|UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549FORM 10-Q
|---------------------------------------------------------------------------------
|(Mark One)[Ö
]                                                                   

|For the quarterly period ended September 30, 2004
|-------------------------------------------------

|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 Number: 1-15991
|---------------------------------------------------------------------------------------------

|AirTran Holdings, Inc.(Exact name of registrant as specified in its charter)                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------------------
|Nevada(State or other jurisdiction of incorporation or organization)9955 AirTran Boulevard, Orlando, Florida
(Address of principal executive offices)
|(407) 251-5600(Registrant's telephone number, including area code)                                                                                   



|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  Ö    No  Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes  Ö    No  Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Common Stock, $0.001 par value - approximately 85,728,000 shares as of October 31, 2004.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|AIRTRAN HOLDINGS, INC.
Form 10-QFor the Quarter Ended September 30, 2004
INDEX
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|        |                                                                                                                                       | Page
|------- | ------------------------------------------------------------------------------------------------------------------------------------- | ----
|        | PART I - FINANCIAL INFORMATION                                                                                                        |     
|        |                                                                                                                                       |     
|Item 1. | Financial Statements                                                                                                                  |     
|        |                                                                                                                                       |     
|        | Condensed Consolidated Statements of Operations
         - Three months and nine months ended September 30, 2004 and 2003 (unaudited) | 3   
|        |                                                                                                                                       |     
|        | Condensed Consolidated Balance Sheets
         - September 30, 2004 (unaudited) and December 31, 2003                                 | 4   
|        |                                                                                                                                       |     
|        | Condensed Consolidated Statements of Cash Flows
         - Nine months ended September 30, 2004 and 2003 (unaudited)                  | 6   
|        |                                                                                                                                       |     
|        | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                      | 7   
|        |                                                                                                                                       |     
|Item 2. | Management's Discussion and Analysis of Financial Condition
      and Results of Operations                                           | 15  
|        |                                                                                                                                       |     
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                                            | 25  
|        |                                                                                                                                       |     
|Item 4. | Controls and Procedures                                                                                                               | 25  
|        |                                                                                                                                       |     
|        | PART II - OTHER INFORMATION                                                                                                           |     
|        |                                                                                                                                       |     
|Item 6. | Exhibits                                                                                                                              | 26  
|        |                                                                                                                                       |     
|        | Signatures                                                                                                                            | 27  
|        |                                                                                                                                       |     
|        |                                                                                                                                       |     



2



PART I - FINANCIAL INFORMATION

|AirTran Holdings, Inc.                         
|-----------------------------------------------
|Condensed Consolidated Statements of Operations
|(In thousands, except per share data)          
|(Unaudited)                                    
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|Operating Revenues:                            
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|Operating Expenses:                            
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|Operating Income (Loss)                        
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|Other (Income) Expense:                        
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|Income (Loss) Before Income Taxes              
|                                               
|Net Income (Loss)                              
|                                               
|Earnings (Loss) per Common Share               
|Basic                                          
|Diluted                                        
|                                               
|Weighted-average Shares Outstanding            
|Basic                                          
|Diluted                                        





3

|AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|---------------------------------------------------------------------------
|                                                                           
|                                                                           
|                                                                           
|ASSETS                                                                     
|Current Assets:                                                            
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|Property and Equipment:                                                    
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|Other Assets:                                                              
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|Total assets                                                               
|                                                                           

(Continued on next page)



4

|AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets (Continued)
(In thousands)
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|                                                                                       
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                   
|Current Liabilities:                                                                   
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Long-term debt, less current portion                                                   
|                                                                                       
|Deferred income taxes                                                                  
|Other liabilities                                                                      
|                                                                                       
|Commitments and Contingencies                                                          
|                                                                                       
|Stockholders' Equity:                                                                  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Total liabilities and stockholders' equity                                             
|                                                                                       

See accompanying Notes to Condensed Consolidated Financial Statements.

5

|AirTran Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|-------------------------------------------------------------------------------------------------
|                                                                                                 
|                                                                                                 
|Operating activities:                                                                            
|Net income                                                                                       
|Adjustments to reconcile net income to net cash provided by                                      
|operating activities:                                                                            
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|Investing activities:                                                                            
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|                                                                                                 
|Financing activities:                                                                            
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Net (decrease) increase in cash and cash equivalents                                             
|Cash and cash equivalents at beginning of period                                                 
|Cash and cash equivalents at end of period                                                       
|                                                                                                 
|                                                                                                 
|Supplemental Disclosure of Cash Flow Activities:                                                 
|Non-cash investing and financing activities                                                      
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 

See accompanying Notes to Condensed Consolidated Financial Statements.

6



AirTran Holdings, Inc.
Notes to Condensed Consolidated Financial Statements 
(Unaudited)

Note 1 - Summary of Significant Accounting Policies Business
All of the operations of AirTran Holdings, Inc. are conducted by our wholly owned subsidiary, AirTran Airways, Inc.  AirTran Airways, Inc. is one of the largest low-fare, scheduled airlines in the United States in terms of departures and seats offered.  We operate scheduled air transportation of passengers principally in the eastern United States, primarily from our hub at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia.Basis of PresentationOur accompanying unaudited Condensed Consolidated Financial Statements include the accounts of AirTran Holdings, Inc. (Holdings) 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 are of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented.  Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for reports on Form 10-Q.  It is suggested that these unaudited interim financial statements 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, 2003.
The preparation of the accompanying unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying Notes.  Actual results may differ from those estimates and such differences may be material to the unaudited Condensed Consolidated Financial Statements.ReclassificationCertain 2003 amounts have been reclassified to conform to 2004 classifications.

