  and  in other respects,  which  would  adversely
affect  the Company's earnings and/or growth prospects.  The Company
cannot predict the outcome of United's decision.  As of December 31,
2002,  the Company believes that United owed ACA approximately  $8.0
million as of the date of United's bankruptcy filing for unpaid pre-
petition  obligations relating to United Express services  prior  to
the   filing  and  that,  if  these  pre-petition  amounts  are  not
ultimately paid by United, ACA will have the right to offset amounts
ACA  owes  United  for pre-petition services totaling  approximately
$5.4  million. As of December 31, 2002, the Company has taken a pre-
tax  charge  of  $2.6  million relating to this unpaid  pre-petition
obligation.   The  Company continues to assess the  effects  of  the
bankruptcy filing by United Airlines and its related companies.

          The  Company devotes a substantial portion of its business
to its operations with United, and obtains substantial services from
United  in operating that business.  The Company's future operations
are  substantially dependent on United's successful  emergence  from
bankruptcy and on the affirmation or renegotiation of the  Company's
UA  Agreement  by  United on acceptable terms, or on  the  Company's
ability  to  successfully  establish an alternative  to  the  United
business  and  services.   There is no assurance  that  United  will
successfully  emerge  from  bankruptcy, and  United  has  said  that
liquidation  is  a  possibility.  If  United  does  not  succeed  in
reorganizing  its  operations  and  emerging  from  bankruptcy,  and
instead  files  for  a  liquidation under  Chapter  7  of  the  U.S.
Bankruptcy  Code, the Company would be faced with  the  prospect  of
having to quickly find another code share partner or to develop  the
airline  related  infrastructure to fly as an  independent  airline.
The  Company has commenced planning for these contingencies and will
continue  to pursue actions management believes appropriate  in  the
event   that  United  liquidates  under  Chapter  7.   The   Company
anticipates  that  there would be an interruption  in  its  services
during  a  transition period, the length of which would be dependent
on  several factors including how soon United liquidates.  There are
no  assurances  that the Company will be able to find  another  code
share  partner or be able to compete as an independent airline,  and
any  prolonged stoppage of flying would materially adversely  affect
the   Company's  results  of  operations  and  financial   position.
United's bankruptcy filing may affect the Company in other ways that
it is not currently able to anticipate or plan for.


          The  UA  Agreements  call for the  resetting  of  fee-per-
departure  rates annually based on the Company and United's  planned
level  of operations for the upcoming year.  The Company and  United
are  in  discussions  regarding the fee-per-departure  rates  to  be
utilized  during  2003.   During 2002, the  average  utilization  of
aircraft in the United Express operation declined, and as a  result,
the  2002 rates do not adequately reflect decreases in the Company's
aircraft utilization.  In the first quarter of 2003,  utilization of
the Company's aircraft has continued to  decline  relative to fourth
quarter 2002 levels.   The Company is seeking a rate adjustment  for
2003  consistent  with  its interpretation  of  the  United  Express
Agreements that would, among other things, offset this reduction  in
utilization.   Until new rates are established for 2003,  United  is
paying  the Company based on 2002 rates and the Company is recording
its revenue in 2003 using the rates established for 2002.  There can
be  no assurance that the Company will be able to successfully reset
fee-per-departure rates.  Unless the Company is successfully able to
reset   its   2003  fee-per-departure  rates  with  United   or   to
significantly  reduce costs or increase utilization,  its  operating
margins for 2003 will be materially affected.


          The  Company's Delta Connection service commenced  revenue
service with 328JETs during the third quarter of 2000 and added CRJs
during  the  fourth quarter of 2000.  Approximately $7.8 million  in
start-up  expenses  from inception through commencement  of  revenue
service  were incurred, which were expensed as incurred.   Delta  is
reimbursing  the Company for $5.2 million of these  costs,  and  the
amounts  are  being recorded as revenue ratably through  July  2003.
Through December 31, 2002, the Company has recorded $4.0 million  of
this revenue.  In January 2003, the Company and Delta agreed to 2003
rates, consistent with the rate setting process contained in the  DL
Agreement.

          The  Company's agreement with Bombardier provides  for  30
CRJs  to be delivered during the remainder of 2003 and an additional
12  CRJs  to  be  delivered  by April 30,  2004.   The  Company  has
generally  financed  its  new aircraft deliveries  through  leverage
lease   structures   involving  investments  by   institutional   or
industrial investors who provide debt and equity capital to  finance
the  Company's  aircraft.   This type of  financing  has  been  more
difficult  to obtain since September 11, both in terms of  cost  and
sources  of  funds.   Although  the Company  has  finalized  funding
arrangements for all aircraft delivered through March 15, 2003,  the
Company  has not been able to locate equity funding, which  provides
approximately 20% of the aircraft acquisition cost, for any  further
deliveries  and  had obtained contingent debt commitments  for  only
four   undelivered   aircraft.    The   availability   of   funding,
particularly equity funding, remains uncertain.  The Company  has  a
contingent  commitment  from  Economic  Development  Corporation  of
Canada  ("EDC")  for  debt  financing of  four  aircraft  originally
scheduled for delivery in March and April 2003.  As a result of  the
bankruptcy  of  United, EDC's debt funding obligation is  contingent
upon  the  Company  obtaining a waiver from EDC.  Since  the  United
bankruptcy  filing through the date of this filing, the Company  has
been successful in obtaining such waivers.  The Company has been  in
discussions  with  EDC  to  provide debt  financing  for  additional
ordered  aircraft.   The Company may be forced to  utilize  its  own
funds  for  equity  investments or to seek  alternative  sources  of
funding  a  portion of its aircraft deliveries. Due to a  number  of
factors,  including  the  United  bankruptcy,  the  effect  on   the
operations  of  the airline industry of the war with Iraq,  and  the
state  of  the  financing markets, the Company and  Bombardier  have
agreed to delay by two weeks the delivery of two aircraft originally
scheduled  for  March deliveries.  The Company  is  considering  the
delay  of  future  deliveries  and is engaged  in  discussions  with
Bombardier  regarding financing and the aircraft delivery  schedule.
As   a  result  of  these  discussions,  Bombardier  is  withholding
approximately  $3.7  million in payments  due  to  the  Company  for
amounts owed under the Company's aircraft purchase agreements.    In
addition,  as  of  February 2003, the Company had $37.3  million  on
deposit with Bombardier for future aircraft orders.

          In  July  2002, Fairchild, the manufacturer of the 32-seat
328JET,  opened formal insolvency proceedings in Germany.  Fairchild
had  been operating under the guidance of a court appointed  interim
trustee  since  April  2002.   Fairchild subsequently  notified  the
Company  that  it  has  rejected  the Company's  purchase  agreement
covering the remaining 30 328JETs the Company had on firm order  for
its  United  Express operation, two 328JETs on firm  order  for  the
Company's  Private  Shuttle operation, and  options  to  acquire  81
additional  aircraft.   At  the  time  of  the  opening  of   formal
insolvency proceedings, Fairchild had significant current and future
obligations to the Company in connection with the Company's order of
328JET  aircraft.  These include obligations: to deliver 30  328JETs
the  Company had on firm order for its United Express operation, two
328JETs  on  firm  order for the Private Shuttle operation,  and  81
additional option 328JETs with certain financing support; to pay the
Company  the  difference  between the  sublease  payments,  if  any,
received from remarketing 26 J-41 Turboprop aircraft leased  by  the
Company  and the lease payment obligations of the Company  on  those
aircraft;  to  purchase five J-41 aircraft owned by the  Company  at
their  net  book value at the time of retirement; to assume  certain
crew  training costs; and to provide spares, warranty,  engineering,
and related support.  In August 2002, the Company filed its claim in
the  Fairchild  insolvency  proceeding.   The  Fairchild  insolvency
trustee  indicated that it is unlikely that funds will be  available
for  claims by unsecured creditors.  During the first quarter  2003,
the  trustee indicated that he is finalizing plans to sell  portions
of  the  prior  business  including the production  and  support  of
328JETs.   The  Company anticipates that long-term  product  support
would be improved should the businesses be successfully transitioned
to a new owner, but does not have any knowledge as to whether a sale
of  these  businesses can in fact be completed or whether production
can  be resumed.  In addition, the Company does not anticipate  that
such a sale will have an effect on its prior contractual commitments
or on its bankruptcy claim.

          The  Company  believes  it  has  a  security  interest  in
Fairchild's equity interest in 32 delivered 328JETs, under which its
right to proceed against this collateral will apply upon termination
of  the applicable lease unless other arrangements are made with the
other  interested  parties.   The  Company's  balance  sheet  as  of
December  31,  2002  includes a receivable  for  $1.2  million  with
respect  to deposits placed with Fairchild for undelivered aircraft.
The  Company holds a bond from an independent insurance company that
was  delivered  to secure this deposit, and has made  a  demand  for
payment under this bond.  Fairchild's insolvency trustee has made  a
claim for the collateral posted with the insurance company, and  the
insurance  company has withheld payment of the bond.  The matter  is
presently with the U.S. bankruptcy court for the Western District of
Texas.   The  Company's balance sheet as of December 31,  2002  also
includes  approximately $1.0 million due from  Fairchild,  resulting
from  payments  made  or owed by the Company to  third  parties  for
certain  training  and  other  matters  that  were  to  be  paid  by
Fairchild.   To  the  extent the Company does  not  prevail  in  its
claims, it may be required to take a charge for all or a portion  of
the $1.0 million due from Fairchild for third party expenses, or the
$1.2  million  in  deposits secured by the bond.   At  the  time  of
Fairchild's insolvency, the Company had outstanding invoices due  to
Fairchild  for various spare parts purchases.  The Company  believes
it  has  the  right  to offset these and other  amounts  claimed  by
Fairchild  against  obligations due from Fairchild,  to  the  extent
permitted  by law.  Fairchild related entities dispute  this  right,
and  Fairchild's wholly owned U.S. subsidiary, Dornier  Aviation  of
North  America  ("DANA"), has filed a lawsuit  against  the  Company
claiming amounts allegedly due for certain spare parts, late payment
charges,  and consignment inventory carrying charges.  DANA contends
that  although its German parent company may not have fulfilled  its
contractual obligations to the Company, DANA sold spare parts to the
Company  independent  of its parent company's  activities  and  that
there  is  no  right  of  offset.   The  Company  acknowledges  that
approximately $8 million in outstanding invoices existed, while DANA
claims  that  an  additional $3.6 million is  due.   The  action  is
presently in the discovery stage and it is anticipated that a  trial
will be held during the summer of 2003.

          The  Company's costs to operate its current  fleet  of  33
328JETs  increased  in 2002, and may continue  to  increase  in  the
future  due to costs incurred for maintenance repairs that otherwise
would have been covered by the manufacturer's warranty and the costs
and  limited availability of spare parts.  Additionally, as a result
of  Fairchild's rejection of the purchase contract, the Company does
not expect Fairchild to satisfy its obligation to pay the difference
in the sublease payments, if any, received from remarketing the 26 J-
41  aircraft leased by the Company on those aircraft and the  amount
due under the Company's aircraft leases.

          On  June  4,  2002, the Company and United  agreed  to  an
amendment  to the Company's UA Agreement authorizing the Company  to
operate  an  additional 25 CRJs in lieu of 32 328JETs that  were  to
have been delivered by Fairchild, with the additional aircraft to be
placed in service no later than April 30, 2004.  The Company entered
into agreements with Bombardier for the purchase of 25 additional 50-
seat  CRJs  to replace the two delivered and 30 undelivered  32-seat
328JETs for its United Express operation.  The Company now has  firm
orders for 42 additional CRJs as of March 15, 2003, and continues to
hold  options for an additional 80 CRJs.  See below with respect  to
the Company's present considerations regarding future deliveries.

          Fairchild  had  the  obligation  to  purchase  five   J-41
aircraft owned by the Company at their net book value at the time of
their  retirement.   As  a result of Fairchild's  rejection  of  the
purchase contract, the Company does not expect Fairchild to  satisfy
this obligation.  The Company is required to evaluate the book value
of its long-lived assets as compared to estimated fair market value.
The  Company now estimates that the fair market value of four of the
five  owned  J-41 aircraft will be, in the aggregate,  $2.9  million
below book value when the aircraft are retired from the fleet.  As a
result,  the  Company  is  recognizing $2.9  million  in  additional
depreciation  charges related to such aircraft over their  remaining
estimated  service lives.  As of December 31, 2002, the Company  had
recognized $1.0 million of this additional depreciation expense.

          In  June  2002  the Company reconfirmed its commitment  to
United  to remove its remaining J-41 turboprop aircraft from service
no  later  than  April  30, 2004.  The Company has  long-term  lease
commitments for 25 of these J-41 aircraft and owns 5 J-41  aircraft.
During   2002,  the  Company  recorded  aircraft  early   retirement
operating  charges  totaling $24.3 million  ($14.6  million  net  of
income  tax)  for the non-discounted value of future lease  payments
and  other  costs associated with the early retirement  of  18  J-41
turboprop  aircraft.   The  total  2002  aircraft  early  retirement
charges reflects a charge of $21.5 million ($12.9 million after tax)
in  the  fourth quarter of 2002 relating to J-41 aircraft which  are
expected to be retired by the fourth quarter of 2003, a $7.6 million
charge ($4.5 million after tax) in the third quarter of 2002 related
to  expected scheduled aircraft retirements by the third quarter  of
2003,  and a $4.8 million ($2.8 million after tax) credit to  income
in  the  second quarter of 2002 to reverse a portion  of  its  prior
aircraft  early  retirement charge of $23.0 million  ($13.8  million
after  tax)  recorded in the fourth quarter of  2001.   The  Company
estimates that it will expense approximately $26.5 million (pre-tax)
to  retire  the remaining 8 leased J-41s as they are retired  during
2004.   The  Company  plans to actively remarket the  J-41s  through
leasing, subleasing or outright sale of the aircraft.  Any of  these
arrangements  involving leased aircraft may require the  Company  to
make  payments to the lessor to cover shortfalls between sale prices
and  lease  stipulated  loss  values.   Significant  delays  in  the
delivery of the remaining CRJs on firm order could negatively impact
the Company's ability to complete its early aircraft retirement plan
for the J-41 turboprop fleet.

Liquidity and Capital Resources

          As  of  December  31,  2002, the Company  had  cash,  cash
equivalents,  and  short-term  investments  of  $242.6  million  and
working  capital  of $197.6 million compared to $181.0  million  and
$138.7  million, respectively, as of December 31, 2001.  During  the
year  ended  December 31, 2002, cash and cash equivalents  decreased
$144.4 million, reflecting net cash provided by operating activities
of  $106.8 million, net cash used in investing activities of  $252.1
million  (primarily the results of the net increase  in  short  term
investments  of  $206.1  million  and  purchases  of  property   and
equipment  of  $35.7  million) and net cash  provided  by  financing
activities  of  $0.8  million.   Net  cash  provided  by   financing
activities  was  mainly related to proceeds from exercise  of  stock
options.

          As  of  December  31,  2001, the Company  had  cash,  cash
equivalents,  and  short-term  investments  of  $181.0  million  and
working  capital  of $138.7 million compared to $121.2  million  and
$72.0  million, respectively, as of December 31, 2000.   During  the
year  ended  December 31, 2001, cash and cash equivalents  increased
$87.6  million, reflecting net cash provided by operating activities
of  $88.0  million,  net cash used in investing activities  of  $5.7
million  (primarily the results of increased purchases  of  property
and  equipment of $34.9 million offset by the net reduction in short
term  investments  of  $27.8  million)  and  net  cash  provided  by
financing  activities  of  $5.2  million.   Net  cash  provided   by
financing activities was mainly related to proceeds from exercise of
stock options.

     Capital Commitments

          The   Company's   business  is  very  capital   intensive,
requiring significant amounts of capital to fund the acquisition  of
assets, particularly aircraft.  The Company has historically  funded
the  acquisition of its aircraft by entering into off-balance  sheet
financing  arrangements known as leveraged leases,  in  which  third
parties  provide equity and debt financing to purchase the  aircraft
and  simultaneously  enter into long-term agreements  to  lease  the
aircraft  to  the Company.  See the discussion above in the  "Recent
Developments  and  Outlook" section with respect  to  the  Company's
present considerations regarding future deliveries.  Similarly,  the
Company  often  enters  into long-term lease commitments  to  ensure
access   to   terminal,  cargo,  maintenance   and   other   similar
facilities.   As  can  be  seen in the  table  below  setting  forth
information   as  of  December  31,  2002,  these  operating   lease
commitments are significant.
<TABLE>
<CAPTION>
                   2003   2004   2005   2006   2007   Thereafter   Total
 (In millions)
<S>              <C>    <C>    <C>    <C>    <C>     <C>        <C>
Long term debt   $  4.9 $  5.2 $  6.0 $  5.9 $  5.5  $   30.9   $   58.4
Capital lease
 obligations        1.5     .8      -      -      -         -        2.3
Guaranteed
 simulator usage
 commitments        1.4    1.4    1.2    1.2    1.2       3.7       10.1
Operating lease
 commitments      153.5  148.7  147.1  145.4  138.2   1,099.9    1,832.8
Aircraft purchase
 commitments      700.0  240.0      -      -      -         -      940.0
Total contractual
 capital
 commitments     $861.3 $396.1 $154.3 $152.5 $144.9  $1,134.5   $2,843.6
</TABLE>

See Note 4 "Debt", Note 5 "Obligations Under Capital Leases", Note 6
"Operating  Leases", and Note 10 "Commitments and Contingencies"  in
the  Notes  to  Consolidated  Financial  Statements  for  additional
discussion of these items.  Between December 31, 2002 and March  15,
2003,  the  Company accepted deliveries of 5 CRJs, and paid  certain
operating lease commitments.  As a result, as of March 15, 2003, the
Company's  operating lease commitments were $64.4  million  for  the
remainder of 2003, $156.6 million for 2004, $157.4 million for 2005,
$154.2  million  for  2006,  and  $1.3  billion   thereafter.    The
Company's  aircraft purchase commitments were $600 million  for  the
remainder of 2003 and $240 million for 2004.

          The   Company  also  has  a  variety  of  other  long-term
contractual commitments that are of a nature that, under  accounting
principles generally accepted in the United States, are not required
to  be  reflected on the Company's balance sheet, and that  are  not
generally viewed as "off-balance sheet financing arrangements," such
as  commitments  for  major overhaul maintenance  on  the  Company's
aircraft,  and pilot training.  See "Liquidity and Capital Resources
-  Other  Commitments" below and "Business - Pilot Training"  above,
and  Note  1 "Summary of Accounting Policies - (l) Maintenance"  and
Note  10 "Commitments and Contingencies - Training" in the Notes  to
Consolidated Financial Statements for additional discussion of these
items.

          The  Company believes that its cash balances and cash flow
from  operations together with operating lease financing  and  other
available  equipment  financing will be  sufficient  to  enable  the
Company to meet its working capital needs, expected operating  lease
financing commitments, other capital expenditures, and debt  service
requirements  for  the  remainder of 2003.  However,  the  Company's
industry environment is highly uncertain and volatile at this  time.
Future events could affect the industry or the Company in ways  that
are  not  presently  anticipated that  could  adversely  affect  the
Company's liquidity.

     Other Financing

          On  September 28, 2001, the Company entered into an asset-
based  lending  agreement with Wachovia Bank,  N.A.  that  initially
provided  the Company with a line of credit for up to $25.0 million.
As  a result of the Chapter 11 bankruptcy filing by United Airlines,
it was necessary for the Company to request a covenant waiver.  As a
result of these negotiations, the Company agreed to reduce the  size
of  the  lending  agreement  to $17.5  million  and  revise  certain
covenants.   The  line of credit, which will expire on  October  15,
2003,  carries  an  interest  rate of LIBOR  plus  .875%  to  1.375%
depending  on  the  Company's  fixed charges  coverage  ratio.   The
Company  has  pledged  $15.7  million of  this  line  of  credit  as
collateral for letters of credit issued on behalf of the Company  by
a  financial institution.  The available borrowing under the line of
credit  is limited to the value of the bond letter of credit on  the
Company's  Dulles, Virginia hangar facility plus  60%  of  the  book
value  of certain rotable spare parts.  As of December 31, 2002  the
value  of the collateral supporting the line was sufficient for  the
amount  of  available  credit under the line to  be  $17.5  million.
There  have  been no borrowings on the line of credit.   The  amount
available for borrowing at December 31, 2002 was $1.8 million  after
deducting  $15.7  million which has been pledged as  collateral  for
letters  of credit.  The Company intends to request that its current
line  of  credit be renewed upon expiration.   If it  is  unable  to
renew, the Company believes it has adequate liquidity to pledge cash
as collateral for letters of credit.

           In  September  1997, approximately $112 million  of  pass
through  certificates were issued in a private placement by separate
pass  through  trusts, which purchased with the proceeds,  equipment
notes  (the  "Equipment  Notes")  issued  in  connection  with   (i)
leveraged  lease transactions relating to four J-41s and  six  CRJs,
all of which were leased to the Company (the "Leased Aircraft"), and
(ii)  the  financing of four J-41s owned by the Company (the  "Owned
Aircraft").   The Equipment Notes issued with respect to  the  Owned
Aircraft are direct obligations of ACA, guaranteed by ACAI  and  are
included  as  debt  obligations  in  the  accompanying  consolidated
financial  statements and in the table above.  The  Equipment  Notes
issued  with  respect to the Leased Aircraft are not obligations  of
ACA or guaranteed by ACAI.

     Aircraft

          The Company has significant lease obligations for aircraft
that  are  classified  as operating leases  and  therefore  are  not
reflected  as  liabilities  on  the Company's  balance  sheet.   The
remaining  terms of such leases range from one to sixteen and  three
quarters years.  The Company's total rent expense in 2002 under  all
non-cancelable  aircraft operating leases was  approximately  $112.1
million.   As  of  December 31, 2002, the Company's  minimum  annual
rental payments for 2003 under all non-cancelable aircraft operating
leases with remaining terms of more than one year were approximately
$144.7  million.   In  order to minimize the total  aircraft  rental
expense over the entire life of the related aircraft leveraged lease
transactions, the Company has uneven semiannual lease payment  dates
of  January  1  and July 1 for its CRJ and 328JET aircraft.   As  of
March  15,  2003, approximately 22.1% of the Company's annual  lease
payments  for its CRJ and 328JET aircraft are due in July  2003  and
69.4%  are  due in January 2004.  The amounts due under and  payment
schedules for any aircraft lease financing entered into after  March
15,  2003 may cause these amounts to change.  The Company made lease
payments  for its CRJ and 328JET aircraft totaling $83.8 million  in
January  2003.

          As  of March 15, 2003, the Company had a total of 42  CRJs
on  firm  order from Bombardier, Inc., in addition to the 79 already
delivered, and held options for 80 additional CRJs.    The  42  firm
ordered  aircraft include 25 CRJs that were ordered  in  July,  2002
after Fairchild Dornier GmbH ("Fairchild"), the manufacturer of  the
32-seat 328JET, opened formal insolvency proceedings in Germany  and
rejected  the  Company's  purchase agreement  covering  328JETs  the
Company had on firm order and under option.  The Company's agreement
with  Bombardier  provides for 30 CRJs to be  delivered  during  the
remainder of 2003 and an additional 12 CRJs to be delivered by April
30,  2004.   Due  to  a  number  of factors,  including  the  United
bankruptcy, the effect on the operations of the airline industry  of
the  war  with  Iraq,  and the state of the financing  markets,  the
Company  and  Bombardier  have agreed to  delay  by  two  weeks  the
scheduled  delivery  date of two aircraft originally  scheduled  for
March  deliveries.  The Company is considering the delay  of  future
deliveries  and is engaged in discussions with Bombardier  regarding
financing  and  the  aircraft delivery  schedule.   See  the  Recent
Developments and Outlook section above with respect to the Company's
present considerations regarding future deliveries.

