<PAGE>
 
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                           --------------------------



                                   FORM 10-Q


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

               ------------------------------------------------



For the Quarter ended:  June 30, 1997             Commission File Number 0-26582



                              WORLD AIRWAYS, INC.
            (Exact name of registrant as specified in its charter)



DELAWARE                                                              94-1358276
(State of incorporation)                 (I.R.S. Employer Identification Number)

             13873 Park Center Road, Suite 490, Herndon, VA  20171
                   (Address of Principal Executive Offices)
                                (703) 834-9200
                        (Registrant's telephone number)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes      X        No
    ----------       -----------           

The number of shares of the registrant's Common Stock outstanding on August 1,
1997 was 11,230,064.



================================================================================
<PAGE>
 
                              WORLD AIRWAYS, INC.

                    JUNE 1997, QUARTERLY REPORT ON FORM 10Q

                               TABLE OF CONTENTS
<TABLE> 
<CAPTION> 
                                                                                     Page
                                                                                     ----
PART I - FINANCIAL INFORMATION
<S>    <C>                                                                           <C> 
       Item 1.   Financial Statements
 
                 Condensed Balance Sheets, June 30, 1997 and December 31, 1996.......  3
 
                 Condensed Statements of Operations, 
                 Three Months Ended June 30, 1997 and 1996...........................  5
 
                 Condensed Statements of Operations, 
                 Six Months Ended June 30, 1997 and 1996.............................  6
 
                 Condensed Statement of Changes in Common Stockholders' Equity, 
                 Six months ended June 30, 1997......................................  7
 
                 Condensed Statements of Cash Flows, 
                 Six months ended June 30, 1997 and 1996.............................  8
           
                 Notes to Condensed Financial Statements.............................  9
 
       Item 2.   Management's Discussion and Analysis of Financial Condition 
                 and Results of Operations........................................... 11
 
PART II - OTHER INFORMATION

       Item 6.  Exhibits and Reports on Form 8-K..................................... 23
</TABLE> 

                                       2
<PAGE>
 
ITEM 1.  FINANCIAL STATEMENTS


                              WORLD AIRWAYS, INC.
                           CONDENSED BALANCE SHEETS
                                    ASSETS
                                (in thousands)
<TABLE>
<CAPTION>
 
 
                                                     (unaudited)
                                                      June 30,    December 31,
                                                        1997          1996
                                                     -----------  ------------
<S>                                                  <C>          <C>
CURRENT ASSETS
  Cash and cash equivalents, including restricted
    cash of $921 at June 30, 1997 and
    $338 at December 31, 1996                          $  8,270       $  7,028
 
  Restricted short-term investments                       1,201          1,047
 
  Trade accounts receivable, less allowance for
    doubtful accounts of $409 at June 30, 1997
    and $413 at December 31, 1996                         8,013         14,093
 
  Other receivables                                       5,411          4,464
 
  Due from affiliate, net                                 4,171          4,181
 
  Prepaid expenses and other current assets               5,892          7,778
 
  Assets held for sale                                      500            500
                                                       --------       --------
 
    Total current assets                                 33,458         39,091
                                                       --------       --------
 
ASSETS HELD FOR SALE                                      3,067          3,426
 
EQUIPMENT AND PROPERTY
  Flight and other equipment                             83,928         72,089
  Equipment under capital leases                         11,466         11,466
                                                       --------       --------
                                                         95,394         83,555
  Less: accumulated depreciation and amortization        22,247         18,553
                                                       --------       --------
 
    Net equipment and property                           73,147         65,002
                                                       --------       --------
 
LONG-TERM OPERATING DEPOSITS                             15,965         15,951
 
OTHER ASSETS AND DEFERRED CHARGES, NET                    2,032          2,687
                                                       --------       --------
 
TOTAL ASSETS                                           $127,669       $126,157
                                                       ========       ========

                                                                   (Continued)
</TABLE>

                                       3
<PAGE>
 
                              WORLD AIRWAYS, INC.
                           CONDENSED BALANCE SHEETS
                                  (continued)
                  LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
                       (in thousands except share data)

<TABLE>
<CAPTION>
 
                                                                      (unaudited)
                                                                       June 30,    December 31,
                                                                         1997          1996
                                                                      -----------  -------------
<S>                                                                   <C>          <C>
CURRENT LIABILITIES                                
  Notes payable                                                         $    806       $ 11,386
  Current maturities of long-term obligations                             10,888          9,046
  Accounts payable                                                        21,413         22,749
  Net liabilities of discontinued operations                                 220          1,834
  Unearned revenue                                                         3,163          3,046
  Accrued maintenance in excess of reserves paid                          16,095          9,770
  Accrued salaries and wages                                              11,254          9,351
  Accrued taxes                                                            1,331          1,225
  Due to affiliate                                                             4             83
  Other accrued liabilities                                                  136            157
                                                                        --------       --------
    Total current liabilities                                             65,310         68,647
                                                                        --------       --------
                                                   
LONG-TERM OBLIGATIONS, NET                                                29,070         30,106
                                                   
OTHER LIABILITIES                                  
  Deferred gain from sale-leaseback transactions, net of                                             
    accumulated amortization of $19,627 at June    
    30, 1997 and $19,099 at December 31, 1996                              5,724          6,252
  Accrued maintenance in excess of reserves paid                           2,123          6,867
  Accrued postretirement benefits                                          2,648          2,545
  Other liabilities                                                        3,898          3,378
                                                                        --------       --------
    Total other liabilities                                               14,393         19,042
                                                                        --------       --------
                                                   
TOTAL LIABILITIES                                                        108,773        117,795
                                                                        --------       --------
                                                   
COMMON STOCKHOLDERS' EQUITY                        
  Common stock, $.001 par value (40,000,000 shares authorized;                                        
    12,000,064 shares issued and 11,230,064 outstanding at                                
    June 30, 1997 and 12,000,064 shares issued and 
    11,282,064 outstanding at December 31, 1996)                              12             12
  Preferred stock, $.001 par value (5,000,000 shares authorized                               
    and no shares issued or outstanding at June 30, 1997                                      
    and December 31, 1996)                                                    --             --
  Additional paid-in capital                                              42,522         42,522
  Contributed capital                                                      3,000          3,000
  Accumulated deficit                                                    (18,340)       (29,006)
  ESSOP guaranteed bank loan                                                (461)          (805)
  Treasury stock, at cost (770,000 shares at June 30, 1997                                        
    and 718,000 shares at December 31, 1996)                              (7,837)        (7,361)
                                                                        --------       --------
    Total common stockholders' equity                                     18,896          8,362
                                                                        --------       --------
                                                   
COMMITMENTS AND CONTINGENCIES                      
                                                   
TOTAL LIABILITIES AND COMMON STOCKHOLDERS'         
  EQUITY                                                                $127,669       $126,157
                                                                        ========       ========
</TABLE>
           See accompanying Notes to Condensed Financial Statements

                                       4
<PAGE>
 
                              WORLD AIRWAYS, INC.
                      CONDENSED STATEMENTS OF OPERATIONS
                      For the Three Months Ended June 30,
                     (in thousands except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                               1997      1996
                                                             --------  -------- 
OPERATING REVENUES
<S>                                                          <C>       <C>
  Flight operations                                          $80,063   $ 80,337
  Flight operations subcontracted to other carriers            1,703      6,048
  Other                                                          162        123
                                                             -------   --------
    Total operating revenues                                  81,928     86,508
                                                             -------   --------
 
OPERATING EXPENSES
  Flight                                                      16,682     13,318
  Maintenance                                                 17,917     15,964
  Aircraft costs                                              24,693     22,837
  Fuel                                                         2,663      2,577
  Flight operations subcontracted to other carriers            1,892      6,952
  Promotions, sales and commissions                            2,382      2,321
  Depreciation and amortization                                2,196      1,911
  General and administrative                                   7,005      5,357
                                                             -------   --------
    Total operating expenses                                  75,430     71,237
                                                             -------   --------
 
OPERATING INCOME                                               6,498     15,271
                                                             -------   --------
 
OTHER INCOME (EXPENSE)
  Interest expense                                              (883)      (855)
  Interest income                                                190        332
  Other, net                                                     (59)        26
                                                             -------   --------
    Total other expense                                         (752)      (497)
                                                             -------   --------
 
EARNINGS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES                                          5,746     14,774
 
INCOME TAX EXPENSE                                              (100)      (315)
                                                             -------   --------
 
EARNINGS FROM CONTINUING OPERATIONS                            5,646     14,459
 
DISCONTINUED OPERATIONS                                           --    (28,518)
                                                             -------   --------
 
NET EARNINGS (LOSS)                                          $ 5,646   $(14,059)
                                                             =======   ========
 
PRIMARY EARNINGS (LOSS) PER COMMON EQUIVALENT SHARE
  Continuing operations                                      $  0.50   $   1.20
  Discontinued operations                                         --      (2.37)
                                                             -------   --------
  Net earnings (loss)                                        $  0.50   $  (1.17)
                                                             =======   ========
 
WEIGHTED AVERAGE COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING                               11,230     12,000
                                                             =======   ========
 
FULLY DILUTED EARNINGS (LOSS) PER COMMON EQUIVALENT SHARE
  Continuing operations                                      $  0.50   $   1.20
  Discontinued operations                                         --      (2.37)
                                                             -------   --------
  Net earnings (loss)                                        $  0.50   $  (1.17)
                                                             =======   ========
 
WEIGHTED AVERAGE COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING                               11,235     12,000
                                                             =======   ========
</TABLE>
           See accompanying Notes to Condensed Financial Statements

