<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: September 30, 2001
                        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)

            HLH Building, 101 World Drive, Peachtree City, GA 30269
                   (Address of Principal Executive Offices)
                                (770) 632-8000
                        (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 October 31,
2001 was 10,919,351.

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

                              WORLD AIRWAYS, INC.

               September 30, 2001 QUARTERLY REPORT ON FORM 10-Q

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                     Page
                                                                                                                     ----
<S>                                                                                                                  <C>
PART I - FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Condensed Balance Sheets, September 30, 2001(Unaudited) and December 31, 2000..................    3

                  Condensed Statements of Operations (Unaudited),
                  Three Months Ended September 30, 2001 and 2000.................................................    5

                  Condensed Statements of Operations (Unaudited),
                  Nine Months Ended September 30, 2001 and 2000..................................................    6

                  Condensed Statement of Changes in Stockholders' Deficiency (Unaudited),
                  Nine months ended September 30, 2001...........................................................    7

                  Condensed Statements of Cash Flows (Unaudited),
                  Nine months ended September 30, 2001 and 2000..................................................    8

                  Notes to Condensed Financial Statements........................................................    9

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations......................................................................   11

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk.....................................   15


PART II - OTHER INFORMATION

         Item 4.  Submission  of Matters to a Vote of Security  Holders..........................................   15

         Item 6.  Exhibits and Reports on Form 8-K...............................................................   15
</TABLE>

                                       2
<PAGE>

                          ITEM 1. FINANCIAL STATEMENTS
                               WORLD AIRWAYS, INC.
                            CONDENSED BALANCE SHEETS
                                     ASSETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                   (unaudited)
                                                                                  September 30,      December 31,
                                                                                      2001              2000
                                                                                  -------------      -----------
<S>                                                                               <C>                <C>
CURRENT ASSETS
     Cash and cash equivalents, including restricted
         cash of $428 at September 30, 2001 and
         $2,828 at December 31, 2000                                              $       3,315      $    14,386

     Short-term marketable investments                                                        -            1,296

     Accounts receivable, less allowance for doubtful
         accounts of $931 at September 30, 2001 and
         $331 at December 31, 2000                                                       24,177           15,758

     Prepaid expenses and other current assets                                            7,810            7,922
                                                                                  -------------      -----------

         Total current assets                                                            35,302           39,362
                                                                                  -------------      -----------

EQUIPMENT AND PROPERTY
     Flight and other equipment                                                          75,946           90,060
     Equipment under capital leases                                                       9,463            9,463
                                                                                  -------------      -----------
                                                                                         85,409           99,523
     Less: accumulated depreciation and amortization                                     41,294           41,974
                                                                                  -------------      -----------

         Net equipment and property                                                      44,115           57,549
                                                                                  -------------      -----------

LONG-TERM OPERATING DEPOSITS                                                             18,393           15,848

MARKETABLE INVESTMENTS                                                                        -              389

OTHER ASSETS AND DEFERRED CHARGES, NET                                                      671              742
                                                                                  -------------      -----------

TOTAL ASSETS                                                                      $      98,481      $   113,890
                                                                                  =============      ===========
</TABLE>


                                                                     (Continued)

                                       3
<PAGE>

                               WORLD AIRWAYS, INC.
                            CONDENSED BALANCE SHEETS
                                   (continued)
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                       (in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                                  (unaudited)
                                                                                  September 30,     December 31,
                                                                                      2001               2000
                                                                                  -------------     ------------
<S>                                                                               <C>               <C>
CURRENT LIABILITIES
     Notes payable                                                                $      14,590     $     11,532
     Current maturities of long-term obligations                                          1,836            3,523
     Accounts payable                                                                    31,726           19,138
     Unearned revenue                                                                     1,150            6,278
     Accrued maintenance                                                                  2,192            2,182
     Accrued salaries and wages                                                           7,535            8,250
     Accrued taxes                                                                        2,190            1,539
     Other accrued liabilities                                                              281            1,121
                                                                                  -------------     ------------
         Total current liabilities                                                       61,500           53,563
                                                                                  -------------     ------------

LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES                                         41,300           48,969