          The Company relies on third party financing to pay for the
CRJ  aircraft it has ordered.  In order to realize the lowest  lease
rates, the Company has utilized leveraged lease transactions.  In  a
leveraged  lease, there is an equity source for 20%  -  30%  of  the
purchase price and a debt source for the remaining 70% - 80%.   With
the  uncertainty  of  United's future and industry  conditions,  the
Company  has  been unable to secure equity funding for  any  of  its
remaining   firm  ordered  aircraft.   The  Company  has   been   in
discussions  with  the  Economic Development Corporation  of  Canada
("EDC") to provide the debt financing for the ordered aircraft.  The
Company  has a contingent commitment from EDC for debt financing  of
four  aircraft scheduled for delivery in April and May 2003.   As  a
result  of  the bankruptcy of United, the obligation of the  EDC  to
fund  any  of  the  four  aircraft is contingent  upon  the  Company
obtaining  a  waiver  from  the EDC.  Since  the  United  bankruptcy
filing,  through  the  date of this filing,  the  Company  has  been
successful in obtaining such waivers.

          A  CRJ  was damaged in October 2002 as a result  of  being
struck  by  a shuttle bus that was not operated by the Company.   In
addition,  a  CRJ was damaged in February 2003 as a result  of  snow
accumulation  on  an improperly cleared runway.  It  is  anticipated
that both aircraft will be out of operation through May of 2003, and
the  Company expects the repair costs on both aircraft to be covered
by  insurance  proceeds.  The Company does not currently  anticipate
the  loss of use of these aircraft to have a material effect on  its
results of operations.

     Capital Equipment and Debt Service

           In  2003,  the  Company anticipates capital  spending  of
approximately $25 million consisting of approximately  $6.8  million
for  rotable  spare  parts and flight equipment,  $7.5  million  for
ground   and  maintenance  equipment,  $5.5  million  for   computer
equipment, and $5.2 million for other capital assets, and expects to
finance these capital expenditures out of working capital.

           Principal  payments  on  long  term  debt  for  2003  are
estimated  to  be  approximately $4.9 million reflecting  borrowings
related  to the purchase of four CRJs acquired in 1998 and 1999  and
five J-41s acquired in 1997 and 1998.  The foregoing amount does not
include  additional debt that may be required for the  financing  of
new CRJs,  spare parts and spare engines.

     Other Commitments

          The  Company's  regional jet fleet  is  comprised  of  new
aircraft  with  an average age of less than two and  a  half  years.
Since  maintenance  expense on new aircraft is lower  in  the  early
years  of  operation  due  to  manufacturers'  warranties  and   the
generally  lower  failure rates of major components,  the  Company's
maintenance  expense  for  regional jet aircraft  will  increase  in
future periods.

          In 2000, the Company executed a seven-year engine services
agreement  with  GE  Engine  Services,  Inc.  ("GE")  covering   the
scheduled and unscheduled repair of ACA's CRJ jet engines,  operated
on  the  43 CRJs already delivered or on order at that time for  the
United  Express operation.  This agreement was amended in July  2000
to  cover  23 additional CRJ aircraft, bringing the total number  of
CRJ aircraft covered under the agreement to 66.  Under the terms  of
the  agreement, the Company pays a set dollar amount per engine hour
flown on a monthly basis to GE and GE assumes the responsibility  to
repair  the  engines when required at no additional expense  to  the
Company,  subject  to  certain  exclusions.   The  Company's  future
maintenance expense on CRJ engines covered under the agreement  will
escalate based on contractual rate increases, intended to match  the
timing  of  actual maintenance events that are due pursuant  to  the
terms.   The  Company expenses aircraft maintenance based  upon  the
amount  paid to GE under the agreement, as engine hours  are  flown.
To  date, the time between scheduled repair work has been longer and
therefore the costs of maintaining these engines has been lower than
anticipated at the time the original contract and rates were agreed.
The Company has been in negotiations with GE to reduce the base rate
in  the agreement to reflect the actual operating performance of the
engines, to add the remaining ordered aircraft to the agreement, and
to extend the term.  The Company has disputed the appropriateness of
certain contract rate adjustments and in the fourth quarter of  2001
sought  other rate concessions from GE in the context of negotiating
with  GE  for  an  adjustment in rates and for an extension  of  the
contract  to  cover  a longer term and to cover  the  remaining  CRJ
aircraft  on order.  Consistent with its understanding at the  time,
the  Company reduced the amounts it paid GE under the agreement  and
correspondingly   reduced  the  amounts  it  expensed   for   engine
maintenance.  The Company continues to negotiate with GE  and  other
vendors  in  order  to  reach an acceptable  maintenance  agreement.
Accordingly, the Company currently is not adding engines beyond  the
66  covered aircraft and anticipates that the adjustments  described
above  will  continue  to be disputed.  The  Company  recorded  $4.8
million,  $1.3 million, and $1.3 million to maintenance  expense  in
the  second,  third, and fourth quarters of 2002, which  represented
the  Company's estimate of amounts that GE may seek to collect under
the  agreement.  In addition, the Company believes that,  if  it  so
elects,  it  has  the right to remove any or all engines  from  this
agreement  at  any  time.   GE does not  agree  with  the  Company's
interpretation  of  the  agreement.  In February  2003  the  Company
provided  notice of its desire to settle this issue in  arbitration.
GE  subsequently presented an invoice for amounts it believes to  be
due  from the Company, which amounts are $1.0 million  in excess  of
the  amounts accrued by the Company, and requested that the question
of  the amounts due also be settled by arbitration.  The parties are
presently negotiating whether an agreement can be reached outside of
arbitration, as provided in the agreement.  If no agreement  can  be
reached  and the arbitration is decided in the Company's favor,  the
Company  will  remove  the  engines  from  the  agreement  and  will
negotiate  for new terms at market rates.  A decision in GE's  favor
will  result in covered engines remaining in the agreement  for  the
balance of the term.

         Effective  September 2001, the Company  entered  a  sixteen
year  maintenance  agreement with Air Canada  covering  maintenance,
repair  and  overhaul services for airframe components  on  its  CRJ
aircraft.   Under the terms of this agreement, the  Company  pays  a
varying amount per flight hour each month, based on the age  of  the
aircraft.  The Company expenses the amount paid to Air Canada  based
on  the  rates stipulated in the agreement and the hours flown  each
month.   In  February  2002, the Company entered  into  a  five-year
agreement  with  Air Canada covering the scheduled airframe  C-check
overhaul of its CRJ aircraft.  The Company expenses this cost as the
overhaul is completed.

         Effective  January  2001,  the  Company  entered  into   an
agreement  with  BAE  Systems Holdings,  Inc.  covering  repair  and
overhaul  of  airframe rotable parts on the Company's J-41  aircraft
through  the  remaining service life of the J-41 fleet.   Under  the
terms  of this agreement, the Company pays a fixed amount per flight
hour  each  month.   The Company expenses the  amount  paid  to  BAE
Systems  Holdings,  Inc.  based  on  the  rates  stipulated  in  the
agreement and the hours flown each month.

          The  Company  has  entered into  agreements  with  Pan  Am
International Flight Academy ("PAIFA"), which allow the  Company  to
train  CRJ,  J-41  and  328JET  pilots  at  PAIFA's  facility   near
Washington-Dulles.   In 2001, PAIFA relocated its  Washington-Dulles
operations to a new training facility near the Company's Washington-
Dulles  headquarters.   This  facility currently  houses  three  CRJ
simulators,  a 328JET simulator, and a J-41 simulator.  The  Company
has agreements to purchase an annual minimum number of CRJ simulator
training hours at agreed rates through 2010.  The Company's  payment
obligations for CRJ simulator usage over the remaining years of  the
agreements total approximately $10.1 million.

          In  2001, PAIFA, CAE Schreiner and the Company executed  a
simulator  provision  and  service agreement  providing  for  328JET
training  at the PAIFA facility.  Under this agreement, the  Company
has  committed  to  purchase all of its 328JET simulator  time  from
PAIFA  at  agreed  upon rates, with no minimum number  of  simulator
hours guaranteed.

          The  Company has committed to provide its senior executive
officers  a  deferred compensation plan which utilizes split  dollar
life  insurance  policies, and for a certain officer,  a  make-whole
provision  for income taxes, post retirement salary based on  ending
salary,  and post retirement benefits based on benefits  similar  to
those  currently provided to the executive while actively  employed.
The  Company has estimated the cost of the deferred compensation and
tax  gross  up  feature, future salary and future  benefits  and  is
accruing this cost over the remaining required service time  of  the
executive  officers.   In  2002, the Company expensed  approximately
$1.8  million  as  the current year's cost of these  benefits.   The
Company  expects  to  recognize  similar  costs  annually  over  the
remaining required service life of the senior executives.

          In  1999,  the Company commenced a replacement project  of
its  computer software systems covering financials, human resources,
benefits,  and maintenance.   The majority of these costs are  being
capitalized  and amortized over seven years.  In 1999,  the  Company
expensed  approximately  $400,000 related  to  replacement  software
selection   and   capitalized  $2.3  million  in   acquisition   and
implementation  costs.   In  2000,  2001  and  2002,   the   Company
capitalized  an  additional  $5.2 million,  $2.8  million  and  $3.5
million   of  costs  incurred,  respectively,  bringing  the   total
capitalized costs as of December 31, 2002 to $13.8 million.

          The   Company's  Board  of  Directors  has  approved   the
repurchase  of  up  to  $40.0 million of the  Company's  outstanding
common stock in open market or private transactions.  As of March 1,
2003  the  Company has repurchased 2,171,837 shares  of  its  common
stock  and  has approximately $21.0 million remaining of  the  $40.0
million authorized for repurchase.

     Inflation

           Inflation has not had a material effect on the  Company's
operations because the Company's fee-for-service rates are  adjusted
annually under the terms of its agreements with United and Delta.

Critical Accounting Policies and Estimates

          The  preparation of the Company's financial statements  in
conformity  with  generally accepted accounting principles  requires
Company management to make estimates and assumptions that affect the
reported  amounts of assets and liabilities, revenues and  expenses,
and  related disclosures of contingent assets and liabilities in the
consolidated financial statements and accompanying notes.  The  U.S.
Securities  and  Exchange Commission has defined  a  Company's  most
critical accounting policies as the ones that are most important  to
the  portrayal of the Company's financial condition and results, and
which  require the company to make its most difficult and subjective
judgments,  often  as  a result of the need  to  make  estimates  of
matters  that  are inherently uncertain.  Based on this  definition,
the  Company  has  identified its critical  accounting  policies  as
including  those addressed below.  The Company also  has  other  key
accounting  policies, which involve the use of estimates,  judgments
and  assumptions.  See Note 1 "Summary of Accounting Policies  "  in
the  Notes  to  Consolidated  Financial  Statements  for  additional
discussion  of these items.  Management believes that its  estimates
and  assumptions  are  reasonable, based upon information  presently
available;  however, actual results may differ from these  estimates
under different assumptions or conditions.

          Revenue    Recognition:   Under   the    proration-of-fare
arrangement  in  effect  with United until  November  of  2000,  the
Company  recognized passenger revenue when a flight  was  completed.
This  required  various estimates about passenger  fares  and  other
factors  that  were subject to subsequent adjustment and  settlement
with  United  and  other  carriers.  Following  certain  changes  in
estimates,  which resulted in adjustments in 2001  as  described  in
"Results  of  Operations", the Company does not expect  any  further
adjustments    attributable   to   the   former    proration-of-fare
arrangement.   Under  the fee-per-departure and  fee-per-block  hour
contracts  currently  in place with United and Delta,  respectively,
revenue  is  the product of the agreed upon rate and the  number  of
departures or the number of block hours flown.  Rates are  generally
agreed  to  on  an annual basis and are subject to adjustments  upon
certain  specified events, such as changes in cities  served  or  in
aircraft  utilization levels.  Until rates are agreed to  each  year
with  United  and  Delta  or are adjusted in response  to  specified
events,  the  Company may be required to estimate  these  rates  and
record  revenue  based  upon such estimates until  final  rates  are
agreed to by either United or Delta.  In addition, certain incentive
payments  are  recorded based upon the Company's assessment  of  its
satisfaction of operational performance criteria and are subject  to
review by United or Delta.

          Major  maintenance costs:  The Company has executed  long-
term  agreements  with the engine manufacturers  and  other  service
providers covering the repair and overhaul of its engines,  airframe
and   avionics  components,  and  landing  gear.   These  agreements
generally include escalating rates per flight hour over the term  of
the  agreement.   The escalating rates are intended to  reflect  the
approximate  actual maintenance cost increases as the aircraft  age.
The  Company expenses costs based upon the current rate per hour and
the  number  of  aircraft and engines hours for the  period.   As  a
result, maintenance costs for the Company's existing aircraft  fleet
are expected to increase in future years.

          Aircraft  leases:  The majority of the Company's  aircraft
are  leased  from  third parties. In order to determine  the  proper
classification of a lease as either an operating lease or a  capital
lease,  the Company must make certain estimates at the inception  of
the lease relating to the economic useful life and the fair value of
an  asset as well as select an appropriate discount rate to be  used
in  discounting future lease payments.  These estimates are utilized
by  management  in  making  computations  as  required  by  existing
accounting  standards that determine whether the lease is classified
as  an operating lease or a capital lease.  Substantially all of the
Company's aircraft leases have been classified as operating  leases,
which  results in rental payments being charged to expense over  the
terms of the related leases.  Additionally, operating leases are not
reflected  in  the balance sheet and accordingly,  neither  a  lease
asset  nor an obligation for future lease payments are reflected  in
the Company's consolidated balance sheet.

          Aircraft Early Retirement Costs:  In determining the  cost
of  the early retirement of leased aircraft (and thus in determining
the  amount  of the aircraft early retirement charge),  the  Company
must  estimate,  among other things, retirement date,  market  lease
rates,  future  sub-lease  income, the cost  of  maintenance  return
provisions,  future interest and inflation rates, and  the  duration
and cost of aircraft storage.  The Company generally does not accrue
for  the costs of retiring leased aircraft more than one year before
the  planned date of removal from service, considering the potential
for  changes in plans and associated costs. As the associated leases
may extend over several years, these costs estimates are subject  to
change.   Any  significant delays in the delivery of  the  remaining
CRJs on firm order could cause the actual retirement dates to differ
materially from the planned retirement dates.

Recent Accounting Pronouncements

          In  January 2003, the Financial Accounting Standards Board
issued  FASB  Interpretation  No.  46,  "Consolidation  of  Variable
Interest   Entities,"  an  interpretation  of  Accounting   Research
Bulletin   No.   51,   "Consolidated  Financial  Statements."   This
interpretation requires an existing unconsolidated variable interest
entity to be consolidated by their primary beneficiary if the entity
does not effectively disperse risk among all parties involved or  if
other  parties do not have significant capital to finance activities
without subordinated financial support from the primary beneficiary.
The  primary beneficiary is the party that absorbs a majority of the
entity's  expected  losses,  receives a  majority  of  its  expected
residual returns, or both as a result of holding variable interests,
which  are  the ownership, contractual, or other pecuniary interests
in  an entity.  We do not expect the statement to have a significant
impact on our financial position or operating results.


          In   December  2002,  the  FASB  issued  SFAS   No.   148,
"Accounting   for   Stock-Based  Compensation   -   Transition   and
Disclosure," which amended SFAS No. 123 "Accounting for  Stock-Based
Compensation."  The  new  standard provides alternative  methods  of
transition for a voluntary change to the fair value based method  of
accounting for stock-based employee compensation. Additionally,  the
statement  amends the disclosure requirements of  SFAS  No.  123  to
require  prominent  disclosures in the annual and interim  financial
statements  about the method of accounting for stock-based  employee
compensation and the effect of the method used on reported  results.
This  statement  is  effective for financial statements  for  fiscal
years  ending after December 15, 2002. In compliance with  SFAS  No.
148,  the  Company has elected to continue to follow  the  intrinsic
value method in accounting for its stock-based employee compensation
arrangement  as  defined  by  Accounting  Principles  Board  Opinion
("APB")  No.  25, Accounting for Stock Issued to Employee,  and  has
made  the  applicable  disclosures in Note  1  to  the  consolidated
financial statements.

          In November 2002, the Financial Accounting Standards Board
issued  FASB  Interpretation  No. 45,  "Guarantor's  Accounting  and
Disclosure   Requirements   for   Guarantees,   Including   Indirect
Guarantees  of  Indebtedness of Others," an interpretation  of  FASB
Statements  No.  5, 57 and 107 and rescission of FASB Interpretation
No.  34. This interpretation outlines disclosure requirements  in  a
guarantor's  financial statements relating to any obligations  under
guarantees  for  which it may have potential risk or  liability,  as
well as clarifies a guarantor's requirement to recognize a liability
for  the  fair  value,  at the inception of  the  guarantee,  of  an
obligation  under  that  guarantee.  The  initial  recognition   and
measurement  provisions  of this interpretation  are  effective  for
guarantees  issued  or  modified after December  31,  2002  and  the
disclosure  requirements are effective for financial  statements  of
interim  or  annual periods ending after December 15,  2002.  As  of
March  1,  2003,  we  have not provided any  guarantees  that  would
require   recognition  or  disclosure  as  liabilities  under   this
interpretation.

          On July 30, 2002, the Financial Accounting Standards Board
issued FASB Statement No. 146, "Accounting for Costs Associated with
Exit  or  Disposal  Activities", which  is  effective  for  exit  or
disposal  activities  that are initiated after  December  31,  2002.
Statement No. 146 requires that liabilities for the costs associated
with  exit or disposal activities be recognized when the liabilities
are  incurred, rather than when an entity commits to an  exit  plan.
The  Company adopted Statement No. 146 on January 1, 2003.  The  new
rules  will  change the timing of liability and expense  recognition
related to exit or disposal activities, but not the ultimate  amount
of  such expenses.  Existing accounting rules permit the accrual  of
such  costs for firmly committed plans which will be executed within
twelve months.  Accordingly, to the extent that the Company's  plans
to  early  retire J-41 turboprop aircraft extend beyond the  end  of
2003,  the  adoption of Statement No. 146 will cause the Company  to
record  costs associated with such individual early retired aircraft
in  the month they are retired, as opposed to the current accounting
treatment  of  taking a charge for these aircraft in the  period  in
which  the  retirement plan is initiated.  See Note 11 of  Notes  to
Condensed Consolidated Financial Statements.

          In  April  2002, the Financial Accounting Standards  Board
issued  SFAS No. 145, "Rescission of FASB Statements No. 4, 44,  and
64,  Amendment of FASB Statement No. 13, and Technical Corrections."
The  provisions  of  this standard, which primarily  relate  to  the
rescission of Statement 4, eliminate the requirement that gains  and
losses   from   the   extinguishment  of  debt  be   classified   as
extraordinary  items unless it can be considered unusual  in  nature
and  infrequent  in occurrence. These provisions  are  effective  in
fiscal  years  beginning after May 15, 2002. We will  implement  the
provisions of SFAS No. 145 beginning in fiscal year 2003. We do  not
expect  the statement to have a significant impact on our  financial
position or operating results.


          On  July 5, 2001, the Financial Accounting Standards Board
issued   Statement  of  Financial  Accounting  Standard   No.   141,
"Business  Combinations",  and  Statement  of  Financial  Accounting
Standard   No.   142,   "Goodwill  and  Other  Intangible   Assets".
Statement  No.  141  addresses the accounting  for  acquisitions  of
businesses and is effective for acquisitions occurring on  or  after
July  1,  2001.   Statement No. 142 includes  requirements  to  test
goodwill and indefinite life intangible assets for impairment rather
than  amortize them. Statement No. 142 will be effective for  fiscal
years  beginning  after  December 15,  2001.   The  Company  adopted
Statement   No.   142    in  the  first  quarter   of   2002.    The
implementation  of SFAS 141 and SFAS 142 has had minimal  impact  on
the  Company's  financial position or results  of  operations.   The
Company  anticipates  that SFAS 142 will continue  to  have  minimal
impact on the Company's financial position or results of operations.

          On  October  3,  2001, the Financial Accounting  Standards
Board  issued FASB Statement No. 144, "Accounting for the Impairment
or   Disposal  of  Long-Lived  Assets",  which  addresses  financial
accounting  and  reporting for the impairment or disposal  of  long-
lived assets.  Statement No. 144 supersedes FASB Statement No.  121,
"Accounting  for the Impairment of Long-Lived Assets and  for  Long-
Lived  Assets to Be Disposed Of" and APB Opinion No. 30,  "Reporting
the  Results  of Operations-Reporting the Effects of Disposal  of  a
Segment  of  a Business, and Extraordinary, Unusual and Infrequently
Occurring  Events  and Transactions".  Statement  No.  144  includes
requirements  related to the classification of assets  as  held  for
sale,  including  the  establishment of six criteria  that  must  be
satisfied  prior  to this classification.  Statement  No.  144  also
includes  guidance  related to the recognition  and  calculation  of
impairment  losses  for long-lived assets.   Statement  No.  144  is
effective  for fiscal years beginning after December 15,  2001.  The
Company  adopted  Statement No. 144 on  January  1,  2002.     Under
Statement  No.  144, the Company is required to  evaluate  the  book
value  of its long-lived assets as compared to estimated fair market
value.  The Company estimates that the fair market value of four  of
the  five owned J-41 aircraft will be in the aggregate $2.9  million
below book value when the aircraft are retired from the fleet.  As a
result,  the  Company  is  recognizing $2.9  million  in  additional
depreciation  charges related to such aircraft over their  remaining
estimated  service  lives.   In 2002, the  Company  recognized  $1.0
million in additional depreciation expense.




Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

          The  Company's principal market risk results from  changes
in interest rates.

          The  Company's  exposure to market  risk  associated  with
changes  in  interest rates relates to the Company's  commitment  to
acquire regional jets.  The Company has periodically entered into  a
series  of put and call contracts as an interest rate hedge designed
to  limit  its exposure to interest rate changes on the  anticipated
issuance of permanent financing relating to the delivery of the  CRJ
aircraft.  During 2000 and 2001, the Company settled eight  and  one
hedge  transactions, respectively, paying the counterparty  $379,000
in  2000  and paying the counterparty $722,000 in 2001.  At December
31,  2000  the Company had one interest rate hedge transaction  open
with  a  notional value of $8.5 million.  It settled on  January  3,
2001  resulting in the payment to the counterparty referenced above.
The Company had no interest rate hedge transactions in 2002.

          As  of March 15, 2003, the Company had firm commitments to
purchase  42 additional jet aircraft.  The Company relies  on  third
party  financing  to pay for the CRJ aircraft it  has  ordered.   In
order  to  realize the lowest lease rates, the Company has  utilized
leveraged  lease transactions.  In a leveraged lease,  there  is  an
equity  source for 20% - 30% of the purchase price and a debt source
for  the  remaining  70%  - 80%.  With the uncertainty  of  United's
future  and  industry conditions, the Company  has  been  unable  to
secure  equity  funding  for  any  of  its  remaining  firm  ordered
aircraft.   The  Company has been in discussions with  the  Economic
Development  Corporation  of  Canada ("EDC")  to  provide  the  debt
financing  for the ordered aircraft.  The Company has  a  contingent
commitment  from  EDC for debt financing of four aircraft  scheduled
for  delivery in April and May 2003.  As a result of the  bankruptcy
of  United,  the  obligation of the EDC to  fund  any  of  the  four
aircraft is contingent upon the Company obtaining a waiver from  the
EDC.   Since  the  United bankruptcy filing, the  Company  has  been
successful in obtaining such waivers.

          The Company does not have significant exposure to changing
interest rates on its long-term debt as the interest rates  on  such
debt are fixed.  The fair value of this fixed rate debt is sensitive
to changes in interest rates.  If market rates decline, the required
payments  will  exceed  those based on current  market  rates.   The
Company's  interest  rate on its $17.5 million  line  of  credit  is
dependent  on LIBOR plus a percentage ranging from .875%  to  1.375%
depending  on  the  Company's  fixed charges  coverage  ratio.   The
Company  does  not  hold  long-term interest  sensitive  assets  and
therefore  is  not  exposed to interest rate  fluctuations  for  its
assets.  The  Company  does  not purchase  or  hold  any  derivative
financial instruments for trading purposes.

Item 8.        Consolidated Financial Statements

     INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS


Independent Auditors' Report

Consolidated Balance Sheets as of December 31, 2001 and 2002

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

Consolidated  Statements of Stockholders' Equity  for  the
 years ended December 31, 2000, 2001 and 2002

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

Notes to Consolidated Financial Statements






                     Independent Auditors' Report


The Board of Directors and Stockholders
Atlantic Coast Airlines Holdings, Inc.:

We  have  audited  the accompanying consolidated balance  sheets  of
Atlantic  Coast  Airlines  Holdings, Inc.  and  subsidiaries  as  of
December  31, 2001 and 2002, and the related consolidated statements
of  operations, stockholders' equity, and cash flows for each of the
years  in  the  three-year period ended December  31,  2002.   These
consolidated  financial  statements are the  responsibility  of  the
Company's  management.  Our responsibility is to express an  opinion
on these consolidated financial statements based on our audits.