                                       5
<PAGE>
 
                              WORLD AIRWAYS, INC.
                      CONDENSED STATEMENTS OF OPERATIONS
                       For the Six Months Ended June 30,
                     (in thousands except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
 
                                                             1997       1996
                                                          ----------  -------- 
<S>                                                       <C>         <C>
OPERATING REVENUES
  Flight operations                                        $158,484   $144,842
  Flight operations subcontracted to other carriers           1,943      6,712
  Other                                                         249        319
                                                           --------   --------
    Total operating revenues                                160,676    151,873
                                                           --------   --------
 
OPERATING EXPENSES
  Flight                                                     33,114     33,283
  Maintenance                                                34,595     30,493
  Aircraft costs                                             49,379     41,452
  Fuel                                                        5,703      8,070
  Flight operations subcontracted to other carriers           2,249      8,013
  Promotions, sales and commissions                           4,663      3,633
  Depreciation and amortization                               4,331      3,894
  General and administrative                                 13,808     11,089
                                                           --------   --------
    Total operating expenses                                147,842    139,927
                                                           --------   --------
 
OPERATING INCOME                                             12,834     11,946
                                                           --------   --------
 
OTHER INCOME (EXPENSE)
  Interest expense                                           (2,046)    (1,576)
  Interest income                                               338        653
  Other, net                                                   (110)        64
                                                           --------   --------
    Total other expense                                      (1,818)      (859)
                                                           --------   --------
 
EARNINGS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES                                        11,016     11,087
 
INCOME TAX EXPENSE                                             (350)      (315)
                                                           --------   --------
 
EARNINGS FROM CONTINUING OPERATIONS                          10,666     10,772
 
DISCONTINUED OPERATIONS                                          --    (32,705)
                                                           --------   --------
 
NET EARNINGS (LOSS)                                        $ 10,666   $(21,933)
                                                           ========   ========
 
PRIMARY EARNINGS (LOSS) PER COMMON EQUIVALENT SHARE
  Continuing operations                                    $   0.95   $   0.90
  Discontinued operations                                        --      (2.73)
                                                           --------   --------
  Net earnings (loss)                                      $   0.95   $  (1.83)
                                                           ========   ========
 
WEIGHTED AVERAGE COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING                              11,234     12,000
                                                           ========   ========
 
FULLY DILUTED EARNINGS (LOSS) PER COMMON EQUIVALENT SHARE  
  Continuing operations                                    $   0.95   $   0.90
  Discontinued operations                                        --      (2.73)
                                                           --------   --------
  Net earnings (loss)                                      $   0.95   $  (1.83)
                                                           ========   ========
 
WEIGHTED AVERAGE COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING                              11,236     12,000
                                                           ========   ========
</TABLE>
           See accompanying Notes to Condensed Financial Statements

                                       6
<PAGE>
 
                              WORLD AIRWAYS, INC.
                        CONDENSED STATEMENTS OF CHANGES
                        IN COMMON STOCKHOLDERS' EQUITY
                    For the Six Months Ended June 30, 1997
                                (in thousands)
                                  (unaudited)


<TABLE>
<CAPTION>
 
 
                                                                                                         Total
                                      Additional                                ESSOP     Treasury       Common
                              Common   Paid-in    Contributed  Accumulated   Guaranteed    Stock,    Stockholders'
                              Stock    Capital      Capital      Deficit      Bank Loan    at Cost       Equity
                              ------  ----------  -----------  ------------  -----------  ---------  --------------
<S>                           <C>     <C>         <C>          <C>           <C>          <C>        <C>
 
BALANCE AT
   DECEMBER 31, 1996             $12     $42,522       $3,000     $(29,006)       $(805)   $(7,361)        $ 8,362
 
Common stock repurchases          --          --           --           --           --       (476)           (476)
 
Employee Savings and Stock
   Ownership Plan
   Guaranteed bank loan           --          --           --           --          344         --             344
 
Net earnings                      --          --           --       10,666           --         --          10,666
                              ------  ----------  -----------  -----------   ----------   --------         -------
 
BALANCE AT
   JUNE 30, 1997                 $12     $42,522       $3,000     $(18,340)       $(461)   $(7,837)        $18,896
                              ======  ==========  ===========  ===========   ==========   ========         =======
 
</TABLE>

           See accompanying Notes to Condensed Financial Statements

                                       7
<PAGE>
 
                              WORLD AIRWAYS, INC.
                      CONDENSED STATEMENTS OF CASH FLOWS
                       For the Six Months Ended June 30,
                            (dollars in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
 
 
                                                             1997        1996
                                                          -----------  ---------
<S>                                                       <C>          <C>
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            $  7,028   $ 25,271
 
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)                                           10,666    (21,933)
Adjustments to reconcile net loss to cash
 provided (used) by operating activities:
 Depreciation and amortization                                 4,331      3,894
 Deferred gain recognition                                      (528)      (531)
 Gain on sale of property and equipment                           59        (14)
 Loss on disposal of discontinued operations                      --     20,985
 Other                                                           477         --
 Changes in certain assets and liabilities net of
   effects of non-cash transactions:
   Decrease (increase) in accounts receivable                  5,143    (16,127)
   Increase in restricted short-term investments                (154)      (120)
   Decrease in deposits, prepaid expenses
     and other assets                                          1,897      1,529
   Increase in accounts payable, accrued
     expenses and other liabilities                              730      9,699
   Increase (decrease) in unearned revenue                       117     (3,280)
   Increase in air traffic liability                              --      4,878
                                                            --------   --------
 Net cash provided (used) by operating activities             22,738     (1,020)
                                                            --------   --------
 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to equipment and property                           (4,565)    (4,788)
Proceeds from disposals of equipment and property                355        322
                                                            --------   --------
 Net cash used by investing activities                        (4,210)    (4,466)
                                                            --------   --------
 
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in line of credit borrowing
 arrangement, net                                             (7,520)     7,668
Issuance of debt                                                  --        348
Repayment of debt                                             (9,290)    (8,889)
 Purchase of World Airways common stock, at cost                (476)        --
                                                            --------   --------
 Net cash used by financing activities                       (17,286)      (873)
                                                            --------   --------
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           1,242     (6,359)
                                                            --------   --------
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $  8,270   $ 18,912
                                                            ========   ========
 
</TABLE>
           See accompanying Notes to Condensed Financial Statements

                                       8
<PAGE>
 
                              WORLD AIRWAYS, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS

1. The condensed balance sheet of World Airways, Inc. ("World Airways" or the
   "Company") as of June 30, 1997, the related condensed statements of
   operations for the three and six month periods ended June 30, 1997 and 1996,
   the condensed statements of changes in common stockholders' equity for the
   six months ended June 30, 1997, and the condensed statements of cash flows
   for the six months ended June 30, 1997 and 1996 are unaudited.  In the
   opinion of management, all adjustments necessary for a fair presentation of
   such financial statements have been included.  Such adjustments consisted
   only of normal recurring items.  Interim results are not necessarily
   indicative of results for a full year.

   The condensed financial statements and notes are presented as required by
   Form 10-Q and do not contain certain information included in the Company's
   annual financial statements and notes.  These financial statements should be
   read in conjunction with the financial statements and the notes included in
   the Company's Form 10-K for the year ended December 31, 1996.

2. In July 1996, the Company announced its decision to exit its scheduled
   service operations by October 1996 and focus its operations on its core
   business:  operating aircraft under contracts with international carriers,
   the U.S. Government, and international tour operators.  Consistent with this
   decision, World Airways ceased all scheduled operations as of October 27,
   1996.  As a result, the Company's scheduled service operations were reflected
   as discontinued operations as of June 30, 1996, and prior period results were
   restated to reflect scheduled service operations as discontinued operations.
   Loss from discontinued operations (net of income tax effect) approximated
   $11.7 million for the year ended December 31, 1996.  In addition, an
   estimated loss on disposal of $21.0 million (net of income tax effect) which
   was recorded as of June 30, 1996, included the following:  $13.6 million for
   estimated operating losses during the phase-out period; a $2.6 million
   estimated loss to be incurred in connection with sub-leasing DC-10 aircraft
   which would not be utilized in the Company's operations subsequent to the
   phase-out of scheduled service operations; a $2.3 million writeoff of related
   leasehold improvements; and $2.0 million for passenger reprotection expenses.
   The Company has incurred approximately $21.0 million of these costs through
   June 30, 1997 and believes that its remaining accrual for estimated losses on
   disposal will be adequate to meet the remaining costs to be incurred during
   the phase-out period. In connection with the discontinuance of the Company's
   scheduled service operations, the Company was subject to claims by various
   third parties and may be subject to further claims in the future (see Note
   5).

3. As of August 14, 1997, the Company was in the process of issuing $75.0
   million of convertible senior subordinated debentures (the "Debentures") due
   in 2004 (the "Offering").  The Debentures would be unsecured obligations,
   convertible into shares of the Company's common stock, and subordinated to
   all present and future senior indebtedness of the Company.  The Company
   intends to use net proceeds of the Offering to purchase between 4.0 and 5.8
   million shares of is common stock, repay certain indebtedness and increase
   working capital.  Failure by the Company to repurchase at least 4.0 million
   shares of common stock within 150 days after the sale of the Debentures
   constitutes a repurchase event whereby each holder of the Debentures would
   have the right, at the holder's option, to require the Company to repurchase
   such holders Debentures at 100% of their principal amount, plus accrued
   interest.  No assurances, however, can be given with respect to the eventual
   outcome of the Offering or the subsequent repurchase of the Company's common
   stock.

