##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2007

OR



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

For the transition period from  to

Commission file
No. 1-15991



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LOGO

AirTran Holdings, Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|NEVADA                                                         |  | 58-2189551                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|9955 AirTran Boulevard, Orlando, Florida |  | 32827     
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code: (407) 251-5600



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer in Rule 12b-2 of the Exchange Act.



|                             |  |                    |  |                       
|---------------------------- |  | ------------------ |  | ----------------------
|Large accelerated filer    x |  | Accelerated filer ̈ |  | Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

Number of shares of Common Stock outstanding as of the close of business on August 7, 2007: 91,620,609par value $0.001



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##### Table of Contents

AIRTRAN HOLDINGS, INC.

Form 10-Q

For the Quarter Ended June 30, 2007

INDEX



|                                                                                                                                                                                                                                        |  |                                                                                                     |  |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                                        |  |                                                                                                     |  | Page
|PART I.                                                                                                                                                                                                                                 |  | FINANCIAL INFORMATION                                                                               |  |     
|Item 1.                                                                                                                                                                                                                                 |  | Financial Statements (unaudited)                                                                    |  |     
|                                                                                                                                                                                                                                        |  | Condensed Consolidated Statements of Operations - Three and six months ended June 30, 2007 and 2006 |  | 1   
|                                                                                                                                                                                                                                        |  | Condensed Consolidated Balance Sheets - June 30, 2007 and December 31, 2006                         |  | 2   
|                                                                                                                                                                                                                                        |  | Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2007 and 2006           |  | 4   
|                                                                                                                                                                                                                                        |  | Condensed Consolidated Statement of Stockholders Equity  Six months ended June 30, 2007           |  | 5   
|                                                                                                                                                                                                                                        |  | Notes to Condensed Consolidated Financial Statements                                                |  | 6   
|Item 2.                                                                                                                                                                                                                                 |  | Managements Discussion and Analysis of Financial Condition and Results of Operations               |  | 12  
|Item 3.                                                                                                                                                                                                                                 |  | Quantitative and Qualitative Disclosures About Market Risk                                          |  | 19  
|Item 4.                                                                                                                                                                                                                                 |  | Controls and Procedures                                                                             |  | 21  
|PART II.                                                                                                                                                                                                                                |  | OTHER INFORMATION                                                                                   |  | 22  
|Item 1.                                                                                                                                                                                                                                 |  | Legal Proceedings                                                                                   |  | 22  
|Item 1A.                                                                                                                                                                                                                                |  | Risk Factors                                                                                        |  | 22  
|Item 2.                                                                                                                                                                                                                                 |  | Unregistered Sales of Equity Securities and Use of Proceeds                                         |  | 22  
|Item 3.                                                                                                                                                                                                                                 |  | Defaults Upon Senior Securities                                                                     |  | 22  
|Item 4.                                                                                                                                                                                                                                 |  | Submission of Matters to a Vote of Security Holders                                                 |  | 22  
|Item 5.                                                                                                                                                                                                                                 |  | Other Information                                                                                   |  | 22  
|Item 6.                                                                                                                                                                                                                                 |  | Exhibits                                                                                            |  | 22  
|Signatures                                                                                                                                                                                                                              |  |                                                                                                     |  | 23  
|Exhibit Listing                                                                                                                                                                                                                         |  |                                                                                                     |  |     
|Ex  10.54  Purchase Agreement No. 2444 Supplement No. 12, dated as of June 4, 2007, by and between The Boeing Company and AirTran Airways,
Inc.                                                                                        |  |                                                                                                    
|Ex  10.55  Credit Agreement, dated as of June 28, 2007, among AirTran Airways, Inc., as Borrower, Each Lender Identified on Schedule 1
thereto, as Lenders, and Bayerische Hypo- und Vereinsbank AG, London Branch, as Security Agent. |  |                                                                                                    
|Ex  10.56  Security Agreement, dated as of June 28, 2007, by and between AirTran Airways, Inc. and Bayerische Hypo- und Vereinsbank AG,
London Branch, as Security Agent.                                                              |  |                                                                                                    
|Ex  3l.1 (Exhibit 31.1 CEO Certification)                                                                                                                                                                                              |  |                                                                                                    
|Ex  3l.2 (Exhibit 31.2 CFO Certification)                                                                                                                                                                                              |  |                                                                                                    
|Ex  32.1 (Exhibit 32.1 CEO and CFO Certifications)                                                                                                                                                                                     |  |                                                                                                    



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##### Table of Contents

AirTran Holdings, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|---------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                         |  | Three months endedJune 30, |         |   | Six months endedJune 30, |  
|                                         |  | 2007                       |         |   | 2006                     |   |         | 2007 |  |   | 2006      |  
|Operating Revenues:                      |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Passenger                                |  | $                          | 585,875 |   |                          | $ | 509,159 |      |  | $ | 1,064,429 |   |  | $ | 908,298 |  
|Cargo                                    |  |                            | 1,159   |   |                          |   | 865     |      |  |   | 2,058     |   |  |   | 2,079   |  
|Other                                    |  |                            | 26,492  |   |                          |   | 17,851  |      |  |   | 51,105    |   |  |   | 33,334  |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Total operating revenues                 |  |                            | 613,526 |   |                          |   | 527,875 |      |  |   | 1,117,592 |   |  |   | 943,711 |  
|                                         |  |                            |         |  
|Operating Expenses:                      |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Aircraft fuel                            |  |                            | 201,588 |   |                          |   | 175,116 |      |  |   | 367,668   |   |  |   | 321,150 |  
|Salaries, wages and benefits             |  |                            | 110,972 |   |                          |   | 96,508  |      |  |   | 218,689   |   |  |   | 188,773 |  
|Aircraft rent                            |  |                            | 60,667  |   |                          |   | 56,915  |      |  |   | 121,560   |   |  |   | 110,652 |  
|Maintenance, materials and repairs       |  |                            | 38,190  |   |                          |   | 35,015  |      |  |   | 71,724    |   |  |   | 68,234  |  
|Distribution                             |  |                            | 23,874  |   |                          |   | 19,736  |      |  |   | 42,803    |   |  |   | 35,684  |  
|Landing fees and other rents             |  |                            | 30,268  |   |                          |   | 26,380  |      |  |   | 59,180    |   |  |   | 49,033  |  
|Aircraft insurance and security services |  |                            | 5,895   |   |                          |   | 6,386   |      |  |   | 11,631    |   |  |   | 12,285  |  
|Marketing and advertising                |  |                            | 10,151  |   |                          |   | 11,960  |      |  |   | 21,280    |   |  |   | 23,002  |  
|Depreciation                             |  |                            | 11,547  |   |                          |   | 6,208   |      |  |   | 21,788    |   |  |   | 12,282  |  
|Other operating                          |  |                            | 48,746  |   |                          |   | 39,438  |      |  |   | 96,702    |   |  |   | 79,865  |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Total operating expenses                 |  |                            | 541,898 |   |                          |   | 473,662 |      |  |   | 1,033,025 |   |  |   | 900,960 |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Operating Income                         |  |                            | 71,628  |   |                          |   | 54,213  |      |  |   | 84,567    |   |  |   | 42,751  |  
|Other (Income) Expense:                  |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Interest income                          |  |                            | (5,521  | ) |                          |   | (5,549  | )    |  |   | (10,498   | ) |  |   | (10,053 | )
|Interest expense                         |  |                            | 18,321  |   |                          |   | 11,901  |      |  |   | 34,983    |   |  |   | 22,337  |  
|Capitalized interest                     |  |                            | (2,361  | ) |                          |   | (3,284  | )    |  |   | (4,845    | ) |  |   | (6,295  | )
|Gain on sale of aircraft                 |  |                            | (6,234  | ) |                          |   |        |      |  |   | (6,234    | ) |  |   |        |  
|Other                                    |  |                            | 156     |   |                          |   |        |      |  |   | 156       |   |  |   |        |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Other (income) expense, net              |  |                            | 4,361   |   |                          |   | 3,068   |      |  |   | 13,562    |   |  |   | 5,989   |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Income Before Income Taxes               |  |                            | 67,267  |   |                          |   | 51,145  |      |  |   | 71,005    |   |  |   | 36,762  |  
|Income tax expense                       |  |                            | 25,208  |   |                          |   | 19,368  |      |  |   | 26,788    |   |  |   | 13,925  |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Net Income                               |  | $                          | 42,059  |   |                          | $ | 31,777  |      |  | $ | 44,217    |   |  | $ | 22,837  |  
|                                         |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Earnings per Common Share                |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Basic                                    |  | $                          | 0.46    |   |                          | $ | 0.35    |      |  | $ | 0.48      |   |  | $ | 0.25    |  
|Diluted                                  |  | $                          | 0.42    |   |                          | $ | 0.32    |      |  | $ | 0.45      |   |  | $ | 0.25    |  
|                                         |  |                            |         |  
|Weighted-average Shares Outstanding      |  |                            |         |   |                          |   |         |      |  |   |           |   |  |   |         |  
|Basic                                    |  |                            | 91,524  |   |                          |   | 90,744  |      |  |   | 91,431    |   |  |   | 89,992  |  
|Diluted                                  |  |                            | 104,366 |   |                          |   | 103,806 |      |  |   | 104,244   |   |  |   | 103,534 |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

AirTran Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands)