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

In  our  opinion, the consolidated financial statements referred  to
above  present  fairly,  in  all material  respects,  the  financial
position  of Atlantic Coast Airlines Holdings, Inc. and subsidiaries
as  of  December  31,  2001  and 2002,  and  the  results  of  their
operations and their cash flows for each of the years in the  three-
year  period ended December 31, 2002, in conformity with  accounting
principles generally accepted in the United States of America.



                                             KPMG LLP

McLean, VA
January 29, 2003, except as to Notes 1(f) and 13,
which are as of March 28, 2003



               Atlantic Coast Airlines Holdings, Inc.
                   Consolidated Balance Sheets


<TABLE>
<CAPTION>
 (In thousands, except for share data and par values)
December 31,                                            2001        2002
<S>                                                  <C>         <C>
Assets
 Current:
  Cash and cash equivalents                          $ 173,669   $  29,261
  Short term investments                                 7,300     213,360
  Accounts receivable, net                               8,933      13,870
  Expendable parts and fuel inventory,net               10,565      14,317
  Prepaid expenses and other current assets             19,365      38,610
  Deferred tax asset                                     6,806      16,114
     Total current assets                              226,638     325,532
 Property and equipment at cost, net of
  accumulated depreciation and amortization            171,528     195,413
 Intangible assets, net of accumulated amortization      1,941       1,873
 Debt issuance costs, net of accumulated amortization    3,415       3,117
 Aircraft deposits                                      44,810      44,810
 Other assets                                            4,093       4,393
     Total assets                                    $ 452,425   $ 575,138
Liabilities and Stockholders' Equity
 Current:
  Current portion of long-term debt                  $   4,639   $   4,900
  Current portion of capital lease obligations           1,359       1,449
  Accounts payable                                      21,750      22,475
  Accrued liabilities                                   55,570      84,377
  Accrued aircraft early retirement charge               4,661      14,700
     Total current liabilities                          87,979     127,901
 Long-term debt, less current portion                   58,441      53,540
 Capital lease obligations, less current portion         2,202         751
 Deferred tax liability                                 17,448      22,384
 Deferred credits, net                                  45,063      61,903
 Accrued aircraft early retirement charge,
  less current portion                                  19,226      31,768
 Other long-term liabilities                               766       1,523
     Total liabilities                                 231,125     299,770
 Stockholders' equity:
  Preferred Stock: $.02 par value per share;
   shares authorized 5,000,000; no shares issued or
   outstanding in 2001 or 2002                               -           -
  Common stock: $.02 par value per share;
   shares authorized 130,000,000; shares
   issued 49,229,202 in 2001 and 50,255,184
   in 2002; shares outstanding 44,182,870 in
   2001 and 45,195,115 in 2002                             985       1,005
  Class A common stock: nonvoting; no par
   value; $.02 stated value per share;
   shares authorized 6,000,000; no shares
   issued or outstanding                                     -           -
  Additional paid-in capital                           136,058     151,103
  Less:  Common stock in treasury, at cost,
   5,046,332 shares in 2001 and 5,060,069 in
   2002                                                (35,303)    (35,586)
  Retained earnings                                    119,560     158,846
     Total stockholders' equity                        221,300     275,368
     Total liabilities and stockholders' equity      $ 452,425   $ 575,138
     Commitments and Contingencies
</TABLE>
See accompanying notes to consolidated financial statements



               Atlantic Coast Airlines Holdings, Inc.
               Consolidated Statements of Operations


(In thousands, except for per share data)
<TABLE>
<CAPTION>
Years ended December 31,                          2000       2001       2002
<S>                                           <C>        <C>        <C>
Operating revenues:
 Passenger                                    $ 442,695  $ 577,604  $ 749,103
 Other                                            9,831      5,812     11,421
     Total operating revenues                   452,526    583,416    760,524
Operating expenses:
 Salaries and related costs                     107,831    164,446    203,341
 Aircraft fuel                                   64,433     88,308    115,801
 Aircraft maintenance and materials              36,750     48,478     72,233
 Aircraft rentals                                59,792     90,323    112,068
 Traffic commissions and related fees            56,623     15,589     19,994
 Facility rents and landing fees                 20,284     32,025     43,805
 Depreciation and amortization                   11,193     15,353     21,155
 Other                                           42,537     61,674     85,163
 Aircraft early retirement charge                28,996     23,026     24,331
     Total operating expenses                   428,439    539,222    697,891
Operating income                                 24,087     44,194     62,633
Other (expense) income:
 Interest expense                                (6,030)    (4,832)    (4,332)
 Interest income                                  5,033      7,500      4,628
 Government compensation                              -      9,710        944
 Other (expense) income, net                       (278)       263        552
     Total other (expense) income, net           (1,275)    12,641      1,792
Income before income tax provision               22,812     56,835     64,425
  Income tax provision                            7,657     22,513     25,139
Net income                                    $  15,155  $  34,322  $  39,286
Income per share:
 Basic:
     Net income                                    $.38       $.79       $.87
 Diluted:
     Net income                                    $.36       $.76       $.85

 Weighted average shares used in
  computation:
     Basic                                       40,150     43,434     45,047
     Diluted                                     43,638     45,210     46,019
</TABLE>
         See accompanying notes to consolidated financial statements.


                         Atlantic Coast Airlines Holdings, Inc.
                   Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
(In thousands, except for share data)

                         Common Stock  Additional   Treasury Stock
                         ------------   Paid-In     --------------    Retained
                        Shares   Amount Capital    Shares    Amount   Earnings
<S>                   <C>        <C>    <C>       <C>       <C>       <C>
Balance
 December 31, 1999    42,167,854 $  843 $ 88,704  4,911,332 $(34,106) $ 70,083
Exercise of common
 stock options         1,132,432     23    3,919          -        -         -
Tax benefit of stock
 option exercise               -      -    4,952          -        -         -
Purchase of treasury
 stock                         -      -        -    135,000   (1,197)        -
Conversion of debt     4,404,434     88   19,261          -        -         -
Amortization of
 deferred compensation         -      -      448          -        -         -
Net income                     -      -        -          -        -    15,155

Balance
 December 31, 2000    47,704,720 $  954 $117,284  5,046,332 $(35,303) $ 85,238
Exercise of common
 stock options         1,524,482     31    8,145          -        -         -
Tax benefit of stock
 option exercise               -      -    9,010          -        -         -
Amortization of
 deferred compensation         -      -    1,619          -        -         -
Net income                     -      -        -          -        -    34,322

Balance December 31
 December 31, 2001    49,229,202 $  985 $136,058  5,046,332 $(35,303) $119,560
 Exercise of common
 stock options         1,025,982     20    7,027          -        -         -
Tax benefit of stock
 option exercise               -      -    6,634          -        -         -
Purchase of treasury
 stock                         -      -        -     13,737     (283)        -
Amortization of
 deferred compensation         -      -    1,384          -        -         -
Net income                     -      -        -          -        -    39,286

Balance
 December 31, 2002    50,255,184 $1,005 $151,103  5,060,069 $(35,586) $158,846
</TABLE>
See accompanying notes to consolidated financial statements.


                         Atlantic Coast Airlines Holdings, Inc.
                   Consolidated Statements of Cash Flows


(In thousands)
<TABLE>
<CAPTION>

Years ended December 31,                         2000       2001       2002
<S>                                           <C>         <C>       <C>
Cash flows from operating activities:
 Net income                                   $ 15,155    $ 34,322  $ 39,286
 Adjustments to reconcile net income to
 net cash provided by operating activities:
  Depreciation and amortization                 11,544      16,179    22,031
  Amortization of intangibles and
   pre-operating costs                             183         193        17
  Provision for uncollectible
   accounts receivable                             503         227     2,619
  Provision for inventory obsolesence              237         578       596
  Amortization of deferred credits              (1,599)     (3,662)   (4,966)
  Amortization of debt issuance costs              297         293       304
  Capitalized interest, net                     (2,554)     (1,835)   (1,032)
  Deferred tax (benefit) provision              (4,648)      5,681    (4,372)
  Net loss on disposal of fixed assits               -         198       567
  Amortization of debt discount and
   finance costs                                    56          61       202
  Gain on early termination of
   capital lease                                    (3)          -         -
  Amortization of deferred compensation            469       1,619     1,384
  Other                                              -           -         -
 Changes in operating assets and
 liabilities:
  Accounts receivable                            6,564      25,148     2.455
  Expendable parts and fuel inventory           (2,310)     (4,956)   (4,348)
  Prepaid expenses and
   other current assets                         (1,866)     (5,376)  (19,403)
  Accounts payable                              22,300       9,275    12,016
  Accrued liabilities                           49,601      10,100    59,477
    Net cash provided by operating activities   93,929      88,045   106,833
Cash flows from investing activities:
 Purchases of property and equipment           (19,146)    (34,903)  (35,655)
 Proceeds from sales of fixed assets               585           -        28
 Purchases of short term investments           (74,705)    (76,715) (651,365)
 Maturities of short term investments           57,155     104,515   445,305
 Refund of deposits                              4,600      11,100     5,800
 Payments for aircraft and other deposits      (12,330)     (9,701)  (16,170)
    Net cash used in investing activities      (43,841)     (5,704) (252,057)
Cash flows from financing activities:
 Payments of long-term debt                     (4,758)     (4,344)   (4,640)
 Payments of capital lease obligations          (1,647)     (1,959)   (1,361)
 Proceeds from receipt of deferred
  credits and other                                173       4,286         -
 Deferred financing costs                         (381)       (948)       53
 Proceeds from exercise of stock options         3,942       8,176     7,047
 Purchase of treasury stock                     (1,197)          -      (283)
    Net cash (used in)
     provided by financing activities           (3,868)      5,211       816                Net cash (used in)
Net increase (decrease) in cash and
 cash equivalents                               46,220      87,522  (144,408)
Cash and cash equivalents, beginning
 of year                                        39,897      86,117   173,669
Cash and cash equivalents, end of year        $ 86,117    $173,669  $ 29,261
</TABLE>

See accompanying notes to consolidated financial statements.

1.Summary of
  Accounting
  Policies

                 (a)Basis of Presentation

                    The     accompanying    consolidated    financial
                    statements include the accounts of Atlantic Coast
                    Airlines  Holdings, Inc. ("ACAI") and its  wholly
                    owned   subsidiaries,  Atlantic  Coast   Airlines
                    ("ACA")  and Atlantic Coast Jet, Inc.  ("ACJet"),
                    (collectively,  the "Company"), pursuant  to  the
                    rules  and  regulations  of  the  Securities  and
                    Exchange  Commission.   On  July  1,  2001,  ACAI
                    combined  the operations of its ACJet  subsidiary
                    into  the operations of ACA and on July  9,  2002
                    converted Atlantic Coast Jet, Inc. into a limited
                    liability  corporation named Atlantic Coast  Jet,
                    LLC.   Neither Atlantic Coast Jet, LLC,  nor  its
                    predecessor,  ACJet, have had any activity  since
                    June  30,  2001.   All  significant  intercompany
                    accounts and transactions have been eliminated in
                    consolidation.    The   Company's   flights   are
                    operated  under  code  sharing  agreements   with
                    United   Airlines,  Inc.  ("United")  and   Delta
                    Airlines  ("Delta") and are identified as  United
                    Express  and Delta Connection flights in computer
                    reservation  systems.  As of December  31,  2002,
                    the Company provided scheduled air transportation
                    service  as  United  Express  for  passengers  to
                    destinations in the Eastern and Midwestern United
                    States.   The  Company  provides  scheduled   air
                    transportation  service as  Delta  Connection  to
                    various destinations in the Eastern United States
                    and  Canada.   The Company also operates  private
                    shuttle service and ad hoc charter service.

                 (b)Cash, Cash Equivalents and Short-Term Investments

                    The   Company  considers  investments   with   an
                    original  maturity of three months or  less  when
                    purchased  to  be cash equivalents.   Investments
                    with  an  original  maturity greater  than  three
                    months  and  less  than one year  are  considered
                    short-term investments. In addition, the  Company
                    holds   investments  in  tax-free,  variable-rate
                    Industrial  Revenue  Bonds  ("IRB")  and  General
                    Obligation    Bonds   ("GOB")   having    initial
                    maturities  up  to  30 years.   Pursuant  to  the
                    company's  investment policy,  these  bonds  must
                    have  a  long-term  rating  of  at  least  AA  by
                    Standard  & Poor's or Aa by Moodys to be eligible
                    investments.   The  Company's  investment  policy
                    also  has  issuer and geographical  concentration
                    limitations  on these investments.   These  bonds
                    are   often  backed  by  letters  of  credit   or
                    insurance  and can be sold back to the remarketer
                    at par on a weekly or monthly basis.

                    As  such,  the  Company considers  securities  of
                    this  type  to  be  short-term investments.   All
                    short-term  investments  are  considered  to   be
                    available  for sale.  Due to the short maturities
                    associated  with  the Company's investments,  the
                    amortized  cost approximates fair  market  value.
                    Accordingly,  no  adjustment  has  been  made  to
                    record unrealized holding gains and losses


                 (c)Airline Revenues

                    Passenger  revenues  are  recorded  as  operating
                    revenues  at the time transportation is provided.
                    Under  the Company's fee-per-departure  and  fee-
                    per-block  hour  agreements,  transportation   is
                    considered  provided  when the  flight  has  been
                    completed.    Under   the   proration   of   fare
                    agreement  in  effect  with  United  for  periods
                    prior    to    and    through   November    2000,
                    transportation was considered provided  when  the
                    passenger  flew.   All of the  passenger  tickets
                    used  by  the  Company's revenue  passengers  are
                    sold by other air carriers.

                    Under   the   proration-of-fare  arrangement   in
                    effect  with United until November of  2000,  the
                    Company  recognized  passenger  revenue  when   a
                    flight   was  completed.  This  required  various
                    estimates   about  passenger  fares   and   other
                    factors   that   were   subject   to   subsequent
                    adjustment and settlement with United  and  other
                    carriers.  Under the fee-per-departure  and  fee-
                    per-block hour contracts currently in place  with
                    United  and Delta, respectively, revenue  is  the
                    product  of  the agreed upon rate and the  number
                    of  departures  or  the  number  of  block  hours
                    flown.   Rates  are generally  agreed  to  on  an
                    annual basis and are subject to adjustments  upon
                    certain  specified  events, such  as  changes  in
                    cities  served or in aircraft utilization levels.
                    Until  rates are agreed to each year with  United
                    and   Delta  or  are  adjusted  in  response   to
                    specified events, the Company may be required  to
                    estimate  these  rates and record  revenue  based
                    upon  such estimates until final rates are agreed
                    to  by  either  United  or Delta.   In  addition,
                    certain  incentive  payments are  recorded  based
                    upon    the   Company's   assessment    of    its
                    satisfaction of operational performance  criteria
                    and are subject to review by United or Delta.



                    ACA   participates  in  United's   Mileage   Plus
                    frequent  flyer program and in the Delta SkyMiles
                    frequent  flyer  program.  The Company  does  not
                    accrue   for   incremental  costs   for   mileage
                    accumulation  or  redemption  relating  to  these
                    programs  because  the  Company  operates   under
                    agreements  with  United  and  Delta,   and   the
                    Company's  revenues under these  agreements   are
                    not  affected  by the number of miles  earned  by
                    its  passengers  or number of passengers  on  its
                    flights redeeming miles.

                 (d)Accounts and Notes Receivable

                    Accounts  receivable are stated net of allowances
                    for   uncollectible  accounts  of   approximately
                    $595,000  and $3.1 million at December  31,  2001
                    and  2002,  respectively.   Amounts  charged   to
                    expenses  for  uncollectible accounts  in   2000,
                    2001  and  2002 were $503,000, $227,000 and  $2.6
                    million   respectively.   Write-off  of  accounts
                    receivable  were $521,000, $386,000 and  $150,000
                    in   2000, 2001 and 2002, respectively.  Accounts
                    receivable  as  of  December 31,  2001  and  2002
                    included  ticket receivables of $1.3 million  and
                    $607,000  respectively,  and  approximately  $4.4
                    million and $4.3 million respectively, related to
                    manufacturers  credits  to  be  applied   towards
                    future   spare   parts  purchases  and   training
                    expenses.  The  increase in  the  allowances  for
                    uncollectible   accounts  in  2002   is   largely
                    attributed  to  the potential  write-off  of  net
                    amounts  due from United Airlines as a result  of
                    its  bankruptcy filing.  Based on  the  Company's
                    most  recent estimates, the Company believes that
                    United owed ACA approximately $8.0 million as  of
                    the date of United's bankruptcy filing for unpaid
                    pre-petition  obligations  relating   to   United
                    Express services prior to the filing and that, if
                    these pre-petition obligations are not ultimately
                    paid by United, ACA will have the right to offset
                    amounts ACA owes United for pre-petition services
                    totaling  approximately $5.4 million.  The  large
                    decrease  in  ticket receivables is  due  to  the
                    change  in  the UA Agreement from a proration-of-
                    fare    arrangement    to   a   fee-per-departure
                    arrangement as described herein.

                 (e)Concentrations of Credit Risk

                    Substantially  all  of  the  Company's  passenger
                    tickets are sold by other air carriers.  Prior to
                    the change from a proration of fare agreement  to
                    a  fee-per-departure agreement, the Company had a
                    significant   concentration   of   its   accounts
                    receivable  with  other  air  carriers  with   no
                    collateral.   At  December  31,  2001  and  2002,
                    accounts  receivable  from air  carriers  totaled
                    approximately $929,000 and $449,000 respectively.
                    Of  the total amount, approximately $240,000  and
                    $118,000   at   December  31,  2001   and   2002,
                    respectively,  were due from United.   Under  the
                    fee-per-departure   agreements,    the    Company
                    receives payment in advance from both United  and
                    Delta.   Historically, accounts receivable losses
                    have not been significant.


                 (f)Risks and Uncertainties


                    The   U.S.   airline   industry   continues    to
                    experience   depressed  demand  and   shifts   in
                    passenger  demand,  increased  insurance   costs,
                    changing  and  increased  government  regulations
                    and   tightened  credit  markets,  evidenced   by
                    higher   credit  spreads  and  reduced  capacity.
                    These   factors   are  directly   affecting   the
                    operations    and    financial    condition    of
                    participants   in  the  industry  including   the
                    Company,  its  code share partners, and  aircraft
                    manufacturers.   Although recent steps  taken  by
                    the   major   U.S.   carriers   to   return    to
                    profitability   have  generally   increased   the
                    importance  of  regional jets  to  the  industry,
                    future   implementation  will  depend  on  market
                    conditions    and   relative   cost   structures.
                    Aggressive   cost-cutting  by   major   airlines,
                    including  United's actions in  bankruptcy,  have
                    reduced the gap between trip costs for the  major
                    airlines'  smallest  jets  relative  to  regional
                    jets,   thus   putting  increased   pressure   on
                    regional  jet  operators to also  decrease  their
                    costs.  Moreover, the ongoing losses incurred  by
                    the  industry continue to raise substantial risks
                    and  uncertainties.   As discussed  below,  these
                    risks  may  impact the Company,  its  code  share
                    partners,  and  aircraft  manufacturers  in  ways
                    that  the  Company  is  not  currently  able   to
                    predict.

                    United Express:

                    The  Company's  United  Express  Agreements  ("UA
                    Agreements")  define  the Company's  relationship
                    with  United.  In November 2000, the Company  and
                    United  amended  and restated the UA  Agreements,
                    effectively  changing  from  a  revenue   sharing
                    arrangement  to a fee-per-departure  arrangement.
                    Under  the  UA  Agreements  in  effect  prior  to
                    November  2000,  the Company was responsible  for
                    scheduling,  marketing and pricing  its  flights,
                    in  coordination  with United's  operations,  and
                    paid  a  portion of the revenue it received  from
                    passenger  fares to United.  Under  the  fee-per-
                    departure  structure in effect as of December  1,
                    2000,  the  Company  operates a  flight  schedule
                    designated by United, for which United  pays  the
                    Company    an   agreed   amount   per   departure
                    regardless  of the number of passengers  carried,
                    with   the   Company  being   able   to   receive
                    additional    incentive   payments    based    on
                    operational  performance.   The  Company  thereby
                    assumes  the risks associated with operating  the
                    flight  schedule and United assumes the  risk  of
                    scheduling, marketing, and selling seats  to  the
                    traveling  public.   The restated  UA  Agreements
                    are  for  a  term of ten years.  The restated  UA
                    Agreements,  as amended, give ACA  the  authority
                    to  operate up to 121 regional jets in the United
                    Express  operation  if  delivered  by  April  30,
                    2004.  By operating under the UA Agreements,  the
                    Company  is  able  to  use United's  "UA"  flight
                    designator   code  to  identify   the   Company's
                    flights  and  fares in the major  airline  global
                    distribution    systems,    including    United's
                    "Apollo"  reservation  system,  and  to  use  the
                    United  Express logo and exterior aircraft  paint
                    schemes and uniforms similar to those of United.

                    Pursuant  to the restated UA Agreements,  United,
                    at   its  own  expense,  provides  a  number   of
                    additional   services  to  ACA.   These   include
                    customer    reservations,    customer    service,
                    pricing, scheduling, revenue accounting,  revenue
                    management,    frequent   flyer   administration,
                    advertising,   provision   of   ticket   handling
                    services  at  United's ticketing  locations,  and
                    provision  of airport signage and ground  support
                    services  at most of the airports where both  ACA
                    and  United operate flights.  Under the  restated
                    agreement,  the  Company remains responsible  for
                    fees  associated  with  the  global  distribution
                    systems.   The  UA  Agreements  do  not  prohibit
                    United  from  serving,  or  from  entering   into
                    agreements  with other airlines who would  serve,
                    routes  served  by the Company,  but  state  that
                    United  may terminate the UA Agreements  if  ACAI
                    or  ACA enter into a similar arrangement with any
                    other  carrier other than Delta or a  replacement
                    for   Delta   without  United's   prior   written
                    approval.   The UA Agreements limit  the  ability
                    of  ACAI and ACA to merge with another company or
                    dispose  of  certain assets or  aircraft  without
                    offering  United  a  right of  first  refusal  to
                    acquire  the Company or such assets or  aircraft,
                    and provide United the right to terminate the  UA
                    Agreements  if  ACAI or ACA  merge  with  or  are
                    controlled  or acquired by another  carrier.  The
                    UA  agreements provide United with the  right  to
                    assume  ACA's ownership or leasehold interest  in
                    certain   aircraft  in  the  event  ACA  breaches
                    specified  provisions of the  UA  agreements,  or
                    fails  to  meet specified performance  standards.
                    The  UA Agreements call for the resetting of fee-
                    per-departure  rates  annually   based   on   the
                    Company  and United's planned level of operations
                    for  the  upcoming year.  The Company and  United
                    are   in   discussions  regarding  the   fee-per-
                    departure rates to be utilized during 2003.

                    On   December   9,  2002,  UAL,  Inc.   and   its
                    subsidiaries,   including   United,   filed   for
                    protection under Chapter 11 of the United  States
                    Bankruptcy Code.  UAL is currently operating  and
                    managing its business and affairs as a debtor  in
                    possession.    As part of its first  day  filings
                    in  the  bankruptcy proceeding, United  requested
                    and  was  granted  a court order permitting,  but
                    not  requiring  it to continue to  honor  the  UA
                    Agreements  while  United is  in  bankruptcy.  As
                    such,  the  Company continues  to  operate  as  a
                    United   Express  carrier  pursuant  to  its   UA
                    agreement.   UAL, Inc. and its subsidiaries  have
                    been  granted  the exclusive right until  October
                    6,  2003,  to  file a plan of reorganization  and
                    the  exclusive right until December 5,  2003,  to
                    seek  acceptances of any such  plan.   The  Court
                    has  set  May  12, 2003 as the deadline  for  the
                    filing   of   proofs  of  claim,  although   this
                    deadline  does not apply to claims arising  under
                    executory  contracts  and unexpired  leases  that
                    have  yet  to  be rejected by UAL, Inc.  and  its
                    subsidiaries.   It is possible that  any  or  all
                    of  the foregoing deadlines may be extended.   In
                    bankruptcy, United also has the right  to  assume
                    or   reject  the  Company's  UA  Agreements,   as
                    described  in  Recent  Development  and   Outlook
                    below.   No  deadline has been set for United  to
                    assume or reject the Company's UA Agreements.