4. In 1996, World Airways instituted a program to purchase up to one million
   shares of its publicly-traded Common Stock pursuant to open market
   transactions. As of June 30, 1997, World Airways had purchased 770,000 shares
   of Common Stock at an aggregate cost of approximately $7.8 million pursuant
   to such program.  In connection with the above-mentioned Offering, the
   Company and WorldCorp are currently in discussions and expect to enter into
   an agreement for the repurchase of up to 4.7 million shares of common stock
   owned by WorldCorp.  There can be no assurance that such agreement will be
   completed or related repurchase will be consummated.

5. For a discussion of commitments and contingencies see "Management's
   Discussion and Analysis of Financial Condition and Results of Operations -
   Legal and Administrative Proceedings".

6. In February 1997, the Financial Accounting Standards Board issued Statement
   of Financial Accounting Standards ("SFAS") No. 128 ("FAS #128") Earnings per
   Share, and SFAS No. 129 ("FAS #129") Disclosure

                                       9
<PAGE>
 
   of Information About Capital Structure. FAS #128 was issued to simplify the
   computation of earnings per share and to make the U.S. standard more
   compatible with the standards of other countries and that of the
   International Accounting Standards Committee. FAS #128 replaces primary and
   full diluted earnings per share with basic earnings and diluted earnings per
   share. FAS #129 will change some of the required disclosures about capital
   structure. It is not expected that these statements will have a material
   effect on the Company's financial statements in the future. The statements
   are effective for the year ended December 31, 1997.

                                       10
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------  -----------------------------------------------------------------------
         OF OPERATIONS
         -------------

Management's Discussion and Analysis of Financial Condition and Results of
Operations presented below relates to the operations of World Airways, Inc.
("World Airways" or "the Company") as reflected in its financial statements.
World Airways was organized in March 1948 and became a wholly owned subsidiary
of WorldCorp, Inc. ("WorldCorp") in a holding company reorganization in 1987.
In February 1994, pursuant to an October 1993 agreement, WorldCorp sold 24.9% of
its ownership to MHS Berhad ("MHS"), a Malaysian aviation company.  Effective
December 31, 1994, WorldCorp increased its ownership in the Company to 80.1%
through the purchase of 5% of World Airways common stock held by MHS.  In
October 1995, the Company completed an initial public offering in which
2,000,000 shares were issued and sold by the Company and 900,000 shares were
sold by WorldCorp.  At June 30, 1997, WorldCorp and MHS owned 61.6% and 17.7%,
respectively, of the outstanding common stock of World Airways.  The balance was
publicly traded.

As of August 14, 1997, the Company was in the process of issuing $75.0 million
of convertible senior subordinated debentures (the "Debentures") due in 2004
(the "Offering").  The Debentures would be unsecured obligations, convertible
into shares of the Company's common stock, and subordinated to all present and
future senior indebtedness of the Company.  The Company intends to use net
proceeds of the Offering to purchase between 4.0 and 5.8 million shares of is
common stock, repay certain indebtedness and increase working capital.  Failure
by the Company to repurchase at least 4.0 million shares of common stock within
150 days after the sale of the Debentures constitutes a repurchase event whereby
each holder of the Debentures would have the right, at the holder's option, to
require the Company to repurchase such holders Debentures at 100% of their
principal amount, plus accrued interest.  No assurances, however, can be given
with respect to the eventual outcome of the Offering or the subsequent
repurchase of the Company's common stock.

In 1996, World Airways instituted a program to purchase up to one million shares
of its publicly-traded Common Stock pursuant to open market transactions. As of
June 30, 1997, World Airways had purchased 770,000 shares of Common Stock at an
aggregate cost of approximately $7.8 million pursuant to such program.  In
connection with the above-mentioned Offering, the Company and WorldCorp are
currently in discussions and expect to enter into an agreement for the
repurchase of up to 4.7 million shares of common stock owned by WorldCorp.
There can be no assurance that such agreement will be completed or related
repurchase will be consummated.

The Private Securities Litigation Reform Act of 1995 (the "Act") was recently
passed by Congress.  The Company desires to take advantage of the "safe harbor"
provisions of the Act.  Therefore, this report contains forward looking
statements that are subject to risks and uncertainties, including, but not
limited to, the reliance on key strategic alliances, fluctuations in operating
results and other risks detailed from time to time in the Company's filings with
the Securities and Exchange Commission.  These risks could cause the Company's
actual results for 1997 and beyond to differ materially from those expressed in
any forward looking statements made by, or on behalf of, the Company.

OVERVIEW

General

World Airways is a global provider of long-range passenger and cargo air
transportation outsourcing services to major international airlines under fixed
rate, multi-year contracts.  The Company's passenger and freight operations
employ 13 wide-body aircraft which are operated under contracts, primarily with
Pacific Rim airlines.  These contracts generally require the Company to supply
aircraft, crew, maintenance and insurance ("ACMI" or "wet lease"), while the
Company's customers are responsible for a large portion of the other operating
expenses, including fuel.  World Airways' airline customers have determined that
outsourcing a portion of their wide-body passenger and cargo requirements can be
less expensive, and offers greater operational and financial flexibility, than
purchasing new aircraft and additional spare parts required for such aircraft.
World Airways also leads a contractor teaming arrangement that is one of the
largest single supplier of commercial airlift services to the United States Air
Force's Air Mobility Command ("U.S. Air Force" or "USAF").

In July 1996, World Airways restructured its business to focus on ACMI contract
services. As such, the Company ceased all scheduled passenger and scheduled
charter services as of October 27, 1996, taking a one-time charge of $21.0
million as of June 30, 1996 (see "Discontinuation of Scheduled Service
Operations").

                                       11
<PAGE>
 
The Company generally charges customers on a block hour basis rather than a per
seat or per pound basis.  "Block hours" are defined as the elapsed time computed
from the moment the aircraft first moves under its own power at the point of
origin to the time it comes to rest at its final destination.  The Company
provides most services under two types of contracts:  wet lease contracts and
full service contracts.  Under wet lease contracts, the Company provides the
aircraft, cockpit crew, maintenance and insurance and the customer provides all
other operating services and bears all other operating expenses, including fuel
and fuel servicing, marketing costs associated with obtaining passengers and/or
cargo, airport passenger and cargo handling fees, landing fees, cabin crews,
catering, ground handling and aircraft push-back and de-icing services.  Under
full service contracts, the Company provides fuel, catering, ground handling,
cabin crew and all related support services as well.  Accordingly, the Company
generally charges a lower rate per block hour for wet lease contracts than full
service contracts, although it does not necessarily earn a lower profit.
Because of shifts in the mix between full service contracts and wet lease
contracts, fluctuations in revenues are not necessarily indicative of volume
trends or profitability.  It is important, therefore, to measure the Company's
business volume by block hours flown and to measure profitability by operating
income per block hour.

The Company's operating philosophy is to build on its existing ACMI
relationships to achieve a strong platform for future growth. World Airways
concentrates on ACMI contracts which shift yield, load factor and certain cost
risks to the customer. The customer bears the risk of filling the aircraft with
passengers or cargo and assumes a large portion of the operating expenses,
including fuel. World Airways has elected to emphasize its ACMI business because
the Company perceives a number of opportunities created by a growing global
economy, particularly growth in second and third world economies where the
demand for airlift exceeds capacity. World Airways attempts to maximize
profitability by combining its multi-year ACMI contracts with short term,
higher-yielding ACMI agreements which meet the peak seasonal requirements of its
customers. The Company responds opportunistically to rapidly changing market
conditions by maintaining a flexible fleet of aircraft that can be deployed in a
variety of configurations.

As is common in the air transportation industry, the Company has relatively high
fixed aircraft costs. World Airways operates a fleet of nine MD-11 and four
DC10-30 wide-body aircraft and, while the Company believes that the lease rates
on its MD-11 aircraft are favorable relative to lease rates of other MD-11
operators, the Company's MD-11 aircraft have higher lease costs (although lower
operating costs) than its DC10-30 aircraft.  Therefore, achieving high average
daily utilization of its aircraft (particularly its MD-11 aircraft) at
attractive yields are important factors to the Company's financial results.  In
addition to fixed aircraft costs, a portion of the Company's labor costs are
fixed due to monthly minimum guarantees to cockpit crewmembers and flight
attendants.

Significant Customer Relationships

The Company's business relies heavily on its contracts with Malaysian Airline
System Berhad ("Malaysian Airlines"), Philippine Airlines, Inc. ("Philippine
Airlines"), P.T. Garuda Indonesia ("Garuda") and the U.S. Air Force.  For the
first six months of 1997, these customers provided approximately 27%, 36%, 19%
and 15%, respectively, of the Company's revenues and 30%, 38%, 20% and 8%,
respectively, of total block hours.  In 1996, these customers provided
approximately 34%, 15%, 13%, and 25%, respectively, of the Company's revenues
and 42%, 17%, 14%, and 17%, respectively, of total block hours flown from
continuing operations.

Malaysian Airlines.  World Airways has provided wet lease services to Malaysian
------------------                                                             
Airlines since 1981, providing wet lease services for Malaysian Airlines'
scheduled passenger and cargo operations as well as transporting passengers for
the annual Hadj pilgrimage.  MHS, which owned 17.7% of the Company as of June
30, 1997, also owns 29.1% of Malaysian Airlines.  The Company recently entered
into a new 32-month agreement for year-round operations (including the Hadj)
with Malaysian Airlines whereby the Company will provide two passenger aircraft
with cockpit crews, maintenance and insurance to Malaysian Airlines' newly-
formed charter division through May 1999. The Company provided three aircraft
for 1997 Hadj operations.