|                                                                                                                                    |  |              |            |   |                  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                    |  | June 30,2007 |            |   | December 31,2006 |  
|                                                                                                                                    |  | (Unaudited)  |            |   |                  |  
|ASSETS                                                                                                                              |  |              |            |   |                  |   |            |  
|Current Assets:                                                                                                                     |  |              |            |   |                  |   |            |  
|Cash and cash equivalents                                                                                                           |  | $            | 230,804    |   |                  | $ | 159,100    |  
|Restricted cash                                                                                                                     |  |              | 29,579     |   |                  |   | 24,815     |  
|Short-term investments                                                                                                              |  |              | 168,350    |   |                  |   | 151,100    |  
|Accounts receivable, less allowance of $829 and $1,180 at June 30, 2007 and December 31, 2006, respectively                         |  |              | 70,934     |   |                  |   | 38,613     |  
|Spare parts and supplies, less allowance for obsolescence of $2,002 and $1,749 at June 30, 2007 and December 31, 2006, respectively |  |              | 42,524     |   |                  |   | 17,236     |  
|Deferred income taxes                                                                                                               |  |              | 9,221      |   |                  |   | 8,854      |  
|Fuel derivative contracts                                                                                                           |  |              | 13,942     |   |                  |   |           |  
|Prepaid expenses and other current assets                                                                                           |  |              | 25,865     |   |                  |   | 17,239     |  
|                                                                                                                                    |  |              |            |   |                  |   |            |  
|Total current assets                                                                                                                |  |              | 591,219    |   |                  |   | 416,957    |  
|                                                                                                                                    |  |             
|Property and Equipment:                                                                                                             |  |              |            |   |                  |   |            |  
|Flight equipment                                                                                                                    |  |              | 1,174,490  |   |                  |   | 885,738    |  
|Less: Accumulated depreciation                                                                                                      |  |              | (76,267    | ) |                  |   | (60,921    | )
|                                                                                                                                    |  |              |            |   |                  |   |            |  
|                                                                                                                                    |  |              | 1,098,223  |   |                  |   | 824,817    |  
|Purchase deposits for flight equipment                                                                                              |  |              | 113,631    |   |                  |   | 119,895    |  
|Other property and equipment                                                                                                        |  |              | 109,541    |   |                  |   | 113,214    |  
|Less: Accumulated depreciation                                                                                                      |  |              | (36,253    | ) |                  |   | (42,697    | )
|                                                                                                                                    |  |              |            |   |                  |   |            |  
|                                                                                                                                    |  |              | 73,288     |   |                  |   | 70,517     |  
|                                                                                                                                    |  |              |            |   |                  |   |            |  
|Total property and equipment                                                                                                        |  |              | 1,285,142  |   |                  |   | 1,015,229  |  
|                                                                                                                                    |  |             
|Other Assets:                                                                                                                       |  |              |            |   |                  |   |            |  
|Goodwill                                                                                                                            |  |              | 8,350      |   |                  |   | 8,350      |  
|Trademarks and trade names                                                                                                          |  |              | 21,567     |   |                  |   | 21,567     |  
|Debt issuance costs                                                                                                                 |  |              | 14,659     |   |                  |   | 11,929     |  
|Deferred income taxes                                                                                                               |  |              |           |   |                  |   | 7,772      |  
|Prepaid aircraft rent                                                                                                               |  |              | 78,025     |   |                  |   | 70,802     |  
|Other assets                                                                                                                        |  |              | 69,964     |   |                  |   | 50,976     |  
|                                                                                                                                    |  |              |            |   |                  |   |            |  
|Total Assets                                                                                                                        |  |              | $2,068,926 |   |                  |   | $1,603,582 |  
|                                                                                                                                    |  |              |            |   |                  |   |            |  

(Continued on next page)



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##### Table of Contents

AirTran Holdings, Inc.

Condensed Consolidated Balance Sheets (Continued)

(In thousands)



|                                             |  |              |           |                  |   |           |  
|-------------------------------------------- |  | ------------ | --------- | ---------------- | - | --------- | -
|                                             |  | June 30,2007 |           | December 31,2006 |  
|                                             |  | (Unaudited)  |           |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |              |           |                  |   |           |  
|Current Liabilities:                         |  |              |           |                  |   |           |  
|Accounts payable                             |  | $            | 48,410    |                  | $ | 35,050    |  
|Accrued and other liabilities                |  |              | 154,698   |                  |   | 127,254   |  
|Air traffic liability                        |  |              | 265,950   |                  |   | 148,938   |  
|Current portion of capital lease obligations |  |              | 947       |                  |   | 876       |  
|Current portion of long-term debt            |  |              | 106,198   |                  |   | 85,969    |  
|                                             |  |              |           |                  |   |           |  
|Total current liabilities                    |  |              | 576,203   |                  |   | 398,087   |  
|Long-term capital lease obligations          |  |              | 12,492    |                  |   | 12,979    |  
|Long-term debt                               |  |              | 912,381   |                  |   | 711,286   |  
|Other liabilities                            |  |              | 103,676   |                  |   | 101,947   |  
|Deferred tax liability                       |  |              | 25,689    |                  |   |          |  
|Commitments and Contingencies                |  |              |           |                  |   |           |  
|Stockholders Equity:                        |  |              |           |                  |   |           |  
|Common stock                                 |  |              | 91        |                  |   | 91        |  
|Additional paid-in-capital                   |  |              | 392,802   |                  |   | 389,043   |  
|Other comprehensive income (loss)            |  |              | 5,974     |                  |   | (5,252    | )
|Accumulated earnings (deficit)               |  |              | 39,618    |                  |   | (4,599    | )
|                                             |  |              |           |                  |   |           |  
|Total stockholders equity                   |  |              | 438,485   |                  |   | 379,283   |  
|                                             |  |              |           |                  |   |           |  
|Total Liabilities and Stockholders Equity   |  | $            | 2,068,926 |                  | $ | 1,603,582 |  
|                                             |  |              |           |                  |   |           |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

AirTran Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                  |  |                           |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | Six Months Ended June 30, |           
|                                                                                  |  | 2007                      |            |   | 2006 |  
|Operating activities:                                                             |  |                           |            |   |      |   |            |  
|Net Income                                                                        |  | $                         | 44,217     |   |      | $ | 22,837     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |            |   |      |   |            |  
|Depreciation and amortization                                                     |  |                           | 22,540     |   |      |   | 13,755     |  
|Amortization of deferred gains from sale/leaseback of aircraft                    |  |                           | (2,237     | ) |      |   | (2,192     | )
|Provisions for uncollectible accounts                                             |  |                           | 579        |   |      |   | 537        |  
|(Gain) loss on asset disposals                                                    |  |                           | (4,267     | ) |      |   | 1,080      |  
|Deferred income tax expense                                                       |  |                           | 26,788     |   |      |   | 13,926     |  
|Share based compensation                                                          |  |                           | 2,517      |   |      |   | 2,060      |  
|Changes in certain assets and liabilities:                                        |  |                           |            |   |      |   |            |  
|Restricted cash                                                                   |  |                           | (4,764     | ) |      |   | (6,103     | )
|Accounts receivable                                                               |  |                           | (27,761    | ) |      |   | (12,245    | )
|Spare parts, materials and supplies                                               |  |                           | (25,540    | ) |      |   | (18,919    | )
|Other assets                                                                      |  |                           | (12,980    | ) |      |   | (38,291    | )
|Prepaid aircraft rent                                                             |  |                           | (7,274     | ) |      |   |           |  
|Accounts payable, accrued and other liabilities                                   |  |                           | 38,821     |   |      |   | 36,858     |  
|Air traffic liability                                                             |  |                           | 117,012    |   |      |   | 79,065     |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                           | 167,651    |   |      |   | 92,368     |  
|Investing activities:                                                             |  |                           |            |   |      |   |            |  
|Purchases of property and equipment                                               |  |                           | (133,933   | ) |      |   | (29,074    | )
|Return (payment) of aircraft purchase deposits, net                               |  |                           | 6,264      |   |      |   | (36,194    | )
|Proceeds from sales of aircraft                                                   |  |                           | 72,879     |   |      |   |           |  
|Purchases of available-for-sale securities                                        |  |                           | (1,009,300 | ) |      |   | (1,412,140 | )
|Sales of available-for-sale securities                                            |  |                           | 992,050    |   |      |   | 1,198,715  |  
|Acquisition costs                                                                 |  |                           | (7,335     | ) |      |   |           |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash used for investing activities                                            |  |                           | (79,375    | ) |      |   | (278,693   | )
|Financing activities:                                                             |  |                           |            |   |      |   |            |  
|Issuance of long-term debt                                                        |  |                           | 43,640     |   |      |   | 33,436     |  
|Payments on long-term debt                                                        |  |                           | (57,382    | ) |      |   | (27,098    | )
|Debt issuance costs                                                               |  |                           | (4,072     | ) |      |   | (1,829     | )
|Proceeds from exercise of stock options and employee stock purchase plan          |  |                           | 1,242      |   |      |   | 10,795     |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash (used for) provided by financing activities                              |  |                           | (16,572    | ) |      |   | 15,304     |  
|Net change in cash and cash equivalents                                           |  |                           | 71,704     |   |      |   | (171,021   | )
|Cash and cash equivalents at beginning of period                                  |  |                           | 159,100    |   |      |   | 370,572    |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                        |  | $                         | 230,804    |   |      | $ | 199,551    |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Supplemental Disclosure of Cash Flow Activities:                                  |  |                           |            |   |      |   |            |  
|Non-cash investing and financing activities                                       |  |                           |            |   |      |   |            |  
|Purchase of equipment in exchange for debt                                        |  | $                         | 234,650    |   |      | $ | 144,900    |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

AirTran Holdings, Inc.

Condensed Consolidated Statement of Stockholders Equity

(In thousands)

(Unaudited)



|                                                                              |  |              |  |                            |    |                                             |   |         |                                |   |        |                           |  |   |        |   |  |   |        
|----------------------------------------------------------------------------- |  | ------------ |  | -------------------------- | -- | ------------------------------------------- | - | ------- | ------------------------------ | - | ------ | ------------------------- |  | - | ------ | - |  | - | -------
|                                                                              |  | Common Stock |  | Additional Paid-in Capital |    | AccumulatedOther Comprehensive (Loss)Income |   |         | Accumulated Earnings (Deficit) |   |        | TotalStockholders Equity
|                                                                              |  | Shares       |  | Amount                     |    |                                             |   |        
|Balance at January 1, 2007                                                    |  | 91,160       |  | $                          | 91 |                                             | $ | 389,043 |                                | $ | (5,252 | )                         |  | $ | (4,599 | ) |  | $ | 379,283
|Net income                                                                    |  |             |  |                            |   |                                             |   |        |                                |   |       |                           |  |   | 44,217 |   |  |   | 44,217 
|Unrealized gain on derivative instruments, net of $5.9 million deferred taxes |  |             |  |                            |   |                                             |   |        |                                |   | 10,054 |                           |  |   |       |   |  |   | 10,054 
|Adjustment to post retirement expense, net of $0.3 million deferred taxes     |  |             |  |                            |   |                                             |   |        |                                |   | 1,172  |                           |  |   |       |   |  |   | 1,172  
|                                                                              |  |              |  |                            |    |                                             |   |         |                                |   |        |                           |  |   |        |   |  |   |        
|Total comprehensive income                                                    |  |              |  |                            |    |                                             |   |         |                                |   |        |                           |  |   |        |   |  |   | 55,443 
|Issuance of common stock for exercise of options                              |  | 126          |  |                            |   |                                             |   | 584     |                                |   |       |                           |  |   |       |   |  |   | 584    
|Share-based compensation                                                      |  | 241          |  |                            |   |                                             |   | 2,517   |                                |   |       |                           |  |   |       |   |  |   | 2,517  
|Issuance of common stock under employee stock purchase plan                   |  | 61           |  |                            |   |                                             |   | 658     |                                |   |       |                           |  |   |       |   |  |   | 658    
|                                                                              |  |              |  |                            |    |                                             |   |         |                                |   |        |                           |  |   |        |   |  |   |        
|Balance at June 30, 2007                                                      |  | 91,588       |  | $                          | 91 |                                             | $ | 392,802 |                                | $ | 5,974  |                           |  | $ | 39,618 |   |  | $ | 438,485
|                                                                              |  |              |  |                            |    |                                             |   |         |                                |   |        |                           |  |   |        |   |  |   |        

See accompanying Notes to Condensed Consolidated Financial Statements.



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AIRTRAN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1Summary of Significant Accounting Policies

Basis
of Presentation

Our unaudited Condensed Consolidated Financial Statements include the accounts of AirTran Holdings, Inc. (Holdings or the Company)
and our wholly-owned subsidiaries, including our principal subsidiary, AirTran Airways, Inc. (Airways). All significant intercompany accounts and transactions have been eliminated in consolidation for all periods presented. In the opinion of
management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the financial position, results of
operations, cash flows and stockholders equity for the periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) for reports on Form 10-Q. These unaudited interim financial statements should be read in conjunction with the
audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006.