                    Delta Connection:

                    In  September  1999, the Company reached  a  ten-
                    year  agreement  with Delta to  operate  regional
                    jet  aircraft  as  part of the  Delta  Connection
                    program.   The  Company  began  Delta  Connection
                    revenue   service  on  August   1,   2000.    The
                    Company's   Delta   Connection   Agreement   ("DL
                    Agreement")  defines  the Company's  relationship
                    with  Delta. The Company is compensated by  Delta
                    on  a  fee-per-block hour basis.  Under the  fee-
                    per-block   hour  arrangement,  the  Company   is
                    contractually  obligated  to  operate  a   flight
                    schedule  designated by Delta,  for  which  Delta
                    pays  the Company an agreed amount per block hour
                    flown  regardless  of  the number  of  passengers
                    carried,   with  incentive  payments   based   on
                    operational  performance.   The  Company  thereby
                    assumes  the risks associated with operating  the
                    flight  schedule and Delta assumes the  risks  of
                    scheduling, marketing, and selling seats  to  the
                    traveling  public.  By operating as part  of  the
                    Delta Connection program, the Company is able  to
                    use  Delta's  "DL" flight designator to  identify
                    ACA's  flights  and fares in global  distribution
                    systems,     including    Delta's    "Deltamatic"
                    reservation   system,  and  to  use   the   Delta
                    Connection  logo  and  exterior  aircraft   paint
                    schemes and uniforms similar to those of Delta.

                    Pursuant  to  the  DL Agreement,  Delta,  at  its
                    expense,  provides a number of  support  services
                    to  ACA.   These  include customer  reservations,
                    customer   service,   ground  handling,   station
                    operations,  a  maintenance  hangar  facility  in
                    Cincinnati,    pricing,    scheduling,    revenue
                    accounting,  revenue management,  frequent  flyer
                    administration, advertising and other  passenger,
                    aircraft  and  traffic  servicing  functions   in
                    connection  with  the ACA operation.   Delta  may
                    terminate  the DL Agreement at any  time  if  the
                    Company   fails   to  meet  certain   performance
                    standards and, subject to certain rights  of  the
                    Company and by providing 180 days notice  to  the
                    Company,  may terminate without cause.  If  Delta
                    terminates  the  Delta  agreement  without  cause
                    prior  to  March 2010, the Company has the  right
                    to  put  all  or  some  of the  Delta  Connection
                    aircraft  to Delta.    The DL Agreement  requires
                    the  Company  to  obtain Delta's approval  if  it
                    chooses  to enter into a code-sharing arrangement
                    with  another  carrier other than  in  connection
                    with  termination of the UA Agreements,  to  list
                    its  flights under any other code, or to  operate
                    flights  for  any  other  carrier,  except   with
                    respect to such arrangements with United or  non-
                    U.S.  code-share partners of United or in certain
                    other  circumstances.  The DL Agreement does  not
                    prohibit  Delta  from serving, or  from  entering
                    into  agreements with other airlines  that  would
                    serve,  routes  flown  by the  Company.   The  DL
                    Agreement  also  restricts  the  ability  of  the
                    Company  to  dispose of aircraft subject  to  the
                    agreement  without  offering  Delta  a  right  of
                    first  refusal  to  acquire  such  aircraft,  and
                    provides  that Delta may extend or terminate  the
                    agreement  if,  among other things,  the  Company
                    merges  with  or  sells  its  assets  to  another
                    entity, is acquired by another entity or  if  any
                    person  acquires more than a specified percentage
                    of its stock.

                    In  January 2003, the Company and Delta agreed to
                    2003  rates,  consistent with  the  rate  setting
                    process contained in the DL Agreement.

                    At   December  31,  2002  74  Bombardier  CRJ200s
                    ("CRJs"),    2    Fairchild    Dornier    328JETs
                    ("328JET"), and 30 British Aerospace J-41's  ("J-
                    41's")  were  operated under the  United  Express
                    program  and 30 328JETs  were operated under  the
                    Delta  Connection program.  For  the  year  ended
                    December  31, 2002, 82% of consolidated passenger
                    revenues  were  derived from the  United  Express
                    program   and   18%  of  consolidated   passenger
                    revenues  were derived from the Delta  Connection
                    program.   Following  the  terrorist  attacks  on
                    September 11, 2001, the major U.S. airlines  have
                    suffered substantial losses and continued  losses
                    are   expected  until  passenger  traffic  levels
                    substantially recover.

                    Fairchild Dornier Purchase Agreement:

                    In  July 2002, Fairchild, the manufacturer of the
                    32-seat    328JET,   opened   formal   insolvency
                    proceedings  in  Germany.   Fairchild  had   been
                    operating   under  the  guidance   of   a   court
                    appointed  interim  trustee  since  April   2002.
                    Fairchild subsequently notified the Company  that
                    it  has rejected the Company's purchase agreement
                    covering  the  remaining 30 328JETs  the  Company
                    had   on   firm  order  for  its  United  Express
                    operation,  two  328JETs on firm  order  for  the
                    Company's Private Shuttle operation, and  options
                    to  acquire 81 additional aircraft.  At the  time
                    of  the opening of formal insolvency proceedings,
                    Fairchild  had  significant  current  and  future
                    obligations  to  the Company in  connection  with
                    the  Company's  order of 328JET aircraft.   These
                    include  obligations: to deliver 30  328JETs  the
                    Company  had on firm order for its United Express
                    operation,  two  328JETs on firm  order  for  the
                    Private  Shuttle  operation,  and  81  additional
                    option  328JETs  with certain financing  support;
                    to  pay  the  Company the difference between  the
                    sublease   payments,   if  any,   received   from
                    remarketing 26 J-41 Turboprop aircraft leased  by
                    the Company and the lease payment obligations  of
                    the  Company on those aircraft; to purchase  five
                    J-41  aircraft owned by the Company at their  net
                    book  value at the time of retirement; to  assume
                    certain  crew  training  costs;  and  to  provide
                    spares,   warranty,  engineering,   and   related
                    support.   In August 2002, the Company filed  its
                    claim  in  the  Fairchild insolvency  proceeding.
                    The  Fairchild insolvency trustee indicated  that
                    it  is unlikely that funds will be available  for
                    claims by unsecured creditors.  During the  first
                    quarter  2003, the trustee indicated that  he  is
                    finalizing  plans to sell portions of  the  prior
                    business including the production and support  of
                    328JETs.   The Company anticipates that long-term
                    product  support  would be  improved  should  the
                    businesses be successfully transitioned to a  new
                    owner,  but  does  not have any knowledge  as  to
                    whether  a sale of these businesses can  in  fact
                    be   completed  or  whether  production  can   be
                    resumed.   In  addition,  the  Company  does  not
                    anticipate that such a sale will have  an  effect
                    on  its  prior contractual commitments or on  its
                    bankruptcy claim.

                    The  Company believes it has a security  interest
                    in  Fairchild's equity interest in  32  delivered
                    328JETs,   under  which  its  right  to   proceed
                    against   this   collateral   will   apply   upon
                    termination of the applicable lease unless  other
                    arrangements  are made with the other  interested
                    parties.   The  Company's  balance  sheet  as  of
                    December 31, 2002 includes a receivable for  $1.2
                    million  with  respect  to deposits  placed  with
                    Fairchild  for undelivered aircraft. The  Company
                    holds   a  bond  from  an  independent  insurance
                    company   that  was  delivered  to  secure   this
                    deposit, and has made a demand for payment  under
                    this  bond.   Fairchild's insolvency trustee  has
                    made  a claim for the collateral posted with  the
                    insurance company, and the insurance company  has
                    withheld  payment  of the bond.   The  matter  is
                    presently with the U.S. bankruptcy court for  the
                    Western   District  of  Texas.    The   Company's
                    balance  sheet  as  of  December  31,  2002  also
                    includes  approximately  $1.0  million  due  from
                    Fairchild, resulting from payments made  or  owed
                    by  the  Company  to  third parties  for  certain
                    training and other matters that were to  be  paid
                    by   Fairchild.   At  the  time  of   Fairchild's
                    insolvency, the Company had outstanding  invoices
                    due   to   Fairchild  for  various  spare   parts
                    purchases.   The  Company  believes  it  has  the
                    right  to  offset  these  and  other  obligations
                    claimed  by Fairchild against amounts the Company
                    owes  Fairchild, to the extent permitted by  law.
                    Fairchild  disputes this right,  and  Fairchild's
                    wholly  owned  U.S. subsidiary, Dornier  Aviation
                    of   North  America  ("DANA"),  has  filed   suit
                    against  the  Company claiming amounts  allegedly
                    due   for   certain  spare  parts,  late  payment
                    charges,   and  consignment  inventory   carrying
                    charges.  DANA contends that although its  German
                    parent   company  may  not  have  fulfilled   its
                    contractual  obligations  to  the  Company,  DANA
                    sold  spare  parts to the Company independent  of
                    its  parent  company's activities and that  there
                    is  no right of offset.  The Company acknowledges
                    that  approximately  $8  million  in  outstanding
                    invoices  existed,  while  DANA  claims  that  an
                    additional  $3.6 million is due.  The  action  is
                    presently  in  the  discovery  stage  and  it  is
                    anticipated that a trial will be held during  the
                    summer  of  2003. To the extent the Company  does
                    not prevail in its claims, it may be required  to
                    take  a  charge for all or a portion of the  $1.0
                    million  due  from  Fairchild  for  third   party
                    expenses,   or  the  $1.2  million  in   deposits
                    secured by the bond.

                    The  Company's costs to operate its current fleet
                    of   33  328JETs  increased  in  2002,  and   may
                    continue to increase in the near future,  due  to
                    costs  incurred  for  maintenance  repairs   that
                    otherwise   would  have  been  covered   by   the
                    manufacturer's  warranty  and   the   costs   and
                    limited    availability    of    spare     parts.
                    Additionally,   as   a  result   of   Fairchild's
                    rejection  of the purchase contract, the  Company
                    does   not   expect  Fairchild  to  satisfy   its
                    obligation to pay the difference in the  sublease
                    payments,  if any, received from remarketing  the
                    26  J-41 aircraft leased by the Company on  those
                    aircraft  and the amount due under the  Company's
                    aircraft leases.

                    Collective Bargaining Agreements:

                    The  Company's  pilots  are  represented  by  the
                    Airline   Pilots  Association  ("ALPA"),   flight
                    attendants are represented by the Association  of
                    Flight    Attendants   ("AFA"),   and    aviation
                    maintenance   technicians  and   ground   service
                    equipment  mechanics  are  represented   by   the
                    Aircraft    Mechanics    Fraternal    Association
                    ("AMFA").

                    In  January  2001, the Company agreed  to  a  new
                    four-and-a-half   year   collective    bargaining
                    agreement   with   its  pilot  union   that   was
                    subsequently  ratified and  became  effective  on
                    February  9,  2001.   The  collective  bargaining
                    agreement  covers pilots flying  for  the  United
                    Express,    Delta   Connection,    and    charter
                    operations.   The  Company  has  approached   its
                    pilot  union  with the intent to  negotiate  wage
                    reductions   and   work  rule   changes   through
                    voluntary concessions, with the goal of  bringing
                    its  pilot  costs  in  line with  other  regional
                    carriers  that compete with the Company  for  its
                    existing and new business.

                    The  Company's  collective  bargaining  agreement
                    with  AMFA,  which  was ratified  in  June  1998,
                    became   amendable   in  June   2002,   and   its
                    collective  bargaining agreement  with  the  AFA,
                    which   was  ratified  in  October  1998,  became
                    amendable  in  October  2002.   The  Company  has
                    entered  into  negotiations  with  AMFA  and  AFA
                    regarding new agreements.

                    In  the  airline  industry, labor  relations  are
                    regulated  by  the  Railway  Labor  Act  ("RLA").
                    Under  the  RLA, collective bargaining agreements
                    do  not  expire  but, rather,  become  amendable.
                    The   wage   rates,  benefits  and   work   rules
                    contained   in   a  contract  that   has   become
                    amendable  remain  in  place  and  represent  the
                    status  quo  until a successor  agreement  is  in
                    place.   The parties may not resort to self-help,
                    such  as  strikes  or  lockouts,  until  the  RLA
                    processes  for  collective bargaining  have  been
                    exhausted.

                    Certain  of  the  Company's  unrepresented  labor
                    groups  are  from  time  to  time  approached  by
                    unions  seeking to represent them.  In 2002,  the
                    International   Association  of  Machinists   and
                    Aerospace  Workers ("IAM") attempted to  organize
                    the  Company's  customer service employees.   The
                    Company  was  informed by the National  Mediation
                    Board  ("NMB")  that the IAM did  not  receive  a
                    sufficient  showing  of  interest  from  customer
                    service  employees to merit holding an  election.
                    Because  of  this, the NMB will  not  accept  any
                    application   seeking   representation   of   the
                    Company's  customer  service employees  prior  to
                    March 2004.

                    In  February  2003, the Company was  informed  by
                    the  National Mediation Board that the  Transport
                    Workers  Union  ("TWU") was seeking  election  to
                    represent the Company's dispatch employees.   The
                    election will take place in early April.

                    The  Company is in the process of implementing  a
                    hiring   freeze,  wage  reductions  for  salaried
                    employees,  and  bonus plan  reductions  for  all
                    employees   as   a   part  of  its   cost-cutting
                    measures,  as  more  fully detailed  in  Note  13
                    Subsequent Events.

                    Aviation Insurance

                    Following  the  September 11  terrorist  attacks,
                    the   aviation  insurance  industry   imposed   a
                    worldwide  surcharge on aviation insurance  rates
                    as  well  as a reduction in coverage for  certain
                    war  risks.   In  response to  the  reduction  in
                    coverage,  the  Air  Transportation  Safety   and
                    System   Stabilization  Act  provides  U.S.   air
                    carriers with the option to purchase certain  war
                    risk  liability insurance from the United  States
                    government on an interim basis at rates that  are
                    more  favorable  than those  available  from  the
                    private  market.   Prior to  December  2002,  the
                    Company  purchased hull war risk coverage through
                    the   private  insurance  market,  and  purchased
                    liability    war   risk   coverage   through    a
                    combination    of   U.S.   government    provided
                    insurance  and  private insurance.   In  December
                    2002,  the  U.S.  government offered  to  provide
                    additional   war  risk  coverage  that   included
                    certain   risks  previously  covered  by  private
                    insurance.  The Company has purchased,  at  rates
                    that  are significantly lower than those  charged
                    by   private   insurance   carriers,   hull   and
                    liability  war  risk  coverage  from   the   U.S.
                    government   through  April  14,   2003.    These
                    savings  are  passed  through  to  the  Company's
                    major  airline partners pursuant to  its  current
                    UA  and  DL  Agreements.  The Company anticipates
                    that  it will renew the government insurance  for
                    as  long  as the coverage is available, and  then
                    obtain   this   coverage  through   the   private
                    insurance market.  Under the Company's UA and  DL
                    Agreements, the Company passes through  the  cost
                    of  insurance  to  its  partners.   However,  the
                    absence   of   insurance,  or   availability   at
                    excessive   rates,  could  affect  the  Company's
                    ability  to  operate.    The Company  anticipates
                    that  it  will  follow  industry  practices  with
                    respect to sources of insurance.


                 (g)Use of Estimates

                    The   preparation  of  financial  statements   in
                    accordance  with accounting principles  generally
                    accepted in the United States of America requires
                    management   to   make  certain   estimates   and
                    assumptions   regarding  valuation   of   assets,
                    recognition  of  liabilities for  costs  such  as
                    aircraft  maintenance, differences in  timing  of
                    air   traffic  billings  from  United  and  other
                    airlines, operating revenues and expenses  during
                    the  period  and disclosure of contingent  assets
                    and  liabilities at the date of the  consolidated
                    financial   statements.   Actual  results   could
                    differ from those estimated.

                 (h)Expendable Parts

                    Expendable parts and supplies are stated  at  the
                    weighted  average  cost, less  an  allowance  for
                    obsolescence of $1.2 million and $1.1 million  as
                    of  December  31,  2001 and  2002,  respectively.
                    Expendable  parts  and supplies  are  charged  to
                    expense  as  they are used.  Amounts  charged  to
                    costs and expenses for obsolescence in 2000, 2001
                    and  2002  were $237,000, $578,000 and  $596,000,
                    respectively.


                 (i)Property and Equipment

                    Property  and equipment, including rotable  spare
                    parts,   are  stated at cost.  Assets held  under
                    capital  leases  are initially  recorded  at  the
                    present   value  of  the  minimum  future   lease
                    payments.   Depreciation is  computed  using  the
                    straight-line  method over the  estimated  useful
                    lives of the related assets that range from  five
                    to  sixteen  and one half years.  Capital  leases
                    and leasehold improvements are amortized over the
                    shorter  of  the estimated life or the  remaining
                    term of the lease.

                    Amortization  of  capital  leases  and  leasehold
                    improvements is included in depreciation expense.

                    The Company periodically evaluates whether events
                    and  circumstances have occurred which may impact
                    the   remaining  estimated  useful  life  or  the
                    recoverability of the remaining carrying value of
                    its  long-lived assets, including  rotable  spare
                    parts.   If such events or circumstances were  to
                    indicate that the carrying amount of these assets
                    would  not  be  recoverable,  the  Company  would
                    estimate the future cash flows expected to result
                    from  the  use  of the assets and their  eventual
                    disposition.   If the sum of the expected  future
                    cash  flows  (undiscounted and  without  interest
                    charges) is less than the carrying amount of  the
                    asset, an impairment loss would be recognized  by
                    the Company.

                 (j)Pre-operating Costs

                    The   American  Institute  of  Certified   Public
                    Accountants  issued Statement  of  Position  98-5
                    ("SOP  98-5")  on accounting for start-up  costs,
                    including  pre-operating  costs  related  to  the
                    introduction  of  new fleet  types  by  airlines,
                    which  the  Company adopted effective January  1,
                    1999.

                    In  accordance with SOP 98-5, approximately  $5.6
                    million  of  pre-operating costs incurred  during
                    2000  for the start up of ACJet were expensed  as
                    incurred.

                 (k)Intangible Assets

                    Goodwill    of   approximately   $3.2    million,
                    representing  the excess of cost  over  the  fair
                    value  of  net assets acquired in the acquisition
                    of ACA, was previously amortized by the straight-
                    line method over twenty years. Costs incurred  to
                    acquire  slots  were  being  amortized   by   the
                    straight-line  method over  twenty  years.    The
                    primary  financial indicator used by the  Company
                    to  assess  the recoverability of its  intangible
                    assets  is  undiscounted future cash  flows  from
                    operations.  The amount of impairment, if any, is
                    measured  based  on projected future  cash  flows
                    using  a  discount rate reflecting the  Company's
                    average  cost of funds.  Accumulated amortization
                    of  intangible assets at December  31,  2001  and
                    2002 was $1.8 million.

                    In   accordance  with  Statement   of   Financial
                    Accounting  Standards No.  142,  (see  Note  17),
                    which  the Company adopted as of January 1, 2002,
                    the Company no longer recognizes amortization  of
                    its  goodwill and slots for 2002 and future years
                    but,  instead, evaluates these assets,  at  least
                    annually,  for  potential impairment  based  upon
                    fair value.

                 (l)Maintenance

                    The  Company  has  executed long term  agreements
                    with  the engine manufacturers and other  service
                    providers  covering repair and  overhaul  of  its
                    engines,  airframe and avionics  components,  and
                    landing  gear.   These  agreements  call  for  an
                    escalating rate per hour flown over the  life  of
                    the   agreement.    The   Company's   maintenance
                    accounting policy is to expense amounts based  on
                    the  current  rate  as  the aircraft  are  flown.
                    Prior   to   the  execution  of  these  long-term
                    maintenance agreements, the Company's maintenance
                    policy  was  a  combination of expensing  certain
                    events  as  incurred  and  accruing  for  certain
                    maintenance events at rates it estimated would be
                    sufficient  to  cover maintenance  cost  for  the
                    aircraft.

                    In   2000,  the  Company  executed  a  seven-year
                    engine   services  agreement   with   GE   Engine
                    Services, Inc. ("GE") covering the scheduled  and
                    unscheduled  repair  of ACA's  CRJ  jet  engines,
                    operated on the 43 CRJs already delivered  or  on
                    order   at  that  time  for  the  United  Express
                    operation.   This agreement was amended  in  July
                    2000   to   cover  23  additional  CRJ  aircraft,
                    bringing   the  total  number  of  CRJ   aircraft
                    covered  under  the agreement to 66.   Under  the
                    terms  of the agreement, the Company pays  a  set
                    dollar  amount per engine hour flown on a monthly
                    basis to GE and GE assumes the responsibility  to
                    repair   the   engines  when   required   at   no
                    additional  expense  to the Company,  subject  to
                    certain   exclusions.    The   Company's   future
                    maintenance expense on CRJ engines covered  under
                    the  agreement will escalate based on contractual
                    rate  increases, intended to match the timing  of
                    actual  maintenance events that are due  pursuant
                    to  the  terms.   The  Company expenses  aircraft
                    maintenance  based  upon the amount  paid  to  GE
                    under  the agreement, as engine hours are  flown.
                    To  date, the time between scheduled repair  work
                    has  been  longer  and  therefore  the  costs  of
                    maintaining  these engines has  been  lower  than
                    anticipated  at  the time the  original  contract
                    and  rates were agreed.  The Company has been  in
                    negotiations with GE to reduce the base  rate  in
                    the  agreement  to  reflect the actual  operating
                    performance of the engines, to add the  remaining
                    ordered aircraft to the agreement, and to  extend
                    the   term.    The  Company  has   disputed   the
                    appropriateness   of   certain   contract    rate
                    adjustments  and  in the fourth quarter  of  2001
                    sought  other  rate concessions from  GE  in  the
                    context  of negotiating with GE for an adjustment
                    in  rates and for an extension of the contract to
                    cover  a  longer term and to cover the  remaining
                    CRJ  aircraft  on  order.   Consistent  with  its
                    understanding  at the time, the  Company  reduced
                    the  amounts  it paid GE under the agreement  and
                    correspondingly reduced the amounts  it  expensed
                    for  engine  maintenance.  The Company  continues
                    to  negotiate with GE and other vendors in  order
                    to  reach  an  acceptable maintenance  agreement.
                    Accordingly, the Company currently is not  adding
                    engines  beyond  the  66  covered  aircraft   and
                    anticipates that the adjustments described  above
                    will   continue  to  be  disputed.   The  Company
                    recorded  $4.8  million, $1.3 million,  and  $1.3
                    million  to  maintenance expense in  the  second,
                    third,   and  fourth  quarters  of  2002,   which
                    represented  the  Company's estimate  of  amounts
                    that  GE may seek to collect under the agreement.
                    In  addition, the Company believes that, if it so
                    elects,  it  has the right to remove any  or  all
                    engines  from  this agreement at  any  time.   GE
                    does  not agree with the Company's interpretation
                    of  the  agreement.  In February 2003 the Company
                    provided  notice  of its desire  to  settle  this
                    issue  in arbitration.  GE subsequently presented
                    an  invoice  for amounts it believes  to  be  due
                    from  the Company, which amounts are $1.0 million
                    in  excess of the amounts accrued by the Company,
                    and  requested that the question of  the  amounts
                    due  also be settled by arbitration.  The parties
                    are  presently negotiating whether  an  agreement
                    can   be  reached  outside  of  arbitration,   as
                    provided  in the agreement.  If no agreement  can
                    be  reached and the arbitration is decided in the
                    Company's  favor,  the Company  will  remove  the
                    engines  from  the agreement and  will  negotiate
                    for  new  terms at market rates.  A  decision  in
                    GE's   favor  will  result  in  covered   engines
                    remaining  in  the agreement for the  balance  of
                    the term.