7

Stock-Based Employee CompensationWe grant stock options and restricted stock awards from time to time to certain of our officers, directors and key employees.  We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and accordingly recognize compensation expense when the exercise price of an award is less than the fair value of our common stock on the grant date.  We issued approximately 1,400,355 shares of common stock pursuant to stock option exercises during 2004.
The following table illustrates the effect on net income (loss) and earnings (loss) per common share if we had applied the fair value based method to measure stock-based employee compensation, as required under the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure:

|                                          |      | Three months ended |        |     |         | Nine months ended |  
|----------------------------------------- | ---- | ------------------ | ------ | --- | ------- | ----------------- | -
|                                          |      | September 30,      |        |     |         | September 30,     |  
|(in thousands, except per share amounts)  |      | 2004               |        |     | 2003    |                   |  
|                                          |      |                    |        |     |         |                   |  
|Net income (loss), as reported            | $    | (9,769             | )      | $   | 19,613  |                   |  
|                                          |      |                    |        |     |         |                   |  
|Add: Stock-based employee compensation    |      |                    |        |     |         |                   |  
|expense included in reported income,      |      |                    |        |     |        
|net of related tax effects                | 108  | --                 |        | 250 | --     
|                                          |      |                    |        |     |         |                   |  
|Deduct: Stock-based employee compensation |      |                    |        |     |         |                   |  
|expense determined under the fair value   |      |                    |        |     |         |                   |  
|based method, net of related tax effects  | (862 | )                  | (1,300 | )   |         | (2,749            | )
|                                          |      |                    |        |     |         |                   |  
|Pro forma net income (loss)               | $    | (10,523            | )      | $   | 18,313  |                   |  
|                                          |      | ======             |        |     | ======= |                   |  
|EARNINGS (LOSS) PER SHARE:                |      |                    |        |     |         |                   |  
|                                          |      |                    |        |     |         |                   |  
|Basic, as reported                        | $    | (0.11              | )      | $   | 0.27    |                   |  
|Basic, pro forma                          | $    | (0.12              | )      | $   | 0.25    |                   |  
|                                          |      |                    |        |     |         |                   |  
|Diluted, as reported                      | $    | (0.11              | )      | $   | 0.24    |                   |  
|Diluted, pro forma                        | $    | (0.12              | )      | $   | 0.20    |                   |  

As required, the pro forma disclosures in the previous table include options granted since January 1, 1995.  Consequently, the effects of applying SFAS No. 123 for providing pro forma disclosures may not be representative of the effects on reported net income for future years until all options outstanding are included in the pro forma disclosures.  For purposes of pro forma disclosures, the estimated fair value of stock-based compensation plans and other options is amortized to expense primarily over the vesting period.

We have granted stock awards to our officers and key employees pursuant to our 2002 Long-Term Incentive Plan.  Stock awards are grants that entitle the holder to shares of our common stock as the award vests.  During the first nine months of 2004, we granted approximately 135,250

8

Note 2 - Earnings (Loss) Per Common Share
The following table sets forth the computation of basic and diluted earnings (loss) per common share:

|                                                                              |   | Three months ended
September 30, |   |   | Nine months ended
September 30, | 
|----------------------------------------------------------------------------- | - | -------------------------------- | - | - | ------------------------------- | 
|(in thousands, except per share amounts)                                      |   | 2004                             |   |   | 2003                            | 
|NUMERATOR:                                                                    |   |                                  |   |   |                                 | 
|Net income (loss) available to common stockholders                            | $ | (9,769                           | ) | $ | 19,613                          | 
|Plus income effect of assumed conversion-interest
        on convertible debt |   | --                               |   |   | 2,137                           | 
|Income (loss) before assumed conversion, diluted                              | $ | (9,769                           | ) | $ | 21,750                          | 
|                                                                              |   | ========                         |   |   | ========                        | 
|DENOMINATOR:                                                                  |   |                                  |   |   |                                 | 
|Weighted-average shares outstanding, basic                                    |   | 85,597                           |   |   | 73,732                          | 
|Effect of dilutive securities:                                                |   |                                  |   |   |                                 | 
|Stock options                                                                 |   | --                               |   |   | 5,139                           | 
|Convertible debt                                                              |   | --                               |   |   | 11,241                          | 
|Stock warrants                                                                |   | --                               |   |   | 2,020                           | 
|Adjusted weighted-average shares outstanding,
      diluted                   |   | 85,597                           |   |   | 92,132                          | 
|                                                                              |   | ========                         |   |   | ========                        | 
|EARNINGS (LOSS) PER COMMON SHARE:                                             |   |                                  |   |   |                                 | 
|Basic                                                                         | $ | (0.11                            | ) | $ | 0.27                            | 
|                                                                              |   | ========                         |   |   | ========                        | 
|Diluted                                                                       | $ | (0.11                            | ) | $ | 0.24                            | 
|                                                                              |   | ========                         |   |   | ========                        | 
|                                                                             

For the three months ended September 30, 2004, 3.5 million, 0.6 million and 11.2 million incremental shares related to our stock options, convertible debt and stock warrants, respectively, were not included in the diluted earnings per share calculation because the effect of including these shares would have been anti-dilutive.  For the nine months ended September 30, 2004, 11.2 million incremental shares related to our convertible debt were not included in the diluted earnings per share calculation because the effect of including these shares would have been anti-dilutive.
On September 30, 2004, the Emerging Issues Task Force reached consensus on Issue No. 04-08 (EITF No. 04-08), The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which changes the treatment of contingently convertible debt instruments in the calculation of diluted earnings per share.  EITF No. 04-08 provides that the shares issuable upon conversion of these debt instruments be included in the earnings per share computation, if dilutive, regardless of whether the contingent conditions for their conversion have been met.  This change does not have any effect on net income, but it may affect the related earnings per share amounts.  The new rules will be effective for reporting periods ending after December 15, 2004.  We plan to adopt EITF No. 04-08 as of December 31, 2004.  We will include, if dilutive, the assumed conversion of our 7% convertible notes issued May 2003 in all of our reported diluted earnings per share calculations.  We expect this change to have an immaterial impact on our diluted earnings per share calculations.

9



Note 3 - Comprehensive Income (Loss)
Comprehensive income (loss) encompasses net income (loss) and "other comprehensive income (loss)," which includes all other non-owner transactions and events that change stockholders' equity.  Other comprehensive income (loss) is composed of reclassifications to earnings of deferred gains and losses related to derivative financial instruments used to manage our fuel costs that qualified for hedge accounting.  These derivative instruments were terminated in March 2002.  Amounts are reclassified to earnings as the related fuel is used.  Comprehensive income (loss) was $(9.7) million and $19.7 million for the three months ended September 30, 2004 and 2003 and $11.3 million and $79.3 million for the nine months ended September 30, 2004 and 2003, respectively.  The differences between net income (loss) and comprehensive income (loss) for each of these periods are as follows:

|                                                                   |   | Three months ended
September 30, |   |   | Nine months ended
September 30, | 
|------------------------------------------------------------------ | - | -------------------------------- | - | - | ------------------------------- | 
|(in thousands)                                                     |   | 2004                             |   |   | 2003                            | 
|Net income (loss):                                                 | $ | (9,769                           | ) | $ | 19,613                          | 
|Unrealized income on derivative instruments,
        net of taxes* |   | 59                               |   |   | 121                             | 
|Comprehensive income (loss)                                        | $ | (9,710                           | ) | $ | 19,734                          | 
|                                                                   |   | ========                         |   |   | ========                        | 

* Amounts are net of taxes of $38 and $0 for the three months ended September 30, 2004 and 2003, respectively, and $106 and $0 for the nine months ended September 30, 2004 and 2003, respectively.

