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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)



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



For the quarterly period ended September 30, 2005



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)



LOGO



|                                                               |  |                                    
|-------------------------------------------------------------- |  | -----------------------------------
|Nevada                                                         |  | 58-2189551                         
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No)
|                                                               | 
|9955 AirTran Boulevard, Orlando, Florida                       |  | 32827                              
|(Address of principal executive offices)                       |  | (Zip Code)                         



(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 þ    No ̈



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



Yes þ    No ̈



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act.):



Yes ̈No þ



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 87,817,000 shares, as of November 7, 2005.



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##### Table of Contents

AIRTRAN HOLDINGS, INC.



Form 10-Q



For the Quarter Ended September 30, 2005



INDEX



|        |  |                                                                                                                             |  |     
|------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                             |  | Page
|        |  | PART I - FINANCIAL INFORMATION                                                                                              |  |     
|        |  |                                                                                                                            
|Item 1. |  | Financial Statements                                                                                                        |  | 3   
|        |  |                                                                                                                            
|        |  | Condensed Consolidated Statements of Operations- Three months and nine months ended September 30, 2005 and 2004 (unaudited) |  | 3   
|        |  |                                                                                                                            
|        |  | Condensed Consolidated Balance Sheets- September 30, 2005 (unaudited) and December 31, 2004                                 |  | 4   
|        |  |                                                                                                                            
|        |  | Condensed Consolidated Statements of Cash Flows- Nine months ended September 30, 2005 and 2004 (unaudited)                  |  | 6   
|        |  |                                                                                                                            
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                            |  | 7   
|        |  |                                                                                                                            
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                       |  | 14  
|        |  |                                                                                                                            
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                                  |  | 22  
|        |  |                                                                                                                            
|Item 4. |  | Controls and Procedures                                                                                                     |  | 23  
|        |  |                                                                                                                            
|        |  | PART II - OTHER INFORMATION                                                                                                 |  |     
|        |  |                                                                                                                            
|Item 1. |  | Legal Proceedings                                                                                                           |  | 23  
|        |  |                                                                                                                            
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 23  
|        |  |                                                                                                                            
|Item 3. |  | Defaults upon Senior Securities                                                                                             |  | 23  
|        |  |                                                                                                                            
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                                         |  | 23  
|        |  |                                                                                                                            
|Item 5. |  | Other Information                                                                                                           |  | 23  
|        |  |                                                                                                                            
|Item 6. |  | Exhibits                                                                                                                    |  | 23  
|        |  |                                                                                                                            
|        |  | Signatures                                                                                                                  |  | 24  



2



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##### Table of Contents

PART I - FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



AirTran Holdings, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|---------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                         |  | Three months endedSeptember 30, |         |   | Nine months endedSeptember 30, |  
|                                         |  | 2005                            |         |   | 2004                           |   |         | 2005 |  |   | 2004      |  
|Operating Revenues:                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Passenger                                |  | $                               | 360,351 |   |                                | $ | 236,108 |      |  | $ | 1,003,192 |   |  | $ | 735,555 |  
|Cargo                                    |  |                                 | 850     |   |                                |   |        |      |  |   | 2,546     |   |  |   |        |  
|Other                                    |  |                                 | 13,443  |   |                                |   | 9,532   |      |  |   | 34,936    |   |  |   | 26,495  |  
|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Total operating revenues                 |  |                                 | 374,644 |   |                                |   | 245,640 |      |  |   | 1,040,674 |   |  |   | 762,050 |  
|                                         |  |                                 |         |  
|Operating Expenses:                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Salaries, wages and benefits             |  |                                 | 82,566  |   |                                |   | 70,037  |      |  |   | 241,006   |   |  |   | 199,191 |  
|Aircraft fuel                            |  |                                 | 127,809 |   |                                |   | 64,562  |      |  |   | 321,512   |   |  |   | 171,016 |  
|Aircraft rent                            |  |                                 | 48,887  |   |                                |   | 38,560  |      |  |   | 141,258   |   |  |   | 110,595 |  
|Maintenance, materials and repairs       |  |                                 | 25,643  |   |                                |   | 17,049  |      |  |   | 74,616    |   |  |   | 54,274  |  
|Distribution                             |  |                                 | 17,439  |   |                                |   | 11,922  |      |  |   | 50,625    |   |  |   | 37,271  |  
|Landing fees and other rents             |  |                                 | 22,761  |   |                                |   | 16,183  |      |  |   | 61,487    |   |  |   | 46,257  |  
|Aircraft insurance and security services |  |                                 | 5,658   |   |                                |   | 5,515   |      |  |   | 16,869    |   |  |   | 16,647  |  
|Marketing and advertising                |  |                                 | 8,588   |   |                                |   | 7,186   |      |  |   | 26,234    |   |  |   | 21,421  |  
|Depreciation                             |  |                                 | 5,190   |   |                                |   | 3,662   |      |  |   | 14,010    |   |  |   | 9,849   |  
|Other operating                          |  |                                 | 28,864  |   |                                |   | 22,956  |      |  |   | 81,723    |   |  |   | 66,227  |  
|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Total operating expenses                 |  |                                 | 373,405 |   |                                |   | 257,632 |      |  |   | 1,029,340 |   |  |   | 732,748 |  
|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Operating Income (Loss)                  |  |                                 | 1,239   |   |                                |   | (11,992 | )    |  |   | 11,334    |   |  |   | 29,302  |  
|                                         |  |                                 |         |  
|Other (Income) Expense:                  |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Interest income                          |  |                                 | (3,034  | ) |                                |   | (1,176  | )    |  |   | (7,953    | ) |  |   | (3,314  | )
|Interest expense                         |  |                                 | 5,895   |   |                                |   | 4,646   |      |  |   | 15,698    |   |  |   | 14,370  |  
|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Other expense, net                       |  |                                 | 2,861   |   |                                |   | 3,470   |      |  |   | 7,745     |   |  |   | 11,056  |  
|                                         |  |                                 |         |  
|Income (Loss) Before Income Taxes        |  |                                 | (1,622  | ) |                                |   | (15,462 | )    |  |   | 3,589     |   |  |   | 18,246  |  
|Income tax expense (benefit)             |  |                                 | (1,394  | ) |                                |   | (5,693  | )    |  |   | 487       |   |  |   | 7,116   |  
|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Net Income (Loss)                        |  | $                               | (228    | ) |                                | $ | (9,769  | )    |  | $ | 3,102     |   |  | $ | 11,130  |  
|                                         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|                                         |  |                                 |         |  
|Earnings (Loss) per Common Share         |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Basic                                    |  | $                               | 0.00    |   |                                | $ | (0.11   | )    |  | $ | 0.04      |   |  | $ | 0.13    |  
|Diluted                                  |  | $                               | 0.00    |   |                                | $ | (0.11   | )    |  | $ | 0.03      |   |  | $ | 0.12    |  
|                                         |  |                                 |         |  
|Weighted-average Shares Outstanding      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |         |  
|Basic                                    |  |                                 | 87,376  |   |                                |   | 85,597  |      |  |   | 87,035    |   |  |   | 84,940  |  
|Diluted                                  |  |                                 | 87,376  |   |                                |   | 85,597  |      |  |   | 89,646    |   |  |   | 89,380  |  



See accompanying Notes
to Condensed Consolidated Financial Statements.



3



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AirTran Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands)



|                                                                                                                          |  |                   |           |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | ------- | -
|                                                                                                                          |  | September 30,2005 |           |   | December 31,2004 |  
|                                                                                                                          |  | (Unaudited)       |           |   |                  |  
|ASSETS                                                                                                                    |  |                   |           |   |                  |   |         |  
|Current Assets:                                                                                                           |  |                   |           |   |                  |   |         |  
|Cash and cash equivalents                                                                                                 |  | $                 | 172,576   |   |                  | $ | 307,493 |  
|Restricted cash                                                                                                           |  |                   | 20,139    |   |                  |   | 7,854   |  
|Short-term investments                                                                                                    |  |                   | 189,300   |   |                  |   | 26,975  |  
|Accounts receivable, less allowance of $593 and $627 at September 30, 2005 and December 31, 2004, respectively            |  |                   | 32,020    |   |                  |   | 19,376  |  
|Inventories, less allowance for obsolescence of $1,205 and $987 at September 30, 2005 and December 31, 2004,
respectively |  |                   | 31,509    |   |                  |   | 28,311  |  
|Deferred income taxes - current                                                                                           |  |                   | 7,442     |   |                  |   | 7,442   |  
|Prepaid expenses and other current assets                                                                                 |  |                   | 19,826    |   |                  |   | 14,613  |  
|                                                                                                                          |  |                   |           |   |                  |   |         |  
|Total current assets                                                                                                      |  |                   | 472,812   |   |                  |   | 412,064 |  
|                                                                                                                          |  |                  
|Property and Equipment:                                                                                                   |  |                   |           |   |                  |   |         |  
|Flight equipment                                                                                                          |  |                   | 409,981   |   |                  |   | 294,966 |  
|Less: Accumulated depreciation                                                                                            |  |                   | (40,583   | ) |                  |   | (34,036 | )
|                                                                                                                          |  |                   |           |   |                  |   |         |  
|                                                                                                                          |  |                   | 369,398   |   |                  |   | 260,930 |  
|Purchase deposits for flight equipment                                                                                    |  |                   | 114,635   |   |                  |   | 69,833  |  
|Other property and equipment                                                                                              |  |                   | 86,970    |   |                  |   | 82,854  |  
|Less: Accumulated depreciation                                                                                            |  |                   | (36,087   | ) |                  |   | (29,682 | )
|                                                                                                                          |  |                   |           |   |                  |   |         |  
|                                                                                                                          |  |                   | 50,883    |   |                  |   | 53,172  |  
|                                                                                                                          |  |                   |           |   |                  |   |         |  
|Total property and equipment                                                                                              |  |                   | 534,916   |   |                  |   | 383,935 |  
|                                                                                                                          |  |                  
|Other Assets:                                                                                                             |  |                   |           |   |                  |   |         |  
|Intangibles resulting from business acquisition                                                                           |  |                   | 8,350     |   |                  |   | 8,350   |  
|Trademarks and trade names                                                                                                |  |                   | 21,567    |   |                  |   | 21,567  |  
|Debt issuance costs                                                                                                       |  |                   | 8,051     |   |                  |   | 7,607   |  
|Deferred income taxes - noncurrent                                                                                        |  |                   | 16,221    |   |                  |   | 16,708  |  
|Other assets                                                                                                              |  |                   | 75,273    |   |                  |   | 55,500  |  
|                                                                                                                          |  |                   |           |   |                  |   |         |  
|Total other assets                                                                                                        |  |                   | 129,462   |   |                  |   | 109,732 |  
|                                                                                                                          |  |                   |           |   |                  |   |         |  
|Total assets                                                                                                              |  | $                 | 1,137,190 |   |                  | $ | 905,731 |  
|                                                                                                                          |  |                   |           |   |                  |   |         |  