The preparation of
the accompanying unaudited Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated
Financial Statements and accompanying Notes. Actual results may differ from those estimates and such differences may be material to the Condensed Consolidated Financial Statements.

Business

We offer scheduled airline services, using Boeing B717-200 (B717) and Boeing B737-700 (B737)
aircraft, to 56 locations, primarily in short-haul markets in the eastern United States, as well as to Freeport, Grand Bahamas. We offer very competitive fares by concentrating on keeping our unit costs low. A key to our success is the enthusiasm
and skill of the AirTran employees.

The financial and operating results for any interim period are not indicative of those for the entire year. Air travel
tends to be seasonal with the highest level of travel during the winter months to Florida and the summer months to the northeastern and western United States.

The management of our operations is based on a system-wide approach due to the interdependence of our route structure in the various markets we serve. As we offer only one service (i.e., air transportation), management has concluded that we
only have one segment of business.

Reclassification

Certain 2006 amounts in the Condensed Consolidated Statement of Operations have been reclassified from Maintenance, material and repairs to Other operating expense to conform to current presentation. This reclassification had no impact on
operating income. Certain 2006 amounts in the Condensed Consolidated Balance Sheets have been reclassified from Flight equipment to Other property and equipment.

New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48,Accounting for Uncertainty in Income TaxesAn interpretation of FASB Statement No. 109 (FIN 48). The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements and
prescribes a recognition threshold and measurement attributes of income tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain tax position taken or expected to be taken on an income tax return must be
recognized in the financial statements at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is
more likely than not of being sustained. See Note 7 for discussion of our adoption of FIN 48.

In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS 157 effective January 1, 2008. We have not determined the effect, if any, that the adoption of SFAS 157 will have on our financial
position or results of operations.

In February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159). SFAS 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once
elected. SFAS 159 is effective for fiscal years beginning after November 15, 2007, and early application is allowed under certain circumstances. We will adopt SFAS 159 effective January 1, 2008. We have not yet determined the effect, if
any, that the adoption of SFAS 159 will have on our financial position or results of operations.



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Note 2Stock-Based Employee Compensation

Restricted stock awards have been granted to certain of our officers, directors and key employees pursuant to our 2002 Long-Term Incentive Plan. Stock awards are grants of shares of our common stock which typically
vest over time and are valued at the fair market value of our publicly traded stock on the date of issuance and the value is being charged on a straight-line basis to expense over the respective vesting period (generally three years). During the
first six months of 2007 and 2006, we granted awards for 409,250 shares and 401,000 shares, respectively.

Approximately $1.3 million and $2.5 million was
amortized as compensation expense during the three and six months ended June 30, 2007, respectively. Approximately $0.7 million and $2.1 million was amortized as compensation expense during the three and six months ended June 30, 2006,
respectively. Awards for approximately 241,000 and 128,000 shares of restricted stock vested during the first six months of 2007 and 2006, respectively. As of June 30, 2007, the Company has approximately $9.0 million in total unrecognized
future compensation expense that will be recognized over the next three years relating to awards for approximately 921,000 restricted shares which were outstanding at such date but which had not yet vested. Unvested restricted shares are not
included in reported common shares outstanding amounts.

As of June 30, 2007, options to purchase 3.2 million shares of common stock, at exercise
prices between $2.78 and $13.80 per share were outstanding. All outstanding options to purchase common shares were exercisable as of June 30, 2007.

Note 3Earnings Per Common Share

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



|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        
|--------------------------------------------------------------------- |  | --------------------------- | ------- | ------------------------- | - | ------- |  | ---- | ------- |  | - | -------
|                                                                      |  | Three months ended June 30, |         | Six months ended June 30,
|(in thousands, except per share amounts)                              |  | 2007                        |         | 2006                      |   | 2007    |  | 2006
|NUMERATOR:                                                            |  |                             |         |                           |   |         |  |      |         |  |   |        
|Net income available to common stockholders                           |  | $                           | 42,059  |                           | $ | 31,777  |  | $    | 44,217  |  | $ | 22,837 
|Plus income effect of assumed conversion-interest on convertible debt |  |                             | 1,369   |                           |   | 1,359   |  |      | 2,739   |  |   | 2,719  
|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        
|Income after assumed conversion, diluted                              |  | $                           | 43,428  |                           | $ | 33,136  |  | $    | 46,956  |  | $ | 25,556 
|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        
|DENOMINATOR:                                                          |  |                             |         |                           |   |         |  |      |         |  |   |        
|Weighted-average shares outstanding, basic                            |  |                             | 91,524  |                           |   | 90,744  |  |      | 91,431  |  |   | 89,992 
|Effect of dilutive securities:                                        |  |                             |         |                           |   |         |  |      |         |  |   |        
|Stock options                                                         |  |                             | 1,034   |                           |   | 1,260   |  |      | 1,026   |  |   | 1,450  
|Convertible debt                                                      |  |                             | 11,241  |                           |   | 11,241  |  |      | 11,241  |  |   | 11,241 
|Stock warrants                                                        |  |                             |        |                           |   | 45      |  |      |        |  |   | 389    
|Restricted stock                                                      |  |                             | 567     |                           |   | 516     |  |      | 546     |  |   | 462    
|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        
|Diluted                                                               |  |                             | 104,366 |                           |   | 103,806 |  |      | 104,244 |  |   | 103,534
|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        
|EARNINGS PER COMMON SHARE:                                            |  |                             |         |                           |   |         |  |      |         |  |   |        
|Basic                                                                 |  | $                           | 0.46    |                           | $ | 0.35    |  | $    | 0.48    |  | $ | 0.25   
|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        
|Diluted                                                               |  | $                           | 0.42    |                           | $ | 0.32    |  | $    | 0.45    |  | $ | 0.25   
|                                                                      |  |                             |         |                           |   |         |  |      |         |  |   |        

Note 4Commitments and Contingencies

Aircraft Purchase Commitments

During the six months ended June 30, 2007, we took delivery of eight
purchased B737 aircraft, excluding two aircraft we sold as discussed below. As of June 30, 2007, we had on order 65 B737 aircraft with delivery dates between 2007 and 2012. The table below summarizes all aircraft scheduled for delivery through
2012:



|                  |  |                             
|----------------- |  | ----------------------------
|                  |  | Firm Aircraft DeliveriesB737
|Remainder of 2007 |  | 2                           
|2008              |  | 13                          
|2009              |  | 14                          
|2010              |  | 14                          
|2011              |  | 10                          
|2012              |  | 12                          
|                  |  |                             
|Total             |  | 65                          
|                  |  |                             



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During the quarter ended June 30, 2007, we took delivery of and subsequently sold two aircraft to a carrier outside
the United States for cash of approximately $78 million, of which $5.0 million was received prior to the quarter ended June 30, 2007. We recognized a gain of approximately $6.2 million related to the sale of these two aircraft. Unless otherwise
expressly indicated, all aircraft delivery totals are net of these two deliveries.

In June 2007, we entered into an agreement with an aircraft
manufacturer to purchase an additional 15 B737 aircraft. The newly-ordered aircraft are scheduled to be delivered to us during 2011 and 2012. Also, pursuant to that same amendment, we agreed to reschedule the delivery positions for six B737 aircraft
on firm order with the aircraft manufacturer. The rescheduled aircraft were scheduled to be delivered to us during the second half of 2008 and first half of 2009. The rescheduled aircraft are now currently scheduled to be delivered to us during
2011. The new orders and revised delivery dates are reflected in the table above.

Aircraft purchase contracts typically require the purchaser to make
pre-delivery deposits to the manufacturer. We have arranged pre-delivery deposit financing for a portion of our pre-delivery deposit requirements for aircraft scheduled to be delivered in 2007, 2009, and some in 2010. The pre-delivery deposit
financing typically funds between 75 percent and 100 percent of our pre-delivery deposit obligation for any given aircraft.

Our aircraft purchase
commitments for the remainder of 2007 and for the next five years, in aggregate, are (in thousands): 2007 -$93,800; 2008 - $483,000; 2009 - $508,000; 2010 - $500,600; 2011 - $363,400; and 2012 - $401,300. These amounts include payment
commitments, including payment of pre-delivery deposits, for aircraft on firm order. Payment commitments include the forecasted impact of contractual price escalations. The aircraft purchase commitment totals do not reflect the effects of
prearranged aircraft financings.

Aircraft Financing Arrangements

Of the 65 B737 aircraft we have on order, we have secured debt financing for two B737 aircraft scheduled for delivery in 2007 and for five of the aircraft which are scheduled for delivery in 2008. Such debt financing
funds approximately 85 percent of the total cost of the aircraft.

Fuel Purchase Commitments

Efforts to reduce our exposure to increases in the price and decreases in the availability of aviation fuel include the utilization of fuel purchase contracts involving
both fixed-price arrangements and cap arrangements. Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party fuel supplier at defined prices. Cap arrangements consist of an agreement to
purchase defined quantities of aviation fuel from a third party fuel supplier at a price not to exceed a defined price, limiting our exposure to upside market price risk. Because these agreements are accounted for under the normal purchase exception
included in Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities, (SFAS 133), these agreements are not considered derivative financial instruments for financial reporting
purposes. As of June 30, 2007, utilizing forward fuel purchase contracts, we had committed to purchase 43.3 million gallons of aviation fuel at a weighted average price per gallon, excluding taxes and related fees, of $1.90 during the
remainder of 2007. This represents 22.7 percent of our anticipated fuel needs for the remainder of 2007.

Cash Flow Hedges

During the six months ended June 30, 2007, we entered into jet-fuel derivative financial arrangements with a financial institution to reduce the impact of
fluctuations in jet-fuel prices on future fuel expense. Our primary objective of entering into derivative arrangements is to reduce the impact on our operating results of the volatility of jet fuel prices. As of June 30, 2007 we had entered
into both fuel swap arrangements and option arrangements.

Under the fuel swap arrangements, which expire October through December 2007, we pay a fixed
rate between $1.79 and $2.00 per gallon and receive the monthly average price of Gulf Coast jet-fuel. As of June 30, 2007, these contracts hedge 48.9 million gallons of our fuel purchases and represent 25.6 percent of our anticipated jet
fuel consumption for the remainder of 2007. We account for the fuel swap arrangements as cash flow hedges, as defined by SFAS 133. As of June 30, 2007, the fair value of these fuel swaps was an asset of $14.1 million. The effective portion of
the unrealized gain or loss on the cash flow hedges is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which
the hedged transaction affects earnings (for example, in fuel expense when the hedged transactions are fuel expense cash flows associated with jet-fuel purchases). During the three months ended June 30, 2007, the amount reclassified
into earnings was $2.0 million, net of tax, reducing the fuel expense. Hedge ineffectiveness during the three months ended June 30, 2007 was not material.