Because net deferred tax assets were offset in full by a valuation allowance during 2003 there was no tax effect on the unrealized loss for 2003.

An analysis of the amounts included in Accumulated other comprehensive loss is shown below:

| | (in thousands)                |   | Decrease   |  
| | ----------------------------- | - | ---------- | -
| | Balance at December 31, 2003  | $ | (271       | )
| | Reclassification to earnings  |   | 271        |  
| | Balance at September 30, 2004 | $ | --         |  
| |                               |   | ========== |  

Note 4 - Fuel Risk Management

Our efforts to reduce exposure to increases in the price and availability of aircraft fuel include the utilization of fixed-price fuel contracts and fuel cap contracts (collectively "fuel contracts").  Fixed-price fuel contracts are agreements to purchase defined quantities of aircraft fuel from a third party at defined prices.  Fuel cap contracts are agreements to purchase defined quantities of aircraft fuel from a third party at a price not to exceed a defined price, thereby limiting our exposure to increases in the price of aircraft fuel.  As of September 30, 2004, we had fuel contracts to purchase approximately 60.1 percent and 13.2 percent of our fuel needs through the end of December 2004 and 2005, respectively.  We expect the average price of fuel under these fuel contracts to be no higher than $0.92 and $1.07 per gallon, including delivery to our operations hub in Atlanta and other locations, through the end of December 2004 and 2005, respectively.

10

Note 5 - Commitments and ContingenciesAircraft Purchase Commitments

| |                                                                                                                                                                                                                                                                                                           |  |                 |          |                 |          |          | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | --------------- | -------- | -------- | 
| |                                                                                                                                                                                                                                                                                                           |  | B737 Deliveries |          | B717 Deliveries |         
| |                                                                                                                                                                                                                                                                                                           |  | Firm            | Options  |                 | Firm     | Options  | 
| | 2004                                                                                                                                                                                                                                                                                                      |  | 3               | --       |                 | 2        | --       | 
| | 2005                                                                                                                                                                                                                                                                                                      |  | 13              | --       |                 | 8        | --       | 
| | 2006                                                                                                                                                                                                                                                                                                      |  | 15              | 4        |                 | --       | --       | 
| | 2007                                                                                                                                                                                                                                                                                                      |  | 12              | 5        |                 | --       | --       | 
| | 2008                                                                                                                                                                                                                                                                                                      |  | 4               | 14       |                 | --       | --       | 
| |                                                                                                                                                                                                                                                                                                           |  | --------        | -------- |                 | -------- | -------- | 
| | Total*                                                                                                                                                                                                                                                                                                    |  | 47              | 23       |                 | 10       | --       | 
| |                                                                                                                                                                                                                                                                                                           |  | =====           | =====    |                 | =====    | =====    | 
| |                                                                                                                                                                                                                                                                                                           |  |                 |          |                 |          |          | 
| | * We have purchase rights to acquire up to 25 B737 aircraft in addition to the totals shown above.  See Note 11 to the unaudited Condensed Consolidated Financial Statements for information regarding modified delivery dates for certain B717 firm orders agreed upon subsequent to September 30, 2004.

We have lease-financing commitments from Boeing Capital Loan Corporation or affiliates thereof for our 10 B717 aircraft remaining on firm order, and pursuant to our agreement with an aircraft leasing company we have lease-financing commitments for 19 of the remaining B737 deliveries.  Additionally, we have financing commitments in place for the delivery of four B737 deliveries (see Note 9 to the unaudited Condensed Consolidated Financial Statements for more information on B737 aircraft financing) and have obtained financing commitments from an affiliate of The Boeing Company (Boeing) for up to 80 percent of the purchase price for 16 of the B737 firm orders in the event we are unable to secure financing from the financial markets on acceptable terms.  There can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financing commitments.
During the first nine months of 2004, in connection with Airways' agreement with Boeing, Airways was refunded $7.7 million in previously paid aircraft deposits.  We paid $36.7 million to Boeing in aircraft deposits for the acquisition of B717 and B737 aircraft.

Credit AgreementWe entered into an agreement with a commercial bank that allows us to obtain letters of credit and enter into hedge agreements with the bank for up to $15.0 million.  At September 30, 2004, we had approximately $12.1 million in letters of credit drawn against the credit agreement.OtherDuring 2002, we entered into a cancelable agreement with a regional jet contractor to provide regional jet service between pre-determined pairs of cities.  We paid the contractor to operate the flights and were entitled to all revenues associated with these flights.  These payments were recorded on a net basis as a reduction to passenger revenues

During 2003, we entered into an agreement with an air carrier to provide jet service between pre-determined pairs of cities.  The air carrier provides its own aircraft, crew, maintenance, and hull and liability insurance in exchange for a fixed block hour rate for flights operated on our behalf.  These payments are recorded on a net basis as a reduction of passenger revenues.  We have agreed to phase out this jet service by the end of November 2004.

11

Note 6 - Income Taxes At December 31, 2003, we had net operating loss (NOL) carryforwards for income tax purposes of approximately $118.4 million that will begin to expire in 2016.  We previously carried a valuation allowance on a significant portion of our deferred tax assets, including our NOL carryforwards.  During 2003, as a result of profitable results in 2003 and 2002 and expectations of future profitability, we released the valuation allowance on the deferred tax asset related to our NOL carryforwards.  Therefore, beginning in 2004, we are recording our provision for income taxes at an annualized effective rate of 39 percent.  Income tax expense (benefit) was $(5.7) million and $0.3 million for the three months ended September 30, 2004 and 2003, respectively, and $7.1

12

and unpaid interest.  The holders of the notes may require Holdings to repurchase the notes on July 1, 2010, 2013 and 2018 at a repurchase price of 100 percent plus any accrued and unpaid interest.  Holdings filed a shelf registration statement with the U.S. Securities and Exchange Commission covering the resale of the notes and the underlying common stock which became effective in October 2003. 
In June 2003, Boeing Capital Corporation (Boeing Capital) exercised its remaining conversion rights related to Holdings' 7.75% Series B Senior Convertible Notes.  The conversion resulted in a decrease in Holdings' overall debt of $5.5 million.   In connection with the conversion, Holdings issued approximately 1.0 million shares of its common stock to Boeing Capital.  In accordance with accounting principles generally accepted in the United States, Holdings expensed $1.6 million of debt discount and $0.2 million of debt issuance costs that had not been amortized.  These amounts are shown on the accompanying unaudited Condensed Consolidated Statements of Operations as "Other (Income) Expense - Convertible debt discount amortization."
In August 2003, Holdings redeemed the remaining balance of $10.3 million of its 13% Series A Senior Secured Notes.