(Continued on next
page)



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AirTran Holdings, Inc.

Condensed Consolidated Balance Sheets (Continued)

(In thousands)



|                                                         |  |                   |           |   |                  |   |         |  
|-------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | ------- | -
|                                                         |  | September 30,2005 |           |   | December 31,2004 |  
|                                                         |  | (Unaudited)       |           |   |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY                     |  |                   |           |   |                  |   |         |  
|Current Liabilities:                                     |  |                   |           |   |                  |   |         |  
|Accounts payable                                         |  | $                 | 34,160    |   |                  | $ | 20,988  |  
|Accrued liabilities                                      |  |                   | 98,093    |   |                  |   | 85,047  |  
|Air traffic liability                                    |  |                   | 140,044   |   |                  |   | 87,571  |  
|Current portion of capital lease obligations             |  |                   | 671       |   |                  |   | 886     |  
|Current portion of long-term debt                        |  |                   | 48,594    |   |                  |   | 12,950  |  
|                                                         |  |                   |           |   |                  |   |         |  
|Total current liabilities                                |  |                   | 321,562   |   |                  |   | 207,442 |  
|                                                         |  |                  
|Long-term capital lease obligation, less current portion |  |                   | 14,158    |   |                  |   | 14,559  |  
|Long-term debt, less current portion                     |  |                   | 392,143   |   |                  |   | 285,575 |  
|                                                         |  |                  
|Other liabilities                                        |  |                   | 65,106    |   |                  |   | 64,119  |  
|                                                         |  |                  
|Commitments and Contingencies                            |  |                   |           |   |                  |   |         |  
|                                                         |  |                  
|Stockholders Equity:                                    |  |                   |           |   |                  |   |         |  
|Preferred stock                                          |  |                   |          |   |                  |   |        |  
|Common stock                                             |  |                   | 88        |   |                  |   | 87      |  
|Additional paid-in-capital                               |  |                   | 367,974   |   |                  |   | 361,063 |  
|Unearned compensation                                    |  |                   | (4,453    | ) |                  |   | (4,624  | )
|Accumulated deficit                                      |  |                   | (19,388   | ) |                  |   | (22,490 | )
|                                                         |  |                   |           |   |                  |   |         |  
|Total stockholders equity                               |  |                   | 344,221   |   |                  |   | 334,036 |  
|                                                         |  |                   |           |   |                  |   |         |  
|Total liabilities and stockholders equity               |  | $                 | 1,137,190 |   |                  | $ | 905,731 |  
|                                                         |  |                   |           |   |                  |   |         |  



See accompanying Notes
to Condensed Consolidated Financial Statements.



5



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AirTran Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                  |  |                                 |          |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | ---------- | -
|                                                                                  |  | Nine months ended September 30, |         
|                                                                                  |  | 2005                            |          |   | 2004 |  
|Operating activities:                                                             |  |                                 |          |   |      |   |            |  
|Net income                                                                        |  | $                               | 3,102    |   |      | $ | 11,130     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |          |   |      |   |            |  
|Depreciation and amortization                                                     |  |                                 | 15,201   |   |      |   | 10,948     |  
|Amortization of deferred gains from sale/leaseback of aircraft                    |  |                                 | (3,289   | ) |      |   | (3,289     | )
|Provisions for uncollectible accounts                                             |  |                                 | 349      |   |      |   | 460        |  
|Deferred income taxes                                                             |  |                                 | 487      |   |      |   |           |  
|Other                                                                             |  |                                 | 4,449    |   |      |   | 951        |  
|Changes in current operating assets and liabilities:                              |  |                                 |          |   |      |   |            |  
|Restricted cash                                                                   |  |                                 | (12,285  | ) |      |   | 1,399      |  
|Accounts receivable                                                               |  |                                 | (12,993  | ) |      |   | (3,169     | )
|Fuel                                                                              |  |                                 | (723     | ) |      |   | (12,187    | )
|Aircraft rent                                                                     |  |                                 | (10,584  | ) |      |   | (5,047     | )
|Spare parts, materials and supplies                                               |  |                                 | (2,694   | ) |      |   | (1,524     | )
|Other assets                                                                      |  |                                 | (14,711  | ) |      |   | (5,758     | )
|Accounts payable, accrued and other liabilities                                   |  |                                 | 29,785   |   |      |   | 23,040     |  
|Air traffic liability                                                             |  |                                 | 52,472   |   |      |   | 23,992     |  
|                                                                                  |  |                                 |          |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                                 | 48,566   |   |      |   | 40,946     |  
|                                                                                  |  |                                
|Investing activities:                                                             |  |                                 |          |   |      |   |            |  
|Purchases of property and equipment                                               |  |                                 | (26,062  | ) |      |   | (24,413    | )
|Aircraft purchase deposit (payments) refunds                                      |  |                                 | (52,797  | ) |      |   | (19,245    | )
|Purchases of available-for-sale securities                                        |  |                                 | (694,375 | ) |      |   | (1,110,200 | )
|Sales of available-for-sale securities                                            |  |                                 | 532,050  |   |      |   | 843,225    |  
|                                                                                  |  |                                 |          |   |      |   |            |  
|Net cash used for investing activities                                            |  |                                 | (241,184 | ) |      |   | (310,633   | )
|                                                                                  |  |                                
|Financing activities:                                                             |  |                                 |          |   |      |   |            |  
|Issuance of long-term debt                                                        |  |                                 | 71,515   |   |      |   |           |  
|Debt issuance costs                                                               |  |                                 | (2,210   | ) |      |   | (978       | )
|Payments of long-term debt                                                        |  |                                 | (16,418  | ) |      |   | (3,869     | )
|Proceeds from sale of common stock, net of expenses                               |  |                                 | 4,814    |   |      |   | 7,407      |  
|                                                                                  |  |                                 |          |   |      |   |            |  
|Net cash provided by financing activities                                         |  |                                 | 57,701   |   |      |   | 2,560      |  
|                                                                                  |  |                                
|Net decrease in cash and cash equivalents                                         |  |                                 | (134,917 | ) |      |   | (267,127   | )
|Cash and cash equivalents at beginning of period                                  |  |                                 | 307,493  |   |      |   | 338,707    |  
|                                                                                  |  |                                 |          |   |      |   |            |  
|Cash and cash equivalents at end of period                                        |  | $                               | 172,576  |   |      | $ | 71,580     |  
|                                                                                  |  |                                 |          |   |      |   |            |  
|                                                                                  |  |                                
|Supplemental Disclosure of Cash Flow Activities:                                  |  |                                 |          |   |      |   |            |  
|Non-cash investing and financing activities                                       |  |                                 |          |   |      |   |            |  
|Purchase of equipment under debt                                                  |  | $                               | 86,500   |   |      | $ | 57,500     |  
|Acquisition of equipment under capital lease                                      |  | $                               |         |   |      | $ | 15,513     |  



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 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 interim 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 (SEC) 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, 2004.



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
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:



Airways offers scheduled airline services to more than 45 cities across the United States, primarily in short-haul markets principally in
the eastern U.S..



Our financial and operating results for any interim period
are not necessarily indicative of those for the entire year. Air travel 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.



Reclassification:



Certain 2004 amounts have been reclassified to conform with our current presentation. In the
Condensed Consolidated Balance Sheet as of December 31, 2004, we began classifying holdings in auction rate notes as Short-term investments. Such holdings were previously classified as Cash and cash equivalents.
Accordingly, in the accompanying Condensed Consolidated Statement of Cash Flows for the period ended September 30, 2004, changes in the amounts of Short-term investments, which were previously classified as Cash and cash
equivalents are classified as cash flows from investing activities.