The Company has a long-term contract to operate three MD-11 cargo aircraft for
Malaysian Airlines. However, beginning in July 1996, and as mutually agreed by
the parties, World Airways redeployed two cargo aircraft, which had been
operating under these contracts, into the Philippine Airlines contract. The
Company and Malaysian Airlines are currently discussing the future redeployment
of these aircraft back into Malaysian Airlines' operations in order to meet the
contracts' original obligations. The Company can provide no assurances, however,
that the Company will, in fact, be able to do so. Revenues associated with these
contractual obligations are included in the Company's backlog amount included
herein.

                                       12
<PAGE>
 
Garuda.  The Company has flown for Garuda periodically since 1973 and yearly
------                                                                      
since 1988.  Since 1988, the Company has been one of the largest providers of
passenger services to Indonesia for the Hadj pilgrimage.  The Indonesian Hadj
pilgrimage is the world's largest due to the size of Indonesia's Islamic
population. In 1997, approximately 40,000 of the 200,000 Indonesians who
traveled to Jeddah for the Hadj pilgrimage flew on the Company's aircraft. The
Company is currently negotiating an agreement with Garuda to operate six
aircraft during the 1998 pilgrimage.

Philippine Airlines. World Airways presently operates four MD-11 passenger
-------------------                                                       
aircraft for Philippine Airlines under an agreement with high minimum monthly
utilization levels. Philippine Airlines, however, is experiencing financial
difficulties, and since March 1997 had been making monthly lease payments to the
Company on an installment basis according to a payment plan agreed to by the
Company and Philippine Airlines at the beginning of each month. On July 11,
1997, World Airways agreed to shift two MD-11s currently operating for
Philippine Airlines to Viacao Aereo Sao Paulo ("VASP") later in the third
quarter. As of the date hereof, Philippine Airlines is in compliance with its
agreements with the Company and has reconfirmed its commitment to operate the
remaining two MD-11s currently in its fleet until February 1998. Failure by
Philippine Airlines to meet its aircraft lease obligations, if not offset by
other business, would have a material adverse effect on the financial condition,
cash flows and results of operations of the Company.

VASP.  On July 3, 1997, World Airways entered a binding Memorandum of Agreement
----                                                                           
with VASP for the lease of two MD-11 passenger aircraft to commence in the third
quarter for a six-month term with a six-month renewal option. The Company is
also leasing a cargo plane to VASP under an ACMI contract which began in June
1997. The loss of this agreement, a renegotiation of its terms or a substantial
reduction of business for VASP, if not replaced, could have a material adverse
effect on the financial condition or results of operations of World Airways.

U.S. Air Force.  The Company has provided international air transportation to
--------------                                                               
the U.S. Air Force since 1956. The overall downsizing of the U.S. military
places a premium on the mobility of the U.S. armed forces.  This is reflected in
the stable size over the past several years of the USAF's procurement of
commercial airlift services.  Although the Company's agreements with the USAF
provide for full service contracts with certain minimum performance
requirements, the Company has risks similar to an ACMI agreement because the
USAF agreements are cost-plus contracts at attractive rates.

The USAF awards points to air carriers acting alone or through teaming
arrangements in proportion to the number and type of aircraft such carriers make
available to Civil Reserve Air Fleet.  The Company utilizes such teaming
arrangements to maximize the value of potential awards.  The Company leads a
contractor teaming arrangement that enjoys a 44% market share of the USAF's
overall commercial airlift requirement.  During a period in which the U.S.
military downsized substantially, the Company's portion of the fixed USAF award
increased from $15.6 million for the government's 1992-93 fiscal year, to $52.8
million for the government's 1996-97 fiscal year. While the current annual
contract expires on September 30, 1997, the Company recently received a $73.9
million fixed award for the government's 1997-1998 fiscal year. World Airways,
however, cannot determine how future cuts in military spending may affect future
operations with the U.S. Air Force.

As a result of these and other contracts, the Company had an overall contract
backlog at June 30, 1997 of $338.7 million, compared to $532.6 million at June
30, 1996.  Approximately $116.3 million of the backlog relates to operations
during the remainder of 1997.  The Company's backlog for each contract is
determined by multiplying the minimum number of block hours (defined as the
elapsed time computed from the moment the aircraft first moves under its own
power at the point of origin to the time it comes to rest at its destination)
guaranteed under the applicable contract by the specified hourly rate under such
contract.  Approximately 70% and 13% of the backlog relates to its contracts
with Malaysian Airlines and Philippine Airlines, respectively. In addition, a
significant portion of the Company's current contracts expire near the end of
1997.  Although there can be no assurance that it will be able to secure
additional business to reduce this excess capacity, the Company is actively
seeking customers for 1998 and beyond.  The Company's financial results and
financial condition would be affected adversely if the Company is unable to
secure additional business to reduce this excess capacity.

Seasonality

Historically, World Airways' business has been significantly affected by
seasonal factors. During the first quarter, World Airways typically experiences
lower levels of utilization and yields due to lower demand for passenger and

                                       13
<PAGE>
 
cargo services relative to other times of the year. World Airways experiences
higher levels of utilization and yields in the second quarter, principally due
to peak demand for commercial passenger services associated with the annual Hadj
pilgrimage. In 1997, World Airways' flight operations associated with the Hadj
pilgrimage occurred from March 15 to May 20. Because the Islamic calendar is a
lunar-based calendar, the Hadj pilgrimage occurs approximately 10 to 12 days
earlier each year relative to the Western (Gregorian) calendar. As a result,
revenues resulting from future Hadj pilgrimage contracts will continue to shift
from the second quarter to the first quarter over the next several years. World
Airways believes that its contracts with Malaysian Airlines and the USAF should
lessen the effect of these seasonal factors.

Geographic Concentration

The Company derives a significant percentage of its revenues and block hours
from its operations in the Pacific Rim region.  While the Company believes the
Pacific Rim region is a growth market for air transportation, any economic
decline or any military or political disturbance in this area may interfere with
the Company's ability to provide service in this area and could have a material
adverse effect on the financial condition or results of operations of the
Company.

Utilization of Aircraft

Due to the large capital costs of leasing and maintaining World Airways'
aircraft, each of World Airways' aircraft must have high utilization at
attractive rates in order for World Airways to operate profitably. Although
World Airways' strategy is to enter into long-term contracts with its customers,
the terms of World Airways' existing customer contracts are substantially
shorter than the terms of World Airways' lease obligations with respect to the
aircraft. As mentioned above, a significant portion of World Airways' contract
backlog at June 30, 1997, relates to its multi-year contracts with Malaysian
Airlines and Philippine Airlines. In addition, a significant portion of World
Airways' current contracts expire near the end of 1997. There can be no
assurance that World Airways will be able to enter into additional contracts
with new or existing customers or that it will be able to obtain enough
additional business to fully utilize each aircraft. World Airways' financial
results could be materially adversely affected even by relatively brief periods
of low aircraft utilization and yields. In order to maximize aircraft
utilization, World Airways does not intend to acquire new aircraft unless such
aircraft would be necessary to service existing needs or World Airways has
obtained additional ACMI contracts for the aircraft to service. World Airways is
seeking to obtain additional ACMI contracts with new and existing customers, to
which such new aircraft would be dedicated when placed in service, but World
Airways can provide no assurance that it will obtain new ACMI contracts or that
existing ACMI contracts will be renewed or extended.

Maintenance

Engine maintenance accounts for most of the Company's annual maintenance
expenses. Typically, the hourly cost of engine maintenance increases as the
aircraft ages.  The Company outsources major airframe maintenance and power
plant work to several suppliers.  The Company has a 10-year contract expiring in
August 2003 with United Technologies Corporation's Pratt & Whitney Group for all
off-wing maintenance on the PW 4462 engines that power its MD-11 aircraft.
Under this contract, the manufacturer agreed to provide such maintenance
services at a cost not to exceed specified rates per hour during the term of the
contract. The Company's maintenance costs associated with the MD-11 aircraft and
PW 4462 engines have been significantly reduced due in part to manufacturer
guarantees and warranties which began to expire in 1995 and which will fully
expire by 1998.  In addition, the specified rates per hour are subject to annual
escalation, increasing substantially in 1998.  Accordingly, while the Company
believes the terms of this agreement have resulted in lower engine maintenance
costs than it otherwise would incur, engine maintenance costs will increase
substantially during the last five years of the agreement.  The Company has
begun to accrue these increased expenses in 1997 and such expenses will continue
to increase during the remainder of the term of the contract as the Company's
aircraft fleet ages.

Operating Losses

While the Company generated operating income each year from 1987 through 1992
and in 1995, it sustained operating losses in 1993 and 1994 of $7.3 million and
$5.2 million, respectively, and net losses of $9.0 million in each of these two
years.  For the year ended December 31, 1996, the Company incurred a net loss of
$14.0 million, which resulted from operating losses incurred in the Company's
scheduled service operations, which were

                                       14
<PAGE>
 
discontinued in 1996, and the related estimated loss on disposal.  Earnings from
continuing operations were $18.4 million for 1996.  While the Company generated
operating income for the six months ended June 30, 1997 of $12.8 million, there
can be no assurance that the Company will be able to continue generating
operating income for the remainder of 1997 or future years.