In August 2004, in conjunction with the acquisition of three B737 aircraft, Airways executed the first of three equipment notes for $29.0 million due in August 2016.  The note bears interest (and the two notes to be entered into will bear interest) at a floating rate equal to the six-month US Dollar LIBOR rate in effect at the commencement of each semi-annual period plus 1.5% and is payable semi-annually on February 16 and August 16.  The note is (and the two notes to be entered into will be) secured by a first mortgage on the purchased aircraft.  Airways will pay a commitment fee equal to 0.25% per annum of the undrawn portion of the loan amount.

In September 2004, in conjunction with the acquisition of three additional B737 aircraft, Airways executed the first of three equipment notes for $28.5 million due in September 2016.  The note bears interest (and the two notes to be entered into will bear interest) at a floating rate equal to the six-month US Dollar LIBOR rate in effect at the commencement of each semi-annual period plus 1.5% and is payable March 17 and September 17.  The note is (and the two notes to be entered into will be) secured by a first mortgage on the purchased aircraft and is unconditionally guaranteed by Airways.  Airways will pay a commitment fee equal to 0.65% per annum of the undrawn portion of the loan amount.Note 10 - Indemnifications and Guarantees
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 likelihood of payment in each case is considered remote.  These indemnities consist of the following:

Certain of Airways' debt agreements related to certain aircraft-secured notes payable through 2014 and 2017 contain provisions 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 United States dollars in an amount equal to the pool balance of the certificates.  The maximum potential payment under these indemnities cannot be determined.

In our aircraft financing agreements, we typically indemnify the financing parties, trustees acting on their behalf and other related parties against liabilities that arise from the manufacture, design, ownership, financing, use, operation and maintenance of the aircraft and for tort liability, whether or not these liabilities arise out of or relate to the negligence of these indemnified parties, except for their gross negligence or willful misconduct.  We believe we are

13

covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to aircraft we operate.  Additionally, if there is a change in the law which results in the imposition of any reserve, capital adequacy, special deposit, or similar requirement the result of which is to 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 expect that we would be covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to aircraft we operate.

Airways' aircraft lease transaction documents contain customary indemnities concerning withholding taxes under 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 to leases expiring through 2022.  The maximum potential payment under these indemnities cannot be determined.

We have various real property leases and various agreements among airlines relating to fuel consortia or fuel farms at airports, under which we have agreed to standard provisions 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 under these indemnities.Note 11 - Subsequent Events
On October 24, 2004, Airways agreed, subject to certain conditions, to assume the Chicago Midway Airport gate leases and acquire certain other related assets including takeoff and landing slots at New York's LaGuardia and Washington's Ronald Reagan National airports of ATA Airlines, Inc., a unit of ATA Holdings Corp. (ATA).  ATA and certain of its subsidiaries have filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana.  The purchase price of this transaction is approximately $90.0 million payable in cash upon the approval and transfer of the agreed upon gate leases and slots.  We may use working capital and/or current cash on hand to complete the funding of this transaction.  We may also raise capital through the issuance of new equity or debt, or a combination thereof.  There can be no assurance we will obtain, if necessary, the financing sufficient to fund this transaction.  In addition, the agreement must receive various approvals, including approval of the Bankruptcy Court in ATA's Chapter 11 proceeding.
During October 2004, we modified the delivery dates for two B717 aircraft previously scheduled for delivery in 2005.  The two aircraft are now scheduled for delivery in 2006.

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



15

As discussed in Note 7 to the unaudited Condensed Consolidated Financial Statements, our 2003 results include the receipt of $38.1 million as a government reimbursement pursuant to the Emergency Wartime Supplemental Appropriations Act of 2003 (Wartime Act).  As discussed in Note 9 to the unaudited Condensed Consolidated Financial Statements, our 2003 results include a pre-tax non-cash charge of $1.8 million related to the conversion to equity of the remaining portion of a convertible note.Our financial and operating results for any interim 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 United States.



16

RESULTS OF OPERATIONSThe tables below set forth selected financial and operating data for the indicated periods:

|                                                | Three months ended
September 30, |           |  | Percent | 
|----------------------------------------------- | -------------------------------- | --------- |  | ------- | 
|                                                | 2004                             |           |  | 2003    | 
|                                                |                                  |           |  |         | 
|Revenue passengers                              |                                  | 3,312,802 |  |         | 
|Revenue passenger miles (RPM) (000s)            |                                  | 2,087,355 |  |         | 
|Available seat miles (ASM) (000s)               |                                  | 2,979,243 |  |         | 
|Passenger load factor                           |                                  | 70.1      |  | %       | 
|Break-even load factor                          |                                  | 74.7      |  | %       | 
|Average fare                                    | $                                | 71.27     |  |         | 
|Average yield per RPM                           |                                  | 11.31     |  | ¢   | 
|Passenger revenue per ASM                       |                                  | 7.93      |  | ¢   | 
|Operating cost per ASM                          |                                  | 8.65      |  | ¢   | 
|Average stage length (miles)                    |                                  | 608       |  |         | 
|Average cost of aircraft fuel per gallon,       |                                  |           |  |         | 
|including fuel taxes                            |                                  | 123.19    |  | ¢   | 
|Average cost of aircraft fuel per gallon,       |                                  |           |  |         | 
|excluding fuel taxes                            |                                  | 115.73    |  | ¢   | 
|Average daily utilization (hours:minutes)       |                                  | 10:36     |  |         | 
|Number of operating aircraft in fleet at end of |                                  |           |  |         | 
|period                                          |                                  | 82        |  |         | 



|                                                | Nine months ended
September 30, |           |  | Percent | 
|----------------------------------------------- | ------------------------------- | --------- |  | ------- | 
|                                                | 2004                            |           |  | 2003    | 
|                                                |                                 |           |  |         | 
|Revenue passengers                              |                                 | 9,717,696 |  |         | 
|Revenue passenger miles (RPM) (000s)            |                                 | 6,180,938 |  |         | 
|Available seat miles (ASM) (000s)               |                                 | 8,662,896 |  |         | 
|Passenger load factor                           |                                 | 71.3      |  | %       | 
|Break-even load factor                          |                                 | 69.6      |  | %       | 
|Average fare                                    | $                               | 75.69     |  |         | 
|Average yield per RPM                           |                                 | 11.90     |  | ¢   | 
|Passenger revenue per ASM                       |                                 | 8.49      |  | ¢   | 
|Operating cost per ASM                          |                                 | 8.46      |  | ¢   | 
|Average stage length (miles)                    |                                 | 620       |  |         | 
|Average cost of aircraft fuel per gallon,       |                                 |           |  |         | 
|including fuel taxes                            |                                 | 113.81    |  | ¢   | 
|Average cost of aircraft fuel per gallon,       |                                 |           |  |         | 
|excluding fuel taxes                            |                                 | 109.84    |  | ¢   | 
|Average daily utilization (hours:minutes)       |                                 | 10:54     |  |         | 
|Number of operating aircraft in fleet at end of |                                 |           |  |         | 
|period                                          |                                 | 82        |  |         | 