Stock-Based Employee Compensation:



We have stock-based
compensation plans covering officers, directors and key employees. We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related
interpretations. Accordingly, compensation expense is not recognized for employee stock option grants unless the exercise price is less than the fair value of our common stock on the grant date. Approximately 632,000 shares of common stock were
issued pursuant to stock option exercises during the first nine months of 2005.



7



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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:



|                                                                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                           |  | Three months endedSeptember 30, |        |   | Nine months endedSeptember 30, |  
|(in thousands, except per share amounts)                                                                                   |  | 2005                            |        |   | 2004                           |   |         | 2005 |  |   | 2004   |  
|Net income (loss), as reported                                                                                             |  | $                               | (228   | ) |                                | $ | (9,769  | )    |  | $ | 3,102  |   |  | $ | 11,130 |  
|Add: Stock-based employee compensation expense included in reported income, net of related tax effects                     |  |                                 | 484    |   |                                |   | 108     |      |  |   | 1,506  |   |  |   | 250    |  
|Deduct: Stock-based employee compensation expense determined under the fair value based method, net of related tax effects |  |                                 | (2,040 | ) |                                |   | (862    | )    |  |   | (3,804 | ) |  |   | (2,749 | )
|                                                                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |        |  
|Pro forma net income (loss)                                                                                                |  | $                               | (1,784 | ) |                                | $ | (10,523 | )    |  | $ | 804    |   |  | $ | 8,631  |  
|                                                                                                                           |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |        |  
|                                                                                                                           |  |                                 |        |  
|EARNINGS (LOSS) PER SHARE:                                                                                                 |  |                                 |        |   |                                |   |         |      |  |   |        |   |  |   |        |  
|Basic, as reported                                                                                                         |  | $                               | 0.00   |   |                                | $ | (0.11   | )    |  | $ | 0.04   |   |  | $ | 0.13   |  
|Basic, pro forma                                                                                                           |  | $                               | (0.02  | ) |                                | $ | (0.12   | )    |  | $ | 0.01   |   |  | $ | 0.10   |  
|                                                                                                                           |  |                                 |        |  
|Diluted, as reported                                                                                                       |  | $                               | 0.00   |   |                                | $ | (0.11   | )    |  | $ | 0.03   |   |  | $ | 0.12   |  
|Diluted, pro forma                                                                                                         |  | $                               | (0.02  | ) |                                | $ | (0.12   | )    |  | $ | 0.01   |   |  | $ | 0.10   |  



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.



On September 13, 2005, the Company accelerated the vesting of unvested stock options awarded more than one year ago to employees and officers under its stock option
plans. The affected options had exercise prices greater than the current market price of the stock ($10.68 per share) on the date of acceleration. Options to purchase approximately 352,000 additional shares became exercisable as a result of the
vesting acceleration. Typically, stock options granted at AirTran vest equally over a three year period. Of the accelerated options, approximately 201,000 are held by the Companys pilots with the remainder held by the Companys officers
and management employees. No options held by the Companys Chairman and CEO were accelerated. The purpose of accelerating the vesting of these options was to allow the Company to avoid compensation expense in fiscal 2006 and 2007 associated
with unvested options upon adoption of SFAS No. 123R, Share-Based Payment, in January 2006. The charge to the statement of operations, which would otherwise have been recorded in accordance with the provisions of SFAS No. 123R, is
estimated to be approximately $1 million, net of tax, of which approximately $0.8 million, net of tax, would have been recognized in fiscal 2006. The pro forma compensation expense for the three and nine months ended September 30, 2005,
disclosed in the table above, includes approximately $1.2 million, net of tax, from the acceleration of the vesting of all unvested stock options with an exercise price greater than $10.68 as of September 13, 2005.



Stock awards have been granted 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 2005, we granted approximately 262,000 stock awards and recorded deferred compensation
related to such awards of approximately $2.1 million. Approximately $2.3 million of deferred compensation was amortized as compensation expense during the first nine months of 2005. Approximately 210,000 shares of common stock were issued during the
first nine months of 2005 relating to these stock awards.



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Comprehensive Income:



Comprehensive income (loss) was $(0.2) million and $(9.7) million for the three months ended September 30, 2005 and 2004, respectively,
and $3.1 million and $11.3 million for the nine months ended September 30, 2005 and 2004, respectively.



Recently Issued Accounting Standards:



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes
APB 25. Among other items, SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting for stock based compensation and requires companies to recognize the cost of employee services received in exchange for awards of equity
instruments based on the grant date fair value of those awards in the financial statements. The effective date of SFAS 123R is January 1, 2006 for public calendar year end companies.



SFAS 123R permits companies to adopt its requirements using either a modified prospective method or a modified
retrospective method. Under the modified prospective method, compensation cost is recognized in payments granted after that date based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of
SFAS 123R. Under the modified retrospective method, the requirements are the same as under the modified prospective method but also permits entities to restate financial statements of previous periods based on pro forma
disclosures made in accordance with SFAS 123.



We currently utilize a standard
option pricing model, Black-Scholes, to measure the fair value of the stock options granted to employees for disclosure purposes. While SFAS 123R permits entities to continue to use such a model, the standard also permits the use of a lattice model.
We have not yet determined which model we will use to measure the fair value of employee stock options upon the adoption of SFAS 123R.



SFAS 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow rather than as
an operating cash flow, as under the current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These amounts cannot be estimated because they depend on, among
other things, when employees exercise stock options.



We currently expect to
adopt SFAS 123R effective January 1, 2006 based on the current effective date announced by the SEC. We will use the modified prospective method to account for stock based compensation, however we have not yet fully determined the financial
impact of adopting SFAS 123R under this method.



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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 endedSeptember 30, |        |   | Nine months endedSeptember 30,
|(in thousands, except per share amounts)                              |  | 2005                            |        |   | 2004                           |   |        | 2005 |  | 2004
|NUMERATOR:                                                            |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Net income (loss) available to common stockholders                    |  | $                               | (228   | ) |                                | $ | (9,769 | )    |  | $    | 3,102  |  | $ | 11,130
|Plus income effect of assumed conversion-interest on convertible debt |  |                                 |       |   |                                |   |       |      |  |      |       |  |   |      
|                                                                      |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Income (loss) before assumed conversion, diluted                      |  | $                               | (228   | ) |                                | $ | (9,769 | )    |  | $    | 3,102  |  | $ | 11,130
|                                                                      |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|                                                                      |  |                                 |        |  
|DENOMINATOR:                                                          |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Weighted-average shares outstanding, basic                            |  |                                 | 87,376 |   |                                |   | 85,597 |      |  |      | 87,035 |  |   | 84,940
|Effect of dilutive securities:                                        |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Stock options                                                         |  |                                 |       |   |                                |   |       |      |  |      | 2,090  |  |   | 3,810 
|Convertible debt                                                      |  |                                 |       |   |                                |   |       |      |  |      |       |  |   |      
|Stock warrants                                                        |  |                                 |       |   |                                |   |       |      |  |      | 521    |  |   | 630   
|                                                                      |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Adjusted weighted-average shares outstanding, diluted                 |  |                                 | 87,376 |   |                                |   | 85,597 |      |  |      | 89,646 |  |   | 89,380
|                                                                      |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|                                                                      |  |                                 |        |  
|EARNINGS (LOSS) PER COMMON SHARE:                                     |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Basic                                                                 |  | $                               | 0.00   |   |                                | $ | (0.11  | )    |  | $    | 0.04   |  | $ | 0.13  
|                                                                      |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       
|Diluted                                                               |  | $                               | 0.00   |   |                                | $ | (0.11  | )    |  | $    | 0.03   |  | $ | 0.12  
|                                                                      |  |                                 |        |   |                                |   |        |      |  |      |        |  |   |       



Excluded from the computation of the
weighted average shares outstanding, diluted for the three months ended September 30, 2005 and 2004, were 11.2 million shares issuable upon conversion of our convertible debt, 2.3 million shares related to stock options and
1.0 million shares issuable for detachable stock purchase warrants because the effect of including those shares would be antidilutive. Excluded from the computation of adjusted weighted-average shares outstanding, diluted for the nine months
ended September 30, 2005 and 2004, were 11.2 million shares issuable upon conversion of our convertible debt because the effect of including these shares would have been anti-dilutive.



Note 3 - Fuel Risk Management



Our efforts to reduce our exposure to increases in the price and limitations on the
availability of aviation fuel include the utilization of advance fuel purchase agreements that include fixed-price fuel contracts and fuel cap contracts. Fixed-price fuel contracts are agreements to purchase defined quantities of aviation fuel from
a third party at defined prices. Fuel cap contracts are agreements to purchase defined quantities of aviation fuel from a third party at a price not to exceed a defined price, thereby, limiting our exposure to increases in the price of aviation
fuel. As of September 30, 2005, utilizing fixed-price fuel contracts and fuel cap contracts, we agreed to purchase approximately 67 percent, 25 percent, and 16 percent of our fuel needs for the years ending December 31, 2005, 2006, and
2007, respectively, at a weighted average price of $1.52, $1.68, and $1.63, respectively, per gallon of aviation fuel, including delivery to our operations hub in Atlanta and other locations for 2005, 2006, and 2007. During the fourth quarter of
2005, we entered into additional advance fuel purchase agreements. These new contracts changed our total future



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fuel commitments to approximately 67 percent, 25 percent and 16 percent of our fuel needs in the remainder of 2005, 2006 and 2007, respectively, at a
weighted average price of $1.60, $1.80, and $1.77, respectively, per gallon of aviation fuel.