                    Effective  September 2001, the Company entered  a
                    sixteen  year  maintenance  agreement  with   Air
                    Canada  covering maintenance, repair and overhaul
                    services  for  airframe  components  on  its  CRJ
                    aircraft.   Under  the terms of  this  agreement,
                    the  Company  pays  a varying amount  per  flight
                    hour  each  month,  based  on  the  age  of   the
                    aircraft.   The Company expenses the amount  paid
                    to  Air  Canada based on the rates stipulated  in
                    the  agreement  and the hours flown  each  month.
                    In  February  2002, the Company  entered  into  a
                    five-year agreement with Air Canada covering  the
                    scheduled  airframe C-check overhaul of  its  CRJ
                    aircraft.  The Company expenses this cost as  the
                    overhaul is completed.

                    Effective January 2001, the Company entered  into
                    an  agreement  with  BAE Systems  Holdings,  Inc.
                    covering repair and overhaul of airframe  rotable
                    parts on the Company's J-41 aircraft through  the
                    remaining service life of the J-41 fleet.   Under
                    the  terms of this agreement, the Company pays  a
                    fixed  amount  per flight hour each  month.   The
                    Company  expenses the amount paid to BAE  Systems
                    Holdings,  Inc. based on the rates stipulated  in
                    the agreement and the hours flown each month.


                 (m)Deferred Credits

                    The  Company accounts for incentives provided  by
                    the  aircraft  manufacturers as deferred  credits
                    for leased aircraft.  These credits are amortized
                    on  a straight-line basis as a reduction to lease
                    expense  over  the respective  lease  term.   The
                    incentives  are  credits  that  may  be  used  to
                    purchase  spare parts, pay for training expenses,
                    or be applied against future rental payments.

                 (n)Income Taxes

                    The  Company accounts for income taxes using  the
                    asset and liability method.  Under the asset  and
                    liability   method,  deferred  tax   assets   and
                    liabilities  are recognized for  the  future  tax
                    consequences attributable to differences  between
                    the  financial  statement  carrying  amounts  for
                    existing   assets  and  liabilities   and   their
                    respective  tax bases.  Deferred tax  assets  and
                    liabilities are measured using enacted tax  rates
                    expected  to  apply to taxable income  in  future
                    years  in  which those temporary differences  are
                    expected to be recovered or settled.

                 (o)Stock-Based Compensation

                    The   Company   accounts  for   its   stock-based
                    compensation  plans  using  the  intrinsic  value
                    method  prescribed  under  Accounting  Principles
                    Board (APB) No. 25.  As such, the Company records
                    compensation expense for stock options and awards
                    only  if the exercise price is less than the fair
                    market  value  of  the stock on  the  measurement
                    date.

                    For  purposes  of  the pro forma  disclosures  of
                    compensation expense under Statement of Financial
                    Accounting  Standards  No. 123,  "Accounting  for
                    Stock-Based Compensation", the Company  uses  the
                    Black-Scholes option model to estimate  the  fair
                    value  of options. A risk-free interest  rate  of
                    6.0%,  4.5%  and  3.1% for 2000, 2001  and  2002,
                    respectively, a volatility rate of  65.0%,  73.4%
                    and  70.6% for 2000, 2001 and 2002, respectively,
                    with an expected life of 4.0 years for 2000,  4.0
                    years  for  2001  and  6.3 years  for  2002  were
                    assumed   in  estimating  the  fair  value.    No
                    dividend rate was assumed for any of the years.

                    The  following  summarizes the pro forma  effects
                    assuming  compensation for such awards  had  been
                    recorded based upon the estimated fair value. The
                    pro  forma information disclosed below  does  not
                    include  the  impact  of  awards  made  prior  to
                    January  1, 1995 (in thousands, except per  share
                    data):


<TABLE>
<CAPTION>
                                              2000     2001     2002
<S>                                         <C>      <C>      <C>
Net income, as reported                     $15,155  $34,322  $39,286
Less:  stock-based employee compensation
 expense, net of related tax effects         (3,146)  (5,284   (6,520)
Pro forma net income                        $12,009  $29,038  $32,766


Earnings per share:
 Basic - as reported                           $.38     $.79     $.87
 Basic - pro forma                             $.30     $.67     $.73
 Diluted - as reported                         $.36     $.76     $.85
 Diluted - pro forma                           $.28     $.64     $.71
</TABLE>






                 (p)Income Per Share

                    Basic  income per share is computed  by  dividing
                    net  income  by  the weighted average  number  of
                    common  shares outstanding.  Diluted  income  per
                    share  is computed by dividing net income by  the
                    weighted   average   number  of   common   shares
                    outstanding  and common stock equivalents,  which
                    consist   of  shares  subject  to  stock  options
                    computed  using  the treasury stock  method.   In
                    addition,  dilutive  convertible  securities  are
                    included  in  the denominator while  interest  on
                    convertible  debt, net of tax, is added  back  to
                    the  numerator.  On January 25, 2001, the Company
                    announced  a  2-for-1 common stock split  payable
                    as  a  stock  dividend on February  23,  2001  to
                    shareholders of record on February 9, 2001.   All
                    share  and income per share information has  been
                    adjusted  for all years presented to reflect  the
                    stock split.


                   A  reconciliation of the numerator and denominator
                   used  in  computing income per share is as follows
                   (in thousands, except per share amounts):
<TABLE>
<CAPTION>
                               2000            2001            2002
                          Basic  Diluted  Basic  Diluted  Basic  Diluted
<S>
Share calculation:      <C>     <C>     <C>     <C>     <C>     <C>
Average number of common
 shares outstanding      40,150  40,150  43,434  43,434  45,047  45,047
Incremental
 shares due to assumed
 exercise of options          -   1,616       -   1,776       -     972
Incremental shares
 due to assumed
 conversion of
 convertible debt             -   1,872       -       -       -       -
Weighted average common
 shares Outstanding      40,150  43,638  43,434  45,210  45,047  46,019

Adjustments to net
 income:
Net income              $15,155 $15,155 $34,322 $34,322 $39,286 $39,286
Interest expense on
 convertible debt,
 net of tax                   -     416       -       -       -       -
Net Income              $15,155 $15,571 $34,322 $34,322 $39,286 $39,286

Net income per share       $.38    $.36    $.79    $.76    $.87    $.85
</TABLE>


              (q)   Reclassifications

                    Certain   prior   years'  amounts  as   previously
                    reported have been reclassified to conform to  the
                    current year presentation.

              (r)   Interest Rate Hedges


                    The  Company has periodically used swaps to  hedge
                    the  effects  of  fluctuations in  interest  rates
                    associated   with   aircraft   financings.   These
                    transactions  meet  the requirements  for  current
                    hedge  accounting.   The  effective  portions   of
                    hedging  gains  and  losses  resulting  from   the
                    interest  rate  swap contracts are deferred  until
                    the  contracts are settled and then amortized over
                    the aircraft lease term or capitalized as part  of
                    acquisition  cost, if purchased,  and  depreciated
                    over  the  life of the aircraft.  The  ineffective
                    portions  of hedging gains and losses are recorded
                    as incurred.

              (s)   Segment Information

                    The    Company   has   adopted   SFAS   No.   131,
                    "Disclosures  About Segments of an Enterprise  and
                    Related   Information."   The  statement  requires
                    disclosures  related to components  of  a  company
                    for   which  separate  financial  information   is
                    available  that  is  evaluated  regularly   by   a
                    company's  chief  operating  decision   maker   in
                    deciding   the   allocation   of   resources   and
                    assessing  performance.   The Company  is  engaged
                    in   one  line  of  business,  the  scheduled  and
                    chartered  transportation  of  passengers,   which
                    constitutes nearly all of its operating revenues.

              (t)   Aircraft Deposits
                    As  part of the Company's purchase agreements for
                    certain   aircraft,  the  manufacturers   require
                    deposits to be placed and/or progress payments to
                    be  made in advance of the aircraft's delivery to
                    the    Company.     These    aircraft    deposits
                    are  considered  long term in nature due  to  the
                    fact  that  they are scheduled to be returned  in
                    years extending beyond 2003.


2.Property       Property and equipment consist of
  and              the following:
  Equipment

(in thousands)
<TABLE>
<CAPTION>
  December 31,                                      2001      2002
  <S>                                            <C>        <C>
  Owned aircraft and improvements                $ 92,562   $103,833
  Improvements to leased aircraft                   6,782      7,023
  Flight equipment, primarily rotable spare parts  82,372    105,907
  Maintenance and ground equipment                 10,971     13,849
  Computer hardware and software                   14,314     19,730
  Furniture and fixtures                            2,120      2,998
  Leasehold improvements                            7,887      8,870
                                                  217,008    262,210
  Less: Accumulated depreciation and amortizatio   45,480     66,797
                                                 $171,528   $195,413
</TABLE>

                In   1999,   the  Company  commenced  a  replacement
                project  of  its  computer software  systems.    The
                majority  of  these costs are being capitalized  and
                amortized  over seven years.  In 1999,  the  Company
                expensed    approximately   $400,000   related    to
                replacement software selection and capitalized  $2.3
                million  in  acquisition and  implementation  costs.
                In  2000, 2001 and 2002, the Company capitalized  an
                additional  $5.2  million,  $2.8  million  and  $3.5
                million  of  costs incurred, respectively,  bringing
                the   total  capitalized  costs  to  date  to  $13.8
                million.


3.  Accrued        Accrued liabilities consist of the
    Liabilities      following:
<TABLE>
<CAPTION>
                (in thousands)
                December 31,                         2001     2002
                <S>                               <C>      <C>
                Payroll and employee benefits     $ 20,385 $ 29,973
                Air traffic liability                2,534    2,398
                Landing fees                         2,313    2,994
                Property taxes                       1,205    2,907
                Aircraft rents                       6,765    3,712
                Passenger related expenses           6,075    5,179
                Maintenance costs                    1,266    8,933
                Fuel                                 4,595   11,455
                Other                               10,432   16,826
                                                  $ 55,570 $ 84,377
</TABLE>

4.  Debt        On  September 28, 2001, the Company entered into  an
                asset-based  lending agreement with  Wachovia  Bank,
                N.A.  that  initially provided the  Company  with  a
                line  of  credit  for  up to $25.0  million.   As  a
                result  of  the  Chapter  11  bankruptcy  filing  by
                United  Airlines, it was necessary for  the  Company
                to  request a covenant waiver.  As a result of these
                negotiations, the Company agreed to reduce the  size
                of  the  lending  agreement  to  $17.5  million  and
                revise  certain  covenants.   The  line  of  credit,
                which  will  expire on October 15, 2003, carries  an
                interest   rate  of  LIBOR  plus  .875%  to   1.375%
                depending  on  the Company's fixed charges  coverage
                ratio.   The  Company has pledged $15.7  million  of
                this  line  of credit as collateral for  letters  of
                credit  issued  on  behalf  of  the  Company  by   a
                financial   institution.   The  available  borrowing
                under the line of credit is limited to the value  of
                the  bond letter of credit on the Company's  Dulles,
                Virginia hangar facility plus 60% of the book  value
                of  certain rotable spare parts.  As of December 31,
                2002  the  value  of the collateral  supporting  the
                line  was  sufficient  for the amount  of  available
                credit  under  the line to be $17.5 million.   There
                have been no borrowings on the line of credit.   The
                amount available for borrowing at December 31,  2002
                was  $1.8  million  after  deducting  $15.7  million
                which has been pledged as collateral for letters  of
                credit.   The  Company intends to request  that  its
                current  line of credit be renewed upon  expiration.
                If  it  is unable to renew, the Company believes  it
                has  adequate liquidity to pledge cash as collateral
                for letters of credit.

                In  July  1997,  the Company issued  $57.5  million
                aggregate   principal  amount  of  7%   Convertible
                Subordinated Notes due July 1, 2004 ("the  Notes").
                The  Notes  were convertible into shares of  Common
                Stock unless previously redeemed or repurchased, at
                a  conversion price of $4.50 per share, subject  to
                certain  adjustments.  During  1998,  approximately
                $37.7  million  of  the notes were  converted  into
                approximately  8.5 million shares of common  stock.
                Interest  on the Notes was payable on April  1  and
                October  1  of  each year.  On May  15,  2000,  the
                Company   called   the  remaining   $19.8   million
                principal   amount   of  Notes   outstanding,   for
                redemption at 104% of face value effective July  3,
                2000.   The Noteholders elected to convert  all  of
                the  Notes into common stock and approximately  4.4
                million  shares  were issued in  exchange  for  the
                Notes  during the period May 25, 2000  to  June  6,
                2000,  resulting in an addition to paid in  capital
                of  approximately $19.8 million partially offset by
                a  reduction  of  approximately  $471,000  for  the
                unamortized  debt issuance costs  relating  to  the
                Notes in connection with their conversion.

                In  September 1997, approximately $112  million  of
                pass  through certificates were issued in a private
                placement  by  separate pass through trusts,  which
                purchased  with the proceeds, equipment notes  (the
                "Equipment  Notes") issued in connection  with  (i)
                leveraged lease transactions relating to four J-41s
                and  six  CRJs,  all of which were  leased  to  the
                Company  (the  "Leased  Aircraft"),  and  (ii)  the
                financing  of four J-41s owned by the Company  (the
                "Owned Aircraft").  The Equipment Notes issued with
                respect   to   the   Owned  Aircraft   are   direct
                obligations  of  ACA, guaranteed by  ACAI  and  are
                included  as  debt obligations in the  accompanying
                consolidated  financial statements.  The  Equipment
                Notes  issued  with respect to the Leased  Aircraft
                are not obligations of ACA or guaranteed by ACAI.

                Long-term debt consists of the
                following:
<TABLE>
<CAPTION>
      (in thousands)                                   2001       2002
      December 31,
      <S>                                           <C>        <C>
      Equipment Notes associated with Pass
         Through Trust Certificates, due
         January 1, 2008 and January 1,
         2010, principal payable annually through
         January 1, 2006 and semi-annually
         thereafter through maturity, interest
         payable semi-annually at 7.49%
         throughout term of notes, collateralized
         by four J-41 aircraft.                     $ 12,262   $ 11,147

      Notes payable to institutional lenders, due
         between October 23, 2010 and May 15,
         2015, principal payable semiannually
         with interest ranging from 5.65% to
         7.63% through maturity, collateralized
         by four CRJ aircraft.                        48,096     45,047

      Note payable to institutional lender, due
         October 2, 2006, principal payable
         semiannually with interest at 6.56%,
         collateralized by one J-41 aircraft.          2,722      2,246
      Total                                           63,080     58,440
      Less:  Current Portion                           4,639      4,900
                                                    $ 58,441   $ 53,540
</TABLE>

<TABLE>
<CAPTION>
                As of December 31, 2002, maturities of long-term
                debt are as follows:
                (in thousands)
                <S>                                     <C>
                2003                                    $ 4,900
                2004                                      5,153
                2005                                      6,019
                2006                                      5,936
                2007                                      5,542
                Thereafter                               30,890
                                                       $ 58,440
</TABLE>

                The    Company   has   various   financial   covenant
                requirements  associated with its debt  and  the   UA
                Agreement.   These covenants require the  Company  to
                meet   certain   financial  ratio  tests,   including
                tangible  net worth, net earnings, current ratio  and
                debt service levels.

5. Obligations  The    Company    leases   certain   equipment    for
   Under        noncancelable  terms of more than  one  year.   These
   Capital      lease  agreements  expire on  various  dates  through
   Leases       2004.   The  net  book value of the  equipment  under
                capital  leases  at December 31, 2001  and  2002  was
                $3.6  million  and  $2.2 million, respectively.   The
                leases  were capitalized at the present value of  the
                lease  payments.  The weighted average interest  rate
                for these leases is approximately 7.6 %.

                At December 31, 2002, the future minimum payments, by
                year  and in the aggregate, together with the present
                value  of  the  net  minimum lease payments,  are  as
                follows:
<TABLE>
<CAPTION>
                (in thousands)
                Year Ending December 31,
                 <S>                                         <C>
                 2003                                        $  1,565
                 2004                                             771
                 Total future minimum lease payments            2,336
                 Amount representing interest                     136
                 Present value of minimum lease payments        2,200
                 Less:  Current maturities                      1,449
                                                             $    751
</TABLE>


6.  Operating    Future  minimum  lease payments  under  noncancelable
    Leases       operating leases at December 31, 2002 are as follows:
<TABLE>
<CAPTION>
            (in thousands)
            Year ending December 31,   Aircraft     Other      Total
                <S>                  <C>         <C>       <C>
                2003                 $  144,705  $  8,864  $  153,569
                2004                    139,970     8,691     148,661
                2005                    138,633     8,464     147,097
                2006                    136,985     8,389     145,374
                2007                    130,102     8,059     138,161
                Thereafter            1,049,675    50,239   1,099,914
                 Total minimum
                  lease payments     $1,740,070   $92,706  $1,832,776
</TABLE>


                Certain  of the Company's leases require aircraft  to
                be  in  a  specified maintenance condition  at  lease
                termination or upon return of the aircraft.

                The Company's lease agreements generally provide that
                the  Company  pays taxes, maintenance, insurance  and
                other operating expenses applicable to leased assets.
                Operating  lease  expense was $70.8  million,  $107.4
                million  and  $133.6  million  for  the  years  ended
                December 31, 2000, 2001 and 2002, respectively.

7. Stockholders'Stock Splits
   Equity
                On  January 25, 2001, the Company announced a 2-for-1
                common  stock  split payable as a stock  dividend  on
                February  23,  2001  to  shareholders  of  record  on
                February 9, 2001.  The effect of this stock split  is
                reflected  in the accompanying financial  statements,
                calculation  of  income per share, and  stock  option
                table  presented below as of and for the years  ended
                December 31, 2000, 2001 and 2002.

                Stock Option Plans

                The  Company's 1992 Stock Option Plan has 3.0 million
                shares of which a majority had been granted by  1995.
                The  Company's  1995  Stock Incentive  Plan  has  5.0
                million shares of which the majority had been granted
                by   year-end   1999.    In   2000,   the   Company's
                shareholders approved a new 2000 Stock Incentive Plan
                for  4.0  million  shares.  These  three  shareholder
                approved  plans provide for the issuance of incentive
                stock  and  non qualified stock options  to  purchase
                common  stock  of  the Company and  restricted  stock
                awards  to  certain employees and  directors  of  the
                Company. In addition, during 2000 the Company's Board
                of  Directors approved stock option programs  for  an
                additional  2.4  million shares. The  Board  approved
                programs  provide  for the issuance of  non-qualified
                stock options to purchase common stock of the Company
                and  restricted  stock awards to  certain  employees.
                Executive  officers and directors of the Company  are
                not  eligible to participate in the Board  authorized
                stock option programs.  Under the plans and programs,
                options are granted by the Chief Executive Officer of
                the  Company  with  approval  from  the  Compensation
                Committee of the Board of Directors and vest  over  a
                period ranging from three to five years.


                A summary of the status of the Company's stock option
                plan awards, including restricted stock awards as  of
                December 31, 2000, 2001, and 2002 and changes  during
                the periods ending on those dates is presented below:
<TABLE>
<CAPTION>
                             2000              2001             2002
                                Weighted-         Weighted-        Weighted-
                                 average           average          average
                                exercise          exercise         exercise
                         Shares   price   Shares   price   Shares    price
<S>                    <C>       <C>    <C>       <C>    <C>        <C>
Options outstanding at
 beginning of year     4,445,642 $ 6.14 4,576,994 $ 8.57 5,194,638  $12.07
Granted                1,341,000 $12.51 2,202,826 $14.74   645,500  $12.19
Exercised              1,132,432 $ 3.46 1,524,482 $ 5.35 1,025,982  $ 6.87
Canceled                  77,216 $10.84    60,700 $14.90   103,325  $16.34
Options outstanding at
 end of year           4,576,994 $ 8.58 5,194,638 $12.07 4,710,831  $13.12

Options exercisable at
 year-end              2,132,823 $ 5.02 1,408,608 $ 7.88 1,694,566  $12.49
Options available for
 granting at year end  5,190,884        3,048,758        2,520,320

Weighted-average fair
 value of options
 granted during the
 year                      $7.45            $8.77            $8.05
</TABLE>


                The  Company  awarded  a total of  55,900  shares  of
                restricted  stock to certain employees  during  2001.
                These  shares  vest  over  four  years  and  have   a
                provision  for  accelerated vesting  tied  to  a  25%
                increase in any 2002 quarter's operating results over
                the  prior  year's quarter.  In the first quarter  of
                2002,   the  Company's  operating  results  met   the
                threshold  for accelerated vesting and as  a  result,
                these  restricted shares vested 100% in  April  2002.
                The  Company recognized $218,000 and $1.1 million  in
                compensation  expense in 2001 and 2002, respectively,
                due  to these restricted stock awards and as a result
                of  the  accelerated vesting schedule.   The  Company
                awarded a total of 67,000 shares of restricted  stock
                to  certain employees during 2000.  These shares vest
                over  three years and had a provision for accelerated
                vesting  if the Company's stock price appreciated  by
                25%  during  the first year of vesting.  In  February
                2001, the Company's stock price met the threshold for
                accelerated vesting and as a result, these restricted
                shares  vested  100%  in  April  2001.   The  Company
                recognized  $1.1 million and $78,000 in  compensation
                expense in 2001 and 2000, respectively, due to  these
                restricted  stock  awards and  as  a  result  of  the
                accelerated  vesting schedule.  In 1998, the  Company
                awarded a total of 200,000 shares of restricted stock
                to  certain employees.  These shares vest over  three
                to  five  years.   The  Company recognized  $301,000,
                $241,000  and  $235,000 in compensation  expense  for
                2000, 2001 and 2002 respectively, associated with the
                1998 restricted stock awards and $90,000, $57,000 and
                $54,000   for   2000,  2001  and  2002  respectively,
                associated with certain stock option awards.

                The  following  table  summarizes  information  about
                stock options outstanding at December 31, 2002:
<TABLE>
<CAPTION>
                         Options Outstanding         Options Exercisable
                               Weighted-
                     Number     average-   Weighted-            Weighted-
                  outstanding  remaining    average   Number     average
Range of exercise      at     contractual  exercise exercisable exercise
      price         12/31/02      life      price    12/31/02     price
                                (years)
<S>               <C>              <C>    <C>       <C>          <C>
$0.00 - $2.79        30,494        5.4      $ .18       2,800     $ 1.97
$2.80 - $5.59       128,776        3.9     $ 3.72     128,776     $ 3.72
$5.60 - $8.39        57,536        4.4     $ 6.35      57,536     $ 6.35
$8.40 - $11.19      959,566        8.0     $ 9.44     299,466     $ 9.77
$11.20 - $13.99   2,867,898        8.0    $ 13.50     929,427    $ 13.26
$14.00 - $16.79     287,286        7.1    $ 15.83     153,086    $ 15.75
$16.80 - $19.59      13,000        8.0    $ 17.70       5,250    $ 17.48
$19.60 - $22.39     175,250        8.2    $ 20.77      94,000    $ 20.52
$22.40 - $25.19     101,500        8.9    $ 23.37       4,125    $ 23.49
$25.20 - $27.99      89,525        8.2    $ 26.88      20,100    $ 26.90
                  4,710,831        7.8    $ 13.12   1,694,566    $ 12.49
</TABLE>



                Preferred Stock

                The  Board  of Directors of the Company is  authorized
                to  provide  for  the  issuance   by  the  Company  of
                preferred stock in one or more series and to  fix  the
                rights,   preferences,   privileges,   qualifications,
                limitations   and  restrictions  thereof,   including,
                without  limitation, dividend rights, dividend  rates,
                conversion  rights, voting rights, terms of redemption
                or   repurchase,  redemption  or  repurchase   prices,
                limitations   or  restrictions  thereon,   liquidation
                preferences and the number of shares constituting  any
                series or the designation of such series, without  any
                further vote or action by the stockholders.

8. Employee     Employee Stock Ownership Plan
   Benefit
   Plans        The  Company  established an Employee Stock  Ownership
                Plan   (the   "ESOP")   covering   substantially   all
                employees.  For each of the years 1992  through  1995,
                the  Company made contributions to the ESOP that  were
                used  in  part  to  make loan and  interest  payments.
                Shares  of  common  stock acquired by  the  ESOP  were
                allocated  to  each employee based on  the  employee's
                annual compensation.