17

For the three months ended September 30, 2004 and 2003SummaryFor the three months ended September 30, 2004 we recorded an operating loss of $12.0 million, a net loss of $9.8 million, and our diluted loss per common share was $0.11.  For the comparative period in 2003, we recorded operating income of $26.4 million, net income of $19.6 million, and our diluted earnings per common share was $0.24.Operating Revenues
Our operating revenues for the quarter increased $8.3 million (3.5 percent) primarily due to an increase in passenger revenues.  The increase in passenger revenues was primarily due to a 9.3 percent increase in traffic, as measured by RPMs.
As part of the order we placed with The Boeing Company (Boeing) in 2003 for up to 110 aircraft, we have added 14 new aircraft to our operations since September 30, 2003.  During the same period we retired four McDonnell Douglas DC-9 (DC-9) aircraft.  As a result, our capacity, as measured by ASMs, increased 14.5 percent.  Our ASM growth, combined with our RPM growth of 9.3 percent decreased our passenger load factor by 3.3 percentage points to 70.1 percent.
Our average yield per RPM decreased by 6.0 percent to 11.31 cents.  The reduction in yield resulted from a 2.9 percent increase in our average passenger trip length, as measured by RPMs divided by revenue passengers, to 630 miles, offset by a 3.2 percent decrease in our average fare to $71.27.  This decline in yield, when combined with our 3.3 percentage point decrease in passenger load factor, resulted in a 10.2 percent decrease in passenger unit revenues, or passenger RASM, to 7.93 cents per ASM.Operating Expenses
Our operating expenses for the quarter increased $46.7 million (22.1 percent) on ASM growth of 14.5 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, defined as operating expenses per ASM (CASM), for the indicated period:



|                                         |  | Three months ended
September 30, |       | Percent |      
|---------------------------------------- |  | -------------------------------- | ----- | ------- | -----
|                                         |  | 2004                             |       | 2003    |      
|                                         |  |                                  |       |         |      
|Salaries, wages and benefits             |  | 2.35                             | ¢ | 2.28    | ¢
|Aircraft fuel                            |  | 2.17                             |       | 1.74    |      
|Aircraft rent                            |  | 1.30                             |       | 1.26    |      
|Maintenance, materials and repairs       |  | 0.57                             |       | 0.55    |      
|Distribution                             |  | 0.40                             |       | 0.45    |      
|Landing fees and other rents             |  | 0.54                             |       | 0.52    |      
|Aircraft insurance and security services |  | 0.19                             |       | 0.20    |      
|Marketing and advertising                |  | 0.24                             |       | 0.23    |      
|Depreciation                             |  | 0.12                             |       | 0.13    |      
|Other operating                          |  | 0.77                             |       | 0.75    |      
|                                         |  |                                  |       |         |      
|Total CASM                               |  | 8.65                             | ¢ | 8.11    | ¢
|                                         |  | =======                          |       | ======= |      
|                                         |  |                                  |       |         |      

Salaries, wages and benefits increased $10.7 million (18.0 percent), primarily due to the addition of flight crews and ground support personnel hired to operate and support the growth of our aircraft fleet, including new destinations opened during 2003 and additional frequencies added to our route system, as well as contractual wage increases and higher costs associated with our employee benefit programs.  On a cost per ASM basis these costs increased 3.1 percent to 2.35 cents.  We employed approximately 5,600 and 5,200 employees (full-time equivalents) as of September 30, 2004 and 2003, respectively, representing a 7.7 percent increase.

18

Aircraft fuel increased $19.2 million (42.3 percent), primarily due to historically high fuel prices.  Our average cost of aircraft fuel for the current quarter was $1.23 per gallon, an increase of 26.6 percent over the three months ended September 30, 2003.  Our expanded level of flight operations generated by the growth of our aircraft fleet further increased our consumption of aircraft fuel.  The level of our flight operations, as measured by block hours flown, increased 8.0 percent while our fuel consumption increased 12.4 percent to 680 gallons per block hour.  We currently operate an aircraft fleet consisting entirely of fuel-efficient B737 and Boeing 717-200 (B717) aircraft.  As we replaced our DC-9 aircraft with the B717 aircraft type, we realized cost savings in the form of reduced fuel consumption per block hour.  We retired our last DC-9 aircraft during January 2004.  Aircraft fuel represented 25.1 percent and 21.5 percent of our operating expenses for the three months ended September 30, 2004 and 2003, respectively.  Based on our projected fuel consumption for the twelve-month period ending September 30, 2005, a hypothetical 10 percent increase in the raw price of aircraft fuel would increase our annual fuel expense by approximately $24.2 million.  Increases in fuel prices or a shortage of supply could have a material effect on our operations and operating results.Aircraft rent increased $5.9 million (17.9 percent), primarily due to the leasing of a greater number of aircraft during the period.  Our aircraft deliveries for the twelve-month period ended September 30, 2004 consisted of five B737 aircraft and nine B717 aircraft; with the exception of two B737s, all of these deliveries were lease-financed.  We have lease-financing commitments in place for the five aircraft scheduled for delivery during the remainder of this year.  During the third quarter of 2004, we took delivery of one B737 aircraft and one B717 aircraft that were lease-financed in accordance with our commitments.Maintenance, materials and repairs increased $2.7 million (18.4 percent).  On a block hour basis, maintenance costs increased 9.6 percent to $221 per block hour.  As the original manufacturer warranties expire on our B717 aircraft the maintenance, repair and overhaul of major aircraft engine, parts and components become covered by previously negotiated agreements with FAA-approved maintenance contractors.  Contractually, we pay monthly fees based on the level of our operations, as measured by either the number of flight hours flown or the number of landings.  Our increased level of operations during the period and the related costs associated with our maintenance agreements predominantly account for the overall increase in this area.Distribution costs increased $0.3 million (2.3 percent), primarily due to an overall growth of passenger revenues derived from travel agency sales.  Although total distribution costs have increased, these costs as a percentage of passenger revenues have decreased as more of our passengers have shifted their bookings directly onto our website.  We recognize significant cost savings when our sales are booked directly through our website as opposed to more traditional methods, such as travel agents.Landing fees and other rents increased $2.5 million (18.6 percent), primarily due to growth in the number of flights we operated, landing fee rate increases, and the leasing of facilities at new destinations that were added to our route network during 2003.Aircraft insurance and security services increased $0.4 million (7.7 percent).  The addition of 14 new Boeing aircraft to our fleet during the period increased our total insured hull value and related insurance premiums. Marketing and advertising increased $1.3 million (21.8 percent), primarily due to our promotional efforts associated with the development of our new destinations opened during 2003 and efforts to stimulate demand in all the markets that we serve.Depreciation increased $0.3 million (10.3 percent)