Note 4 - Commitments and Contingencies



Aircraft Purchase Commitments:



During the nine months
ended September 30, 2005, Airways took delivery of four B717 and eight B737 aircraft, of which four B717 and five B737 were leased, under operating leases. The three additional B737 aircraft were purchased and financed through debt.
Additionally Airways exercised options for an additional six B737 aircraft to be delivered in 2006 and 2007 and exercised purchase rights for fifteen B737 aircraft to be delivered in 2009.



As of September 30, 2005, Airways had on order four Boeing 717 aircraft and 59 Boeing
737 aircraft with an estimated cost of approximately $1.8 billion. Additionally, we have 15 options and 10 purchase rights for B737 aircraft as of September 30, 2005. The table below illustrates all aircraft scheduled for delivery through 2009,
including the effect of the aforementioned transactions:



|      |  |                 |  |                 |  |        |  |      |  |        
|----- |  | --------------- |  | --------------- |  | ------ |  | ---- |  | -------
|      |  | B737 Deliveries |  | B717 Deliveries
|      |  | Firm            |  | Options         |  | Rights |  | Firm |  | Options
|2005  |  | 4               |  |                |  |       |  | 2    |  |       
|2006  |  | 18              |  |                |  |       |  | 2    |  |       
|2007  |  | 18              |  | 1               |  |       |  |     |  |       
|2008  |  | 4               |  | 14              |  |       |  |     |  |       
|2009  |  | 15              |  |                |  |       |  |     |  |       
|2010  |  |                |  |                |  | 10     |  |     |  |       
|      |  |                 |  |                 |  |        |  |      |  |        
|Total |  | 59              |  | 15              |  | 10     |  | 4    |  |       
|      |  |                 |  |                 |  |        |  |      |  |        



The four remaining B717 aircraft to be
acquired are to be leased, under operating leases, through an affiliate of the aircraft manufacturer. Of the 59 B737 aircraft on order as of September 30, 2005, Airways has secured lease financing on 11 of the aircraft through an arrangement
with an aircraft leasing company and has secured debt financing for 13 B737 aircraft through arrangements with financial institutions. Airways has also obtained financing commitments from an affiliate of the aircraft manufacturer for up to 80% of
the purchase price for 16 B737 aircraft should Airways be unable to secure financing from the financial markets on acceptable terms. Additionally, we have entered into sale/leaseback transactions with that aircraft leasing company with respect to
six related spare engines to be delivered between the remainder of 2005 and 2010.



There can be no assurance that sufficient financing will be available for all B737 aircraft delivers or for other capital expenditures not covered by firm financing commitments. Should fuel prices remain high and if industry consolidation
does not occur, we may make efforts to slow our growth through various market methods, including the subleasing of our aircraft.



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
amount is not determinable or estimable. These indemnities consist of the following:



Certain of Airways debt agreements related to certain 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



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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.



Airways 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 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.



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



Note 5 - Debt



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



|                                                                                    |  |                   |         |   |                  |   |         |  
|----------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                    |  | September 30,2005 |         |   | December 31,2004 |  
|Aircraft notes payable through 2017, 10.72% weighted-average interest rate          |  | $                 | 113,906 |   |                  | $ | 116,025 |  
|7.00% Convertible notes due 2023                                                    |  |                   | 125,000 |   |                  |   | 125,000 |  
|Floating rate aircraft notes payable due 2016, weighted average interest rate 5.29% |  |                   | 140,037 |   |                  |   | 57,500  |  
|Floating rate aircraft pre-delivery deposit financing payable through 2007, 5.17%   |  |                   | 51,928  |   |                  |   |        |  
|Floating rate aircraft pre-delivery deposit financing payable through 2006, 6.05%   |  |                   | 9,866   |   |                  |   |        |  
|Capital lease obligations                                                           |  |                   | 14,829  |   |                  |   | 15,445  |  
|                                                                                    |  |                   |         |   |                  |   |         |  
|Total long-term debt                                                                |  |                   | 455,566 |   |                  |   | 313,970 |  
|Less current maturities                                                             |  |                   | (49,265 | ) |                  |   | (13,836 | )
|                                                                                    |  |                   |         |   |                  |   |         |  
|                                                                                    |  | $                 | 406,301 |   |                  | $ | 300,134 |  
|                                                                                    |  |                   |         |   |                  |   |         |  



As of September 30, 2005, maturities
of our long-term debt and capital lease obligations for the next five years and thereafter, in aggregate are (in thousands): 2005-$11,421; 2006-$70,619; 2007-$29,657; 2008-$16,764; 2009-$16,250; thereafter-$310,855.



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Pursuant to an existing loan facility entered into in August, 2004, Airways financed the acquisition of three B737
aircraft subject to such loan facility and took delivery of the first such aircraft in August 2004, the second such aircraft in July 2005 and third such aircraft in August 2005. In conjunction with the financing of these B737 aircraft, Airways
issued equipment notes as aircraft were delivered, for an aggregate amount of $87.0 million, which mature between August, 2016 and August, 2017. The notes bear interest at a floating rate equal to the six-month US Dollar London Interbank Offering
rate (LIBOR) in effect at the commencement of each semi-annual period plus 1.5% and are payable semi-annually. The notes are secured by a first mortgage on the purchased aircraft.



Pursuant to an additional existing loan facility entered into in September, 2004, Airways financed the acquisition of three B737 subject to
such loan facility and took delivery of the first such aircraft in September 2004 and the second such aircraft in June 2005. In conjunction with the financing of these B737 aircraft, Airways issued equipment notes as aircraft were delivered for an
aggregate amount of $57.0 million, which mature between September, 2016 and June 2017. The notes bear interest (and the additional note to be entered into to finance an additional aircraft will bear interest) at a floating rate equal to the
six-month US Dollar LIBOR in effect at the commencement of each semi-annual period plus 1.5% and are payable semi-annually. The notes are (and the additional note to be entered into to finance an additional aircraft will be) secured by a first
mortgage on the purchased aircraft. Airways will pay a commitment fee equal to 0.65% per annum of the undrawn portion of the loan amount.



During May 2005, Airways closed on a $19.6 million financing arrangement for pre-delivery aircraft deposits. This agreement will fund up to 65 percent of Airways
pre-delivery deposits on six B737 aircraft scheduled on delivery through February 2006. Advances on the financing arrangement will bear interest at LIBOR plus 2.35 percent.



On September 1, 2005, Airways entered into financing arrangements to facilitate the acquisition of certain of the B737 aircraft under
firm commitments currently scheduled to be delivered in 2006 and 2007 (the Aircraft). The financing arrangements consist of two financing facilities entitling the Company to make drawings in an aggregate amount up to $354 million. The
first of the financing facilities (the PDP Facility) is intended to fund the Airways obligations to make pre-delivery payments in respect of the Aircraft under its purchase agreement with an aircraft manufacturer. The PDP Facility
is secured by certain of the Companys rights and interest in and to such purchase agreement, but only to the extent related to the Aircraft. On September 1, 2005, Airways made an initial drawing under the PDP Facility of approximately
$51.9 million, which is equivalent to pre-delivery payments previously made by Airways for Aircraft through such date. Airways is entitled to make and intends to make additional drawings under the PDP Facility in amounts sufficient to satisfy its
pre-delivery payment obligations to an aircraft manufacturer in respect of the Aircraft. The second financing facility (the Permanent Facility) is intended to fund a portion of the purchase price of the Aircraft on their respective
delivery dates, as well as to satisfy the Airways repayment obligations under the PDP Facility in respect of the Aircraft then being delivered to Airways. A loan made under the Permanent Facility will be secured by, among other things, the
Aircraft to which such loan relates. A loan made under the Permanent Facility will mature on the twelfth anniversary of the delivery date of the Aircraft to which such loan relates.



Credit Agreements:



During April 2005, we signed a new credit agreement with our lender. The new credit agreement included a revolving line of credit for up to $25 million and, additionally,
allowed us to obtain letters of credit for up to $15 million and enter into hedge agreements with the bank. Advances on the revolving line of credit beared interest at a base rate plus a margin spread of 1.5 percent per annum. In September 2005, as
a result of obtaining additional financing, we terminated the credit agreement. As a result $11.1 million of our restricted cash on the accompanying condensed consolidated balance sheet relates to outstanding letters of credit, as of
September 30, 2005.



Note 6 - Income Taxes



Our effective income tax rate was 85.9 percent and 13.6 percent for the three and nine
months ended September 30, 2005 compared to 36.8 percent and 39.0 percent for the three and nine months ended September 30, 2004. Our tax expense for the three and nine months ended September 30, 2005 includes a one-time benefit of
$1.7 million resulting from an adjustment to our deferred tax liabilities which were revalued in connection with a decrease in certain of our state tax rates and additional expense of approximately $1.0 million related to an increase in the
valuation allowance related to certain of our state NOLs. We anticipate our effective income tax rate to be between 35 percent and 37 percent for the year ended December 31, 2005.