Discontinuation of Scheduled Service Operations

The Company commenced service between Tel Aviv and New York in July 1995.  In
the first quarter of 1996, the Company generated $4.2 million in losses related
to these operations.  In the second quarter of 1996, the Company expanded its
scheduled service operations with service between the United States and South
Africa and introduced scheduled charter operations between the United States and
various destinations within Europe.  As the Company was unable to operate these
scheduled service operations profitably, in July 1996, the Company announced its
decision to exit its scheduled service operations by October 1996 and focus its
operations on its core wet lease operations.  Consistent with this decision,
World Airways ceased all scheduled operations as of October 27, 1996.  As a
result, the Company's scheduled service operations were reflected as
discontinued operations as of June 30, 1996, and prior period results were
restated to reflect scheduled service operations as discontinued operations.
Loss from discontinued operations (net of income tax effect) approximated $11.7
million for the year ended December 31, 1996.  In addition, an estimated loss on
disposal of $21.0 million (net of income tax effect) was recorded as of June 30,
1996 and the Company believes that its remaining accrual for estimated losses on
disposal will be adequate to meet the remaining costs to be incurred during the
phase-out period.

Control by WorldCorp; Potential Conflicts of Interest

As of June 30, 1997, WorldCorp owned approximately 61.7% of the outstanding
World Airways common stock. WorldCorp is a holding company that owns positions
in two companies: InteliData and World Airways. WorldCorp is highly leveraged
and therefore requires substantial funds to cover debt service each year. As a
holding company, all of WorldCorp's funds are generated through its
subsidiaries, neither of which is expected to pay dividends in the foreseeable
future. As a result of WorldCorp's cash requirements, it may be required to sell
additional shares of common stock during 1997, and such sales, or the threat of
such sales, could have a material adverse effect on the market price of the
common stock. Except as limited by contractual arrangements with MHS, WorldCorp
also is in a position to control the outcome of substantially all issues
submitted to World Airways' stockholders, including the election of all of World
Airways' Board of Directors, adoption of amendments to World Airways'
Certificate of Incorporation, and approval of mergers. Under Delaware law,
WorldCorp may approve certain actions by written consent without a meeting of
the stockholders of World Airways.

In connection with a $15.0 million loan from a commercial bank (the "Bank
Loan"), WorldCorp has pledged all of the shares of common stock beneficially
owned by WorldCorp (the "WorldCorp Shares").  The Bank Loan matures on September
29, 1997. The Company and WorldCorp are currently in discussions and expect to
enter into an agreement for the repurchase of up to 4.7 million shares of common
stock owned by WorldCorp. If a closing occurs under this agreement, WorldCorp
expects to use a portion of the proceeds to repay the Bank Loan. If a closing
does not occur under this agreement and WorldCorp does not refinance the Bank
Loan, it would be necessary for WorldCorp to sell assets in order to repay the
Bank Loan.  In the event WorldCorp is unable to satisfy its payment obligations
under the Bank Loan on a timely basis, the bank may sell or otherwise dispose of
all or any part of the WorldCorp Shares.  The inability of WorldCorp to satisfy
its payment obligations under the Bank Loan on a timely basis and a subsequent
disposition by the bank of the WorldCorp Shares, may adversely affect the market
price of the common stock, and consequently the price of the Debentures.

RESULTS OF OPERATIONS

Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996

Total block hours, including discontinued operations, decreased 1,571 hours, or
11%, to 12,336 hours in the second quarter of 1997 from 13,907 hours in 1996,
with an average of 14.0 available aircraft per day in 1997 compared to 14.9 in
1996.  Average daily utilization (block hours flown per day per aircraft)
decreased to 9.7 hours in 1997 from 10.2 hours in 1996.  In 1997, wet lease
contracts accounted for 91% of total block hours, an increase from 80% in
1996.  Total operating revenues decreased $4.6 million, or 5%, to $81.9
million in 1997 from $86.5 million in 1996.

                                       15
<PAGE>
 
Continuing Operations
---------------------

Block hours from continuing operations increased to 12,336 hours in the second
quarter of 1997 from 12,173 hours in 1996.

Operating Revenues.  Revenues from flight operations decreased $0.2 million to
------------------                                                            
$80.1 million in 1997 from $80.3 million in 1996.  This decrease corresponds to
a shift in its mix of business during 1997 with an increase in wet lease
operations from full service operations, partially offset by a modest increase
in block hours flown in 1997 compared to 1996.

Operating Expenses.  Total operating expenses increased $4.2 million, or 6%, in
------------------                                                             
1997 to $75.4 million from $71.2 million in 1996.

Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft cost, fuel and maintenance.  Also
included are expenses related to flight dispatch and flight operations
administration.  Flight operations expenses increased $3.4 million, or 26%, in
1997 to $16.7 million from $13.3 million in 1996.  This increase resulted
primarily from higher crew costs, partially offset by the shift in the mix of
business from full service to wet lease operations.  The Company expects that it
will experience increased training costs during the remainder 1997 as a result
of crewmember attrition.

Maintenance expenses increased $1.9 million, or 12%, in 1997 to $17.9 million
from $16.0 million in 1996.  This increase resulted primarily from the increase
in the number of aircraft dedicated to the Company's continuing operations and
an increase in costs associated with the MD-11 aircraft and related engines as a
result of certain manufacturer guarantees and warranties which began to expire
in 1995 and will fully expire by 1998.  This increase was partially offset by a
reversal in 1997 of $1.0 million of accrued maintenance expense in excess of the
cost of an overhaul of a DC-10 aircraft. The Company expects its maintenance
expense to further increase in 1997 and 1998 due to escalations in the specified
rates per hour under the Company's maintenance agreement.

Aircraft costs increased $1.9 million, or 8%, in 1997 to $24.7 million from
$22.8 million in 1996.  This increase resulted primarily from the increase in
the number of aircraft dedicated to the Company's continuing operations,
partially offset by the return of one DC-10 aircraft in the fourth quarter of
1996 and a decrease in aircraft insurance as a result of a reduction in
insurance policy rates.

Depreciation and amortization increased $0.3 million, or 16%, in 1997 to $2.2
million from $1.9 million in 1996.  This increase resulted primarily from an
increase in spare parts required to support the additional MD-11 aircraft
described above, offset by a decrease in the amortization of certain intangible
assets.

General and administrative expenses increased $1.6 million, or 30%, in 1997 to
$7.0 million from $5.4 million in 1996.  This increase was primarily due to the
hiring of additional administrative personnel, beginning in the second quarter
of 1996, necessary to support the growth in the Company's core business and an
increase in property tax accruals.  As part of its strategy to increase its
marketing efforts, the Company is currently increasing its sales and marketing
staff.  As a result, the Company expects a modest increase in general and
administrative expenses during the second half of 1997.

Discontinued Operations
-----------------------

The Company commenced service between Tel Aviv and New York in July 1995.  In
the first quarter of 1996, the Company generated $4.2 million in losses related
to these operations.  In the second quarter of 1996, the Company expanded its
scheduled service operations with service between the United States and South
Africa and introduced scheduled charter operations between the United States and
various destinations within Europe.  As the Company was unable to operate these
scheduled service operations profitably, in July 1996, the Company announced its
decision to exit its scheduled service operations by October 1996 and focus its
operations on its core wet lease operations.  Consistent with this decision,
World Airways ceased all scheduled operations as of October 27, 1996.  As a
result, the Company's scheduled service operations were reflected as
discontinued operations as of June 30, 1996, and prior period results were
restated to reflect scheduled service operations as discontinued operations.

                                       16
<PAGE>
 
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996

Total block hours, including discontinued operations, decreased 391 hours, or
2%, to 24,150 hours in the first six months of 1997 from 24,541 hours in 1996,
with an average of 13.7 available aircraft per day in 1997 compared to 13.3 in
1996. Average daily utilization (block hours flown per day per aircraft)
decreased to 9.8 hours in 1997 from 10.2 hours in 1996. In 1997, wet lease
contracts accounted for 90% of total block hours, an increase from 74% for the
six months ended June 30, 1996. Total operating revenues increased $8.8 million,
or 6%, to $160.7 million in 1997 from $151.9 million in 1996.

Continuing Operations
----------------------

Block hours from continuing operations increased 2,143 hours, or 10%, to 24,150
hours in the first six months of 1997 from 22,007 hours in 1996.

Operating Revenues.  Revenues from flight operations increased $13.7 million, or
------------------                                                              
9%, to $158.5 million in 1997 from $144.8 million in 1996. This increase was
primarily attributable to the increase in block hours flown, partially offset by
a shift in its mix of business during 1997 with an increase in wet lease
operations and a decrease in full service operations.

Operating Expenses.  Total operating expenses increased $7.9 million, or 6%, in
------------------                                                             
1997 to $147.8 million from $139.9 million in 1996.

Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft costs, fuel and maintenance. Also
included are expenses related to flight dispatch and flight operations
administration. Flight operations expenses decreased $0.2 million in 1997 to
$33.1 million from $33.3 million in 1996. This decrease resulted primarily from
the shift in the mix of business from full service to wet lease operations,
partially offset by higher crew costs. The Company expects that it will
experience increased training costs during the remainder of 1997 as a result of
crewmember attrition.

Maintenance expenses increased $4.1 million, or 13%, in 1997 to $34.6 million
from $30.5 million in 1996. This increase resulted primarily from the increase
in the number of aircraft dedicated to the Company's continuing operations, the
integration of additional aircraft into the fleet, and a corresponding increase
in block hours flown. In addition, the Company experienced an increase in costs
of approximately $1.2 million associated with the MD-11 aircraft and related
engines as a result of certain manufacturer guarantees and warranties which
began to expire in 1995 and will fully expire by 1998. The Company expects its
maintenance expense to increase further in 1997 and 1998 due to escalations in
the specified rates per hour under the Company's maintenance agreement. The
increase was partially offset by a reversal in 1997 of $1.0 million of accrued
maintenance expense in excess of the cost of an overhaul of a DC-10 aircraft.