19

Nonoperating (Income) ExpenseOther (income) expense, net was $3.5 million for the first three months of 2004, as compared to $6.5 million for the first three months of 2003.  The decrease is primarily due to lower interest expense as a result of having reduced our outstanding debt obligations.  During 2003, we also recognized a non-cash charge of $1.8 million related to the conversion of the remaining portion of a convertible note.  See Note 9 to the unaudited Condensed Consolidated Financial Statements for more information regarding this charge.

Income Tax ExpenseAt December 31, 2003, we had net operating loss (NOL) carryforwards for income tax purposes of approximately $118.4 million that will begin to expire in 2016.  We previously carried a valuation allowance on a significant portion of our deferred tax assets, including our NOL carryforwards.  During 2003, as a result of profitable results in 2003 and 2002 and expectations of future profitability, we released the valuation allowance on the deferred tax asset related to our NOL carryforwards.  Therefore, beginning in 2004, we are recording our provision for income taxes at an annualized effective rate of 39 percent.  Income tax expense (benefit) was $(5.7) million and $0.3 million for the three months ended September 30, 2004 and 2003, respectively.

For the nine months ended September 30, 2004 and 2003SummaryWe recorded operating income of $29.3 million, net income of $11.1 million, and diluted earnings per common share of $0.12 for the nine months ended September 30, 2004.   For the comparative period in 2003, we recorded operating income of $65.5 million, net income of $78.8 million, and diluted earnings per common share of $0.99.Operating Revenues
Our operating revenues for the nine months ended September 30, 2004 increased $82.8 million (12.2 percent) primarily due to an increase in passenger revenues.  The increase in passenger revenues was primarily due to a 17.3 percent increase in traffic, as measured by RPMs.
As part of the order we placed with Boeing in 2003 for up to 110 aircraft we have added 14 new aircraft to our operations since September 30, 2003.  During the same period we retired four DC-9 aircraft.  As a result, our capacity, as measured by ASMs, increased 17.7 percent.  Our ASM growth, combined with our RPM growth of 17.3 percent decreased our passenger load factor 0.3 percentage points to 71.3 percent.

Our average yield per RPM decreased 4.8 percent to 11.90 cents per RPM.  The reduction in yield resulted from a 4.3 percent increase in our average passenger trip length, as measured by RPMs divided by revenue passengers, to 636 miles, offset by a 0.7 percent decrease in our average fare to $75.69.  This decline in yield, when combined with our 0.3 percentage point decrease in passenger load factor, resulted in a 5.1 percent decrease in passenger unit revenues, or passenger RASM, to 8.49 cents per ASM.

20

Operating Expenses
Our operating expenses for the nine months ended September 30, 2004 increased $119 million (19.4 percent) on ASM growth of 17.7 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, defined as operating expenses per ASM, for the indicated period:



|                                         |  | Nine months ended
September 30, |       | Percent |      
|---------------------------------------- |  | ------------------------------- | ----- | ------- | -----
|                                         |  | 2004                            |       | 2003    |      
|                                         |  |                                 |       |         |      
|Salaries, wages and benefits             |  | 2.30                            | ¢ | 2.33    | ¢
|Aircraft fuel                            |  | 1.98                            |       | 1.81    |      
|Aircraft rent                            |  | 1.28                            |       | 1.21    |      
|Maintenance, materials and repairs       |  | 0.63                            |       | 0.61    |      
|Distribution                             |  | 0.43                            |       | 0.47    |      
|Landing fees and other rents             |  | 0.53                            |       | 0.52    |      
|Aircraft insurance and security services |  | 0.19                            |       | 0.19    |      
|Marketing and advertising                |  | 0.25                            |       | 0.26    |      
|Depreciation                             |  | 0.11                            |       | 0.14    |      
|Other operating                          |  | 0.77                            |       | 0.80    |      
|                                         |  |                                 |       |         |      
|Total CASM                               |  | 8.46                            | ¢ | 8.34    | ¢
|                                         |  | =======                         |       | ======= |      
|                                         |  |                                 |       |         |      

Salaries, wages and benefits increased $27.7 million (16.1 percent), primarily due to the addition of flight crews and ground support personnel hired to operate and support the growth of our aircraft fleet, including new destinations opened during 2003 and additional frequencies added to our route system, as well as contractual wage increases and higher costs associated with our employee benefit programs.  On a cost per ASM basis these costs decreased 1.3 percent to 2.30 cents.  We employed approximately 5,600 and 5,200 employees (full-time equivalents) as of September 30, 2004 and 2003, respectively, representing a 7.7 percent increase. Aircraft fuel increased $37.5 million (28.1 percent), primarily due to historically high fuel costs.  Our average cost of aircraft fuel for the period was $1.14 per gallon, an increase of 15.5 percent over the nine months ended September 30, 2003.  Our expanded level of flight operations generated by the growth of our aircraft fleet further increased our consumption of aircraft fuel.  The level of our flight operations, as measured by block hours flown, increased 11.8 percent while our fuel consumption decreased 0.8 percent to 662 gallons per block hour.  We currently operate an aircraft fleet consisting entirely of fuel-efficient B737 and B717 aircraft.  As we replaced our DC-9 aircraft with the B717 aircraft type, we realized cost savings in the form of reduced fuel consumption per block hour.  We retired our last DC-9 aircraft during January 2004.  Aircraft fuel represented 23.3 percent and 21.8 percent of our operating expenses for the nine months ended September 30, 2004 and 2003, respectively.  Based on our projected fuel consumption for the twelve-month period ending September 30, 2005, a hypothetical 10 percent increase in the raw price of aircraft fuel would increase our annual fuel expense by approximately $24.2 million.  Increases in fuel prices or a shortage of supply could have a material effect on our operations and operating results.