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



The information contained in this section: (1) 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, 2004, as filed with the U.S. Securities and Exchange Commission; and (2) is not a comprehensive
discussion and analysis of our financial condition and results of operations, but rather updates disclosures made in the aforementioned filing. 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, fare levels and actions by competitors, regulatory matters, general economic conditions, fuel and other 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 manage fuel costs, our ability to take delivery of and to finance aircraft, the adequacy of our insurance coverage and the results of litigation or investigations. 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.



AVAILABLE INFORMATION



Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as
amended, are accessible free of charge on our website at www.airtran.com. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically
with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing.



GENERAL INFORMATION



During the third quarter 2005, the airline industry continued to face several challenges. Our financial performance was challenged by record-high fuel prices and excess capacity. While we saw increases in revenue
performance over the quarter, it has been insufficient to cover the rising fuel costs. There also has been little consolidation of the industry, either through liquidation of airlines in bankruptcy or through mergers and to the extent that any
consolidation is occurring, the impact of the consolidation has yet to be realized. Accordingly, overcapacity during the quarter resulted in a relatively weak airline industry revenue environment.



During the third quarter of 2005, as a result of Hurricanes Katrina and Rita, we saw
disruptions of oil production along the US Gulf Coast. Disruptions in oil production in the future, regardless of the cause, could have a material adverse effect on our results of operations.



While the airline industry revenue environment has remained challenging, we noted an all-time
record passenger count of 4.4 million passengers and a quarterly all-time load factor record of 76.3 percent. For the three months ended September 30, 2005, our passenger unit revenues or passenger revenue available seat miles (RASM)
increased 16.4% to 9.23¢ from 7.93¢ for the comparable prior year period. Notwithstanding the high fuel costs, we succeeded in reducing our cost per available seat mile (CASM) when fuel was excluded. During the third quarter of both 2004
and 2005 our results of operations were impacted by Hurricanes, though the impact in 2004 was far more significant.



During the first nine months of 2005, we took delivery of four Boeing 717 (B717) aircraft and eight Boeing 737 (B737) aircraft. We expect to continue growing the airline
by adding two additional B717 aircraft and four additional B737 aircraft through the remainder of 2005. The B737 aircraft are part of our plans announced in July 2003 to add up to 100 new Boeing 737-700/800 aircraft. We anticipate that deliveries
related to the order will occur through 2010. As a result of a labor strike at Boeing, which has been recently resolved, the Company has



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experienced a delay in Boeing 737-700 aircraft deliveries. Our expectation is that the additional new aircraft we have on order will play an important role
in our effort to continue providing our customers with a mix of low fares and excellent customer service while also improving our financial results by lowering our cost of doing business.



During the third quarter of 2005, we announced service to Detroit from Atlanta, Orlando and Sarasota/Bradenton commencing in November 2005
and early 2006. Additionally, we announced expanded service in a number of existing markets. Our domestic and international markets continue to reflect our three pronged growth strategy to increase frequencies in existing markets, add new segments
between cities we already serve (connect the dots), and open new cities.



In
October, we announced a new distribution agreement with Sabre including the Sabre Travel Network, Travelocity.com and Travelocity for Business, and Cendant, including Apollo, Galileo, Orbitz.com and Cheaptickets.com, that will reduce our cost of
travel agent distribution, improve functionality and customer service as well as potentially open new revenue streams. We subsequently terminated agreements with Worldspan, a GDS, which will also impact our ability to do business with companies like
Expedia.com.



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 and western United
States.



RESULTS OF OPERATIONS



The tables below set forth selected financial and operating data for the three and nine
months ended September 30, 2005 and 2004 and has been derived from our condensed consolidated financial statements. This information should be read in conjunction with the condensed consolidated financial statements and related notes included
elsewhere in this 10-Q:



|                                                               |  |                                 |           |   |                |   |           |   |  |      |     
|-------------------------------------------------------------- |  | ------------------------------- | --------- | - | -------------- | - | --------- | - |  | ---- | ----
|                                                               |  | Three months endedSeptember 30, |           |   | Percent change |  
|                                                               |  | 2005                            |           |   | 2004           |   |          
|Revenue passengers                                             |  |                                 | 4,396,524 |   |                |   | 3,312,802 |   |  | 32.7 |     
|Revenue passenger miles (RPM) (000s)                           |  |                                 | 2,980,552 |   |                |   | 2,087,355 |   |  | 42.8 |     
|Available seat miles (ASM) (000s)                              |  |                                 | 3,905,905 |   |                |   | 2,979,243 |   |  | 31.1 |     
|Passenger load factor                                          |  |                                 | 76.3      | % |                |   | 70.1      | % |  | 6.2  | pts.
|Break-even load factor                                         |  |                                 | 76.7      | % |                |   | 74.7      | % |  | 2.0  | pts.
|Average fare                                                   |  | $                               | 81.96     |   |                | $ | 71.27     |   |  | 15.0 |     
|Average yield per RPM                                          |  |                                 | 12.09     | ¢ |                |   | 11.31     | ¢ |  | 6.9  |     
|Passenger revenue per ASM                                      |  |                                 | 9.23      | ¢ |                |   | 7.93      | ¢ |  | 16.4 |     
|Operating cost per ASM                                         |  |                                 | 9.56      | ¢ |                |   | 8.65      | ¢ |  | 10.5 |     
|Average stage length (miles)                                   |  |                                 | 650       |   |                |   | 608       |   |  | 6.9  |     
|Average cost of aircraft fuel per gallon, including fuel taxes |  |                                 | 192.83    | ¢ |                |   | 123.19    | ¢ |  | 56.5 |     
|Average cost of aircraft fuel per gallon, excluding fuel taxes |  |                                 | 170.45    | ¢ |                |   | 111.65    | ¢ |  | 52.7 |     
|Average daily utilization (hours:minutes)                      |  |                                 | 10:48     |   |                |   | 10:36     |   |  | 2.8  |     
|Number of operating aircraft in fleet at end of period         |  |                                 | 99        |   |                |   | 82        |   |  | 20.7 |     



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|                                                               |  |                                |            |   |                |   |           |   |  |      |     
|-------------------------------------------------------------- |  | ------------------------------ | ---------- | - | -------------- | - | --------- | - |  | ---- | ----
|                                                               |  | Nine months endedSeptember 30, |            |   | Percent change |  
|                                                               |  | 2005                           |            |   | 2004           |   |          
|Revenue passengers                                             |  |                                | 12,250,016 |   |                |   | 9,717,696 |   |  | 26.1 |     
|Revenue passenger miles (RPM) (000s)                           |  |                                | 8,339,845  |   |                |   | 6,180,938 |   |  | 34.9 |     
|Available seat miles (ASM) (000s)                              |  |                                | 11,224,686 |   |                |   | 8,662,896 |   |  | 29.6 |     
|Passenger load factor                                          |  |                                | 74.3       | % |                |   | 71.3      | % |  | 3.0  | pts.
|Break-even load factor                                         |  |                                | 74.0       | % |                |   | 69.6      | % |  | 4.4  | pts.
|Average fare                                                   |  | $                              | 81.89      |   |                | $ | 75.69     |   |  | 8.2  |     
|Average yield per RPM                                          |  |                                | 12.03      | ¢ |                |   | 11.90     | ¢ |  | 1.1  |     
|Passenger revenue per ASM                                      |  |                                | 8.94       | ¢ |                |   | 8.49      | ¢ |  | 5.3  |     
|Operating cost per ASM                                         |  |                                | 9.17       | ¢ |                |   | 8.46      | ¢ |  | 8.4  |     
|Average stage length (miles)                                   |  |                                | 651        |   |                |   | 620       |   |  | 5.0  |     
|Average cost of aircraft fuel per gallon, including fuel taxes |  |                                | 171.24     | ¢ |                |   | 113.81    | ¢ |  | 50.5 |     
|Average cost of aircraft fuel per gallon, excluding fuel taxes |  |                                | 150.80     | ¢ |                |   | 102.84    | ¢ |  | 46.6 |     
|Average daily utilization (hours:minutes)                      |  |                                | 11:00      |   |                |   | 10:54     |   |  | 0.9  |     
|Number of operating aircraft in fleet at end of period         |  |                                | 99         |   |                |   | 82        |   |  | 20.7 |     



For the three months ended
September 30, 2005 and 2004



Summary



We recorded operating income of $1.2 million, net loss of $0.2 million and diluted loss
per common share of $0.00 for the three months ended September 30, 2005. For the comparative period in 2004, we recorded an operating loss of $12.0 million, net loss of $9.8 million, and diluted loss per common share of $0.11.



Operating Revenues



Our operating revenues for the three months ended September 30, 2005 increased $129.0
million (52.5 percent), primarily due to a 52.6 percent increase in passenger revenues. The increase in passenger revenues was largely due to a 42.8 percent increase in traffic, as measured by revenue passenger miles (RPMs), and an increase in the
average fares of 15.0 percent to $81.96.