Aircraft costs increased $7.9 million, or 19%, in 1997 to $49.4 million from
$41.5 million in 1996. This increase resulted from the increase in the number of
aircraft dedicated to the Company's continuing operations, primarily due to the
lease of two MD-11ER aircraft in March 1996, and the lease of additional spare
engines necessary to maintain the expanded fleet.

Fuel expenses decreased $2.4 million, or 30%, in 1997 to $5.7 million from $8.1
million in 1996. This decrease is due primarily to the shift from full service
to wet lease operations where the Company is not responsible for fuel costs.
This decrease was partially offset by an increase in price per gallon.

Promotions, sales and commissions increased $1.1 million in 1997 to $4.7 million
from $3.6 million in 1996. This increase resulted primarily from expenses
incurred in connection with a customer contract.

Depreciation and amortization increased $0.4 million in 1997 to $4.3 million
from $3.9 million in 1996. This increase resulted primarily from an increase in
spare parts required to support the additional MD-11 aircraft described above,
offset by a decrease in the amortization of certain intangible assets.

General and administrative expenses increased $2.7 million, or 24%, in 1997 to
$13.8 million from $11.1 million in 1996. This increase was primarily due to the
hiring of additional administrative personnel, beginning in the second

                                       17
<PAGE>
 
quarter of 1996, necessary to support the growth in the Company's core business
and an increase in property tax accruals. As part of its strategy to increase
its marketing efforts, the Company is currently increasing its sales and
marketing staff. As a result, the Company expects a modest increase in general
and administrative expenses during the second half of 1997.

LIQUIDITY AND CAPITAL RESOURCES

The Company is highly leveraged and will be substantially more leveraged upon
completion of the Offering.  The Company incurred substantial debt and lease
commitments during the past three years in connection with its acquisition of
MD-11 aircraft and related spare parts. As of June 30, 1997, the Company had
outstanding $29.1 million in long-term debt and capital leases, with expected
debt service and capital lease expense of $5.9 million for the six months ending
December 31, 1997 and $13.3 million for the year ending December 31, 1998. In
addition, the Company has significant future long-term obligations under
aircraft lease obligations relating to its aircraft.

The Company has historically financed its working capital and capital
expenditure requirements out of cash flow from operating activities, public and
private sales of its common stock, secured borrowings, and other financings from
banks and other lenders. The degree to which the Company is leveraged could have
important consequences to holders of common stock, including the following:  (i)
World Airways' ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may be limited;
(ii) a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness; (iii)
World Airways' degree of leverage and related debt service obligations, as well
as its obligations under operating leases for aircraft, may make it more
vulnerable than some of its competitors in a prolonged economic downturn; (iv)
World Airways' ability to meet its payment obligations under existing and future
indebtedness, capital leases and operating leases may be limited; and (v) World
Airways' financial position may restrict its ability to pursue new business
opportunities and limit its flexibility in responding to changing business
conditions.

World Airways' cash and cash equivalents at June 30, 1997 and December 31, 1996
were $8.3 million and $7.0 million, respectively. As is common in the airline
industry, World Airways operates with a working capital deficit. At June 30,
1997, World Airways' current assets were $33.5 million and current liabilities
were $65.3 million. World Airways has substantial long-term aircraft lease
obligations with respect to its current aircraft fleet. Although there can be no
assurances, World Airways believes that its existing contracts and additional
business which it expects to obtain in the near term, along with its existing
cash and financing arrangements and net proceeds from the Offering will be
sufficient to allow World Airways to meet its cash requirements related to debt
service and the operating and capital requirements for its continuing operations
for the next 12 months.

In 1996, World Airways instituted a program to purchase up to one million shares
of its publicly-traded common stock pursuant to open market transactions. As of
June 30, 1997, World Airways had purchased 770,000 shares of common stock at an
aggregate cost of approximately $7.8 million pursuant to such program. WorldCorp
and World Airways are currently in discussions and expect to enter into an
agreement for the repurchase of up to 4.7 million common stock owned by
WorldCorp.  There can be no assurance that such agreement will be completed or
related repurchase will be consummated.

In the event that World Airways enters into leases for additional aircraft,
World Airways will need to make capital expenditures for additional spare
engines and parts. No assurances can be given, however, that World Airways will
obtain all of the financing required for such capital expenditures.

Cash Flows from Operating Activities

Operating activities provided $22.7 million in cash for the six months ended
June 30, 1997 compared to using $1.0 million in the comparable period in 1996.
This increase in cash in 1997 resulted primarily from an increase in net
earnings and a decrease in accounts receivable, partially offset by a decrease
in accounts payable, accrued expenses, and other liabilities.

Cash Flows from Investing Activities

Investing activities used $4.2 million in cash for the six months ended June 30,
1997, compared to $4.5 million in

                                       18
<PAGE>
 
the comparable period in 1996. In 1997, cash was used primarily for the purchase
of rotable spare parts, a spare engine, and engine upgrades required for two MD-
11 aircraft.

Cash Flows from Financing Activities

Financing activities used $17.3 million in cash for the six months ended June
30, 1997 compared to using $0.9 million in the comparable period in 1996. This
decrease in cash resulted primarily from an increase in repayments of the
Company's net borrowings and the purchase of shares of the Company's common
stock for an aggregate cost of $0.5 million in 1997.

Capital Commitments/Financing Developments

In October 1992 and January 1993, the Company signed a series of agreements to
lease seven new MD-11 aircraft for initial lease terms of two to five years,
renewable for up to 10 years (and in the case of one aircraft, for 13 years) by
the Company with increasing rent costs. As of March 1995, the Company had taken
delivery of all seven aircraft, consisting of four passenger MD-11 aircraft, one
freighter MD-11, and two passenger/cargo convertible MD-11s. As part of the
lease agreements, the Company was assigned purchase options for four additional
MD-11 aircraft. In 1992, the Company made non-refundable deposits of $1.2
million toward the option aircraft and the purchase options were terminated. In
March 1996, the Company signed an agreement with the manufacturer to lease two
MD-11ER aircraft. Under the agreement, the Company leased each aircraft for a
term of 24 years with an option to return the aircraft after a seven-year period
with certain fixed termination fees. As part of the agreement, the above-
mentioned deposits were applied towards the deposits required on these two
aircraft. In addition, the Company agreed to assume an existing lease of two
additional MD-11 freighter aircraft for 20 years, beginning in 1999, in the
event that the existing lessee terminates its lease with the manufacturer at
that time.

As of June 30, 1997, World Airways has long-term leases for four DC10-30
aircraft. Three of the leases expire in 1998 and one expires in 2003.

In August 1995, the Company amended its aircraft spare parts facility under the
Credit Agreement to provide for a variable rate borrowing. Approximately $2.5
million of this facility was used to pay off the previously outstanding balance
of the spare parts loan facility and $0.8 million was used to purchase
additional spare parts for MD-11s required during the remainder of 1995. The
balance of this loan facility was used to increase cash balances which were
drawn down during the first half of 1995 to purchase MD-11 spare parts.

In September 1995, the Company agreed to purchase a spare engine which was
delivered in March 1996. The engine cost approximately $8.0 million. The Company
entered into an agreement with the engine's manufacturer to finance 80% of the
purchase price over a seven-year term. The Company made payments of $1.2 million
and $0.4 million towards this purchase in September 1995 and January 1996,
respectively.

In January 1996, the Company agreed to purchase an additional engine and
received a commitment from the engine manufacturer to finance 85% of its
purchase price over a seven-year term with an interest rate to be fixed at the
time of delivery. In June 1997, the Company took delivery of the engine and
signed a note for $6.3 million. The note bears interest at a rate of 8.18% and
is payable over an 84-month period at approximately $48,000 per month with the
balance of $2.2 million due on June 18, 2004.

As discussed above, the Company signed an agreement for the lease of two MD-11ER
aircraft beginning in the first quarter of 1996 to provide additional capacity
for growth opportunities. As part of the agreement for the MD-11 aircraft, the
Company received spare parts financing from the lessor of $9.0 million of which
$3.0 million was made available with the delivery of each aircraft, and the
remaining $3.0 million was made available in December 1996. As of June 30, 1997,
approximately $7.4 million had been received.

As of June 30, 1997, annual minimum payments required under the Company's
aircraft and lease obligations totaled $43.6 million for the remainder of 1997
and $84.9 million for 1998. The Company anticipates that its total capital
expenditures in 1997, which includes the spare engine, will approximate $13.0
million of which the Company will receive approximately $6.3 million in
financing. The Company expects that the remaining balance will be funded from
its operating cash flow and proceeds from the Offering. As of June 30, 1997, the
Company held approximately $3.6 million (at book value) of aircraft spare parts
currently available for sale.

                                       19
<PAGE>
 
Effective June 30, 1996, the Company amended its Credit Agreement with BNY
Financial Corporation ("BNY") to include the following:  a $10.0 million spare
parts loan and an $8.0 million revolving line of credit.  This amended Credit
Agreement is collateralized by certain receivables, inventory, and equipment.
As of June 30, 1997, the outstanding balance of the spare parts loan was $4.0
million with no outstanding balance or available capacity on the revolving line
of credit.

Under the terms of the amended Credit Agreement, the Company is not permitted to
(i) incur indebtedness in excess of $25.0 million (excluding capital leases),
(ii) declare, pay, or make any dividend or distribution in any six month period
which aggregate in excess of the lesser of $4.5 million or 50% of net income for
the previous six months, (iii) declare or pay dividends if after giving effect
to such dividends the Company's cash or cash equivalents would be less than $7.5
million or (iv) make capital expenditures in 1997 of more than $25.0 million or
in any subsequent year of more than $15.0 million. Recently, the date that World
Airways is required to pay any outstanding amounts under the line of credit was
extended to December 31, 2000. The aircraft security agreement remains payable
in 1999. The Company must also maintain a certain quarterly net worth and net
income (loss) requirements. While the Company was in compliance with these
covenants at June 30, 1997, no assurances can be given that the Company will
continue to meet these covenants or, if necessary, obtain the required waivers.
In addition, World Airways granted warrants to BNY in October 1996 to purchase
up to 50,000 shares of common stock.