                Effective June 1, 1998, the Board of Directors of the
                Company  voted to terminate the Plan.  On  March  15,
                1999,   the   Internal  Revenue  Service   issued   a
                determination letter notifying the Company  that  the
                termination of the Plan does not adversely affect the
                Plan's  qualification for federal tax purposes.  Upon
                termination  of the Plan, a participant becomes  100%
                vested  in his or her account. In preparing  for  the
                final distribution of ESOP shares to participants, it
                was  determined that a misallocation  of  shares  had
                occurred  in  years  1993 through 1997  resulting  in
                certain  eligible participants not receiving some  of
                their  entitled  shares. The Company contributed  the
                required  number  of additional shares  to  the  ESOP
                during the second and third quarters of 1999 when the
                final   calculation  was  determined  and  recognized
                approximately $250,000 in expense. The Company  filed
                a  request for a compliance statement under the IRS's
                Voluntary  Compliance Resolution  Program  to  obtain
                Service  approval of the Company's  response  to  the
                share  misallocation  issue. In September  1999,  the
                ESOP  trustee began distribution of the  ESOP  assets
                per   participant's  direction.  In  2000  and  2001,
                additional   ESOP   shares   were   distributed,   as
                participants  were located.  The ESOP  will  continue
                until  all participants are located and any remaining
                assets  are  properly  distributed.   The  number  of
                shares remaining in the Plan as of December 31,  2001
                and 2002 were 14,537 and 11,789, respectively.

                401K Plan

                Effective  January  1,  1992, the  Company  adopted  a
                401(k)   Plan  (the  "Plan").  The  Plan  covers   all
                employees    who    meet   the   Plan's    eligibility
                requirements.  Employees may elect a salary  reduction
                contribution   of   up   to  15%   of   their   annual
                compensation not to exceed the maximum amount  allowed
                by the Internal Revenue Service.

                Effective  October 1, 1994, the Plan was  amended  to
                require the Company to make contributions to the Plan
                for   eligible   pilots  in  exchange   for   certain
                concessions.   These contributions are in  excess  of
                any  discretionary contributions made for the  pilots
                under   the  original  terms  of  the  Plan.    These
                contributions are 100% vested and equal to 3% of  the
                first  $15,000 of each eligible pilot's  compensation
                plus  2%  of compensation in excess of $15,000.   The
                Plan  limits  the  Company's  contributions  for  the
                pilots  to  15% of the Company's adjusted net  income
                before  extraordinary items for such plan year.   The
                Company's  obligations  to  make  contributions  with
                respect  to  all  plan  years in  the  aggregate  are
                limited  to  $2.5 million.  The employer's  aggregate
                contribution as of December 31, 1999 was $2,500,000.

                The  Plan  allows  the Company to  make  discretionary
                matching   contributions  for   non-union   employees,
                mechanics,  and  certain flight attendants,  equal  to
                25%   of  salary  contributions  up  to  4%  of  total
                compensation.  Effective with the ratification of  the
                pilot's  new union agreement on February 9, 2001,  the
                Company's match for pilots is variable depending  upon
                the  pilot's  length  of  service  and  the  Company's
                operational   performance.   The  Company's   matching
                percentage  for  a pilot can range  from  two  to  six
                percent   of  eligible  compensation.   The  Company's
                matching contribution for all qualified employees,  if
                any,  vests  ratably  over five  years.   Contribution
                expense  was approximately $374,000, $3.9 million  and
                $1.6  million  for 2000, 2001 and 2002,  respectively.
                The  Company's  contribution expense in 2001  includes
                estimated   costs  of  $2.9  million  for   additional
                contributions to correct operational defects found  in
                the  Company's 401(k) plan in addition to  $1  million
                in discretionary matching contributions.

                Profit Sharing Programs

                The  Company  has profit sharing programs that  result
                in   periodic  payments  to  all  eligible  employees.
                Profit   sharing  compensation,  which  is  based   on
                attainment   of  certain  performance  and   financial
                goals,  was approximately $4.5 million, $6.3  million,
                and   $10.3   million   in  2000,   2001   and   2002,
                respectively.


 9.  Income Taxes


  The provision (benefit) for income taxes includes the following components:
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31,               2000            2001          2002
<S>                                <C>             <C>           <C>
Federal:
 Current                           $ 11,295        $ 15,392      $ 25,124
 Deferred                            (4,267)          4,437        (2,850)
Total federal provision               7,028          19,829        22,274
State:
 Current                              1,010           2,207         4,388
 Deferred                              (381)            477        (1,523)
Total state provision                   629           2,684         2,865
Total provision                    $  7,657        $ 22,513      $ 25,139
</TABLE>

                A   reconciliation  of  income  tax  expense  at   the
                applicable  federal statutory income tax rate  of  35%
                to the tax provision recorded is as follows:
<TABLE>
<CAPTION>
(in thousands)
Year ended December 31,               2000            2001          2002
<S>                                <C>             <C>           <C>
Income tax expense
 at statutory rate                 $  7,984        $ 19,892      $ 22,549
Increase (decrease)in tax
 expense due to:
  Permanent differences and other      (487)            877           711
  State income taxes, net
   of federal benefit                   160           1,744         1,879
Income tax expense                 $  7,657        $ 22,513      $ 25,139
</TABLE>

                Deferred    income   taxes   result   from   temporary
                differences which are the result of provisions of  the
                tax  laws that either require or permit certain  items
                of  income or expense to be reported for tax  purposes
                in  different  periods  than for  financial  reporting
                purposes.  The Company's 2000 effective tax  rate  was
                positively  affected  by the receipt  of  a  favorable
                ruling  request  which allowed the Company  to  obtain
                additional  tax credits to offset income tax  as  well
                as  the realization of certain tax benefits that  were
                previously reserved which together reduced income  tax
                expense by approximately $1.4 million.

                The  following is a summary of the Company's  deferred
                income taxes as of December 31, 2001 and 2002:

                 (in thousands)
                 December 31,
                 <TABLE>
                 <CAPTION>
                                                        2001        2002
                 <S>                               <C>          <C>
                 Deferred tax assets:
                   Engine maintenance accrual      $     411    $  3,212
                   Intangible assets                     569         333
                   Air traffic liability                 942         432
                   Allowance for bad debts               238       1,248
                   Deferred aircraft rent              2,363       2,824
                   Deferred credits                    2,241       2,431
                   Accrued compensation                1,557       1,964
                   Accrued aircraft early              9,555      18,587
                    retirement charge
                   Start up and organizational         1,702       1,227
                    costs
                   Other                               3,735       5,787
                     Total deferred tax assets        23,313      38,045

                 Deferred tax liabilities:
                   Depreciation and amortization     (32,717)    (43,277)
                   Accrued expenses and other         (1,238)     (1,038)
                     Total deferred tax liabilities  (33,955)    (44,315)
                 Net deferred income tax
                   (liabilities)                   $ (10,642)   $ (6,270)
                 </TABLE>

                 No  valuation  allowance was established  in  either
                 2001  or  2002, as the Company believes it  is  more
                 likely than not that the deferred tax assets will be
                 realized.



   10.           Aircraft
   Commitments
       and       As  of December 31, 2002, the Company had a total of
   Contingencies 47   Bombardier  CRJ200s  ("CRJs")  on  order   from
                 Bombardier,   Inc.,   and  held   options   for   80
                 additional   CRJs.    Of  the   47   firm   aircraft
                 deliveries,  35  are  scheduled  for  2003  and   an
                 additional  12 are scheduled for 2004.  The  Company
                 is  obligated  to  purchase and  finance  (including
                 leveraged  leases) the 47 firm ordered  aircraft  at
                 an approximate capital cost of $0.9 billion.

                 The  Company has generally financed its new aircraft
                 deliveries   through   leverage   lease   structures
                 involving    investments   by    institutional    or
                 industrial  investors who provide  debt  and  equity
                 capital  to  finance the Company's  aircraft.   This
                 type  of financing has been more difficult to obtain
                 since  September  11,  both in  terms  of  cost  and
                 sources of funds.  The Company has not been able  to
                 locate  equity funding, which provides approximately
                 20%  of  the  aircraft  acquisition  cost,  for  any
                 further    deliveries   and   had   obtained    debt
                 commitments  for  only  four  undelivered  aircraft.
                 The  availability  of  funding, particularly  equity
                 funding,  which provides approximately  20%  of  the
                 aircraft  acquisition cost, remains uncertain.   The
                 Company  may be forced to utilize its own funds  for
                 equity  investments  or to seek alternative  sources
                 of   funding   for   a  portion  of   its   aircraft
                 deliveries.  (See Note 13).


                 Deferred Compensation Arrangements

                 The  Company  has  committed to provide  its  senior
                 executive  officers  a  deferred  compensation  plan
                 which   utilizes   split   dollar   life   insurance
                 policies,  and for a certain officer,  a  make-whole
                 provision  for taxes, post retirement  salary  based
                 on  ending  salary,  and  post  retirement  benefits
                 based   on   benefits  similar  to  those  currently
                 provided  to the executive while actively  employed.
                 The  Company has estimated the cost of the  deferred
                 compensation  and  tax  gross  up  feature,   future
                 salary  and  future benefits and  is  accruing  this
                 cost  over  the remaining required service  time  of
                 the   executive  officer.   In  2002,  the   Company
                 expensed  approximately $1.8 million as the  current
                 year's  cost of these benefits.  The company expects
                 to   recognize  similar  costs  annually  over   the
                 remaining service life of the senior executives.

                 Training

                 The Company has entered into agreements with Pan  Am
                 International Flight Academy ("PAIFA"), which  allow
                 the Company to train CRJ, J-41 and 328JET pilots  at
                 PAIFA's  facility near Washington-Dulles.  In  2001,
                 PAIFA relocated its Washington-Dulles operations  to
                 a   new   training  facility  near   the   Company's
                 Washington-Dulles   headquarters.    This   facility
                 currently  houses  three CRJ  simulators,  a  328JET
                 simulator,  and a J-41 simulator.  The  Company  has
                 agreements to purchase an annual minimum  number  of
                 CRJ   simulator  training  hours  at  agreed   rates
                 through  2010.   The  Company's payment  obligations
                 for CRJ simulator usage over the remaining years  of
                 the agreements total approximately $10.1 million.

                 In 2001, PAIFA, CAE Schreiner and the Company
                 executed a simulator provision and service
                 agreement providing for 328JET training at the
                 PAIFA facility.  Under this agreement, the Company
                 has committed to purchase all of its 328JET
                 simulator time from PAIFA at agreed upon rates,
                 with no minimum number of simulator hours
                 guaranteed.

                 At  December 31, 2002, the Company's minimum payment
                 obligations under the PAIFA agreements for  the  CRJ
                 simulator is as follows:
                 <TABLE>
                 <CAPTION>
                 (in thousands)
                 Year ended December 31,
                 <S>                    <C>
                 2003                   $  1,371
                 2004                      1,391
                 2005                      1,178
                 2006                      1,195
                 2007                      1,213
                 Thereafter                3,748
                                        $ 10,096
                 </TABLE>



                 Derivative Financial Instruments

                 The  Company has periodically entered into a  series
                 of  put and call contracts as an interest rate hedge
                 designed  to  limit its exposure  to  interest  rate
                 changes  on  the anticipated issuance  of  permanent
                 financing  relating  to  the  delivery  of  the  CRJ
                 aircraft.    During  2000  and  2001,  the   Company
                 settled    eight   and   one   hedge   transactions,
                 respectively,  paying the counterparty  $379,000  in
                 2000  and paying the counterparty $722,000 in  2001.
                 At  December  31, 2000 the Company had one  interest
                 rate  hedge  transaction open with a notional  value
                 of  $8.5  million.  It settled on  January  3,  2001
                 resulting   in   the  payment  to  the  counterparty
                 referenced above.  The Company had no interest  rate
                 hedge transactions in 2002.

                 In  October 1999, the Company entered into commodity
                 swap   transactions  to  hedge  price   changes   on
                 approximately 13,300 barrels of crude oil per  month
                 for   the  period  April  to  June  2000,   and   on
                 approximately 23,300 barrels of crude oil per  month
                 for  the  period July through September  2000.   The
                 contracts provided for an average fixed price  equal
                 to  approximately  52.6 cents  per  gallon  for  the
                 second  quarter of 2000 and 51 cents per gallon  for
                 the third quarter of 2000.    Effective December  1,
                 2000,  under  the  United Air Lines  agreements  and
                 since  inception of the Delta Air Lines  agreements,
                 the  Company  no  longer bears the  risk  associated
                 with  fuel  price  volatility  for  its  operations.
                 Accordingly,  no  fuel  hedging  transactions   were
                 entered  for 2001 and 2002, and there were  no  fuel
                 hedging  transactions open as of December  31,  2001
                 and 2002.

11.  Aircraft    In  June 2002 the Company reconfirmed its commitment
     Early       to  United  to  remove its remaining J-41  turboprop
     Retirement  aircraft from service no later than April 30,  2004.
     Charge      The  Company has long-term lease commitments for 25
                 of  these  J-41  aircraft and owns 5 J-41  aircraft.
                 During  2002,  the Company recorded  aircraft  early
                 retirement operating charges totaling $24.3  million
                 ($14.6  million  net of income  tax)  for  the  non-
                 discounted value of future lease payments and  other
                 costs associated with the early retirement of 18  J-
                 41  turboprop  aircraft.  The  total  2002  aircraft
                 early  retirement charges reflects a charge of $21.5
                 million  ($12.9  million after tax)  in  the  fourth
                 quarter of 2002 relating to J-41 aircraft which  are
                 expected  to  be  retired by the fourth  quarter  of
                 2003,  a  $7.6  million charge ($4.5  million  after
                 tax)  in  the  third  quarter  of  2002  related  to
                 expected  scheduled  aircraft  retirements  by   the
                 third  quarter  of  2003, and a $4.8  million  ($2.8
                 million  after tax) credit to income in  the  second
                 quarter  of 2002 to reverse a portion of  its  prior
                 aircraft  early retirement charge of  $23.0  million
                 ($13.8  million after tax) recorded  in  the  fourth
                 quarter  of  2001.   The Company estimates  that  it
                 will  expense approximately $26.5 million  (pre-tax)
                 to  retire the remaining 8 leased J-41s as they  are
                 retired  during 2004.  The Company plans to actively
                 remarket  the  J-41s through leasing, subleasing  or
                 outright  sale  of  the  aircraft.   Any  of   these
                 arrangements involving leased aircraft  may  require
                 the  Company to make payments to the lessor to cover
                 shortfalls  between sale prices and lease stipulated
                 loss values.  Significant delays in the delivery  of
                 the  remaining  CRJs on firm order could  negatively
                 impact  the Company's ability to complete its  early
                 aircraft  retirement  plan for  the  J-41  turboprop
                 fleet.

                 In  the fourth quarter of 2001, the Company recorded
                 an   aircraft  early  retirement  charge  of   $23.5
                 million  ($14.0  million after tax)  for  the  early
                 retirement  of  nine  leased Jetstream-41  turboprop
                 aircraft  that  were  originally  scheduled  to   be
                 removed   from  service  prior  to  year-end   2002.
                 During  2000,  the Company recorded  aircraft  early
                 retirement operating charges totaling $29.0  million
                 ($17.4  million  net of income tax)  for  the  early
                 lease   termination  of  its  28   19-seat   British
                 Aerospace    Jetstream   32   ("J-32's")   turboprop
                 aircraft, which were removed from service  prior  to
                 December   31,   2001.   The  charge  included   the
                 estimated  cost of contractual obligations  to  meet
                 aircraft  return  conditions, as  well  as  a  lease
                 termination fee, which fee was calculated  including
                 such  factors as the discounted present  value  cost
                 of  future lease obligations from the planned out of
                 service  date  to  the lease termination  date,  and
                 miscellaneous costs and benefits of early return  to
                 the lessor.

                 As  a result of completing the J-32 early retirement
                 during  the  fourth  quarter of  2001,  the  Company
                 reversed  portions of this aircraft early retirement
                 charge    which    were    no    longer    required.
                 Approximately   $500,000  of  the   original   $29.0
                 million J-32 charge was reversed and recorded  as  a
                 reduction  to  the aircraft early retirement  charge
                 in  2001, and approximately $200,000 of this  charge
                 was  reversed  as a reduction to the aircraft  early
                 retirement charge in 2002.

                 As   of   December   31,  2002,  the   Company   had
                 liabilities  of  $46.5  million   accrued  for  J-41
                 aircraft  to be early retired.  This amount reflects
                 aircraft early retirement charges booked, offset  by
                 cash payments of $1.7 million for the retirement  of
                 one J-41 in 2002.






12 Air            On  September 22, 2001, President Bush signed  into
   Transportation law   the  Air  Transportation  Safety  and  System
   Safety and     Stabilization Act ("the Stabilization  Act").   The
   System         Stabilization   Act   provided   cash   grants   to
   Stabilization  commercial  air carriers as compensation  for:  (1)
   Act/Aviation   direct   losses   incurred   beginning   with   the
   and            terrorist  attacks  on  September  11,  2001  as  a
   Transportation result  of  any  FAA  mandated  ground  stop  order
   Security Act   issued by the Secretary of Transportation (and  for
                  any  subsequent  order which  continues  or  renews
                  such   a  stoppage),  and  (2)  incremental  losses
                  incurred during the period beginning September  11,
                  2001  and  ending  December 31, 2001  as  a  direct
                  result  of such attacks.  The Company was  entitled
                  to  receive  cash  grants under  these  provisions.
                  The  Company has complied with the requirements  of
                  the  Stabilization  Act  and  submitted  its  final
                  claim.   The  Company and the Airline Stabilization
                  Review   Team  have  reached  agreement  on   $10.7
                  million  as  the  total  amount  the  Company   was
                  eligible  to  receive as direct compensation  under
                  the  Stabilization Act.  The Company  has  received
                  payment  of  this amount from the government.   All
                  amounts  received  as government  compensation  are
                  subject   to   additional  audit  by  the   federal
                  government for the next five years.

                  In  addition  to the compensation described  above,
                  the   Stabilization   Act,  among   other   things,
                  provides  U.S.  air  carriers with  the  option  to
                  purchase certain war risk liability insurance  from
                  the  United  States government on an interim  basis
                  at   rates  that  are  more  favorable  than  those
                  available  from  the private market and  authorizes
                  the  federal  government to reimburse air  carriers
                  for  the  increased  cost  of  war  risk  insurance
                  premiums  for a period of thirty days as  a  result
                  of  the  terrorist attacks of September  11,  2001.
                  Prior to December 2002, the Company purchased  hull
                  war  risk  coverage  through the private  insurance
                  market,  and purchased liability war risk  coverage
                  through  a combination of U.S. government  provided
                  insurance  and  private  insurance.   In   December
                  2002,   the  U.S.  government  offered  to  provide
                  additional war risk coverage that included  certain
                  risks  previously  covered  by  private  insurance.
                  The  Company  anticipates that it  will  renew  the
                  government  insurance for as long as  the  coverage
                  is available.

                  On  November 19, 2001 the President signed into law
                  the  Aviation and Transportation Security Act  (the
                  "Security   Act").   The  Security   Act   requires
                  heightened  passenger, baggage and  cargo  security
                  measures  be  adopted as well as  enhanced  airport
                  security procedures.  The Security Act created  the
                  Transportation   Security  Administration   ("TSA")
                  that  has  taken  over from the  air  carriers  the
                  reasonability  for  conducting  the  screening   of
                  passengers  and  their baggage.   The  TSA  assumed
                  both   of   the   Company's   passenger   screening
                  contracts  on  February  17,  2002.   Air  carriers
                  continue   to  have  responsibility  for   aircraft
                  security, employee background checks, the  security
                  of   air  carrier  airport  facilities  and   other
                  security related functions.

                  The  activities of the TSA are to be funded in part
                  by   the  application  of  a  $2.50  per  passenger
                  enplanement security fee (subject to a  maximum  of
                  $5.00  per  one  way  trip)  and  payment  by   all
                  passenger  carriers  of a sum  not  exceeding  each
                  carrier's  passenger  and  baggage  screening  cost
                  incurred  in  calendar  year  2000.   The  TSA   is
                  required  to  deploy  federal air  marshals  on  an
                  increased   number  of  passenger   flights.    The
                  Security    Act    imposes   new   and    increased
                  requirements  for  air carrier employee  background
                  checks  and additional security training of  flight
                  and  cabin crew personnel.  The Security  Act  also
                  mandated   and  the  FAA  has  adopted  new   rules
                  requiring the strengthening of cockpit doors,  some
                  of  the costs of which are being reimbursed by  the
                  FAA.     The    Company   completed    Level    One
                  fortification if its cockpit doors on  all  of  its
                  aircraft  as of November 15, 2001, and began  level
                  two   fortifications  in  December  2002.   As   of
                  December  31,  2002, the Company has received  $1.9
                  million  in  reimbursements from the  FAA  for  the
                  mandated cockpit door modifications.  There  is  no
                  guarantee  that the Company will be  reimbursed  in
                  full  for  the  cost  of these modifications.   The
                  modifications  are expected to be completed  during
                  2003.    New   passenger  and   baggage   screening
                  requirements have caused disruptions  in  the  flow
                  of  passengers through airports and in  some  cases
                  delayed   airline  operations.   The  Company   may
                  experience  security-related  disruptions  in   the
                  future, including reduced passenger demand for  air
                  travel,  but  believes that its  exposure  to  such
                  disruptions  is  not  greater than  that  faced  by
                  other providers of regional air carrier services.


13.  Subsequent  In  anticipation of the start of a war with Iraq and
     Events      the  continued deterioration of the economics in the
                 airline  industry, the Company embarked  on  a  cost
                 reduction   program  with  the  goal   of   reducing
                 annualized operating expenses by approximately  10%.
                 As   part   of   this  program,  the   Company   has
                 implemented  a hiring freeze, has begun  furloughing
                 excess  pilots,  has  eliminated  or  reduced  bonus
                 programs,  and  has  implemented  salary  reductions
                 ranging  from 5% to 10% for all salaried  employees.
                 The  effect  of  the elimination of and  changes  in
                 bonus   plans  and  salaries  for  those  management
                 employees  paid  more  than  $30,000  per  year   is
                 anticipated to reduce cash compensation  by  between
                 10%  and 33% for salaried employees with the largest
                 reductions affecting the Company's officers.

                 On   December   9,   2002,   UAL,   Inc.   and   its
                 subsidiaries,    including   United,    filed    for
                 protection  under  Chapter 11 of the  United  States
                 Bankruptcy  Code.  UAL is currently operating  as  a
                 debtor  in possession and managing its business  and
                 affairs.   As part of its first day filings  in  the
                 bankruptcy  proceeding,  United  requested  and  was
                 granted   a   court   order  permitting,   but   not
                 requiring,   it  to  continue  to   honor   the   UA
                 Agreements while United is in bankruptcy. UAL,  Inc.
                 and   its   subsidiaries  have  been   granted   the
                 exclusive  right until October 6, 2003,  to  file  a
                 plan  of  reorganization  and  the  exclusive  right
                 until  December 5, 2003, to seek acceptances of  any
                 such  plan.  The Court has set May 12, 2003  as  the
                 deadline   for  the  filing  of  proofs  of   claim,
                 although  this  deadline does not  apply  to  claims
                 arising  under  executory  contracts  and  unexpired
                 leases  that  have yet to be rejected by  UAL,  Inc.
                 and  its subsidiaries.   It is possible that any  or
                 all of the foregoing deadlines may be extended.   In
                 bankruptcy  United also has the right to  assume  or
                 reject the UA Agreements.  No deadline has been  set
                 for United to assume or reject the UA Agreements.