During the twelve months ended
September 30, 2005, we took delivery of 11 B737 aircraft and six B717 aircraft. As a result our capacity, as measured by available seat miles (ASMs), increased 31.1 percent. Our traffic, as measured by RPMs, increased 42.8 percent, resulting in
a 6.2 percentage point increase in passenger load factor to 76.3 percent. Our average yield per RPM increased 6.9 percent to 12.09 cents per RPM. The increase in yield resulted from a 6.9 percent increase in our average passenger trip length to 650
miles combined with a 15.0 percent increase in our average fare to $81.96. This increase in yield, when combined with our 6.2 percentage point increase in passenger load factor, resulted in a 16.4 percent increase in passenger unit revenues or
passenger revenue available seat miles (RASM) to 9.23 cents per ASM. During the third quarter of both 2004 and 2005 our revenue was impacted by hurricanes, though the impact in 2004 was far more significant and does contribute to the increased unit
revenue performance in 2005.



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Operating Expenses



Our operating expenses for the three months ended September 30, 2005 increased $115.8 million (44.9 percent) on ASM growth of 31.1 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:



|                                         |  |                                 |   |  |                |   |  |       |  
|---------------------------------------- |  | ------------------------------- | - |  | -------------- | - |  | ----- | -
|                                         |  | Three months endedSeptember 30, |   |  | Percent change |  
|                                         |  | 2005                            |   |  | 2004           |   | 
|Salaries, wages and benefits             |  | 2.11                            | ¢ |  | 2.35           | ¢ |  | (10.2 | )
|Aircraft fuel                            |  | 3.27                            |   |  | 2.17           |   |  | 50.7  |  
|Aircraft rent                            |  | 1.25                            |   |  | 1.30           |   |  | (3.8  | )
|Maintenance, materials and repairs       |  | 0.66                            |   |  | 0.57           |   |  | 15.8  |  
|Distribution                             |  | 0.45                            |   |  | 0.40           |   |  | 12.5  |  
|Landing fees and other rents             |  | 0.58                            |   |  | 0.54           |   |  | 7.4   |  
|Aircraft insurance and security services |  | 0.15                            |   |  | 0.19           |   |  | (21.1 | )
|Marketing and advertising                |  | 0.22                            |   |  | 0.24           |   |  | (8.3  | )
|Depreciation                             |  | 0.13                            |   |  | 0.12           |   |  | 8.3   |  
|Other operating                          |  | 0.74                            |   |  | 0.77           |   |  | (3.9  | )
|                                         |  |                                 |   |  |                |   |  |       |  
|Total CASM                               |  | 9.56                            | ¢ |  | 8.65           | ¢ |  | 10.5  |  
|                                         |  |                                 |   |  |                |   |  |       |  



Salaries, wages and benefits
increased $12.5 million (17.9 percent), primarily due to the addition of flight crews and ground support personnel hired to operate and support the growth of our B717 and B737 aircraft fleet, and new destinations added to our route system, as well
as, our contractual wage increases and higher costs associated with our employee benefit programs offset by increases in productivity. However, on a cost per ASM basis, these costs decreased 10.2 percent to 2.11 cents primarily due to gains in
productivity driven by the increased number of aircraft and increased daily utilization. We employed approximately 6,300 employees (full-time equivalents), as of September 30, 2005, representing a 12.4 percent increase over the comparative
period in 2004.



Aircraft fuel increased $63.2 million (98.0 percent) or
50.7% on an ASM basis, primarily due to escalating fuel prices and the expanded level of our flight operations generated by the growth of our aircraft fleet that, in turn, increased our consumption of aircraft fuel. Our fuel price per gallon,
including all fees and taxes, increased 56.5 percent from $1.23 during the third quarter 2004 to $1.93 for the third quarter 2005. The level of our flight operations, as measured by block hours flown, increased 25.3 percent while our fuel
consumption per block hour increased 0.9 percent to 686 gallons due to additional aircraft added during the year and additional cities served. We currently operate an aircraft fleet consisting entirely of fuel-efficient B717 and B737 aircraft. In a
continued effort to reduce our fuel costs, we have begun adding winglets to our B737 aircraft as they are delivered. These enhancements extend the aircraft range and reduce fuel costs. Aircraft fuel represented 34.2 percent and 25.1 percent of our
operating expenses for the three months ended September 30, 2005 and 2004, respectively. Based on our 2005 projected fuel consumption, a 10 percent increase in the average price per gallon of aircraft fuel would increase fuel expense for the
remainder of the year by approximately $1.0 million, including the effects of our fixed-price fuel contracts and fuel cap contracts. Increases in fuel prices or a shortage of supply could have a material adverse effect on our operations, operating
results, and cash flows.



Maintenance, materials and repairs increased
$8.6 million (50.4 percent), or 15.8% on an ASM basis. On a block hour basis, maintenance costs increased 19.9 percent to $265 per block hour due to an increase in rotable repair expense resulting from the expiration of warranties on the B717
aircraft and an increase in airframe checks. Rotable components are components which, when they fail or reach the end of their recommended service cycle, may be removed and a replacement component installed. The removed component may be repaired
and, subject to service life criteria, may be re-used. As the original manufacturer warrantees expire on our B717 and B737 aircraft, the maintenance, repair and overhaul of major aircraft engine, parts and components become covered by previously
negotiated agreements with FAA-approved maintenance contractors. Under our maintenance agreements, we pay monthly charges based on either the number of flight hours flown or the number of landings.



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Distribution costs increased $5.5 million (46.3 percent), or 12.5% on an ASM basis, 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 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 $6.6 million (40.6 percent), or 7.4% on an ASM basis primarily due to growth of additional
flights operated, increase in landing fee rates, and leasing of facilities at new destinations that were added to our route network during 2005.



Aircraft insurance and security services increased $0.1 million (2.6 percent). The addition of seventeen new Boeing aircraft to our fleet for the twelve-month
period ending September 30, 2005 increased our total insured hull value and related insurance premiums. On a cost per available seat mile basis, aircraft insurance and security services decreased 21.1 percent due to a reduction in hull and
liability insurance rates for our 2005 fleet coverage.



Marketing and
advertising increased $1.4 million (19.5 percent), primarily due to promotional efforts associated with the development of our new destinations opened during 2005 and efforts to stimulate demand in all the markets that we serve. On an ASM basis
marketing and advertising decreased 8.3% due to less costly online advertising and reduced spending for new city development.



Depreciation increased $1.5 million (41.7 percent), or 8.3% on an ASM basis, primarily due to the addition of three B737 aircraft for the twelve-month period
ending September 30, 2005 as well as, the purchase of spare aircraft parts for the new B737 fleet.



Nonoperating (Income) Expense



Other
(income) expense, net decreased by $0.6 million (17.6 percent). Increases in rates earned on cash and higher investment balances increased interest income by $1.9 million. Interest expense increased by $1.2 million, primarily due to the issuance
of new debt during the twelve months ended September 30, 2005.



Income
Tax Expense



Our effective income tax rate was 85.9 percent for the three
months ended September 30, 2005 compared to 36.8 percent for the three months ended September 30, 2004. Our tax expense for the three months ended September 30, 2005 includes a one-time benefit of $1.7 million resulting from an
adjustment to our deferred tax liabilities which were revalued in connection with a decrease in certain of our state tax rates and additional expense of approximately $1.0 million related to an increase in the valuation allowance related to certain
of our state NOLs. We anticipate our effective income tax rate to be between 35 percent and 37 percent for the year ended December 31, 2005.



For the nine months ended September 30, 2005 and 2004



Summary



We recorded operating income of $11.3 million, net income of $3.1 million and diluted earnings per common share of $0.03 for the nine months ended September 30, 2005. For the comparative period in 2004, we
recorded operating income of $29.3 million, net income of $11.1 million, and diluted earnings per common share of $0.12.



Operating Revenues



Our operating revenues for the nine months ended September 30, 2005 increased $278.6 million (36.6 percent), primarily due to a 36.4 percent increase in passenger revenues. The increase in passenger revenues was
largely due to a 34.9 percent increase in traffic, as measured by revenue passenger miles (RPMs), and an increase in the average fares of 8.2 percent to $81.89.



During the twelve months ended September 30, 2005, we took delivery of six B717 aircraft and 11 B737 aircraft. As a result our capacity, as measured by available
seat miles (ASMs), increased 29.6 percent. Our traffic, as measured by RPMs, increased 34.9 percent, resulting in a 3.0 percentage point increase in passenger load factor to 74.3 percent.



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Our average yield per RPM increased 1.1 percent to 12.03 cents per RPM. The increase in yield resulted from a 7.1 percent
increase in our average passenger trip length to 681 miles combined with a 8.2 percent increase in our average fare to $81.89. This increase in yield, when combined with our 3.0 percentage point increase in passenger load factor, resulted in a 5.3
percent increase in passenger unit revenues or passenger revenue available seat miles (RASM) to 8.94 cents per ASM.