OTHER MATTERS

Legal and Administrative Proceedings

World Airways has periodically received correspondence from the FAA with respect
to minor noncompliance matters. In November 1996, as the FAA has increased its
scrutiny of U.S. airlines, World Airways was assessed a preliminary fine of
$810,000 in connection with certain security violations by ground handling crews
contracted by World Airways for services at foreign airport locations. Under 49
U.S.C., Section 46301, any violation of pertinent provisions of 49 U.S.C.
Subsection 40101 or related rules is subject to a civil penalty for each
violation. Upon review of the evidence or facts and circumstances relating to
the violation, the statute allows for the compromise of proposed civil
penalties. The proposed penalties were imposed by the FAA in connection with
recent inspections at foreign airport facilities and relate primarily to ground
handling services provided by World Airways' customers in connection with their
operations; specifically, the inspection procedures of its aircraft, passengers
and associated cargo. In each of these instances, World Airways was in
compliance with international regulations, but not the more stringent U.S.
requirements, despite the fact that the flights in question did not originate or
terminate in the United States. World Airways has taken steps to comply with the
U.S. requirements and is currently working with the FAA to settle these claims
and believes that any fines ultimately imposed by the FAA will not have a
material adverse effect on the financial condition or results of operations of
World Airways. While World Airways believes it is currently in compliance in all
material respects with all appropriate standards and has all required licenses
and authorities, any material non-compliance by World Airways therewith or the
revocation or suspension of licenses or authorities could have a material
adverse effect on the financial condition or results of operations of World
Airways.

World Airways and WorldCorp (the "World Defendants") were defendants in
litigation brought by the Committee of Unsecured Creditors of Washington
Bancorporation in August 1992, captioned Washington Bancorporation v. Boster et.
al., Adv. Proc. 92-0133 (Bankr. D.D.C.) (the "Boster Litigation"). Under a
settlement agreement, the plaintiff agreed to dismiss with prejudice the Boster
Litigation against all defendants, including the World Defendants, with each
party to bear its own costs. Under the settlement agreement, the World
Defendants do not have any further liability in the Boster Litigation.

In connection with the discontinuance of World Airways' scheduled service
operations, World Airways is subject to claims by various third parties and may
be subject to further claims in the future. One claim which had been filed in
connection with World Airways' discontinuance of scheduled service to South
Africa, and which sought approximately $37.8 million in compensatory and
punitive damages, has been settled by the parties for approximately $0.7
million.

In addition, World Airways is party to routine litigation and administrative
proceedings incidental to its business, none of which is believed by World
Airways to be likely to have a material adverse effect on the financial
condition of World Airways.

                                       20
<PAGE>
 
Employees

The Company's cockpit crew members, who are represented by the International
Brotherhood of Teamsters (the "Teamsters"), are subject to a four-year
collective bargaining agreement that will become amendable in July 1998.

The Company's flight attendants, who are also represented by the Teamsters, are
subject to a four-year collective bargaining agreement that will expire in
August 2000.  The Company's flight attendants challenged the use of foreign
flight attendant crews on the Company's flights for Malaysian Airlines and
Garuda Indonesia which has historically been the Company's operating procedure.
The Company is contractually obligated to permit its Southeast Asian customers
to deploy their own flight attendants.  While the arbitrator in this matter
recently denied the Union's request for back pay to affected flight attendants
for flying relating to the 1994 Hadj, the arbitrator concluded that the
Company's contract with its flight attendants requires the Company to first
actively seek profitable business opportunities that require using the Company's
flight attendants, before the Company may accept wet lease business
opportunities that use the flight attendants of the Company's customers.  The
Company can provide no assurances as to how the imposition of this requirement
will affect the Company's financial condition and results of operations.

The Company's aircraft dispatchers are represented by the Transport Workers
Union (the "TWU"). This contract became amendable on June 30, 1993. In May 1995,
the parties reached agreement with respect to a new four-year contract.  This
contract was ratified in February 1996.  Fewer than 12 Company employees are
covered by this collective bargaining agreement.

The Company is unable to predict whether any of its employees not currently
represented by a labor union, such as the Company's maintenance personnel, will
elect to be represented by a labor union or collective bargaining unit. The
election by such employees of representation in such an organization could
result in employee compensation and working condition demands that could have a
material adverse effect on the financial results of the Company.

Dividend Policy

The Company has not declared or paid any cash dividends or distributions on its
common stock since the payment of a distribution to WorldCorp in 1992. The
Company currently intends to retain its future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. Any future decision
concerning the payment of dividends on its common stock will depend upon the
results of operations, financial condition and capital expenditure plans of the
Company, as well as such other factors as the Board of Directors, in its sole
discretion, may consider relevant.

The Credit Agreement, between the Company and BNY contains restrictions on the
Company's ability to pay dividends on its common stock. The Credit Agreement
provides that the Company shall not declare, pay or make any dividends or
distributions in any six-month period which aggregate in excess of the lesser of
$4.5 million or 50% of the Company's net income for the previous six months and
requires that the Company have a cash balance of not less than $7.5 million
after giving effect to such dividend or distribution. Additionally, WorldCorp is
subject to the provisions of an indenture, expiring in 2004, which causes the
Company not to pay dividends upon the occurrence of any events of default by
WorldCorp under the indenture. However, the indenture will no longer be
applicable to World Airways if WorldCorp's ownership percentage drops below 50%
of the issued and outstanding shares of common stock.

Income and Other Taxes

As of December 31, 1996, World Airways had net operating loss carryforwards
("NOLs") for federal income tax purposes of $104.7 million ($38.1 million of
which is subject to a $6.9 million annual limitation as a result of an ownership
change of World Airways for tax purposes in 1991). These NOLs, if not utilized
to offset taxable income in future periods, would expire between 1998 and 2011.
Use of World Airways' NOLs in future years could be further limited if an
ownership change were to occur in the future. World Airways believes that the
sale of common stock in its initial public offering did not cause an ownership
change.  However, the application of the Internal Revenue Code (the "Code") in
this area is subject to interpretation by the Internal Revenue Service. The NOLs
are subject to examination by the IRS and, thus, are subject to adjustment or
disallowance resulting from any such IRS examination. In addition, conversion of
the proposed Debentures or future transactions in the Common Stock or the

                                       21
<PAGE>
 
common stock of the Company's stockholders may cause an ownership change, which
could result in a substantial reduction in the annual limitation in the use of
the NOLs and the loss of a substantial portion of the NOLs available to the
Company.

Inflation

The Company believes that inflation has not had a material effect on the
Company's revenues during the past three years.

New Accounting Standards

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128 ("FAS #128")  Earnings per
Share, and SFAS No. 129 ("FAS #129") Disclosure of Information About Capital
Structure.  FAS #128 was issued to simplify the computation of earnings per
share and to make the U.S. standard more compatible with the standards of other
countries and that of the International Accounting Standards Committee.  FAS
#128 replaces primary and full diluted earnings per share with basic earnings
and diluted earnings per share.  FAS #129 will change some of the required
disclosures about capital structure. It is not expected that these statements
will have a material effect on the Company's financial statements in the future.
The statements are effective for the year ended December 31, 1997.

                                       22
<PAGE>
 
                                    PART IV

ITEM 6.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
 
(a)  Exhibits
No.    Description
---    -----------
<S>     <C>                                                                                           <C> 
 1.1    Form of Underwriting Agreement to be entered into among                                       Incorporated
        the Company, WorldCorp, Inc. and the Underwriters.                                            By Reference
 
 3.1    Amended and Restated Certificate of                                                           Incorporated      
        Incorporation.                                                                                By Reference 
  
 3.2    Amended and Restated Bylaws.                                                                  Incorporated
                                                                                                      By Reference 

 4.1    Article IV of the Company's Amended and Restated Certificate of                               Incorporated
        Incorporation, incorporated by reference to Exhibit 3.1 filed herewith,                       By Reference 
        and Section 6 of the Company's Bylaws, incorporated by reference to
        Exhibit 3.2 filed herewith.
 
 5.1    Opinion of Hunton & Williams.                                                                 Incorporated
                                                                                                      By Reference
 
10.1    The Company's 1995 Stock Option Plan.                                                         Incorporated
                                                                                                      By Reference 

10.2    Form of Directors' Indemnification Agreement.                                                 Incorporated
                                                                                                      By Reference
 
10.9    Aircraft Lease Agreement for Aircraft Serial Number 48518 dated as of                         Incorporated
        September 30, 1992 between the Company and International Lease Finance                        By Reference 
        Corporation. (Filed as Exhibit 10.38 to WorldCorp, Inc.'s Annual Report
        on Form 10-K for the fiscal year ended December 31, 1992 and
        incorporated herein by reference.)
 
10.10   Amendment No. 1 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48518 dated as of November 1992 between the Company and International                         By Reference 
        Lease Finance Corporation. (Filed as Exhibit 10.68 to WorldCorp, Inc.'s
        Annual Report on Form 10-K for the fiscal year ended December 31, 1993
        and incorporated herein by reference.)
 
10.11   Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48518 dated as of March 8, 1993 between the Company and International                         By Reference 
        Lease Financial Corporation. (Filed as Exhibit 10.69 to WorldCorp,
        Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31,
        1993 and incorporated herein by reference.)
 