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We have entered into option agreements which as of June 30, 2007, represent 1.46 percent of our anticipated 2008 jet
fuel requirements. We presently do not account for these option arrangements as hedges. Consequently, unrealized changes in the fair value of the option arrangements are classified as other (income) expense. The aggregate fair value of the option
arrangements as of June 30, 2007 was a liability of $0.2 million.

During the fourth quarter of 2006, we entered into interest rate swap agreements
that effectively convert a portion of our floating-rate debt to a fixed-rate basis for the next 12 years, thus reducing the impact of interest-rate changes on future interest expense and cash flows. Under these agreements, which expire in 2018, we
pay fixed rates of 5.085 percent and 4.9875 percent and receive the London InterBank Offered Rate (LIBOR) every three months. The primary objective for our use of interest rate hedges is to reduce the volatility of interest rates. We account for the
interest rate hedges as cash flow hedges, as defined by SFAS 133. The fair values of interest rate swap derivatives are included in other assets or liabilities. As of June 30, 2007, the fair value of the interest rate swaps included in other
assets is $2.1 million. As of December 31, 2006, the fair value of the interest rate swaps included in other assets is $0.1 million. The effective portion of the gain or loss on the derivative instrument is reported as a component of other
comprehensive income and reclassified into earnings in the same line item as the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in interest expense when the hedged
transactions are interest cash flows associated with floating-rate debt). During the three and six months ended June 30, 2007 amounts reclassified into earnings were not material.

Credit Card Arrangements

We have agreements with organizations that process credit card transactions arising
from purchases of air travel by our customers. Our agreement with the MasterCard/Visa processor expires March 31, 2008. Our other credit card processing agreements generally have no fixed term but are terminable without cause after 30 days.
Each of our agreements with the organizations that process American Express, Discover, and MasterCard/Visa transactions allows, under specified conditions, the credit card processor to retain cash that such processor otherwise would deliver to us
(i.e., a holdback). A holdback consisting of cash escrowed by the processor is classified as restricted cash whereas a holdback consisting of a delay of cash remittance to us is classified as accounts receivable. As of June 30, 2007
we were in compliance with our credit card arrangements and we had holdbacks with only one processor. The holdback with this processor was in amounts that were not material to our cash balances. A majority of our revenues relate to credit card
transactions processed by the MasterCard/Visa processor. Our agreement with the MasterCard/Visa credit card processor contains covenants which permit the processor to holdback cash remittances to us if: we do not maintain aggregate prescribed levels
of unrestricted cash and short-term investments; the processor determines that there has been a material adverse occurrence; or certain other events occur. The amount which the processor may be entitled to withhold varies over time and may be up to
the estimated liability for future air travel purchased with Visa and MasterCard cards (which liability was $202.7 million as of June 30, 2007). As of June 30, 2007 we were in compliance with the agreement, no remittances had been withheld
and the processor was not entitled to withhold future remittances. We have the right to reduce the amount withheld to the extent that we provide the processor with a letter of credit and/or a cash deposit.

General Indemnifications

We are party to many routine
contracts under which we indemnify third parties for various risks. We have not accrued any liability for any of these indemnities, as the amounts are not determinable or estimable. These indemnities consist of the following:

Certain of our debt agreements related to aircraft-secured notes payable through 2017 contain language, whereby, we have agreed to indemnify certain holders of
certificates evidencing the debt associated with such notes, as necessary, to compensate them for any costs incurred by or any reduction in receivables due to such certificate holders resulting from broadly defined regulatory changes that impose or
modify any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of or any deposits with or other liabilities of such certificate holders. Additionally, if it becomes unlawful for such certificate
holders to make or maintain the investment or credit evidenced by the certificates, we have agreed to pay such certificate holders an amount necessary to cause the interest rate with respect to the certificates to be a rate per annum equal to 4.88%
over the rate specified by such certificate holders as the cost to them of obtaining funds in dollars in the United States in an amount equal to the pool balance of the certificates. The maximum potential payment under these indemnities cannot be
determined.

Our aircraft lease transaction documents contain customary indemnities concerning withholding taxes in which we are responsible in some
circumstances should withholding taxes be imposed for paying such amounts of additional rent, as is necessary to ensure that the lessor still receives, after taxes, the rent stipulated in the lease agreements. These provisions apply on leases
expiring through 2022. The maximum potential payment under these indemnities cannot be determined.

In our aircraft financing agreements, we typically
indemnify the financing parties, the trustee acting on their behalf and, other related parties against liabilities that arise from the manufacture, design, ownership, financing, use, operation, and maintenance of the aircraft for tort liability,
whether or not these liabilities arise out of or relate to the negligence of these indemnified parties except for their gross negligence or willful misconduct. We believe that we are covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities, as described above with respect to the aircraft we operate. Additionally, if there is a change in the law which



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results in the imposition of any reserve, capital adequacy, special deposit, or similar requirement which will increase
the cost to the lender, we will pay the lender the additional amount necessary to compensate the lender for the actual cost increase.

We have various
leases with respect to real property and various agreements among airlines relating to fuel consortia or fuel farms at airports in which we have agreed to standard language indemnifying the lessor against environmental liabilities associated with
the real property covered under the agreement, even if we are not the party responsible for the environmental damage. In the case of fuel consortia at the airports, these indemnities are generally joint and several among the airlines. We cannot
quantify the maximum potential exposure under these indemnities and we do not currently have liability insurance that protects us against environmental damages.

Under certain contracts with third parties, we indemnify the third party against legal liability arising out of an action by a third party. The terms of these contracts vary and the potential exposure under these indemnities cannot be
determined. Generally, we have liability insurance protecting us from obligations undertaken under these indemnities.

Note 5Long-term Debt and
Capital Leases

The components of our long-term debt, including capital lease obligations, were (in thousands):



|                                                                                                                  |  |              |           |                  |   |        
|----------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---------------- | - | -------
|                                                                                                                  |  | June 30,2007 |           | December 31,2006
|Floating rate aircraft notes payable through 2019, 6.76% weighted-average interest rate                           |  | $            | 649,119   |                  | $ | 428,680
|Fixed rate aircraft notes payable through 2019, 7.02% weighted-average interest rate                              |  |              | 72,444    |                  |   | 76,070 
|7.00% convertible notes due 2023                                                                                  |  |              | 125,000   |                  |   | 125,000
|Aircraft notes payable through 2017, 10.56% weighted-average interest rate                                        |  |              | 95,747    |                  |   | 97,322 
|Floating rate aircraft pre-delivery deposit financings payable through 2010, 7.18% weighted-average interest rate |  |              | 76,269    |                  |   | 70,183 
|Capital lease obligations payable through 2015, 13.15% weighted-average interest rate                             |  |              | 13,439    |                  |   | 13,855 
|                                                                                                                  |  |              |           |                  |   |        
|Total long-term debt                                                                                              |  |              | 1,032,018 |                  |   | 811,110
|Less current maturities                                                                                           |  |              | 107,145   |                  |   | 86,845 
|                                                                                                                  |  |              |           |                  |   |        
|Long-term debt maturities                                                                                         |  | $            | 924,873   |                  | $ | 724,265
|                                                                                                                  |  |              |           |                  |   |        

Aircraft Purchase Financing Facilities

Through June 30, 2007, we have entered into seven separate aircraft purchase financing facilities for purposes of financing the acquisition of B737 aircraft on order with the aircraft manufacturer. During the six
months ended June 30, 2007, we issued equipment notes in an aggregate amount of $235.1 million (included in floating rate aircraft notes above) under these facilities as eight aircraft were delivered. The equipment notes are scheduled to mature
through 2019, bear interest at a floating rate per annum above either the three- or six-month US Dollar LIBOR in effect at the commencement of each three- or six-month period, and require payments of principal and interest either quarterly or
semi-annually. Each note is secured by a first mortgage on the aircraft to which it relates.

As of June 30, 2007, financing for six aircraft
scheduled for delivery in the second half of 2007 and 2008 is committed under these facilities. Additionally, the lender has an option to enter into financing with us under one of the facilities for two additional B737 aircraft with delivery dates
in 2008. The lender has not exercised this option.

Floating Rate Aircraft Pre-delivery Deposit Financing

In July 2007, we entered into a sixth pre-delivery deposit facility, (PDP-6), for purposes of financing our obligations to make pre-delivery payments on 18
B737 aircraft on order with an aircraft manufacturer. The PDP facilities entitle us to draw amounts up to approximately $82 million to fund a portion of our obligations to make pre-delivery payments on the 18 B737 aircraft which have delivery dates
scheduled through 2008. Drawings made under the PDP facilities bear interest at a floating rate per annum above one-month US Dollar LIBOR. As of June 30, 2007, $12.6 million was outstanding under these facilities.

Letters of Credit

As of June 30, 2007, $14.4 million of
restricted cash on the accompanying condensed consolidated balance sheet relates to outstanding letters of credit, primarily for airport facilities and insurance.



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Note 6Comprehensive Income

Comprehensive income encompasses net income and other comprehensive income, which includes all other non-owner transactions and events that change stockholders equity. Other comprehensive income is
composed of changes in the fair value of certain of our derivative financial instruments and the funded status of our post retirement obligations.

The
components of Accumulated other comprehensive income (loss), are shown below (in thousands):



|                                         |  |                                               |        |   |                                 |   |        |                                             |  |   |        |  
|---------------------------------------- |  | --------------------------------------------- | ------ | - | ------------------------------- | - | ------ | ------------------------------------------- |  | - | ------ | -
|                                         |  | Unrealizedgain (loss) onderivativeinstruments |        |   | Postretirementbenefitobligation |   |        | Accumulated othercomprehensiveincome (loss) | 
|Balance at January 1, 2007               |  | $                                             | 84     |   |                                 | $ | (5,336 | )                                           |  | $ | (5,252 | )
|2007 changes in fair value, net of tax   |  |                                               | 12,016 |   |                                 |   |       |                                             |  |   | 12,016 |  
|Reclassification to earnings, net of tax |  |                                               | (1,962 | ) |                                 |   | 1,172  |                                             |  |   | (790   | )
|                                         |  |                                               |        |   |                                 |   |        |                                             |  |   |        |  
|Balance at June 30, 2007                 |  | $                                             | 10,138 |   |                                 | $ | (4,164 | )                                           |  | $ | 5,974  |  
|                                         |  |                                               |        |   |                                 |   |        |                                             |  |   |        |  

Note 7Income Tax Expense

Our effective income tax rate was 37.5 percent and 37.7 percent for the three and six months ended June 30, 2007 compared to 37.9 percent and 37.9 percent for the three and six months ended June 30, 2006.

We adopted the provisions of FIN 48 as of January 1, 2007. The total amount of unrecognized tax benefits as of the date of adoption was not material.
We did not recognize any adjustment for unrecognized tax benefits as a result of the implementation of FIN 48 or during the six months ended June 30, 2007.

The entire unrecognized tax benefits at January 1, 2007 would affect the effective tax rate if recognized. The Company believes there are no tax positions for which it is reasonably possible that the total amount of unrecognized tax
benefit will significantly increase or decrease during 2007.

The Companys policy for recording interest and penalties associated with an uncertain
tax position is to classify interest as interest expense and penalties as income tax expense. Upon adoption of FIN 48 effective January 1, 2007, the Company did not require an accrual for interest or penalties.