Operating Expenses



Our operating expenses for the nine months ended September 30, 2005 increased $296.6 million (40.5 percent) on ASM growth of 29.6 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 change |  
|                                         |  | 2005                            |   |  | 2004           |   | 
|Salaries, wages and benefits             |  | 2.15                            | ¢ |  | 2.29           | ¢ |  | (6.1  | )
|Aircraft fuel                            |  | 2.86                            |   |  | 1.98           |   |  | 44.4  |  
|Aircraft rent                            |  | 1.26                            |   |  | 1.28           |   |  | (1.6  | )
|Maintenance, materials and repairs       |  | 0.66                            |   |  | 0.63           |   |  | 4.8   |  
|Distribution                             |  | 0.45                            |   |  | 0.43           |   |  | 4.7   |  
|Landing fees and other rents             |  | 0.55                            |   |  | 0.53           |   |  | 3.8   |  
|Aircraft insurance and security services |  | 0.15                            |   |  | 0.19           |   |  | (21.1 | )
|Marketing and advertising                |  | 0.23                            |   |  | 0.25           |   |  | (8.0  | )
|Depreciation                             |  | 0.13                            |   |  | 0.11           |   |  | 18.2  |  
|Other operating                          |  | 0.73                            |   |  | 0.77           |   |  | (5.2  | )
|                                         |  |                                 |   |  |                |   |  |       |  
|Total CASM                               |  | 9.17                            | ¢ |  | 8.46           | ¢ |  | 8.4   |  
|                                         |  |                                 |   |  |                |   |  |       |  



Salaries, wages and benefits
increased $41.8 million (21.0 percent), primarily due to the addition of flight crews and ground support personnel hired to operate and support the growth of our B717 and B737 aircraft fleet, and new destinations added to our route system, as well
as, our contractual wage increases and higher costs associated with our employee benefit programs offset by increases in productivity. However on a cost per ASM basis, these costs decreased 6.1 percent to 2.15 cents due to gains in productivity
driven by the increased number of aircraft and increased daily utilization. We employed approximately 6,300 employees (full-time equivalents), as of September 30, 2005, representing a 12.4 percent increase over the comparative period in
2004.



Aircraft fuel increased $150.5 million (88.0 percent), or
44.4% on an ASM basis, primarily due to escalating fuel prices and the expanded level of our flight operations generated by the growth of our aircraft fleet that, in turn, increased our consumption of aircraft fuel. Our fuel price per gallon,
including all fees and taxes, increased 50.5 percent from $1.14 during the nine months ended September 30, 2004 to $1.71 for nine months ended September 30, 2005. The level of our flight operations, as measured by block hours flown,
increased 23.2 percent while our fuel consumption per block hour increased 1.4 percent to 671 gallons. We currently operate an aircraft fleet consisting entirely of fuel-efficient B717 and B737 aircraft. In a continued effort to reduce our fuel
costs, we have begun adding winglets to our B737 aircraft as they are delivered. These enhancements extend the aircraft range and reduce fuel costs. Aircraft fuel represented 31.2 percent and 23.3 percent of our operating expenses for the nine
months ended September 30, 2005 and 2004, respectively. Based on our 2005 projected fuel consumption, a 10 percent increase in the average price per gallon of aircraft fuel would increase fuel expense for the remainder of the year by
approximately $1.0 million, including the effects of our fixed-price fuel contracts and fuel cap contracts. Increases in fuel prices or a shortage of supply could have a material adverse effect on our operations, operating results, and cash flows.



Aircraft insurance and security services increased $0.2 million (1.3
percent). The addition of seventeen new Boeing aircraft to our fleet for the twelve-month period ending September 30, 2005 increased our total insured hull value and related insurance premiums. On a cost per available seat mile basis, aircraft
insurance and security services decreased 21.1 percent due to a reduction in hull and liability insurance rates for our 2005 fleet coverage.



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Marketing and advertising increased $4.8 million (22.5 percent), primarily due to promotional efforts associated
with the development of our new destinations opened during 2005 and efforts to stimulate demand in all the markets that we serve. On an ASM basis marketing and advertising decreased 8.0% due to less costly online advertising and reduced spending for
new city development.



Depreciation increased $4.2 million (42.2
percent), or 18.2% on an ASM basis, primarily due to the addition of three B737 for the twelve-month period ending September 30, 2005 as well as, the purchase of spare aircraft parts for the new B737 fleet.



Other operating increased $15.5 million (23.4 percent), primarily due to additional
passenger-related costs associated with the higher level of operations, increases in training costs for the new B737 aircraft, and increases in contractual costs related to the opening of new destinations and routes. On a cost per available seat
mile basis, other operating expenses decreased 5.2 percent due to an increase in capacity, as measured by ASMs, of 29.6 percent.



Nonoperating (Income) Expense



Other (income) expense, net decreased by $3.3 million (29.9 percent). Increases in rates earned on cash and higher investment balances increased interest income by
$4.6 million. Interest expense increased by $1.3 million, primarily due to the issuance of new debt during the twelve months ended September 30, 2005.



Income Tax Expense



Our effective income tax rate was 13.6 percent for the nine months ended September 30, 2005 compared to 39.0 percent for the nine months ended September 30, 2004. Our tax expense for the nine months
ended September 30, 2005 includes a one-time benefit of $1.7 million resulting from an adjustment to our deferred tax liabilities which were revalued in connection with a decrease in certain of our state tax rates and additional expense of
approximately $1.0 million related to an increase in the valuation allowance related to certain of our state NOLs. We anticipate our effective income tax rate to be between 35 percent and 37 percent for the year ended December 31, 2005.



LIQUIDITY AND CAPITAL RESOURCES



Our primary source of funds is cash provided by operations and cash provided by
financing activities. Our primary uses of cash are for working capital (including labor and fuel costs), capital expenditures and general corporate purposes, which may include the acquisitions of other airlines and their assets, whether in
connection with bankruptcy proceedings or otherwise in strategic alliances, code-share agreements, or other business arrangements.



Our total cash, including cash and cash equivalents, and short-term investments totaled $361.9 million and $338.6 million at September 30, 2005, and 2004,
respectively. Short-term investments represent auction rate securities with reset periods less than 12 months.



Operating activities for the nine months ended September 30, 2005 generated $48.6 million of cash compared to $40.9 million for the comparable period in 2004. The increase was primarily due to an increase
in passenger bookings for future travel. Passengers pay in advance for travel and we record these remittances as air traffic liability. The expenses to provide transportation purchased by our customers represent the majority of our operating cash
outflows. This was offset by lower net income during 2005 and an increase in restricted cash during 2005 for our outstanding letters of credit.



Investing activities for the nine months ended September 30, 2005 used $241.2 million in cash compared to $310.6 million in 2004. Investing activities for
both periods include purchases and sales of auction rate securities that provide higher interest rate returns. Additionally, cash is used for purchase deposits used to pay for new aircraft and for purchase of spare parts and equipment provisioning
with the B717 and B737 aircraft fleets.



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Financing activities for the nine months ended September 30, 2005 generated $57.7 million of cash compared to
$2.6 million for the comparable period in 2004. During 2005, we generated cash from obtaining debt financing on aircraft pre-delivery deposits of $71.5 million, which was offset by repayments of debt of $16.4 million.



During the nine months ended September 30, 2005, Airways took delivery of four B717 and
eight B737 aircraft, of which four B717 and five B737 were leased, under operating leases. The three additional B737 aircraft were purchased and financed through debt. Additionally Airways exercised options for an additional six B737 aircraft to be
delivered in 2006 and 2007 and exercised purchase rights for fifteen B737 aircraft to be delivered in 2009.



As of September 30, 2005, Airways had on order four Boeing 717 aircraft and 59 Boeing 737 aircraft with an estimated cost of approximately $1.8 billion. Additionally, we have 15 options and 10 purchase rights for
B737 aircraft as of September 30, 2005. The table below illustrates all aircraft scheduled for delivery through 2009, including the effect of the aforementioned transactions:



|      |  |                 |  |                 |  |        |  |      |  |        
|----- |  | --------------- |  | --------------- |  | ------ |  | ---- |  | -------
|      |  | B737 Deliveries |  | B717 Deliveries
|      |  | Firm            |  | Options         |  | Rights |  | Firm |  | Options
|2005  |  | 4               |  |                |  |       |  | 2    |  |       
|2006  |  | 18              |  |                |  |       |  | 2    |  |       
|2007  |  | 18              |  | 1               |  |       |  |     |  |       
|2008  |  | 4               |  | 14              |  |       |  |     |  |       
|2009  |  | 15              |  |                |  |       |  |     |  |       
|2010  |  |                |  |                |  | 10     |  |     |  |       
|      |  |                 |  |                 |  |        |  |      |  |        
|Total |  | 59              |  | 15              |  | 10     |  | 4    |  |       
|      |  |                 |  |                 |  |        |  |      |  |        



The four remaining B717 aircraft to be
acquired are to be leased, under operating leases, through an affiliate of the aircraft manufacturer. Of the 59 B737 aircraft on order as of September 30, 2005, Airways has secured lease financing on 11 of the aircraft through an arrangement
with an aircraft leasing company and has secured debt financing for 13 B737 aircraft through arrangements with financial institutions. Airways also has also obtained financing commitments from an affiliate of the aircraft manufacturer for up to 80%
of the purchase price for 16 B737 aircraft should Airways be unable to secure financing from the financial markets on acceptable terms. Additionally, we have entered into sale/leaseback transactions with that aircraft leasing company with respect to
six related spare engines to be delivered between the remainder of 2005 and 2010.



There can be no assurance that sufficient financing will be available for all B737 aircraft delivers or for other capital expenditures not covered by firm financing commitments. Should fuel prices remain high and if industry consolidation
does not occur, we may make efforts to slow our growth through various market methods, including the subleasing of our aircraft.