10.12   Aircraft Lease Agreement for Aircraft Serial Number 48519 dated as of                         Incorporated
        September 30, 1992 between the Company and International Lease Finance                        By Reference 
        Corporation. (Filed as Exhibit 10.39 to WorldCorp, Inc.'s Annual Report
        on Form 10-K for the fiscal year ended December 31, 1992 and
        incorporated herein by reference.)
 
10.13   Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48519 dated as of April 23, 1993 between the Company and International                        By Reference 
        Lease Finance Corporation.
 
10.14   Amendment No. 3 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48519 dated as of April 1993 between the Company and International Lease                      By Reference 
        Finance.
</TABLE> 

                                       23
<PAGE>
 
<TABLE>
<CAPTION>
 
(a)  Exhibits
No.    Description
---    -----------
<S>     <C>                                                                                           <C> 
10.15   Aircraft Lease Agreement for Aircraft Serial Number 48437 dated as of                         Incorporated
        September 30, 1992 between the Company and International Lease Finance                        By Reference 
        Corporation. (Filed as Exhibit 10.40 to WorldCorp, Inc.'s Annual Report
        on Form 10-K for the fiscal year ended December 31, 1992 and
        incorporated herein by reference.)
 
10.16   Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48437 dated as of March 31, 1993 between the Company and International                        By Reference 
        Lease Finance Corporation. (Filed as Exhibit 10.73 to WorldCorp, Inc.'s
        Annual Report on Form 10-K for the fiscal year ended December 31, 1993
        and incorporated herein by reference.)
 
10.17   Amendment No. 3 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48437 dated as of April 15, 1993 between the Company and International                        By Reference 
        Lease Finance Corporation. (Filed as Exhibit 10.74 to WorldCorp, Inc.'s
        Annual Report on Form 10-K for the fiscal year ended December 31, 1993
        and incorporated herein by reference.)
 
10.18   Aircraft Lease Agreement for Aircraft Serial Number 48633 dated as of                         Incorporated
        September 30, 1992 between the Company and International Lease Finance                        By Reference 
        Corporation. (Filed as Exhibit 10.41 to WorldCorp, Inc.'s Annual Report
        on Form 10-K for the fiscal year ended December 31, 1992 and
        incorporated herein by reference.)
 
10.19   Aircraft Lease Agreement for Aircraft Serial Number 48631 dated as of                         Incorporated
        September 30, 1992 between the Company and International Lease Finance                        By Reference 
        Corporation. (Filed as Exhibit 10.42 to WorldCorp, Inc.'s Annual Report
        on Form 10-K for the fiscal year ended December 31, 1992 and
        incorporated herein by reference.)
 
10.20   Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48631 dated as of April 28, 1995 between the Company and International                        By Reference 
        Lease Finance Corporation.
 
10.21   Aircraft Lease Agreement for Aircraft Serial Number 48632 dated as of                         Incorporated
        September 30, 1992 between the Company and International Lease Finance                        By Reference 
        Corporation. (Filed as Exhibit 10.43 to WorldCorp, Inc.'s Annual Report
        on Form 10-K for the fiscal year ended December 31, 1992 and
        incorporated herein by reference.)
 
10.22   Amendment No. 2 to Aircraft Lease Agreement for Aircraft Serial Number                        Incorporated
        48632 dated as of April 28, 1995 between the Company and International                        By Reference 
        Lease Finance Corporation.
 
10.23   Accounts Receivable Management and Security Agreement dated as of                             Incorporated
        December 7, 1993 between the Company and BNY Financial Corporation.                           By Reference 
        (Filed as Exhibit 10.46 to WorldCorp, Inc.'s Annual Report on Form 10-K
        for the fiscal year ended December 31, 1993 and incorporated herein by
        reference.)
 
10.24   Amendment (No. 1) to the Accounts Receivable Management and Security                          Incorporated
        Agreement between the Company and BNY Financial Corporation dated March                       By Reference 
        15, 1995 and effective as of January 1, 1995.
 
10.25   Amendment No. 2 to the Accounts Receivable Management and Security                            Incorporated
        Agreement between the Company and BNY Financial Corporation dated August                      By Reference 
        1995.
</TABLE> 
 

                                       24
<PAGE>
 
<TABLE>
<CAPTION>
 
(a)  Exhibits
No.    Description
---    -----------
<S>     <C>                                                                                           <C> 
10.28   Stock Purchase Agreement by and among the Company, WorldCorp, Inc., and                       Incorporated
        Malaysian Helicopter Services Berhad dated as of October 30, 1993.                            By Reference 
        (Filed as Exhibit 10.87 to WorldCorp, Inc.'s Annual Report on Form 10-K
        for the fiscal year ended December 31, 1994 and incorporated herein by
        reference.)
 
10.29   Stock Registration Rights Agreement between the Company and Malaysian                         Incorporated
        Helicopter Services Berhad dated as of October 30, 1993. (Filed as                            By Reference 
        Exhibit 10.88 to WorldCorp, Inc.'s Annual Report on Form 10-K for the
        fiscal year ended December 31, 1994 and incorporated herein by
        reference.)
 
10.30   Shareholders Agreement between Malaysian Helicopter Services Berhad,                          Incorporated
        WorldCorp, Inc. and the Company, dated as of February 3, 1994. (Filed as                      By Reference 
        Exhibit 10.89 to WorldCorp, Inc.'s Annual Report on Form 10-K for the
        fiscal year ended December 31, 1994 and incorporated herein by
        reference.)
 
10.31   Amendment No. 1 to Shareholders Agreement dated as of February 28, 1994,                      Incorporated
        among WorldCorp, the Company and Malaysian Helicopter Services Berhad.                        By Reference 
        (Filed as Exhibit 10.90 to WorldCorp Inc.'s Annual Report on Form 10-K
        for the fiscal year ended December 31, 1994 and incorporated herein by
        reference.)
 
10.32   Agreement between the Company and the International Brotherhood of                            Incorporated
        Teamsters representing the Cockpit Crewmembers employed by the Company                        By Reference 
        dated August 15, 1994-June 30, 1998. (Filed as Exhibit 10.98 to
        WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended
        December 31, 1994 and incorporated herein by reference.)
 
10.33   Aircraft Services Agreement dated September 26, 1994 by and between the                       Incorporated
        Company and Malaysian Airline System Berhad. (Filed as Exhibit 10.101 to                      By Reference 
        WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended
        December 31, 1994 and incorporated herein by reference.)
 
10.34   Freighter Services Agreement dated October 6, 1994 by and between the                         Incorporated
        Company and Malaysian Airline System Berhad. (Filed as Exhibit 10.102 to                      By Reference 
        WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended
        December 31, 1994 and incorporated herein by reference.)
        
10.35   Amendment No. 1 to Passenger Aircraft Services and Freighter Services                         Incorporated
        Agreement dated December 31, 1994 by and between the Company and                              By Reference 
        Malaysian Airline System Berhad. (Filed as Exhibit 10.107 to WorldCorp,
        Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31,
        1994 and incorporated herein by reference.)
 
10.36   Amendment No. 2 to the Aircraft Services and Freighter Services                               Incorporated
        Agreements by and between the Company and Malaysian Airline System                            By Reference 
        Berhad, dated February 9, 1995.
 
10.37   Amendment No. 3 to the Freighter Services Agreement by and between the                        Incorporated
        Company and Malaysian Airline System Berhad dated May, 1995.                                  By Reference 
 
10.39   FY1996 Contractor Team Agreement among the Company, Continental                               Incorporated
        Airlines, Inc., Emery Worldwide Airlines, Inc., Evergreen International                       By Reference 
        Airlines, Inc., Miami Air International, Inc., Northwest Airlines, Inc.
        and Rich International Airways, Inc. dated April 3, 1995.
 
10.41   Maintenance Agreement between Malaysian Airline System Berhad and the                         Incorporated
        Company dated March 1, 1995.                                                                  By Reference 
 
10.42   Form of Master Services Agreement between the Company and WorldCorp,                          Incorporated
        Inc.                                                                                          By Reference 

</TABLE> 

                                       25
<PAGE>
 
<TABLE>
<CAPTION>
 
(a)  Exhibits
No.    Description
---    -----------
<S>     <C>                                                                                           <C> 
10.44   Amendment No. 3 to the Accounts Receivable Management and Security                            Incorporated
        Agreement between the Company and BNY Financial Corporation dated as of                       By Reference 
        September 28, 1995.
 
10.45   Amendment No. 4 to the Accounts Receivable Management and Security                            Incorporated
        Agreement between the Company and BNY Financial Corporation dated as of                       By Reference 
        September 28, 1995.
 
10.46   Form of Non-Employee Directors' Stock Option Plan.                                            Incorporated
                                                                                                      By Reference
 
11      Computation of earnings (loss) per share.                                                     Filed
                                                                                                      Herewith 

27      Financial data schedule for the quarter ended June 30, 1997                                   Filed
                                                                                                      Herewith 
</TABLE> 

(b)  Reports on Form 8-K

     Form 8-K dated July 7, 1997, was filed with the Securities and Exchange 
     Commission on July 7, 1997.

     Form 8-K dated July 14, 1997, was filed with the Securities and Exchange
     Commission on July 14, 1997.


            *     *     *     *     *     *     *     *     *     *

                                       26
<PAGE>
 
                                  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.



                                    WORLD AIRWAYS, INC.



                                    By:  /s/ Mark S. Lynch
                                        -------------------
                                    Mark S. Lynch
                                    Chief Financial Officer



Date:  August 13, 1997

                                       27