                 The  Company  devotes a substantial portion  of  its
                 business to its operations with United, and  obtains
                 substantial  services from United in operating  that
                 business.   The  Company's  future  operations   are
                 substantially   dependent  on  United's   successful
                 emergence from bankruptcy and on the affirmation  or
                 renegotiation  of  the  Company's  UA  Agreement  by
                 United  on  acceptable terms, or  on  the  Company's
                 ability to successfully establish an alternative  to
                 the  United business and services.  If United  seeks
                 to  renegotiate  the terms of the UA  Agreements,  a
                 renegotiated  agreement is likely  to  be  on  terms
                 that  are less favorable to the Company with  regard
                 to  operating  margins and in other respects,  which
                 would   adversely  affect  the  Company's   earnings
                 and/or  growth  prospects.  There  is  no  assurance
                 that    United   will   successfully   emerge   from
                 bankruptcy, and United has said that liquidation  is
                 a  possibility.   If  United  does  not  succeed  in
                 reorganizing   its  operations  and  emerging   from
                 bankruptcy,  and  instead files  for  a  liquidation
                 under  Chapter  7 of the U.S. Bankruptcy  Code,  the
                 Company  would be faced with the prospect of  having
                 to  quickly  find another code share partner  or  to
                 develop  the airline related infrastructure  to  fly
                 as   an   independent  airline.   The  Company   has
                 commenced planning for these contingencies and  will
                 continue   to  pursue  actions  management  believes
                 appropriate  in  the  event that  United  liquidates
                 under  Chapter  7.   The  Company  anticipates  that
                 there  would  be  an interruption  in  its  services
                 during  a  transition period, the  length  of  which
                 would be dependent on several factors including  how
                 soon  United  liquidates.  There are  no  assurances
                 that  the Company will be able to find another  code
                 share   partner  or  be  able  to  compete   as   an
                 independent  airline, and any prolonged stoppage  of
                 flying   would  materially  adversely   affect   the
                 Company's   results  of  operations  and   financial
                 position.   United's bankruptcy  filing  may  affect
                 the  Company in other ways that it is not  currently
                 able to anticipate or plan for.


                 The UA Agreements call for the resetting of fee-per-
                 departure  rates annually based on the  Company  and
                 United's  planned  level  of  operations   for   the
                 upcoming  year.   The  Company  and  United  are  in
                 discussions  regarding  the fee-per-departure  rates
                 to  be  utilized  during  2003.   During  2002,  the
                 average  utilization  of  aircraft  in  the   United
                 Express  operation declined, and as  a  result,  the
                 2002  rates  do not adequately reflect decreases  in
                 the Company's aircraft utilization.  The Company  is
                 seeking  a rate adjustment for 2003 consistent  with
                 its  interpretation of the United Express Agreements
                 that   would,   among  other  things,  offset   this
                 reduction  in  utilization.   Until  new  rates  are
                 established  for 2003, United is paying the  Company
                 based  on  2002 rates and the Company  is  recording
                 its  revenue in 2003 using the rates established for
                 2002.   There  can be no assurance that the  Company
                 will   be   able  to  successfully  reset   fee-per-
                 departure rates.



                 The   Company   has  contractual  commitments   with
                 Bombardier  for  the  delivery  of  30  CRJs  to  be
                 delivered  during  the  remainder  of  2003  and  an
                 additional  12  CRJs to be delivered  by  April  30,
                 2004.    The   Company  has  generally   relied   on
                 leveraged  lease transactions involving  investments
                 by   institutional  or  industrial  investors   that
                 provide  debt  and  equity capital  to  finance  the
                 purchase  price  of  aircraft it  has  committed  to
                 purchase.  In a leveraged lease, there is an  equity
                 source  for 20% to 30% of the purchase price  and  a
                 debt  source  for the remaining 70% to  80%  of  the
                 purchase  price.  With the uncertainty  of  United's
                 future  and the continued deterioration in  industry
                 conditions,  the Company has been unable  to  secure
                 equity  funding on any terms for its remaining  firm
                 ordered   aircraft.    The  inability   to   finance
                 aircraft  that the Company desires to  purchase  may
                 affect  the Company's growth prospects.  The Company
                 has    a   contingent   commitment   from   Economic
                 Development Corporation of Canada ("EDC")  for  debt
                 financing of four aircraft originally scheduled  for
                 delivery  in March and April 2003.  As a  result  of
                 the   bankruptcy  of  United,  EDC's  debt   funding
                 obligation is contingent upon the Company  obtaining
                 a  waiver  from  EDC.  Since the  United  bankruptcy
                 filing  through the date of this filing, the Company
                 has  been successful in obtaining such waivers.  The
                 Company  has been in discussions with EDC to provide
                 debt  financing  for  additional  ordered  aircraft.
                 The  Company may not be able to obtain such  waivers
                 in  the  future and may not be able to  obtain  debt
                 financing  from EDC or others once the  current  EDC
                 financing  commitment is no longer  available.   The
                 Company  is considering the delay of future aircraft
                 deliveries  and  is  engaged  in  discussions   with
                 Bombardier   regarding   financing   and    aircraft
                 delivery  schedules.   If the Company is  unable  to
                 obtain  permanent  aircraft financing  at  the  time
                 that  it accepts any aircraft for delivery,  it  may
                 be  required to fund aircraft purchases from its own
                 cash  or  to  rely on temporary financing  from  the
                 aircraft  manufacturer.  The Company does  not  have
                 the  financial  resources to pay the  full  purchase
                 price for all of the aircraft that it currently  has
                 on  order.   If  the  Company  is  unable  to  delay
                 deliveries  or pay for aircraft on order, Bombardier
                 may assert a claim for damages.





                 After   evaluating   the  foregoing,   the   Company
                 believes  that its cash balances and cash flow  from
                 operations  together with operating lease  financing
                 and  other  available equipment  financing  will  be
                 sufficient  to  enable  the  Company  to  meet   its
                 liquidity  requirements for the remainder  of  2003.
                 However,  the  Company's  industry  environment   is
                 highly  uncertain and volatile at this time.  Future
                 events  could affect the industry or the Company  in
                 ways  that are not presently anticipated that  could
                 adversely affect the Company's liquidity.





   14.Litigation The Company  has two outstanding legal  matters with
                 respect  to the Fairchild insolvency.  The Company's
                 balance  sheet  as of December 31, 2002  includes  a
                 receivable   for  $1.2  million  with   respect   to
                 deposits   placed  with  Fairchild  for  undelivered
                 aircraft.   The  Company  holds  a  bond   from   an
                 independent insurance company that was delivered  to
                 secure  this  deposit, and has  made  a  demand  for
                 payment  under  this  bond.  Fairchild's  insolvency
                 trustee  has made a claim for the collateral  posted
                 with   the  insurance  company,  and  the  insurance
                 company  has  withheld payment  of  the  bond.   The
                 matter  is presently with the U.S. bankruptcy  court
                 for the Western District of Texas.

                 At  the  time of Fairchild's insolvency, the Company
                 had   outstanding  invoices  due  to  Fairchild  for
                 various   spare   parts  purchases.    The   Company
                 believes it has the right to offset these and  other
                 amounts  due  to  Fairchild against obligations  due
                 from  Fairchild  that will not  be  fulfilled  as  a
                 result   of   the   insolvency.    Fairchild-related
                 entities  dispute  this  right  of  offset  and   in
                 September  Fairchild's wholly owned U.S. subsidiary,
                 Dornier  Aviation of North America  ("DANA"),  filed
                 suit  against  the  Company  in  the  United  States
                 Bankruptcy   Court  for  the  Eastern  District   of
                 Virginia (Civil Action No. 02-08181-SSM) seeking  to
                 recover from the Company payments for certain  spare
                 parts,   late   payment  charges,  and   consignment
                 inventory  carrying  charges.   DANA  contends  that
                 although  its  German parent company  may  not  have
                 fulfilled   its  contractual  obligations   to   the
                 Company,  that DANA sold spare parts to the  Company
                 independent  of its parent company's activities  and
                 that  there  is  no  right of offset.   The  Company
                 acknowledges  that  approximately  $8   million   in
                 outstanding  invoices  existed,  while  DANA  claims
                 that  an additional $3.6 million is due.  The action
                 is  presently  in  the discovery  stage  and  it  is
                 anticipated  that a trial will be  held  during  the
                 summer of 2003.

                 The  Company  has  been named  a  defendant  in  two
                 lawsuits  arising from the terrorist  activities  of
                 September  11,  2001.   These  lawsuits,  known   as
                 Powell   v.   American  Airlines,   Atlantic   Coast
                 Airlines,  et  al.  (United States  District  Court,
                 Southern  District  of  New York,  case  No.  02  CV
                 10160),  and  Gallop v. American Airlines,  Atlantic
                 Coast  Airlines,  et  al.  (United  States  District
                 Court,  Southern District of New York,  case  no.  0
                 3CV  1016),  were  commenced  by  or  on  behalf  of
                 individuals  who  were  injured  or  killed  in  the
                 attack on the Pentagon through the hijacking  of  an
                 American  Airlines  aircraft originating  at  Dulles
                 Airport.   In each case, the plaintiffs  have  named
                 all  airlines operating at Dulles Airport  including
                 the  Company,  under  the theory  that  all  of  the
                 airlines  are  jointly responsible for  the  alleged
                 security    breaches   by   the   Dulles    security
                 contractor,  Argenbright Security.  The Company  has
                 joined   a   motion  filed  on  behalf  of  American
                 Airlines  and other defendants seeking dismissal  of
                 all  ground  victim  claims on the  basis  that  the
                 airline defendants do not owe a duty as a matter  of
                 law  to individuals injured or killed on the ground.
                 It  is anticipated that the judge will rule on  this
                 motion  during  the second quarter  2003.   If  this
                 ruling  is  not  favorable, the Company  anticipates
                 that  it will raise other defenses including a claim
                 that  it is not responsible for the incidents.   The
                 Company  anticipates  that  other  similar  lawsuits
                 could be filed on behalf of other victims.

                 From  time  to  time  claims are  made  against  the
                 Company with respect to activities arising from  its
                 airline   operations.    Typically   these   involve
                 injuries or damages incurred by passengers  and  are
                 considered  routine to the industry.   On  April  1,
                 2002,   one  of  the  Company's  insurers   on   its
                 comprehensive aviation liability policy  was  placed
                 into   rehabilitation   by   the   Commonwealth   of
                 Pennsylvania,  its  state of incorporation.   During
                 the   time   that   Legion  is  in   rehabilitation,
                 Pennsylvania has ordered that Legion pay no  claims,
                 expenses   or  other  items  of  debt  without   its
                 approval.   Consequently, the Company  now  directly
                 carries   the  corresponding  exposure  related   to
                 Legion's  contribution  percentage  for  payouts  of
                 claims  and expenses that Legion represented on  the
                 Company's insurance for the 1999, 2000, 2001 &  2002
                 policy  years.   Those contribution percentages  are
                 15%  for claims arising from incidents occurring  in
                 1999,  19%  for  2000, 15% for 2001,  and  8.5%  for
                 first  quarter  of 2002.  Legion  ceased  to  be  an
                 insurer  for  the Company as of April 1,  2002,  and
                 there  is  therefore  no exposure  with  respect  to
                 Legion  for  claims arising after  that  date.   The
                 insurance  held  by Legion on the  Company's  policy
                 was  fully covered by reinsurance, which means  that
                 other  carriers are contractually obligated to cover
                 all  claims  that are direct obligations of  Legion.
                 While  there  are  contractual  provisions  to   the
                 effect  that  reinsurance funds are to  be  directly
                 applied  against  the Company's liabilities,  it  is
                 anticipated that Legion's creditors will attempt  to
                 obtain  court authority to apply these funds against
                 Legion's other obligations.  It is anticipated  that
                 Legion  will  ultimately not be able  to  cover  its
                 obligations to the Company except to the  extent  of
                 recovery    through   reinsurance.    If    Legion's
                 creditors  are  able  to apply  reinsurance  against
                 Legion's  general obligations, the Company  will  be
                 underinsured  for  these claims at  the  percentages
                 set  forth above.  This underinsurance would include
                 the  September  11 related lawsuits described  above
                 and  any  other  similar lawsuits that  are  brought
                 against   the  Company.   The  Company  has  accrued
                 reserves  of approximately $250,000 for  the  likely
                 exposure on claims known to date.  No reserves  have
                 been accrued for the September 11 related claims.

                 The Company is a party to routine litigation and  to
                 FAA  civil  action  proceedings, all  of  which  are
                 viewed  to be incidental to its business,  and  none
                 of  which the Company believes are likely to have  a
                 material  effect on the Company's financial position
                 or the results of its operations.


   15. Financial Statement  of  Financial  Accounting  Standards  No.
     Instruments 107,   "Disclosure  of  Fair  Value   of   Financial
                 Instruments"  requires the disclosure  of  the  fair
                 value   of  financial  instruments.  Some   of   the
                 information   used  to  determine  fair   value   is
                 subjective  and  judgmental  in  nature;  therefore,
                 fair    value   estimates,   especially   for   less
                 marketable   securities,  may  vary.   The   amounts
                 actually   realized  or  paid  upon  settlement   or
                 maturity could be significantly different.

                 Unless quoted market price indicates otherwise,  the
                 fair  values  of  cash and cash equivalents,  short-
                 term  investments, accounts receivable and  accounts
                 payable generally approximate market because of  the
                 short  maturity  of these instruments.  The  Company
                 has  estimated  the  fair value of  long  term  debt
                 based  on  quoted market prices, when available,  or
                 by  discounted  expected  future  cash  flows  using
                 current  rates offered to the Company for debt  with
                 similar maturities.

                 The estimated fair values of the Company's financial
                 instruments,  none  of  which are  held for  trading
                 purposes, are summarized as follows
                 (brackets denote liability):
                 <TABLE>
                 <CAPTION>
                 (in thousands)     December 31, 2001  December 31, 2002
                                    Carrying Carrying Carrying Estimated
                                     Amount   Amount   Amount  Fair Value
                 <S>                <C>      <C>       <C>      <C>
                 Cash and cash
                   equivalents      $173,669 $173,669  $29,261  $29,261
                 Short-term
                   investments         7,300    7,300  213,360  213,360
                 Accounts receivable   8,933    8,933   20,505   20,505
                 Accounts payable    (21,750) (21,750) (29,110) (29,110)
                 Long-term debt      (63,080) (63,856) (58,440) (63,265)
                 </TABLE>

                 See note 10 for information regarding the fair value of
                 derivative financial instruments.


16.Supplemental  Supplemental disclosures of cash flow information:
   Cash Flow     <TABLE>
   Information   <CAPTION>
                                            Year ended December 31,
                                                (in thousands)
                                            2000      2001     2002

                  <S>                   <C>        <C>      <C>
                  Cash paid during the
                     period for:
                        - Interest      $ 6,410    $ 4,811  $ 4,382
                        - Income taxes    8,944      7,837   24,353
                  </TABLE>


                  The  following  non  cash investing  and  financial
                  activities took place in 2000, 2001 and 2002:

                  In  2000,  the Company capitalized $2.7 million  in
                  interest  related to $46.4 million on deposit  with
                  aircraft manufacturers.

                  In  2000,  the  remaining $19.8  million  principal
                  amount  of  Notes outstanding were  converted  into
                  common  stock of the Company resulting in  a  $19.3
                  million increase to paid in capital.

                  In  2001,  the Company capitalized $2.6 million  in
                  interest  related to $44.8 million on deposit  with
                  aircraft manufacturers.

                  In  2002, the Company capitalized $1.4 million (net
                  of  a reversal $1.1 million of capitalized interest
                  in  connection  with  the  cancellation  of  future
                  deliveries of 328JETs due to the Fairchild  Dornier
                  insolvency) in interest related to $44.8 million on
                  deposit with aircraft manufacturers.

   17.  Recent    In  January 2003, the Financial Accounting Standards
   Accounting     Board    issued   FASB   Interpretation   No.    46,
   Pronouncements "Consolidation  of Variable Interest  Entities,"  an
                  interpretation of Accounting Research  Bulletin  No.
                  51,   "Consolidated   Financial  Statements."   This
                  interpretation  requires an existing  unconsolidated
                  variable interest entity to be consolidated by their
                  primary   beneficiary  if  the   entity   does   not
                  effectively disperse risk among all parties involved
                  or  if other parties do not have significant capital
                  to finance activities without subordinated financial
                  support  from the primary beneficiary.  The  primary
                  beneficiary is the party that absorbs a majority  of
                  the entity's expected losses, receives a majority of
                  its  expected residual returns, or both as a  result
                  of   holding  variable  interests,  which  are   the
                  ownership, contractual, or other pecuniary interests
                  in  an  entity.  We do not expect the  statement  to
                  have  a significant impact on our financial position
                  or operating results.


                  In  December  2002, the FASB issued  SFAS  No.  148,
                  "Accounting    for   Stock-Based   Compensation    -
                  Transition and Disclosure," which amended  SFAS  No.
                  123  "Accounting for Stock-Based Compensation."  The
                  new   standard  provides  alternative   methods   of
                  transition for a voluntary change to the fair  value
                  based  method of accounting for stock-based employee
                  compensation. Additionally, the statement amends the
                  disclosure  requirements of SFAS No. 123 to  require
                  prominent  disclosures  in the  annual  and  interim
                  financial  statements about the method of accounting
                  for stock-based employee compensation and the effect
                  of   the  method  used  on  reported  results.  This
                  statement is effective for financial statements  for
                  fiscal  years  ending after December  15,  2002.  In
                  compliance  with  SFAS  No.  148,  the  Company  has
                  elected  to  continue to follow the intrinsic  value
                  method  in  accounting for its stock-based  employee
                  compensation  arrangement as defined  by  Accounting
                  Principles  Board Opinion ("APB") No. 25, Accounting
                  for  Stock  Issued  to Employee, and  has  made  the
                  applicable disclosures in Note 1 to the consolidated
                  financial statements.

                  In November 2002, the Financial Accounting Standards
                  Board    issued   FASB   Interpretation   No.    45,
                  "Guarantor's  Accounting and Disclosure Requirements
                  for  Guarantees,  Including Indirect  Guarantees  of
                  Indebtedness of Others," an interpretation  of  FASB
                  Statements No. 5, 57 and 107 and rescission of  FASB
                  Interpretation No. 34. This interpretation  outlines
                  disclosure  requirements in a guarantor's  financial
                  statements   relating  to  any   obligations   under
                  guarantees for which it may have potential  risk  or
                  liability,   as  well  as  clarifies  a  guarantor's
                  requirement  to recognize a liability for  the  fair
                  value,  at  the  inception of the guarantee,  of  an
                  obligation   under  that  guarantee.   The   initial
                  recognition  and  measurement  provisions  of   this
                  interpretation  are effective for guarantees  issued
                  or   modified  after  December  31,  2002  and   the
                  disclosure requirements are effective for  financial
                  statements of interim or annual periods ending after
                  December 15, 2002. As of March 1, 2003, we have  not
                  provided   any   guarantees   that   would   require
                  recognition or disclosure as liabilities under  this
                  interpretation.

                  On July 30, 2002, the Financial Accounting Standards
                  Board issued FASB Statement No. 146, "Accounting for
                  Costs  Associated with Exit or Disposal Activities",
                  which  is  effective for exit or disposal activities
                  that   are   initiated  after  December  31,   2002.
                  Statement No. 146 requires that liabilities for  the
                  costs associated with exit or disposal activities be
                  recognized when the liabilities are incurred, rather
                  than  when  an entity commits to an exit  plan.  The
                  Company  plans to adopt Statement No. 146 on January
                  1,  2003.  The new rules will change the  timing  of
                  liability and expense recognition related to exit or
                  disposal activities, but not the ultimate amount  of
                  such expenses.  Existing accounting rules permit the
                  accrual  of  such  costs for firmly committed  plans
                  which   will  be  executed  within  twelve   months.
                  Accordingly, to the extent that the Company's  plans
                  to  early  retire  J-41  turboprop  aircraft  extend
                  beyond  the  end of 2003, the adoption of  Statement
                  No.  146  will  cause the Company  to  record  costs
                  associated   with  such  individual  early   retired
                  aircraft  in the month they are retired, as  opposed
                  to  the  current accounting treatment  of  taking  a
                  charge for these aircraft in the period in which the
                  retirement plan is initiated.  See Note 11 of  Notes
                  to Condensed Consolidated Financial Statements.

                  On  July 5, 2001, the Financial Accounting Standards
                  Board   issued  Statement  of  Financial  Accounting
                  Standard  No.  141,  "Business  Combinations",   and
                  Statement of Financial Accounting Standard No.  142,
                  "Goodwill  and Other Intangible Assets".   Statement
                  No. 141 addresses the accounting for acquisitions of
                  businesses   and   is  effective  for   acquisitions
                  occurring  on or after July 1, 2001.  Statement  No.
                  142  includes  requirements  to  test  goodwill  and
                  indefinite  life  intangible assets  for  impairment
                  rather than amortize them. Statement No. 142 will be
                  effective for fiscal years beginning after  December
                  15, 2001.  The Company adopted Statement No. 142  in
                  the  first  quarter  of 2002. The implementation  of
                  SFAS 141 and SFAS 142 has had minimal impact on  the
                  Company's   financial   position   or   results   of
                  operations.  The Company anticipates that  SFAS  142
                  will   continue  to  have  minimal  impact  on   the
                  Company's   financial   position   or   results   of
                  operations.

                  On   October   3,  2001,  the  Financial  Accounting
                  Standards  Board  issued  FASB  Statement  No.  144,
                  "Accounting for the Impairment or Disposal of  Long-
                  Lived  Assets", which addresses financial accounting
                  and reporting for the impairment or disposal of long-
                  lived  assets.   Statement No. 144  supersedes  FASB
                  Statement No. 121, "Accounting for the Impairment of
                  Long-Lived  Assets and for Long-Lived Assets  to  Be
                  Disposed Of" and APB Opinion No. 30, "Reporting  the
                  Results  of  Operations-Reporting  the  Effects   of
                  Disposal   of   a   Segment  of  a   Business,   and
                  Extraordinary,  Unusual  and Infrequently  Occurring
                  Events   and  Transactions".   Statement   No.   144
                  includes  requirements related to the classification
                  of   assets   as   held  for  sale,  including   the
                  establishment of six criteria that must be satisfied
                  prior  to  this classification.  Statement  No.  144
                  also  includes  guidance related to the  recognition
                  and  calculation of impairment losses for long-lived
                  assets.   Statement No. 144 is effective for  fiscal
                  years beginning after December 15, 2001. The Company
                  adopted  Statement  No.  144  on  January  1,  2002.
                  Under Statement No. 144, the Company is required  to
                  evaluate the book value of its long-lived assets  as
                  compared  to  estimated  fair  market  value.    The
                  Company estimates that the fair market value of four
                  of  the  five  owned J-41 aircraft will  be  in  the
                  aggregate  $2.9  million below book value  when  the
                  aircraft  are retired from the fleet.  As a  result,
                  the   Company   is  recognizing  $2.9   million   in
                  additional  depreciation  charges  related  to  such
                  aircraft  over  their  remaining  estimated  service
                  lives.  In 2002, the Company recognized $1.0 million
                  in additional depreciation expense.

18.  Selected     (in thousands, except per share amounts)
   Quarterly
   Financial
   Data
   (Unaudited)
   <TABLE>
   <CAPTION>
                                     Quarter Ended
                       March 31,   June 30,  September 30, December 31,
                            2002       2002           2002         2002
   <S>                  <C>        <C>           <C>           <C>
   Operating revenues   $172,966   $188,193      $195,033      $204,332
   Operating income
     (Note 1)             23,698     28,633        13,051        (2,749)
   Net income (loss)
     (Note 1,3)           14,319     17,436         8,500          (969)

   Net income (loss)
     per share
      Basic             $   0.32   $   0.39      $   0.19      $  (0.02)
      Diluted           $   0.31   $   0.38      $   0.19      $  (0.02)

   Weighted average
   shares outstanding
      Basic               44,677     45,115        45,194        45,195
      Diluted             46,367     46,305        45,484        45,195
   </TABLE>
   <TABLE>
   <CAPTION>
                                     Quarter Ended
                       March 31,   June 30,  September 30, December 31,
                            2001       2001           2001         2001
   <S>                  <C>        <C>           <C>           <C>
   Operating revenues   $133,454   $146,221      $147,651      $156,090
   Operating income
     (Note 2)             15,479     20,868        15,895        (8,049)
   Net income (loss)
     (Note 2,3)            9,625     12,948        12,751        (1,003)

   Net income (loss)
     per share
      Basic             $   0.23   $   0.30      $   0.29     $   (0.02)
      Diluted           $   0.22   $   0.29      $   0.28     $   (0.02)

   Weighted average
   shares outstanding
      Basic               42,750     43,168        43,775        43,999
      Diluted             44,638     45,029        45,426        43,999
  </TABLE>

   1  In the second, third and fourth quarters of 2002, the Company
   recorded aircraft early retirement charges.  The amount of the
   charges were $(4.8) million (pre-tax) credit in the second quarter
   to reverse amounts recorded in the fourth quarter of 2001, $7.6
   million (pre-tax) in the third quarter, and $21.5 million in the
   fourth quarter.