Pursuant to an existing loan facility entered into in August, 2004, Airways financed the acquisition of three B737 aircraft subject to such loan facility and took
delivery of the first such aircraft in August 2004, the second such aircraft in July 2005 and third such aircraft in August 2005. In conjunction with the financing of these B737 aircraft, Airways issued equipment notes as aircraft were delivered,
for an aggregate amount of $87.0 million, which mature between August, 2016 and August, 2017. The notes bear interest at a floating rate equal to the six-month US Dollar London Interbank Offering rate (LIBOR) in effect at the commencement of each
semi-annual period plus 1.5% and are payable semi-annually. The notes are secured by a first mortgage on the purchased aircraft.



Pursuant to an additional existing loan facility entered into in September, 2004, Airways financed the acquisition of three B737 subject to such loan facility and took
delivery of the first such aircraft in September 2004 and the second such aircraft in June 2005. In conjunction with the financing of these B737 aircraft, Airways issued equipment notes as aircraft were delivered for an aggregate amount of $57.0
million, which mature between September, 2016 and June 2017. The notes bear interest (and the additional note to be entered into to finance an additional aircraft will bear interest) at a floating rate equal to the six-month US Dollar LIBOR in
effect at the commencement of each semi-annual period plus 1.5% and are payable semi-annually. The notes are (and the additional note to be entered into to finance an additional aircraft will be) secured by a first mortgage on the purchased
aircraft. Airways will pay a commitment fee equal to 0.65% per annum of the undrawn portion of the loan amount.



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During May 2005, Airways closed on a $19.6 million financing arrangement for pre-delivery aircraft deposits. This
agreement will fund up to 65 percent of Airways pre-delivery deposits on six B737 aircraft scheduled on delivery through February 2006. Advances on the financing arrangement will bear interest at LIBOR plus 2.35 percent.



On September 1, 2005, Airways entered into financing arrangements to facilitate the
acquisition of certain of the B737 aircraft under firm commitments currently scheduled to be delivered in 2006 and 2007 (the Aircraft). The financing arrangements consist of two financing facilities entitling the Company to make drawings
in an aggregate amount up to $354 million. The first of the financing facilities (the PDP Facility) is intended to fund the Airways obligations to make pre-delivery payments in respect of the Aircraft under its purchase agreement
with an aircraft manufacturer. The PDP Facility is secured by certain of the Companys rights and interest in and to such purchase agreement, but only to the extent related to the Aircraft. On September 1, 2005, Airways made an initial
drawing under the PDP Facility of approximately $51.9 million, which is equivalent to pre-delivery payments previously made by Airways for Aircraft through such date. Airways is entitled to make and intends to make additional drawings under the PDP
Facility in amounts sufficient to satisfy its pre-delivery payment obligations to an aircraft manufacturer in respect of the Aircraft. The second financing facility (the Permanent Facility) is intended to fund a portion of the purchase
price of the Aircraft on their respective delivery dates, as well as to satisfy the Airways repayment obligations under the PDP Facility in respect of the Aircraft then being delivered to Airways. A loan made under the Permanent Facility will
be secured by, among other things, the Aircraft to which such loan relates. A loan made under the Permanent Facility will mature on the twelfth anniversary of the delivery date of the Aircraft to which such loan relates.



Credit Agreements:



During April 2005, we signed a new credit agreement with our lender. The new credit
agreement included a revolving line of credit for up to $25 million and, additionally, allowed us to obtain letters of credit for up to $15 million and enter into hedge agreements with the bank. Advances on the revolving line of credit beared
interest at a base rate plus a margin spread of 1.5 percent per annum. In September 2005, as a result of obtaining additional financing, we terminated the credit agreement. As a result $11.1 million of our restricted cash on the accompanying
condensed consolidated balance sheet relates to outstanding letters of credit, as of September 30, 2005.



The Company has various options available to meet its capital and operating commitments including internally generated funds and various borrowing or leasing options. Additionally the Company has an outstanding shelf
registration which it may utilize for aircraft financings or other purposes in the future.



|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, 2004 other than those discussed below.



Aircraft Fuel



Aircraft fuel is a significant expenditure because our operations are inherently dependent on the use of petroleum products. Aircraft fuel represented approximately 34.2 percent and 25.1 percent of total
operating expenses for the three months ended September 30, 2005, and 2004, respectively, and 31.2 percent and 23.3 percent of total operating expenses for the nine months ended September 30, 2005 and 2004, respectively. Increases in fuel
prices or a shortage of supply could have a material adverse effect on our operations, operating results, and cash flows.



Our efforts to reduce our exposure to increases in the price and limitations on the availability of aviation fuel include the utilization of advance fuel purchase
agreements that include fixed-price fuel contracts and fuel cap contracts. Fixed-price fuel contracts are agreements to purchase defined quantities of aviation fuel from a third party at defined prices. Fuel cap contracts are agreements to purchase
defined quantities of aviation fuel from a third party at a price not to exceed a defined price, thereby, limiting our exposure to increases in the price of aviation fuel. As of



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September 30, 2005, utilizing fixed-price fuel contracts and fuel cap contracts, we agreed to purchase approximately 67 percent, 25 percent, and 16
percent of our fuel needs for the years ending December 31, 2005, 2006, and 2007, respectively, at a weighted average price of $1.52, $1.68, and $1.63, respectively, per gallon of aviation fuel, including delivery to our operations hub in
Atlanta and other locations for 2005, 2006, and 2007. During the fourth quarter of 2005, we entered into additional advance fuel purchase agreements. These new contracts changed our total future fuel commitments to approximately 67 percent, 25
percent and 16 percent of our fuel needs in the remainder of 2005, 2006 and 2007, respectively, at a weighted average price of $1.60, $1.80, and $1.77, respectively, per gallon of aviation fuel.



Based on our 2005 projected fuel consumption, a 10 percent increase in the average price per
gallon of aircraft fuel would increase fuel expense for the remainder of the year by approximately $1.0 million, including the effects of our fixed-price fuel contracts and fuel cap contracts. Increases in fuel prices or a shortage of supply could
have a material adverse effect on our operations, operating results, and cash flows.



Interest Rates



Our long-term debt obligations that
bear variable rates of interest are subject to changes in market rates of interest. If interest rates average 10% higher for the remainder of 2005, our interest expense would increase by approximately $5.0 million.



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



We maintain disclosure controls and procedures designed to ensure that we are able to collect the information that we are required to disclose in the reports we file with
the Securities and Exchange Commission (SEC), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on an evaluation of our disclosure controls and procedures conducted by our
management as of September 30, 2005, with the participation of the Chief Executive and Chief Financial Officers, the Chief Executive and Chief Financial Officers believe that these controls and procedures are effective to ensure that we are
able to collect, process, summarize and disclose information we are required to disclose in the reports we file with the SEC within the required time periods. There has been no change in our internal control over financial reporting during the nine
months ended September 30, 2005, that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.



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 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
|------- | ---------------------------------------------------



None.



|Item 5. | Other Information
|------- | -----------------



None.



|Item 6. | Exhibits
|------- | --------



The following exhibits are filed with this report:



(a)

| |  |             |  |   |  |                                                                                                                                                                                                                                                                
| |  | ----------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit No. |  |   |  | Description                                                                                                                                                                                                                                                    
| |  | 10.24       |  | - |  | Loan Agreement, dated as of August 31, 2005, by and among AirTran Airways, Inc. (AirTran), as Borrower, The Parties Identified in Schedule 1 thereto as Lenders, as Lenders, and
The Royal Bank of Scotland plc, New York Branch (RBS), as Security Agent.*
| |  |             | 
| |  | 10.25       |  | - |  | Credit Agreement, dated as of August 31, 2005, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lenders, and RBS, as Security Agent.*                                                                                       
| |  |             | 
| |  | 10.26       |  | - |  | Security Agreement, dated as of August 31, 2005, by and between AirTran, as Borrower, and RBS, 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                                                                                                                                                                                                           
| |  |             | 
| |  | 32.2        |  | - |  | CFO certification pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                           

---

|* | Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request filed with the Commission.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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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: November 9, 2005 |  |  |  | /s/    STANLEY J. GADEK                     
|                       |  |  |  | Stanley J. Gadek                            
|                       |  |  |  | Senior Vice President, Finance,             
|                       |  |  |  | Treasurer and Chief Financial Officer       
|                       |  |  |  | (Principal Accounting and Financial Officer)



EXHIBIT INDEX



|            |  |   |  |                                                                                                                                                                                                                                                                
|----------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |   |  | Description                                                                                                                                                                                                                                                    
|10.24       |  | - |  | Loan Agreement, dated as of August 31, 2005, by and among AirTran Airways, Inc. (AirTran), as Borrower, The Parties Identified in Schedule 1 thereto as Lenders, as Lenders, and
The Royal Bank of Scotland plc, New York Branch (RBS), as Security Agent.*
|            |  |  
|10.25       |  | - |  | Credit Agreement, dated as of August 31, 2005, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lenders, and RBS, as Security Agent.*                                                                                       
|            |  |  
|10.26       |  | - |  | Security Agreement, dated as of August 31, 2005, by and between AirTran, as Borrower, and RBS, 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 certification pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                           
|            |  |  
|32.2        |  | - |  | CFO certification pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                           

---

|* | Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request filed with the Commission.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24