The Company is subject to taxation in the United States and various state jurisdictions. The Companys tax years for 1996 to 2006 are subject to examination by the
tax authorities.

Note 8Proposed Acquisition of Midwest Air Group

On January 11, 2007, we commenced an exchange offer for all of the outstanding shares of Midwest Air Group, Inc. (Midwest), for $13.25 per Midwest share, based on the closing price of our common stock on
January 8, 2007. The offer consisted of $6.625 in cash and 0.5884 shares of AirTran common stock for each Midwest share. On April 2, 2007, we increased our offer to purchase all of the outstanding shares of Midwest to $15.00 per Midwest
share, based on the closing price of AirTran common stock on March 30, 2007. The offer consists of $9.00 in cash and 0.5842 shares of AirTran common stock for each Midwest share. The total value of the exchange offer is $389.0 million. The
offer, which is being made through a wholly-owned subsidiary, has been extended and is scheduled to expire on August 10, 2007. The offer is subject to specified conditions. We anticipate funding the cash portion of the purchase price with the
proceeds from $225 million in senior secured financing under a proposed credit facility and cash on hand. As of June 30, 2007, other non-current assets include $7.7 million of incremental direct costs associated with the proposed acquisition of
Midwest. Such costs, together with any additional costs incurred subsequent to June 30, 2007, would be immediately expensed if we discontinue our efforts to acquire Midwest.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

The information contained in this section: (i) has been derived from our
historical financial statements and should be read together with our historical financial statements and related notes included elsewhere in this document, in addition to our Annual Report on Form 10-K for the year ended December 31, 2006 as
filed with the U.S. Securities & Exchange Commission; and (ii) is not a comprehensive discussion and analysis of our financial condition and results of operations, but rather updates disclosures made in such Annual Report. The
discussion below contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve
risks and uncertainties including, but not limited to: consumer demand and acceptance of services offered by us, our ability to achieve and maintain acceptable cost levels and fare levels, actions by competitors, regulatory matters, general economic
conditions, commodity prices, and changing business strategies. Forward-looking statements are subject to a number of factors that could cause actual results to differ materially from our expressed or implied expectations, including, but not limited
to our performance in future periods, our ability to generate working capital from operations, our ability to take delivery of and to finance aircraft, the adequacy of our insurance coverage, and the cost and availability of aviation fuel. Our
forward-looking statements can be identified by the use of terminology such as anticipates, expects, intends, believes, will or the negative thereof, or variations thereon or comparable
terminology. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise except as may be required by law.

OVERVIEW

All of the operations of AirTran Holdings, Inc. (the
Company, AirTran, we or us) are conducted by our wholly owned subsidiary, AirTran Airways, Inc. (AirTran Airways or Airways). Airways is one of the largest low cost scheduled airlines in the United States in terms of departures and seats offered. We
operate scheduled airline service primarily in short-haul markets principally in the eastern United States, with a majority of our flights originating and terminating at our hub in Atlanta, Georgia. As of July 1, 2007, we operated 87 Boeing
717-200 (B717) and 48 Boeing 737-700 (B737) aircraft offering approximately 730 scheduled flights per day to 56 locations across the United States, as well as to Freeport, Grand Bahamas.

During the three months ended June 30, 2007, we continued our track record of operating profitably. We reported operating income of $71.6 million, net income of $42.1 million and diluted earnings per common share
of $0.42. We set new second quarter records for passengers, traffic and capacity and initiated new service to Charleston, San Diego, St. Louis, and Portland, Maine. The second quarter was a record quarter financially, setting records for quarterly
operating and net income.

During the six months ended June 30, 2007, we also continued our growth by taking delivery of eight B737 aircraft bringing
our total fleet to 135 aircraft at period end. Since June 30, 2006, we have taken delivery of 18 B737 aircraft. As a result, our capacity, as measured by available seat miles, increased by 21.3 percent compared to the second quarter of 2006.
Revenue passenger seat miles increased by 22.3 percent, resulting in a record load factor of 78.8 percent and increased 0.7 percentage points from the prior year second quarter.

Highlights from the first six months ended June 30, 2007 include the following:



| |  |  | Carried in excess of 6.3 million revenue passengers.
| | - |  | ----------------------------------------------------



| |  |  | Took delivery of eight new Boeing 737-700 aircraft.
| | - |  | ---------------------------------------------------



| |  |  | Initiated new service to Daytona Beach, Phoenix, Newburgh, N.Y., San Diego, St. Louis, Charleston, and Portland, Maine
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Launched over 30 new non-stop routes.
| | - |  | -------------------------------------

We continue
to pursue on our proposal to acquire Midwest Air Group (Midwest) with the aim of developing a stronger presence in the Midwestern United States. On April 2, 2007, we increased our offer to purchase all of the outstanding shares of Midwest to
$15.00 per Midwest share, based on the closing price of AirTran common stock on March 30, 2007. The offer consists of $9.00 in cash and 0.5842 shares of AirTran common stock for each Midwest share. The total value of the exchange offer is
$389.0 million. The offer, which is being made through a wholly-owned subsidiary, has been extended and is scheduled to expire on August 10, 2007. The offer is subject to specified conditions. We anticipate funding the cash portion of the
purchase price with the proceeds from $225 million in senior secured financing under a proposed credit facility and cash on hand. While there can be no assurance that our offer will be accepted, we remain convinced that a combination of AirTran and
Midwest Airlines would bring substantial benefits that would accrue to the shareholders, customers, employees and other stakeholders of both companies.

We
will continue to face several challenges during 2007. Managing costs and increasing revenues in the face of high fuel costs will continue to be a primary focus. If our fuel costs rise, we cannot guarantee that we will be able to raise revenues to
match the increased fuel costs. Our financial and operating results for any prior interim or annual period are not necessarily indicative of those for the entire year. Air travel in our markets tends to be seasonal, with the highest level of travel
occurring during the winter months to Florida and the summer months to the northeastern and western United States. Generally, the second quarter tends to be our strongest revenue quarter.



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##### Table of Contents

RESULTS OF OPERATIONS

For the three and six months ended June 30, 2007 and 2006

The table below sets forth selected financial and operating data for
the three months and six months ended June 30, 2007 and 2006:



|                                                                                   |  |                            |            |   |               |   |           |   |  |      |       
|---------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------- | - | --------- | - |  | ---- | ------
|                                                                                   |  | Three Months EndedJune 30, |            |   | PercentChange |  
|                                                                                   |  | 2007                       |            |   | 2006          |   |          
|Revenue passengers                                                                 |  |                            | 6,323,023  |   |               |   | 5,409,351 |   |  | 16.9 |       
|Revenue passenger miles (RPM) (000s)(1)                                            |  |                            | 4,527,372  |   |               |   | 3,702,762 |   |  | 22.3 |       
|Available seat miles (ASM) (000s)(2)                                               |  |                            | 5,747,975  |   |               |   | 4,739,070 |   |  | 21.3 |       
|Passenger load factor(3)                                                           |  |                            | 78.8       | % |               |   | 78.1      | % |  | 0.7  | pts.  
|Break-even load factor(4)                                                          |  |                            | 69.7       | % |               |   | 70.3      | % |  | (0.6 | ) pts.
|Average fare (excluding transportation taxes)(5)                                   |  | $                          | 92.66      |   |               | $ | 94.13     |   |  | (1.6 | )     
|Average yield per RPM(6)                                                           |  |                            | 12.94      | ¢ |               |   | 13.75     | ¢ |  | (5.9 | )     
|Passenger revenue per ASM (RASM)(7)                                                |  |                            | 10.19      | ¢ |               |   | 10.74     | ¢ |  | (5.1 | )     
|Operating cost per ASM (CASM)(8)                                                   |  |                            | 9.43       | ¢ |               |   | 9.99      | ¢ |  | (5.6 | )     
|Average stage length (miles)(9)                                                    |  |                            | 689        |   |               |   | 652       |   |  | 5.7  |       
|Average cost of aircraft fuel per gallon, including fuel taxes and into-plane fees |  | $                          | 2.23       |   |               | $ | 2.26      |   |  | (1.3 | )     
|Average daily utilization (hours: minutes)(10)                                     |  |                            | 11:12      |   |               |   | 11:18     |   |  | (0.9 | )     
|Number of operating aircraft in fleet at end of period                             |  |                            | 135        |   |               |   | 117       |   |  | 15.4 |       
|                                                                                   |  |                           
|                                                                                   |  | Six months endedJune 30,   |            |   | PercentChange |  
|                                                                                   |  | 2007                       |            |   | 2006          |   |          
|Revenue passengers                                                                 |  |                            | 11,403,131 |   |               |   | 9,896,836 |   |  | 15.2 |       
|Revenue passenger miles (RPM) (000s)(1)                                            |  |                            | 8,175,491  |   |               |   | 6,763,030 |   |  | 20.9 |       
|Available seat miles (ASM) (000s)(2)                                               |  |                            | 10,955,107 |   |               |   | 9,060,814 |   |  | 20.9 |       
|Passenger load factor(3)                                                           |  |                            | 74.6       | % |               |   | 74.6      | % |  |     | pts.  
|Break-even load factor(4)                                                          |  |                            | 69.6       | % |               |   | 71.6      | % |  | (2.0 | ) pts.
|Average fare (excluding transportation taxes)(5)                                   |  | $                          | 93.35      |   |               | $ | 91.78     |   |  | 1.7  |       
|Average yield per RPM(6)                                                           |  |                            | 13.02      | ¢ |               |   | 13.43     | ¢ |  | (3.1 | )     
|Passenger revenue per ASM (RASM)(7)                                                |  |                            | 9.72       | ¢ |               |   | 10.02     | ¢ |  | (3.0 | )     
|Operating cost per ASM (CASM)(8)                                                   |  |                            | 9.43       | ¢ |               |   | 9.94      | ¢ |  | (5.1 | )     
|Average stage length (miles)(9)                                                    |  |                            | 685        |   |               |   | 649       |   |  | 5.5  |       
|Average cost of aircraft fuel per gallon, including fuel taxes and into-plane fees |  | $                          | 2.13       |   |               | $ | 2.17      |   |  | (1.8 | )     
|Average daily utilization (hours: minutes)(10)                                     |  |                            | 11:06      |   |               |   | 11:18     |   |  | (1.8 | )     
|Number of operating aircraft in fleet at end of period                             |  |                            | 135        |   |               |   | 117       |   |  | 15.4 |       

---

|(1) | The number of revenue miles flown by passengers
|--- | -----------------------------------------------

|(2) | The number of seats available for passengers multiplied by the number of miles
each seat is flown
|--- | -------------------------------------------------------------------------------------------------

|(3) | The percentage of aircraft seating capacity that is actually utilized (RPMs
divided by ASMs)
|--- | --------------------------------------------------------------------------------------------

|(4) | Passenger load factor that must be achieved to breakeven at the income before tax
level.
|--- | ----------------------------------------------------------------------------------------

|(5) | Passenger revenue divided by total passengers
|--- | ---------------------------------------------

|(6) | Passenger revenue divided by RPMs
|--- | ---------------------------------

|(7) | Passenger revenue divided by ASMs
|--- | ---------------------------------

|(8) | Operating expenses divided by ASMs
|--- | ----------------------------------

|(9) | Total aircraft miles flown divided by departures
|--- | ------------------------------------------------

|(10) | The average amount of time per day that an aircraft flown is operated in revenue
service
|---- | ----------------------------------------------------------------------------------------



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##### Table of Contents

For the three months ended June 30, 2007 and 2006

Summary

We recorded operating income of $71.6 million, net income of
$42.1 million and income per diluted common share of $0.42 for the second quarter of 2007. For the comparative period in 2006, we recorded operating income of $54.2 million, net income of $31.8 million and income per diluted common share of $0.32.