   2  In the fourth quarter of 2001, the Company recorded an aircraft
   early retirement charge.  The amount of the charge was $23.0
   million (pre-tax).

   3 Includes government compensation of  $0.9 million in the second
   quarter of 2002, $4.6 million in the third quarter of 2001 and
   $5.1 million in the fourth quarter of 2001.

   Note: The sum of the four quarters may not equal the totals for
   the year due to rounding of quarterly results.


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

         None to report.



                                PART III

Item 10.  Directors and Executive Officers of the Registrant.

          The information required by this Item is hereby incorporated by
reference  from  the  Company's  definitive  proxy  statement,  which  is
expected  to  be  filed  pursuant to Regulation  14A  of  the  Securities
Exchange Act of 1934 not later than 120 days after the end of the  fiscal
year covered by this report.


Item 11.   Executive Compensation

          The information required by this Item is hereby incorporated by
reference  from  the  Company's  definitive  proxy  statement,  which  is
expected  to  be  filed  pursuant to Regulation  14A  of  the  Securities
Exchange Act of 1934 not later than 120 days after the end of the  fiscal
year covered by this report.


Item  12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.

          Information   as   of  December  31,  2002   regarding   equity
compensation   plans  approved  and  not  approved  by  shareholders   is
summarized in the following table:
<TABLE>
<CAPTION>
<S>                                <C>           <C>            <C>
                                                                 Number of
                                                                 securities
                                                                 remaining
                                                                 available
                                   Number of                     for future
                                   securities    Weighted-       issuance
                                     to be        average       under equity
                                   issued upon    exercise      compensation
                                   exercise of    price of         plans
                                   outstanding   outstanding    (excluding
                                    options,      options,      securities
                                    warrants      warrants      reflected in
Plan category                      and rights    and rights      column (a))

                                       (a)          (b)              (c)


Equity compensation plans approved
  by shareholders                   3,276,456      $12.29         1,665,318

Equity compensation plans not
  approved by shareholders          1,434,375      $15.01           855,002

           Total                    4,710,831      $13.12         2,520,320
</TABLE>


           The  Company has two equity compensation plans that  were  not
approved  by shareholders, pursuant to which options, rights or  warrants
may  be granted:  the Non-Executive Officer Stock Option Plan (the  "Non-
Executive  Officer Plan") and the Non-Officer Option Grant  Program  (the
"Non-Officer Option Program").  The Company's Board of Directors approved
these two plans in 2000.

Non-Executive Officer Stock Option Plan

          The Non-Executive Officer Plan is substantially identical to
the Company's 2000 Stock Incentive Plan, which was approved by
shareholders.  The Non-Executive Officer Plan allows the Company to grant
equity compensation under non-qualified stock options and restricted
stock awards.  Eligible participants are employees, as defined under
Securities and Exchange Commission Form S-8, and prospective employees of
the Company or any of its affiliates who are not executives or directors
of the Company.  A maximum of 2 million shares of common stock are
authorized for issuance under the Non-Executive Officer Stock Option
Plan.  The exercise price of options granted under the plan can not be
less than 100% of the fair market value of a share of the Company's stock
on the option grant date.  Awards are granted by the Chief Executive
Officer of the Company with approval from the Compensation Committee of
the Board of Directors.  The terms of awards granted under the Non-
Executive Officer Plan, including vesting, forfeiture, post-termination
exerciseability and the effects (if any) of a change in control, are set
by the plan administrator subject to certain restrictions set forth in
the Non-Executive Officer Plan.

Non-Officer Option Grant Program

          There are 400,000 shares reserved for issuance under the Non-
Officer Option Program.  Options granted under the Non-Officer Option
Program are subject to the same terms as non-qualified stock options
granted under the Company's 1995 Stock Incentive Plan or the Company's
2000 Stock Incentive Plan (both of which were approved by shareholders),
as specified in the terms of any such grant.  The exercise price of
options granted under the plan can not be less than 100% of the fair
market value of a share of the Company's stock on the option grant date.
Options are granted by the Chief Executive Officer of the Company with
approval from the Compensation Committee of the Board of Directors.
Stock options granted under the Non-Officer Option Program generally vest
over a period ranging from three to five years and expire 10 years after
the date of grant.

          Other information required by this Item is hereby incorporated
by reference from the Company's definitive proxy statement, which is
expected to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934 not later than 120 days after the end of the fiscal
year covered by this report.


Item 13.  Certain Relationships and Related Transactions.

          The information required by this Item is hereby incorporated by
reference from the Company's definitive proxy statement, which is
expected to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934 not later than 120 days after the end of the fiscal
year covered by this report.

Item 14.  Controls and Procedures.

Within  the 90 days prior to the date of this report, the Company carried
out  an  evaluation, under the supervision and with the participation  of
the  Company's  management, including the Company's  principal  executive
officer  and  principal financial officer, of the  effectiveness  of  the
design  and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14.  Management necessarily applied its
judgment  in  assessing  the  costs and benefits  of  such  controls  and
procedures which, by their nature, can provide only reasonable  assurance
regarding management's control objectives.  It should be noted  that  the
design  of  any  system  of  controls  is  based  in  part  upon  certain
assumptions about the likelihood of future events, and there  can  be  no
assurance  that  any design will succeed in achieving  its  stated  goals
under  all potential future conditions, regardless of how remote.   Based
upon  the  foregoing  evaluation,  the principal  executive  officer  and
principal  financial  officer  concluded that  the  Company's  disclosure
controls and procedures are effective in timely alerting them to material
information   relating  to  the  Company  (including   its   consolidated
subsidiaries)  required  to  be included in the  Company's  periodic  SEC
reports.  In  addition, the Company reviewed its internal  controls,  and
there  have  been no significant changes in our internal controls  or  in
other  factors that could significantly affect those controls  subsequent
to the date of their last evaluation.


                                 PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
     (a)  1.   Financial Statements

               The  Consolidated Financial Statements listed in the index
               in Part II, Item 8, are filed as part of this report.

          2.   Consolidated Financial Statement Schedules

               Reference  is  hereby  made to the Consolidated  Financial
               Statements  and the Notes thereto included in this  filing
               in Part II, Item 8.

          3.   Exhibits
<TABLE>
<CAPTION>
<S>              <C>
Exhibit
Number                Description of Exhibit

3.1 (note 6)     Restated Certificate of Incorporation of the Company.
3.2 (note 16)    Restated By-laws of the Company.
4.1 (note 14)    Specimen Common Stock Certificate.
4.19 (note 15)   Rights Agreement between Atlantic Coast Airlines
                 Holdings, Inc. and Continental Stock Transfer & Trust
                 Company dated as of January 27, 1999.
10.1 (notes 20
     and 22)     Atlantic Coast Airlines, Inc. 1992 Stock Option Plan.
10.6 (notes 8
     and 21)     United Express Agreement, dated as of November 22, 2000,
                 as amended as of February 6, 2001, among United Airlines,
                 Inc., Atlantic Coast Airlines and the Company.
10.6(a) (notes 3
     and 21)     Amendment dated June 4, 2002 to United Express Agreement,
                 dated as of November 22, 2000, among United Airlines, Inc.,
                 Atlantic Coast Airlines and the Company.
10.8 (notes 12
     and 21)     Delta Connection Agreement, dated as of September 9, 1999
                 among Delta Air Lines, Inc., Atlantic Coast Airlines
                 Holdings, Inc. and Atlantic Coast Jet, Inc.
10.12(a)(notes 5
     and 22)     Second Amended and Restated Severance Agreement, dated as
                 of July 25, 2001, between the Company and Kerry B. Skeen.
10.12(b)(notes 4
     and 22)     Amended and Restated Severance Agreement, dated as of
                 December 28, 2001, between the Company and Thomas J. Moore.
10.12(c)(notes 4
     and 22)     Form of Severance Agreement substantially similar to
                 agreements with Richard J. Surratt, Michael S. Davis, and
                 William R. Lange, all restated as of December 28, 2001.
10.12(d)(notes 4
     and 22)     Form of Letter Agreement substantially similar to agreements
                 entered into with Senior Executive Officers regarding
                 reduction in base salary.
10.12(e)(notes 2
     and 22)     Form of Letter Agreement substantially similar to agreements
                 entered into with Senior Executive Officers regarding
                 elimination of voluntary reductions in base salary.
10.13(a)(note 1) Form of Indemnity Agreement. The Company has entered
                 into substantially identical agreements with the
                 individual members of its Board of Directors.
10.23 (note 4)   Loan and Security Agreement dated September 28, 2001
                 between Atlantic Coast Airlines and Wachovia Bank, N.A.
10.23(a)(note 1) Loan Modification Agreement dated December 23, 2002
                 between Atlantic Coast Airlines and Wachovia Bank, N.A.
10.24 (notes 14
     and 22)     Atlantic Coast Airlines, Inc. 1995 Stock Incentive Plan, as
                 amended as of May 5, 1998.
10.245 (notes 10
     and 22)     2000 Stock Incentive Plan of Atlantic Coast Airlines Holding,
                 Inc.
10.246 (notes 1
     and 22)     Non-Executive Officer Stock Plan of Atlantic Coast Airlines
                 Holdings, Inc.
10.247 (notes 1
     and 22)     Non-Officer Option Grant Program of Atlantic Coast Airlines
                 Holdings, Inc.
10.25(a)(notes 14
     and 22)     Form of Incentive Stock Option Agreement.  The
                 Company enters into this agreement with employees who
                 have been granted incentive stock options pursuant to
                 the Stock Incentive Plans.
10.25(b)(notes 14
     and 22)     Form of Incentive Stock Option Agreement.  The Company enters
                 into substantially this agreement, adjusted to reflect
                 the terms of any employment agreements, with corporate
                 officers who have been granted incentive stock options
                 pursuant to the Stock Incentive Plans.
10.25(c)(notes 14
     and 22)     Form of Non-Qualified Stock Option Agreement. The Company
                 enters into this agreement with employees who have been
                 granted non-qualified stock options pursuant to the Stock
                 Incentive Plans.
10.25(d)(notes 14
     and 22)     Form of Non-Qualified Stock Option Agreement.  The Company
                 enters into substantially this agreement, adjusted to
                 reflect the terms of any employment agreements, with
                 corporate officers who have been granted non-qualified
                 stock options pursuant to the Stock Incentive Plans.
10.25(e)(notes 14
     and 22)     Form of Restricted Stock Agreement. The Company entered into
                 this agreement with corporate officers who were granted
                 restricted stock pursuant to the Stock Incentive Plans.
10.27 (notes 11
     and 22)     Form of Split Dollar Agreement and Agreement of Assignment of
                 Life Insurance Death Benefit as Collateral.  The Company
                 has entered into substantially identical agreements with
                 Kerry B. Skeen, Thomas J. Moore, Michael S. Davis,
                 Richard J. Surratt, and William R. Lange.
10.31 (notes 1
     and 22)     Summary of Senior Management Incentive Plan. The Company has
                 adopted a plan as described in this exhibit for 2002 and
                 for the three previous years.
10.32 (notes 1
     and 22)     Summary of Management Incentive Plan and Share the Success
                 Program.  The Company has adopted plans as described in
                 this exhibit for 2002 and for the three previous years.
10.40A (notes 14
     and 21)     Purchase Agreement between Bombardier Inc. and Atlantic Coast
                 Airlines Relating to the Purchase of Canadair Regional
                 Jet Aircraft dated January 8, 1997, as amended through
                 December 31, 1998.
10.40A(1)(notes
     12 and 21)  Contract Change Orders No. 13, 14, and 15, dated April 28,
                 1999, July 29, 1999, and September 24, 1999, respectively,
                 amending the Purchase Agreement between Bombardier Inc.
                 and Atlantic Coast Airlines relating to the purchase of
                 Canadair Regional Jet Aircraft dated January 8, 1997.
10.41 (notes 12
     and 21)     Purchase Agreement between Bombardier Inc. and Atlantic Coast
                 Airlines relating to the Purchase of Canadair Regional
                 Jet Aircraft dated July 29, 1999, as amended through
                 September 30, 1999.
10.41(a)(notes 3
     and 21)     Purchase Agreement between Bombardier Inc. and Atlantic Coast
                 Airlines relating to the Purchase of Canadair Regional
                 Jet Aircraft dated July 29, 1999, as amended.
10.41A(1)(notes 2
     and 21)     Contract Change Orders No. 1, 2, 3, 4, 5 and 6 dated
                 September 24, 1999, August 2, 2000, December 6, 2000,
                 November 7, 2001, December 20, 2001 and July 19, 2002,
                 respectively, amending the Purchase Agreement between
                 Bombardier Inc. and Atlantic Coast Airlines relating to the
                 purchase of Canadair Regional Jet Aircraft dated July 29, 1999.
10.45 (notes 7
     and 21)     Form of Aircraft Purchase Agreement between Fairchild Dornier
                 GmbH and Atlantic Coast Airlines dated effective
                 December 20, 2000 (supersedes Exhibits 10.45 and
                 10.45(1) filed as an Exhibit to the Annual Report on
                 Form 10-K for the year ended December 31, 2000.
10.50(a)(note 17)Form of Purchase Agreement, dated September 19, 1997, among
                 the Company, Atlantic Coast Airlines, Morgan Stanley & Co.
                 Incorporated and First National Bank of Maryland, as
                 Trustee.
10.50(b)(note 17)Form of Pass Through Trust Agreement, dated as of September 25,
                 1997, among the Company, Atlantic Coast Airlines, and
                 First National Bank of Maryland, as Trustee.
10.50(c)(note 17)Form of Pass Through Trust Certificate.
10.50(d)(note 17)Form of Participation Agreement, dated as of September 30,
                 1997, Atlantic Coast Airlines, as Lessee and Initial Owner
                 Participant, State Street Bank and Trust Company of
                 Connecticut, National Association, as Owner Trustee, the
                 First National Bank of Maryland, as Indenture Trustee,
                 Pass-Through Trustee, and Subordination Agent,
                 including, as exhibits thereto, Form of Lease Agreement,
                 Form of Trust Indenture and Security Agreement, and Form
                 of Trust Agreement.
10.50(e)(note 17)Guarantee, dated as of September 30, 1997, from the
                 Company.
10.80 (note 17)  Ground Lease Agreement Between The Metropolitan
                 Washington Airports Authority And Atlantic Coast
                 Airlines dated as of June 23, 1997.
10.85 (note 14)  Lease Agreement Between The Metropolitan Washington
                 Airports Authority and Atlantic Coast Airlines, with
                 amendments as of January 1, 1999.
21.1  (note 1)   Subsidiaries of the Company.
23.1 (note 1)    Consent of KPMG LLP.
99.1 (note 1)    Certification pursuant to 8 U.S.C. section 1350, as
                 adopted pursuant to section 906 of the Sarbanes-Oxley
                 Act of 2002.
</TABLE>

<TABLE>
<CAPTION>
<S>  <C>
Notes

(1)  Filed  as  an  Exhibit to this Annual Report on Form  10-K  for  the
       fiscal year ended December 31, 2002.
(2)  Filed  as  an Exhibit to the Quarterly Report on Form 10-Q  for  the
       three-month period ended September 30, 2002.
(3)  Filed  as  an Exhibit to the Quarterly Report on Form 10-Q  for  the
       three-month period ended June 30, 2002.
(4)  Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal
       year ended December 31, 2001.
(5)  Filed  as  an Exhibit to the Quarterly Report on Form 10-Q  for  the
       three-month period ended September 30, 2001.
(6)  Filed  as  an Exhibit to the Quarterly Report on Form 10-Q  for  the
       three-month period ended June 30, 2001.
(7)  Filed  as  an Exhibit to the Quarterly Report on Form 10-Q  for  the
       three-month period ended March 31, 2001.
(8)    Filed  by Exhibit to the Annual Report on Form 10-K for the fiscal
       year ended December 31, 2000.
(9)    Filed  as  an Exhibit to the Current Report on Form 8-K  filed  on
       March 2, 2001.
(10)   Filed  as an Exhibit to the Quarterly Report on Form 10-Q for  the
       three-month period ended June 30, 2000.
(11)   Filed  as  an Exhibit to the Amended Annual Report on Form  10-K/A
       for the fiscal year ended December 31, 1999.
(12)   Filed  as  Exhibit to the Quarterly Report on Form  10-Q  for  the
       three month period ended September 30, 1999.
(13)   Filed  as  Exhibit to the Quarterly Report on Form  10-Q  for  the
       three month period ended June 30, 1999.
(14)   Filed  as  an  Exhibit to the Annual Report on Form 10-K  for  the
       fiscal year ended December 31, 1998.
(15)   Filed   as   Exhibit  99.1  to  Form  8-A  (File  No.  000-21976),
       incorporated herein by reference.
(16)   Filed  as  Exhibit to the Quarterly Report on Form  10-Q  for  the
       three month period ended June 30, 1998.
(17)   Filed  as an Amendment to the Annual Report on Form 10-K  for  the
       fiscal  year  ended  December  31, 1997,  incorporated  herein  by
       reference.
(18)   Filed  as an Amendment to the Annual Report on Form 10-K  for  the
       fiscal  year  ended  December  31, 1996,  incorporated  herein  by
       reference.
(19)   Filed  as  an  Exhibit to the Annual Report on Form 10-K  for  the
       fiscal  year  ended  December  31, 1994,  incorporated  herein  by
       reference.
(20)   Filed  as  an  Exhibit  to  Form S-1, Registration  No.  33-62206,
       effective July 20, 1993, incorporated herein by reference.
(21)   Portions of this document have been omitted pursuant to a  request
       for  confidential  treatment that has been  granted  or  has  been
       requested.
(22)   This  document  is a management contract or compensatory  plan  or
       arrangement.
</TABLE>




Reports on Form 8-K:

Nov.   12,  2002   Regulation  FD  Disclosure  of  Solomon  Smith  Barney
Transportation Conference Presentation.

Dec. 11, 2002   Regulation  FD  Disclosure  of  news  release  concerning
          bankruptcy filing by United Airlines, Inc.

Jan.  24,  2003  Regulation FD Disclosure of Raymond James  &  Associates
Airline Conference Presentation.

Jan. 29, 2003   Regulation  FD Disclosure of news release concerning  the
          Company's fourth quarter and year end 2002 earnings.

Jan.  31,  2003  Regulation FD Disclosure of Goldman Sachs Transportation
Conference Presentation.

Feb. 10, 2003   Regulation FD Disclosure of Deutsche Banc Securities 2003
          Global Transportation Conference Presentation.

Feb. 26, 2003   Regulation  FD Disclosure of Raymond James  &  Associates
          Institutional Investors Conference Presentation.

                                SIGNATURES

      Pursuant  to  the  requirements of  Section  13  of  15(d)  of  the
Securities  Exchange  Act of 1934, the registrant has  duly  caused  this
report  to  be  signed on its behalf by the undersigned,  thereunto  duly
authorized on March 29, 2003.

                                   ATLANTIC COAST AIRLINES HOLDINGS, INC.

                                              By:        /S/
                                                    Kerry B. Skeen
                                                    Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 29, 2003.

<TABLE>
<CAPTION>
<S>                             <C>
Name                            Title


           /S/                  Chairman of the Board of Directors
Kerry B. Skeen                  and Chief Executive Officer
                                (Principal executive officer)

           /S/                  Director, President and
Thomas J. Moore                 Chief Operating Officer


           /S/                  Executive Vice President, Treasurer and
Richard J. Surratt              Chief Financial Officer
                                (Principal financial officer)

           /S/                  Vice President, and Controller
David W. Asai                   (Principal accounting officer)


           /S/                                /S/
C. Edward Acker                 Robert E. Buchanan
Director                        Director

           /S/                                /S/
Susan MacGregor Coughlin        Daniel L. McGinnis
Director                        Director

           /S/                                /S/
James C. Miller III             John M. Sullivan
Director                        Director

           /S/                                /S/
William Anthony Rice            Caroline M. Devine
Director                        Director
</TABLE>


                              CERTIFICATIONS
I, Kerry B. Skeen, certify that:
1.  I  have  reviewed this annual report on Form 10-K of  Atlantic  Coast
Airlines Holdings, Inc.;
2.  Based on my knowledge, this annual report does not contain any untrue
statement  of a material fact or omit to state a material fact  necessary
to  make  the statements made, in light of the circumstances under  which
such  statements  were made, not misleading with respect  to  the  period
covered by this annual report;
3.  Based  on my knowledge, the financial statements, and other financial
information  included  in  this  annual report,  fairly  present  in  all
material respects the financial condition, results of operations and cash
flows  of  the registrant as of, and for, the periods presented  in  this
annual report;
4.  The registrant's other certifying officers and I are responsible  for
establishing  and  maintaining disclosure  controls  and  procedures  (as
defined  in Exchange Act Rules 13a-14 and 15d-14) for the registrant  and
have:
a)  designed  such  disclosure controls and  procedures  to  ensure  that
material   information   relating  to  the  registrant,   including   its
consolidated  subsidiaries, is made known to us by  others  within  those
entities,  particularly during the period in which this annual report  is
being prepared;
b)  evaluated  the effectiveness of the registrant's disclosure  controls
and  procedures as of a date within 90 days prior to the filing  date  of
this annual report (the "Evaluation Date"); and
c)   presented   in  this  annual  report  our  conclusions   about   the
effectiveness  of  the disclosure controls and procedures  based  on  our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee  of registrant's board of directors (or persons performing  the
equivalent functions):
a)  all  significant deficiencies in the design or operation of  internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for  the
registrant's auditors any material weaknesses in internal controls; and
b)  any fraud, whether or not material, that involves management or other
employees  who  have  a  significant role in  the  registrant's  internal
controls; and
6.  The  registrant's other certifying officers and I have  indicated  in
this  annual  report whether there were significant changes  in  internal
controls  or  in  other factors that could significantly affect  internal
controls  subsequent to the date of our most recent evaluation, including
any  corrective  actions  with  regard to  significant  deficiencies  and
material weaknesses.
Date: March 29, 2003
                        ___/s/ Kerry B. Skeen___
                             Kerry B. Skeen
                  Chairman and Chief Executive Officer

I, Richard J. Surratt, certify that:
1.  I  have  reviewed this annual report on Form 10-K of  Atlantic  Coast
Airlines Holdings, Inc.;
2.  Based on my knowledge, this annual report does not contain any untrue
statement  of a material fact or omit to state a material fact  necessary
to  make  the statements made, in light of the circumstances under  which
such  statements  were made, not misleading with respect  to  the  period
covered by this annual report;
3.  Based  on my knowledge, the financial statements, and other financial
information  included  in  this  annual report,  fairly  present  in  all
material respects the financial condition, results of operations and cash
flows  of  the registrant as of, and for, the periods presented  in  this
annual report;
4.  The registrant's other certifying officers and I are responsible  for
establishing  and  maintaining disclosure  controls  and  procedures  (as
defined  in Exchange Act Rules 13a-14 and 15d-14) for the registrant  and
have:
a)  designed  such  disclosure controls and  procedures  to  ensure  that
material   information   relating  to  the  registrant,   including   its
consolidated  subsidiaries, is made known to us by  others  within  those
entities,  particularly during the period in which this annual report  is
being prepared;
b)  evaluated  the effectiveness of the registrant's disclosure  controls
and  procedures as of a date within 90 days prior to the filing  date  of
this annual report (the "Evaluation Date"); and
c)   presented   in  this  annual  report  our  conclusions   about   the
effectiveness  of  the disclosure controls and procedures  based  on  our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee  of registrant's board of directors (or persons performing  the
equivalent functions):
a)  all  significant deficiencies in the design or operation of  internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for  the
registrant's auditors any material weaknesses in internal controls; and
b)  any fraud, whether or not material, that involves management or other
employees  who  have  a  significant role in  the  registrant's  internal
controls; and
6.  The  registrant's other certifying officers and I have  indicated  in
this  annual  report whether there were significant changes  in  internal
controls  or  in  other factors that could significantly affect  internal
controls  subsequent to the date of our most recent evaluation, including
any  corrective  actions  with  regard to  significant  deficiencies  and
material weaknesses.
Date: March 29, 2003
                        _/s/ Richard J. Surratt__
                           Richard J. Surratt
    Executive Vice President, Treasurer, and Chief Financial Officer