Aircraft rent increased $21.6 million (24.3 percent), primarily due to the leasing of a greater number of aircraft during the period.  Our aircraft deliveries for the twelve-month period ended September 30, 2004 consisted of five B737 aircraft and nine B717 aircraft; with the exception of two B737s, all of these deliveries were lease-financed.  We have lease-financing commitments in place for the five aircraft scheduled for delivery during the remainder of this year.  During the nine months ended September 30, 2004, we took delivery of three B737 aircraft and four B717 aircraft that were lease-financed in accordance with our commitments.

21

Maintenance, materials and repairs increased $9.2

Distribution costs increased $2.9 million (8.3 percent), primarily due to an overall growth of passenger revenues derived from travel agency sales.  Although total distribution costs have increased, these costs as a percentage of passenger revenues have decreased as more of our passengers have shifted their bookings directly onto our website.  We recognize significant cost savings when our sales are booked directly through our website as opposed to more traditional methods, such as travel agents.Landing fees and other rents increased $7.9 million (20.5 percent), primarily due to growth in the number of flights we operated, landing fee rate increases, and the leasing of facilities at new destinations that were added to our route network during 2003.Aircraft insurance and security services increased $2.3 million (15.9 percent).  The addition of 14 new Boeing aircraft to our fleet during the period increased our total insured hull value and related insurance premiums. Marketing and advertising increased $2.5 million (13.4 percent), primarily reflecting promotional efforts associated with the development of our new destinations opened during 2003 and efforts to stimulate demand in all the markets that we serve.Depreciation decreased $0.1 million (1.0 percent).  Our significant asset additions during the period were primarily new Boeing aircraft.  However, with the exception of two B737s, all aircraft additions during the period were lease-financed rather than purchased.Other operating expenses increased $7.6 million (12.9 percent), primarily from added passenger-related costs associated with the higher level of operations, contractual costs related to the opening of new destinations and routes, and the costs associated with our reservations system and other automation projects.Nonoperating (Income) ExpenseOther (income) expense, net was $11.0 million for the first nine months of 2004, as compared to $(15.2) million for the first nine months of 2003.  The increase in expenses is primarily due to the receipt in 2003 of $38.1 million as a government reimbursement pursuant to the Wartime Act.  See Note 7 to the unaudited Condensed Consolidated Financial Statements for more information on the Wartime Act.  During 2003, we also recognized a non-cash charge of $1.8 million related to the conversion of the remaining portion of a convertible note.  See Note 9 to the unaudited Condensed Consolidated Financial Statements for more information regarding this charge.

Income Tax ExpenseAt December 31, 2003, we had NOL carryforwards for income tax purposes of approximately $118.4 million that will begin to expire in 2016.  We previously carried a valuation allowance on a significant portion of our deferred tax assets, including our NOL carryforwards.  During 2003, as a result of profitable results in 2003 and 2002 and expectations of future profitability, we released the valuation allowance on the deferred tax asset related to our NOL carryforwards.  Therefore, beginning in 2004, we are recording our provision for income taxes at an annualized effective rate of 39 percent.  Income tax expense was $7.1 million and $1.8 million for the nine months ended September 30, 2004 and 2003, respectively.

22

LIQUIDITY AND CAPITAL RESOURCESAs of September 30, 2004, our cash and cash equivalents, including restricted cash, totaled $347.0 million compared to $348.5 million at December 31, 2003.  Operating activities for the first nine months of 2004 generated $40.9 million of cash compared to $109.6 million for the same prior year period.  The decrease in cash flows from operating activities was primarily due to: (i) the receipt of $38.1 million during 2003 pursuant to the Wartime Act, which was not received in 2004, and (ii) a $13.5 million decrease in our air traffic liability representing transportation purchased but not yet flown..  See Note 7 to the unaudited Condensed Consolidated Financial Statements for more information on the Wartime Act.  Investing activities for the first nine months of 2004 used $101.2 million in cash compared to $56.4 million in 2003.  Investing activities for 2004 primarily consisted of the purchase of two B737 aircraft, whereas a comparatively greater amount of aircraft purchase deposits were due and paid during 2003.  Financing activities generated $60.1 million and $108.8

| |                                                                                                                                                                                                                                                                                                           |  |                 |          |                 |          |          | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | --------------- | -------- | -------- | 
| |                                                                                                                                                                                                                                                                                                           |  | B737 Deliveries |          | B717 Deliveries |         
| |                                                                                                                                                                                                                                                                                                           |  | Firm            | Options  |                 | Firm     | Options  | 
| | 2004                                                                                                                                                                                                                                                                                                      |  | 3               | --       |                 | 2        | --       | 
| | 2005                                                                                                                                                                                                                                                                                                      |  | 13              | --       |                 | 8        | --       | 
| | 2006                                                                                                                                                                                                                                                                                                      |  | 15              | 4        |                 | --       | --       | 
| | 2007                                                                                                                                                                                                                                                                                                      |  | 12              | 5        |                 | --       | --       | 
| | 2008                                                                                                                                                                                                                                                                                                      |  | 4               | 14       |                 | --       | --       | 
| |                                                                                                                                                                                                                                                                                                           |  | --------        | -------- |                 | -------- | -------- | 
| | Total*                                                                                                                                                                                                                                                                                                    |  | 47              | 23       |                 | 10       | --       | 
| |                                                                                                                                                                                                                                                                                                           |  | =====           | =====    |                 | =====    | =====    | 
| |                                                                                                                                                                                                                                                                                                           |  |                 |          |                 |          |          | 
| | * We have purchase rights to acquire up to 25 B737 aircraft in addition to the totals shown above.  See Note 11 to the unaudited Condensed Consolidated Financial Statements for information regarding modified delivery dates for certain B717 firm orders agreed upon subsequent to September 30, 2004.

We have lease-financing commitments from Boeing Capital Loan Corporation or affiliates thereof for our 10 B717 aircraft remaining on firm order, and pursuant to our agreement with an aircraft leasing company we have lease-financing commitments for 19 of the remaining B737 deliveries.  Additionally, we have financing commitments in place for the delivery of four B737 deliveries (see Note 9 to the unaudited Condensed Consolidated Financial Statements for more information on B737 aircraft financing) and have obtained financing commitments from an affiliate of Boeing for up to 80 percent of the purchase price for 16 of the B737 firm orders in the event we are unable to secure financing from the financial markets on acceptable terms.  There can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financing commitments.
During the first nine months of 2004, in connection with Airways' agreement with Boeing, Airways was refunded $7.7 million in previously paid aircraft deposits.  We paid $36.7 million to Boeing in aircraft deposits for the acquisition of B717 and B737 aircraft.