Operating Revenues

Our operating revenues for the
three months ended June 30, 2007 increased $85.7 million (16.2 percent), primarily due to a 15.1 percent increase in passenger revenues. The increase in passenger revenues was largely due to a 22.3 percent increase in passenger traffic as
measured by revenue passenger miles (RPMs), offset by a decrease in our average yield per RPM of 5.9 percent to 12.94 cents. The decrease in yield resulted primarily from a 1.6 percent decrease in our average fare to $92.66 combined with a 4.5
percent increase in passenger length of haul. This decrease in yield, when combined with our 0.7 percentage point increase in passenger load factor, resulted in a 5.1 percent decrease in passenger unit revenues as measured by passenger revenue per
available seat mile (RASM) to 10.19 cents.

During the three months ended June 30, 2007, we continued our growth by taking delivery of three B737
aircraft bringing our total fleet to 135 aircraft at period end. Since June 30, 2006, we have taken delivery of 18 B737 aircraft. As a result, our capacity, as measured by available seat miles, increased 21.3 percent. Our traffic, as measured
by revenue passenger miles, increased 22.3 percent, resulting in a 0.7 percentage point increase in passenger load factor to 78.8 percent.

Operating
Expenses

Our operating expenses increased by $68.2 million (14.4 percent) on an ASM increase of 21.3 percent. In general, our operating expenses are
significantly affected by changes in our capacity, as measured by ASMs. The following table presents our unit costs, as measured by operating expenses per ASM, for the three months ended June 30, 2007 and 2006, respectively:



|                                         |  |                            |   |  |               |   |  |       |  
|---------------------------------------- |  | -------------------------- | - |  | ------------- | - |  | ----- | -
|                                         |  | Three Months EndedJune 30, |   |  | PercentChange |  
|                                         |  | 2007                       |   |  | 2006          |   | 
|Aircraft fuel                            |  | 3.51                       | ¢ |  | 3.70          | ¢ |  | (5.1  | )
|Salaries, wages and benefits             |  | 1.93                       |   |  | 2.04          |   |  | (5.4  | )
|Aircraft rent                            |  | 1.06                       |   |  | 1.20          |   |  | (11.7 | )
|Maintenance, materials and repairs       |  | 0.66                       |   |  | 0.74          |   |  | (10.8 | )
|Distribution                             |  | 0.42                       |   |  | 0.41          |   |  | 2.4   |  
|Landing fees and other rents             |  | 0.53                       |   |  | 0.56          |   |  | (5.4  | )
|Aircraft insurance and security services |  | 0.10                       |   |  | 0.13          |   |  | (23.1 | )
|Marketing and advertising                |  | 0.18                       |   |  | 0.25          |   |  | (28.0 | )
|Depreciation                             |  | 0.20                       |   |  | 0.13          |   |  | 53.8  |  
|Other operating                          |  | 0.84                       |   |  | 0.83          |   |  | 1.2   |  
|                                         |  |                            |   |  |               |   |  |       |  
|Total CASM                               |  | 9.43                       | ¢ |  | 9.99          | ¢ |  | (5.6  | )
|                                         |  |                            |   |  |               |   |  |       |  

Aircraft fuel decreased 5.1 percent on a cost per ASM basis. Our fuel price per gallon, including taxes and
into-plane fees, decreased 1.3 percent from $2.26 during the second quarter of 2006 to $2.23 during the second quarter of 2007. Additionally, average fuel cost per ASM was favorably impacted by the delivery of B737 aircraft. Both the average
aircraft stage length and average aircraft size increased resulting in lower fuel costs per ASM.

Salaries, wages and benefits decreased 5.4 percent
on a cost per ASM basis, primarily due to gains in productivity driven by the increased number of aircraft and higher daily utilization.

Aircraft
rent decreased 11.7 percent on a cost per ASM basis. Since June 30, 2007, we have taken delivery of 18 B737 aircraft. As a result, our capacity, as measured by available seat miles, increased 21.3 percent. Of the 18 aircraft we have taken
delivery of since June 30, 2006, only two of the aircraft were lease financed.

Maintenance, materials and repairs decreased 10.8 percent on a
cost per ASM basis. The reduction is due primarily to a higher number of heavy maintenance and other one-time maintenance events in the second quarter of 2006 as compared to the three months ended June 30, 2007. Maintenance costs per block hour
were approximately $284 compared to $305 in 2006, representing a 7.0 percent decrease in maintenance costs per block hour.



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##### Table of Contents

Landing fees and other rents decreased 5.4 percent on a cost per ASM basis. Although there were rental rate
increases implemented by various airport authorities, the total increase in expenses of 14.7 percent was offset by an ASM increase of 21.3 percent.

Aircraft insurance and security services decreased 23.1 percent on a cost per ASM basis. While the addition of 18 new Boeing aircraft to our fleet since June 30, 2006, increased our total insured hull value and related insurance
premiums, the decrease on a cost per ASM basis was primarily due to a reduction in hull and liability insurance rates for our fleet coverage.

Marketing
and advertising decreased 28.0 percent on a cost per ASM basis. This unit cost decrease was attributable to the expiration of certain promotional programs as well as the timing of marketing expenses.

Depreciation and amortization increased 53.8 percent on a cost per ASM basis, primarily due to the purchase of 16 B737 aircraft since June 30, 2006 and
purchases of spare aircraft parts for our B737 aircraft fleet.

Non-operating Expenses

Other (income) expense, net increased by $1.3 million. Interest expense increased by $6.4 million primarily due to the effect of aircraft debt financings entered into during 2006 and 2007. Capitalized interest
decreased by $0.9 million due to the delivery of 16 purchased aircraft since June 30, 2006. Capitalized interest represents interest on purchase deposits for future aircraft. These amounts are classified as part of the cost of the aircraft upon
delivery. Additionally, we took delivery of and sold two aircraft during the second quarter 2007 resulting in a gain of $6.2 million.

Income Tax
Expense

Our effective income tax rate was 37.5 percent for the three months ended June 30, 2007 compared to 37.9 percent for the three months
ended June 30, 2006.

For the six months ended June 30, 2007 and 2006

Summary

We recorded operating income of $84.6 million, net income of $44.2 million and diluted earnings per common
share of $0.45 for the six months ended June 30, 2007. For the comparative period in 2006, we recorded operating income of $42.8 million, net income of $22.8 million and diluted earnings per common share of $0.25.

Operating Revenues

Our operating revenues for six months ended
June 30, 2007 increased $173.9 million (18.4 percent), primarily due to a 17.2 percent increase in passenger revenues. The increase in passenger revenues was largely due to a 20.9 percent increase in passenger traffic as measured by revenue
passenger miles (RPMs), offset by a decrease in our average yield per RPM of 3.1 percent to 13.02 cents. The decrease in yield resulted primarily from a 1.7 percent increase in our average fare to $93.35 combined with a 5.0 percent increase in
passenger length of haul. This increase in yield, when combined with a relatively flat passenger load factor, resulted in a 3.0 decrease in passenger unit revenues as measured by passenger revenue per available seat mile (RASM) to 9.72 cents.

During the six months ended June 30, 2007, we continued our growth by taking delivery of eight B737 aircraft bringing our total fleet to 135 aircraft
at period end. Since June 30, 2006, we have taken delivery of 18 B737 aircraft. As a result, our capacity, as measured by available seat miles, increased 20.9 percent. Our traffic, as measured by revenue passenger miles, increased 20.9 percent.



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##### Table of Contents

Operating Expenses

Our operating expenses for the six months ended June 30, 2007 increased $132.1 million (14.7 percent) on ASM growth of 20.9 percent. In general, our operating expenses are significantly affected by changes in our capacity, as measured
by ASMs. The following table presents our unit costs, as measured by operating expenses per ASM, for the six months ended June 30, 2007 and 2006, respectively:



|                                         |  |                          |   |  |               |   |  |       |  
|---------------------------------------- |  | ------------------------ | - |  | ------------- | - |  | ----- | -
|                                         |  | Six Months EndedJune 30, |   |  | PercentChange |  
|                                         |  | 2007                     |   |  | 2006          |   | 
|Aircraft fuel                            |  | 3.36                     | ¢ |  | 3.54          | ¢ |  | (5.1  | )
|Salaries, wages and benefits             |  | 2.00                     |   |  | 2.08          |   |  | (3.8  | )
|Aircraft rent                            |  | 1.11                     |   |  | 1.22          |   |  | (9.0  | )
|Maintenance, materials and repairs       |  | 0.65                     |   |  | 0.75          |   |  | (13.3 | )
|Distribution                             |  | 0.39                     |   |  | 0.39          |   |  |      |  
|Landing fees and other rents             |  | 0.54                     |   |  | 0.54          |   |  |      |  
|Aircraft insurance and security services |  | 0.11                     |   |  | 0.14          |   |  | (21.4 | )
|Marketing and advertising                |  | 0.19                     |   |  | 0.25          |   |  | (24.0 | )
|Depreciation                             |  | 0.20                     |   |  | 0.14          |   |  | 42.9  |  
|Other operating                          |  | 0.88                     |   |  | 0.89          |   |  | (1.1  | )
|                                         |  |                          |   |  |               |   |  |       |  
|Total CASM                               |  | 9.43                     | ¢ |  | 9.94          | ¢ |  | (5.1  | )
|                                         |  |                          |   |  |               |   |  |       |  

Aircraft fuel decreased 5.1 percent on a cost per ASM basis. Our fuel price per gallon, including taxes and
into-plane fees, decreased 1.8 percent from $2.17 during the six months ended June 30, 2006 to $2.13 during the six months ended June 30, 2007. Additionally, average fuel cost per ASM was favorably impacted by the delivery of B737
aircraft. Both the average aircraft stage length and average aircraft size increased resulting in lower fuel costs per ASM

Aircraft rent decreased
9.0 percent on a cost per ASM basis. Since June 30, 2006, we have taken delivery of 18 B737 aircraft. As a result, our capacity, as measured by available seat miles, increased 20.9 percent. Of the 18 aircraft we have taken delivery of since
June 30, 2006, only two of the aircraft were lease financed.

Maintenance, materials and repairs decreased 13.3 percent on a cost per ASM
basis. The reduction is due primarily to a higher number of heavy maintenance and other one-time maintenance events in 2006 as compared to the six months ended June 30, 2007. Maintenance costs per block hour were approximately $277 compared to
$308 in 2006, representing a 10% decrease in maintenance costs per block hour.

Aircraft insurance and security services decreased 21.4 percent on a
cost per ASM basis. While the addition of 18 new Boeing aircraft to our fleet since June 30, 2006 increased our total insured hull value and related insurance premiums, the decrease on an ASM basis was primarily due to a reduction in hull and
liability insurance rates for our fleet coverage.

Marketing and advertising decreased 24.0 percent on a cost per ASM basis. This unit cost decrease
was attributable to the expiration of certain promotional programs as well as the timing of marketing expenses.

Depreciation and amortization
increased 42.9 percent on a cost per ASM basis, primarily due to the purchase of 16 B737 aircraft since June 30, 2006 and purchases of spare aircraft parts for our B737 aircraft fleet.

Non-operating (Income) Expense

Other (income) expense, net
increased by $7.6 million. Interest expense increased by $12.6 million primarily due to the effect of aircraft debt financings entered into during 2006 and 2007. Capitalized interest decreased by $1.5 million due to the delivery of 16 aircraft since
June 30, 2006. Capitalized interest represents interest on purchase deposits for future aircraft. These amounts are classified as part of the cost of the aircraft upon delivery. Additionally, we sold two aircraft during the second quarter 2007
resulting in a gain of $6.2 million.

Income Tax Expense

Our effective income tax rate was 37.7 percent for the six months ended June 30, 2007 compared to 37.9 percent for the six months ended June 30, 2006.



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##### Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2007, we had total cash, cash equivalents and short term investments of $399.2 million, which is an increase of $89.0 million compared to December 31, 2006. Short-term investments represent
auction rate securities with reset periods of less than 12 months. As of June 30, 2007, we also had $29.6 million of restricted cash. Our primary sources of cash are from operating activities and primary uses of cash are for investing and
financing activities.

Operating activities during the first six months of 2007 provided $167.7 million of cash flow compared to $92.4 million
during the same period in 2006. Cash flow from operating activities is related to both the level of our profitability and to changes in working capital and other assets and liabilities. Operating cash inflows are largely attributable to revenues
derived from the transportation of passengers. Operating cash outflows are largely attributable to recurring expenditures for fuel, labor, aircraft rent, aircraft maintenance, marketing and other activities. For the six months ended June 30,
2007, we reported net income of $44.2 million compared to net income of $22.8 million for the six months ended June 30, 2006. The increased profitability favorably impacted cash provided by operating activities.

Changes in the components of our working capital also impact cash flow from operating activities. Changes in the air traffic liability balance and the related accounts
receivable balance have had a significant impact on our net cash flow from operating activities. We have a liability to provide future air travel because travelers tend to purchase air transportation in advance of their intended travel date.
Advanced ticket sales, which are recorded in air traffic liability, fluctuate seasonally and also provide cash as the Company grows and consequently receives additional cash for future travel. During the six months ended June 30, 2007, our air
traffic liability balance increased $100.0 million more than the related accounts receivable balance increased contributing to net cash provided by operating activities. During the six months ended June 30, 2006, our air traffic liability
balance increased $70.0 million more than the related accounts receivable balance increased, contributing to net cash flow from operating activities. Changes in accounts payable, accrued and other current and non-current liabilities also have had a
significant impact on our cash flow from operating activities. During the six months ended June 30, 2007, the $38.8 million increase in accounts payable and accrued and other liabilities contributed favorably to net cash provided by operating
activities. Accounts payable and accrued and other liabilities increased during the period due to increases in accrued employee wages and benefits, accrued B737 aircraft rent, accrued interest, liabilities to governmental authorities for taxes and
fees that we collected on their behalf and various other liabilities. During the six months ended June 30, 2006, the $36.9 million increase in accounts payable and accrued and other liabilities contributed favorably to net cash provided by
operating activities.

We used cash to increase other assets by $13.0 million and $38.3 million during the six months ended June 30, 2007 and 2006,
respectively. Other assets include aircraft maintenance and other deposits, prepaid insurance and prepaid distribution costs. Additionally cash was used to increase spare parts, materials and supplies by $25.5 million and $18.9 million for the six
months ended June 30, 2007 and 2006, respectively primarily due to increases in our prepaid fuel inventory.

Investing activities during the
six months ended June 30, 2007 used $79.4 million in cash compared to the $278.7 million used during the analogous period in 2006. Purchases and sales of available for sales securities are classified as investing activities. During the six
months ended June 30, 2007, purchases of available for sale securities exceeded sales of available for sale securities by $17.3 million. During the six months ended June 30, 2006, purchases of available for sale securities exceeded sales
of available for sale securities by $213.4 million. Investing activities also include expenditures for aircraft deposits, the purchase of aircraft and other property and equipment and deferred costs related to the proposed Midwest acquisition.

Aircraft purchase contracts typically require that the purchaser make pre-delivery deposits to the manufacturer. These deposits are refunded at the time
of aircraft delivery. We may invest a portion or all of such deposits in the aircraft. During the six months ended June 30, 2007, we received $64.5 million in previously paid aircraft deposits while paying $58.2 million in new aircraft
deposits. During the six months ended June 30, 2007, we purchased 10 B737 aircraft, of which two were sold to an airline outside of the United States. We expended $121.3 million in cash and incurred $234.7 million of debt related to the
acquisition of these aircraft. During the six months ended June 30, 2006, we purchased five B737 aircraft. We expended $29.1 million in cash and incurred $144.9 million of debt related to the acquisition of these aircraft.

In May 2007, the Company purchased and subsequently sold two B737 aircraft. The cost of the two aircraft is included in total property and equipment purchases. Cash
received for the two aircraft was $77.9 million, of which $5.0 million was received in the second half of the prior year.

During the six months ended
June 30, 2007, we expended $12.7 million in cash for the acquisition of other property and equipment. Acquisitions of other property and equipment included purchases of rotable spare parts, additions to leasehold improvements and the purchase
of ground and computer equipment.

Financing activities used $16.6 million of cash during the six months ended June 30, 2007 compared to
providing cash of $15.3 million in the similar period in 2006. During the six months ended June 30, 2007, we received cash from the issuance of debt



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##### Table of Contents

financing for aircraft pre-delivery deposits of $43.2 million and repaid $57.4 million of our outstanding debt financing.
During the six months ended June 30, 2006, we repaid $27.1 million of our outstanding debt financing. Also, during the first six months of 2007, we borrowed $234.7 million in non-cash transactions to finance the purchase of 8 B737 aircraft.
During the first six months of 2006, we received cash from the issuance of debt financing for aircraft pre-delivery deposits of $33.4 million. During the first six months of 2006, we borrowed $144.9 million in non-cash aircraft purchase debt
financing transactions. See Note 5 to Condensed Consolidated Financial Statements for additional information regarding our outstanding debt.

During the
six months ended June 30, 2007 and 2006, we received $1.2 million and $10.8 million, respectively, from the exercise of employee options for the purchase of common stock.

Proposed Acquisition of Midwest Air Group

On January 11, 2007, we commenced an exchange offer for all of the
outstanding shares of Midwest Air Group, Inc. (Midwest), for $13.25 per Midwest share, based on the closing price of our common stock on January 8, 2007. The offer consisted of $6.625 in cash and 0.5884 shares of AirTran common stock for each
Midwest share. Because we believe a combination of the two airlines would strengthen both airlines we are continuing to pursue the acquisition of Midwest. On April 2, 2007, we increased our offer to purchase all of the outstanding shares of
Midwest to $15.00 per Midwest share, based on the closing price of AirTran common stock on March 30, 2007. The offer consists of $9.00 in cash and 0.5842 shares of AirTran common stock for each Midwest share. The total value of the exchange
offer is $389.0 million. The offer, which is being made through a wholly-owned subsidiary, has been extended and is scheduled to expire on August 10, 2007. The offer is subject to specified conditions. We anticipate funding the cash portion of
the purchase price with the proceeds from $225 million in senior secured financing under a proposed credit facility and cash on hand. As of June 30, 2007, other non-current assets include $7.7 million of incremental direct costs associated with
the proposed acquisition of Midwest. Such costs, together with any additional costs incurred subsequent to June 30, 2007 would be immediately expensed if we discontinue our efforts to acquire Midwest.

Aircraft Acquisitions and Aircraft Purchase Commitments

During the
six months ended June 30, 2007, we took delivery of eight purchased B737 aircraft. As of June 30, 2007, we had on order 65 B737 aircraft with delivery dates between 2007 and 2012. The table below illustrates all aircraft scheduled for
delivery through 2012:



|                  |  |                             
|----------------- |  | ----------------------------
|                  |  | Firm Aircraft DeliveriesB737
|Remainder of 2007 |  | 2                           
|2008              |  | 13                          
|2009              |  | 14                          
|2010              |  | 14                          
|2011              |  | 10                          
|2012              |  | 12                          
|                  |  |                             
|Total             |  | 65                          
|                  |  |                             

During the quarter ended June 30, 2007, we took delivery of and promptly sold two additional aircraft which
were sold to a carrier outside the United States. We recognized a gain of approximately $6.2 million related to the sale of these two aircraft.

In June
2007, we entered into an amendment with an aircraft manufacturer in which the Company agreed to purchase an additional 15 B737 aircraft. The newly-ordered aircraft are scheduled to be delivered to the Company during 2011 and 2012. Also, pursuant to
that same amendment, we agreed to reschedule the delivery positions for six B737 aircraft on firm order with the aircraft manufacturer. The rescheduled aircraft were scheduled to be delivered to the Company during the second half of 2008 and first
half of 2009. The rescheduled aircraft are now currently scheduled to be delivered to the Company during 2011 and are reflected in the table above.

Aircraft purchase contracts typically require the purchaser to make pre-delivery deposits to the manufacturer. We have arranged pre-delivery deposit financing for all of our pre-delivery deposit requirements for aircraft scheduled to be
delivered in 2007 and 2008. The pre-delivery deposit financing typically funds between 75 percent and 100 percent of our pre-delivery deposit obligation for any given aircraft. We expect to arrange pre-delivery deposit financing for the remainder of
our scheduled aircraft deliveries.

Our aircraft purchase commitments for the remainder of 2007 and for the next five years, in aggregate, are (in
thousands): 2007 - $93,800; 2008 - $483,000; 2009 - $508,000; 2010 - $500,600; 2011 - $363,400; and 2012 - $401,300. These amounts include payment



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commitments, including payment of pre-delivery deposits, for aircraft on firm order. Payment commitments include the
forecasted impact of contractual price escalations. The aircraft purchase commitment totals do not reflect the effects of prearranged aircraft financings.

Aircraft Financing Arrangements

Of the 65 B737 aircraft we have on order, we have secured debt financing for two B737 aircraft
scheduled for delivery in 2007 and for five of the aircraft which are scheduled to be delivered in 2008. Such debt financing funds approximately 85 percent of the total cost of the aircraft. While our intention is to finance the remainder of the
aircraft on order through a combination of debt and lease financings, we have not yet arranged for such financing.