Credit AgreementWe entered into an agreement with a commercial bank that allows us to obtain letters of credit and enter into hedge agreements with the bank for up $15.0 million.  At September 30, 2004, we had approximately $12.1 million in letters of credit drawn against the credit agreement.

23

OtherDuring 2002, we entered into a cancelable agreement with a regional jet contractor to provide regional jet service between pre-determined pairs of cities.  We paid the contractor to operate the flights and were entitled to all revenues associated with these flights.  These payments were recorded on a net basis as a reduction to passenger revenues

During 2003, we entered into an agreement with an air carrier to provide jet service between pre-determined pairs of cities.  The air carrier provides its own aircraft, crew, maintenance, and hull and liability insurance in exchange for a fixed block hour rate for flights operated on our behalf.  These payments are recorded on a net basis as a reduction of passenger revenues.  We have agreed to phase out this jet service by the end of November 2004.

Subsequent Events
On October 24, 2004, Airways agreed, subject to certain conditions, to assume the Chicago Midway Airport gate leases and acquire certain other related assets including takeoff and landing slots at New York's LaGuardia and Washington's Ronald Reagan National airports of ATA Airlines, Inc., a unit of ATA Holdings Corp. (ATA).  ATA and certain of its subsidiaries have filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana.  The purchase price of this transaction is approximately $90.0 million payable in cash upon the approval and transfer of the agreed upon gate leases and slots.  We may use working capital and/or current cash on hand to complete the funding of this transaction.  We may also raise capital through the issuance of new equity or debt, or a combination thereof.  There can be no assurance we will obtain, if necessary, the financing sufficient to fund this transaction.  In addition, the agreement must receive various approvals, including approval of the Bankruptcy Court in ATA's Chapter 11 proceeding.

During October 2004, we modified the delivery dates for two B717 aircraft previously scheduled for delivery in 2005.  The two aircraft are now scheduled for delivery in 2006.

New Accounting Standard
On September 30, 2004, the Emerging Issues Task Force reached consensus on Issue No. 04-08 (EITF No. 04-08), The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which requires the dilutive effect of contingently convertible debt instruments to be included in  the calculation of diluted earnings per share.  Accordingly, the shares issuable upon conversion of contingently convertible debt instruments are to be included in the earnings per share computation, if dilutive, regardless of whether the contingent conditions for their conversion have been met.  The new rules will be effective for reporting periods ending after December 15, 2004.  This change is not expected to have material impact on our diluted earnings per share calculations.

24

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, 2003, other than those discussed below.Aircraft FuelAircraft fuel is one of our significant expenditures, representing approximately 23.3 percent and 21.8 percent of our total operating expenses for the nine months ended September 30, 2004 and 2003, respectively.  Based on our projected fuel consumption for the twelve-month period ending September 30, 2005, a hypothetical 10 percent increase in the raw price of aircraft fuel would increase our annual fuel expense by approximately $24.2 million.  Increases in fuel prices or a shortage of supply could have a material effect on our operations and operating results.

Our efforts to reduce exposure to increases in the price and availability of aircraft fuel include the utilization of fixed-price fuel contracts and fuel cap contracts (collectively "fuel contracts").  Fixed-price fuel contracts are agreements to purchase defined quantities of aircraft fuel from a third party at defined prices.  Fuel cap contracts are agreements to purchase defined quantities of aircraft fuel from a third party at a price not to exceed a defined price, thereby limiting our exposure to increases in the price of aircraft fuel.  As of September 30, 2004, we had fuel contracts to purchase approximately 60.1 percent and 13.2 percent of our fuel needs through the end of December 2004 and 2005, respectively.  We expect the average price of fuel under these fuel contracts to be no higher than $0.92 and $1.07 per gallon, including delivery to our operations hub in Atlanta and other locations, through the end of December 2004 and 2005, respectively.  ITEM 4.  CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded that, based on their evaluation as of September 30, 2004, our disclosure controls and procedures are effective for gathering, analyzing, and disclosing the information we are required to disclose in our reports under the Securities Exchange Act of 1934. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls during the quarter ended September 30, 2004.

25

PART II - OTHER INFORMATIONITEM 6.  EXHIBITS



|    | Exhibit No.     Description                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|    | 10.1 - Letter of Commitment dated October 24, 2004 to ATA Holdings Corp. and ATA Airlines, Inc. (1).                                             
|    | 10.2 - Employment agreement dated October 28, 2004 between Holdings and Joseph B. Leonard (2).                                                   
|    | 31.1 - CEO certification pursuant to Rule 13(a)-14 or 15(d)-14                                                                                   
|    | 31.2 - CFO certification pursuant to Rule 13(a)-14 or 15(d)-14                                                                                   
|    | 32.1 - CEO certification pursuant to 18 U.S.C. Section 1350                                                                                      
|    | 32.2 - CFO certification pursuant to 18 U.S.C. Section 1350                                                                                      
|    |                                                                                                                                                  
|    | Footnotes:                                                                                                                                       
|(1) | Filed as exhibit 10.1 to Holdings' Current Report of Form 8-K filed with the Commission on October 28, 2004 and incorporated by reference herein.
|(2) | Filed as exhibit 10.1 to Holdings' Current Report on Form 8-K filed with the Commission on October 29, 2004 and incorporated by reference herein.





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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.

|Date:  November 9, 2004 | AirTran Holdings, Inc.(Registrant)/s/ Stanley J. GadekStanley J. GadekSenior Vice President, Finance,
Treasurer and Chief Financial Officer(Principal Accounting and Financial Officer)
|----------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                        |                                                                                                                                                                                        
|                        |                                                                                                                                                                                        



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| | EXHIBIT INDEX                                                                                   
| | ------------------------------------------------------------------------------------------------
| |                                                                                                 
| | Exhibit No.     Description                                                                     
| | 10.1 - Letter of Commitment dated October 24, 2004 to ATA Holdings Corp. and ATA Airlines, Inc..
| | 10.2 - Employment agreement dated October 28, 2004 between Holdings and Joseph B. Leonard.      
| | 31.1 - CEO certification pursuant to Rule 13(a)-14 or 15(d)-14                                  
| | 31.2 - CFO certification pursuant to Rule 13(a)-14 or 15(d)-14                                  
| | 32.1 - CEO certification pursuant to 18 U.S.C. Section 1350                                     
| | 32.2 - CFO certification pursuant to 18 U.S.C. Section 1350                                     

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