Letters of Credit

As of June 30, 2007, $14.4 million of restricted cash on the accompanying condensed consolidated balance sheet relates to outstanding letters of credit, primarily
for airport facilities and insurance.

Other Year 2007 Cash Requirements and Sources of Liquidity

During 2007, in addition to funding the committed aircraft acquisitions discussed above, we will need cash for non-aircraft capital expenditures and debt maturities. It
is anticipated that non-aircraft capital expenditures and 2007 debt and capital lease maturities will be funded with cash flow from operations, other financings, and the use of existing cash resources.

We have various options available to meet our debt repayments, capital expenditures and operating commitments including internally generated funds and various financing
or leasing options. Additionally, we have an outstanding shelf registration which we may utilize to raise funds for aircraft financings or other purposes in the future. However, we have no unused lines of credit available and our owned aircraft and
our pre-delivery deposits are pledged as collateral for outstanding debt. There can be no assurance that financing will be available for all B737 aircraft deliveries or for other capital expenditures not covered by firm financing commitments. Should
fuel prices remain high and if we are unable to generate revenues to cover our costs, we may slow our growth, including through the rescheduling of aircraft deliveries or through the sale, lease or sublease of some of our aircraft.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

There
have been no material changes in market risk from the information provided in Part II, Item 7A Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended December 31,
2006, other than those discussed below.

Interest Rates

We had approximately $725.4 million and $498.9 million of variable-rate debt as of June 30, 2007 and December 31, 2006, respectively. We have mitigated our exposure on certain variable-rate debt by entering into interest rate swap
agreements. These swaps expire in May 2018, June 2018, and July 2018. The notional amount of the outstanding interest rate swaps at June 30, 2007 was $82.3 million. The interest rate swaps effectively result in us paying a fixed rate of
interest on a portion of our floating rate debt securities through the expiration of the swaps. If average interest rates increase by 100 basis points during the remainder of 2007, our projected 2007 interest expense would increase by approximately
$3.2 million.

Aviation Fuel

Our results of
operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel expense for the three months ended June 30, 2007 and 2006 represented approximately 37.2 percent and 37.0 percent of our operating
expenses, respectively. Aircraft fuel expense for the six months ended June 30, 2007 and 2006 represented approximately 35.6 percent and 35.6 percent of our operating expenses, respectively. Efforts to reduce our exposure to increases in the
price and decreases in the availability of aviation fuel include the utilization of fuel purchase contracts involving both fixed-price arrangements and cap arrangements. Fixed-price arrangements consist of an agreement to purchase defined quantities
of aviation fuel from a third party at defined prices. Cap arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party at a price not to exceed a defined price, limiting our exposure to upside market price
risk. Because these agreements are accounted for under the normal purchases exception included in SFAS 133, these agreements are not considered derivative financial instruments. As of June 30, 2007, utilizing forward fuel purchase contracts, we
had committed to purchase 43.3 million gallons of aviation fuel at a weighted average price per gallon, excluding taxes and related fees, of $1.90 for the remainder of 2007. This represents 22.7 percent of our anticipated fuel needs for the
remainder of 2007.



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In addition to the fuel purchase contracts discussed above, we have entered into jet fuel derivative financial
arrangements with financial institutions to reduce the impact of fluctuations in jet fuel prices on future fuel expense. Our primary objective of entering into derivative arrangements is to reduce the impact on our operating results of the
volatility of Gulf Coast jet fuel prices. As of June 30, 2007 the fair market value of our fuel derivatives was $13.9 million and was comprised of both fuel swap arrangements and option arrangements. For every dollar increase per barrel in
crude oil or refining costs , our fuel expense for the remainder of 2007, net of fuel contract arrangements and derivative financial instruments, would increase approximately $2.5 million based on current and projected operations.



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|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Restatement.In late July 2007, we
identified possible errors in our accounting for a specific type of passenger revenue transaction. Upon completion of our investigation and analysis of these items, on August 7, 2007, our management concluded that we would amend our previously
filed Annual Report on Form 10-K for the year ended December 31, 2006 and our previously filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 to correct our previously reported passenger revenues for the impact of these
errors. The Audit Committee of our Board of Directors concurred with managements decision to amend our previously filed reports on August 9, 2007. We do not believe the rollover impact of the errors is material to our results of operations for
any individual interim or annual period. However, because the cumulative effect of the errors is material to our most recently completed fiscal year, we restated our previously issued financial statements in accordance with the guidance provided in
SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Additionally, management concluded that our failure to identify the errors in
our accounting for a specific type of passenger revenue transaction constituted a material weakness in our internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Solely as a result of this material weakness, our management has revised its earlier assessment and
concluded that our internal control over financial reporting was not effective as of December 31, 2006, based on the criteria in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. This material weakness caused us to amend our 2006 Form 10-K and Form 10-Q for the quarter ended March 31, 2007, in order to restate our consolidated financial statements as of December 31, 2006 and 2005 and
for each of the three years in the period ended December 31, 2006 and for the quarter ended March 31, 2007.

Disclosure Controls and
Procedures.We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to process, summarize and disclose this information within the
time periods specified in the rules of the SEC. In connection with the restatement, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 as amended (the Exchange Act)). Based on this evaluation our Chief Executive Officer and Chief Financial Officer have concluded that, as a result of
the material weakness in our internal control over financial reporting described above, our disclosure controls and procedures were not effective as of the end of the period covered by this report on Form 10-Q.

Remediation of Material Weakness in Internal Control. We have performed an extensive review of the transactions impacted by the material weakness described above
in an effort to ensure that this amendment reflects all necessary adjustments. We believe that this review, the investigation and analysis of the errors described above, and the changes in the related revenue accounting processes we have implemented
as a result of this restatement will remediate the material weakness and are designed so that similar transactions will be accounted for in accordance with generally accepted accounting principles in our future filings.

Changes in Internal Control. There were no changes to our internal control over financial reporting during the quarter ended June 30, 2007 that materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II.

OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, we are engaged in litigation arising in the
ordinary course of business. We do not believe that any such pending litigation, individually or collectively, will have a material adverse effect on our results of operations or financial condition.

Item 1A.    Risk Factors

Information regarding risk factors appears in MD&A 
Forward-Looking Statements, in Part I  Item 2 of this Form 10-Q and in Risk Factors in Part I  Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. While we believe there
have been no material changes from the risk factors previously disclosed in such Annual Report, you should carefully consider, in addition to the other information set forth in this report, the risk factors discussed in our Annual Report which could
materially affect our business, financial condition or future results. Such risk factors are expressly incorporated herein by reference. The risks described in our Annual Report are not the only risks facing our Company. In addition to risks and
uncertainties inherent in forward looking statements contained in this Report on Form 10-Q, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business,
financial condition and/or operating results.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

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

Our annual meeting of stockholders
was held on May 23, 2007. We solicited proxies for the meeting pursuant to Regulation 14A under the Securities Exchange Act of 1934.

Managements nominees for election to our Board of Directors as listed in our proxy statement were elected for three-year terms; with the results of the voting as follows (there were no broker non-votes on this matter):



|                    |  |            |  |               
|------------------- |  | ---------- |  | --------------
|Nominee             |  | Votes For  |  | Votes Withheld
|J. Veronica Biggins |  | 75,233,563 |  | 9,061,865     
|Robert L. Fornaro   |  | 76,534,897 |  | 7,760,531     
|Alexis P. Michas    |  | 76,644,100 |  | 7,651,328     

As indicated in the table above, J. Veronica Biggins, Robert L. Fornaro and Alexis P. Michas were elected as Class
III Directors for terms expiring at the 2010 annual meeting of stockholders. The terms of the following Class II directors will continue until the annual meeting in 2008: G. Peter DAloia, Jere A. Drummond, John F. Fiedler and William J. Usery,
Jr. The terms of the following Class I Directors will continue until the annual meeting in 2009: Don L. Chapman, Lewis H. Jordan, and Joseph B. Leonard.

Item 5.    Other Information

None

Item 6.    Exhibits

The following exhibits are filed with this report:



|    |         |             |                                                                                                                                      |                                                                                                                                                                                                                            
|--- | ------- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |         | Exhibit No. |                                                                                                                                      | Description                                                                                                                                                                                                                
|    | 10.54 - |             | Purchase Agreement No. 2444 Supplement No. 12, dated as of June 4, 2007, by and between The Boeing Company and AirTran Airways, Inc.
|    |         |            
|    |         | 10.55 -     |                                                                                                                                      | Credit Agreement, dated as of June 28, 2007, among AirTran Airways, Inc., as Borrower, Each Lender Identified on Schedule 1 thereto, as Lenders, and Bayerische Hypo- und Vereinsbank AG, London
Branch, as Security Agent.
|    |         |            
|    |         | 10.56 -     |                                                                                                                                      | Security Agreement, dated as of June 28, 2007, by and between AirTran Airways, Inc. and Bayerische Hypo- und Vereinsbank AG, London Branch, as Security Agent.                                                             
|    |         |            
|    |         | 31.1 -      |                                                                                                                                      | Rule 13(a)-14 Certification of Chief Executive Officer                                                                                                                                                                     
|    |         |            
|    |         | 31.2 -      |                                                                                                                                      | Rule 13(a)-14 Certification of Chief Financial Officer                                                                                                                                                                     
|    |         |            
|    |         | 32.1 -      |                                                                                                                                      | CEO certification pursuant to 18 U.S.C. Section 1350                                                                                                                                                                       



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.



|                     |  |                                                                                                       
|-------------------- |  | ------------------------------------------------------------------------------------------------------
|                     |  | AirTran Holdings, Inc.                                                                                
|                     |  | (Registrant)                                                                                          
|                     | 
|Date: August 9, 2007 |  | /s/
Stanley J. Gadek                                                                                  
|                     |  | Stanley J. Gadek                                                                                      
|                     |  | Senior Vice President Finance and Chief Financial Officer (Principal Accounting and Financial Officer)



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EXHIBIT INDEX



|            |  |   |  |                                                                                                                                                                                                                            
|----------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |   |  | Description                                                                                                                                                                                                                
|10.54       |  | - |  | Purchase Agreement No. 2444 Supplement No. 12, dated as of June 4, 2007, by and between The Boeing Company and AirTran Airways, Inc.                                                                                       
|            |  |  
|10.55       |  | - |  | Credit Agreement, dated as of June 28, 2007, among AirTran Airways, Inc., as Borrower, Each Lender Identified on Schedule 1 thereto, as Lenders, and Bayerische Hypo- und Vereinsbank AG, London
Branch, as Security Agent.
|            |  |  
|10.56       |  | - |  | Security Agreement, dated as of June 28, 2007, by and between AirTran Airways, Inc. and Bayerische Hypo- und Vereinsbank AG, London Branch, as Security Agent.                                                             
|            |  |  
|31.1        |  | - |  | CEO certification pursuant to Rule 13(a)-14                                                                                                                                                                                
|            |  |  
|31.2        |  | - |  | CFO certification pursuant to Rule 13(a)-14                                                                                                                                                                                
|            |  |  
|32.1        |  | - |  | CEO and CFO certifications pursuant to 18 U.S.C. Section 1350