OTHER LIABILITIES
     Deferred gain from sale leaseback transactions, net of
         accumulated amortization of $11,434 at September 30,
         2001 and $10,313 at December 31, 2000                                            6,817            3,351
     Accrued post-retirement benefits                                                     2,860            2,992
     Deferred rent                                                                       12,769           12,295
                                                                                  -------------     ------------
         Total other liabilities                                                         22,446           18,638
                                                                                  -------------     ------------

TOTAL LIABILITIES                                                                       125,246          121,170
                                                                                  -------------     ------------

STOCKHOLDERS' DEFICIENCY
     Preferred stock, $.001 par value (5,000,000 shares authorized;
         no shares issued or outstanding)                                                     -                -
     Common stock, $.001 par value (40,000,000 shares authorized;
         12,147,141 shares issued; 10,919,351 shares outstanding at September 30,
          2001 and 10,334,480 shares outstanding at December 31, 2000)                       12               12
     Additional paid-in capital                                                          24,119           23,980
     Deferred compensation, employee salary exchange program                                  -           (1,735)
     Accumulated deficit                                                                (38,039)         (16,387)
     Treasury stock, at cost (1,227,790 shares at September 30,
         2001 and 1,812,661  shares at December 31, 2000)                               (12,857)         (13,150)
                                                                                  -------------     ------------
         Total  stockholders' deficiency                                                (26,765)          (7,280)
                                                                                  -------------     ------------

COMMITMENTS AND CONTINGENCIES

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                    $      98,481     $    113,890
                                                                                  =============     ============
</TABLE>

           See accompanying Notes to Condensed Financial Statements

                                       4
<PAGE>

                               WORLD AIRWAYS, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                 Three Months Ended September 30, 2001 and 2000
                      (in thousands except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
OPERATING REVENUES                                                                 2001                  2000
                                                                               ------------          ------------
<S>                                                                            <C>                   <C>
     Flight operations                                                         $     84,898          $     67,268
     Other                                                                              289                   261
                                                                               ------------          ------------
         Total operating revenues                                                    85,187                67,529

OPERATING EXPENSES
     Flight operations                                                               29,247                24,997
     Maintenance                                                                     12,483                 6,794
     Aircraft rent and insurance                                                     19,932                17,726
     Fuel                                                                            11,829                 8,282
     Flight operations subcontracted to other carriers                                    -                   383
     Commissions                                                                      3,348                   570
     Depreciation and amortization                                                    1,196                 1,605
     Sales, general and administrative                                                8,842                 6,099
                                                                               ------------          ------------
         Total operating expenses                                                    86,877                66,456



OPERATING INCOME (LOSS)                                                              (1,690)                1,073


OTHER INCOME (EXPENSE)
     Interest expense                                                                (1,206)               (1,368)
     Interest income                                                                     94                   333
     Other, net                                                                         487                     5
                                                                               ------------          ------------
         Total other expense                                                           (625)               (1,030)

NET EARNINGS (LOSS)                                                            $     (2,315)         $         43
                                                                               ============          ============

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                                    $      (0.21)         $       0.00
                                                                               ============          ============

WEIGHTED AVERAGE SHARES OUTSTANDING                                                  10,920                10,216
                                                                               ============          ============
</TABLE>

            See accompanying Notes to Condensed Financial Statements

                                       5
<PAGE>

                              WORLD AIRWAYS, INC.
                      CONDENSED STATEMENTS OF OPERATIONS
                 Nine Months Ended September 30, 2001 and 2000
                     (in thousands except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                   2001                 2000
                                                                              ------------         ------------
<S>                                                                           <C>                  <C>
OPERATING REVENUES
     Flight operations                                                        $    234,824         $    191,646
     Other                                                                             711                  707
                                                                              ------------         ------------
         Total operating revenues                                                  235,535              192,353
                                                                              ------------         ------------

OPERATING EXPENSES
     Flight operations                                                              78,788               63,871
     Maintenance                                                                    45,212               27,768
     Aircraft rent and Insurance                                                    56,694               52,644
     Fuel                                                                           29,568               21,054
     Flight operations subcontracted to other carriers                                 924                5,912
     Commissions                                                                    10,955                3,104
     Depreciation and amortization                                                   4,730                4,970
     Sales, general and administrative                                              26,133               19,873
     Settlement of contract dispute                                                      -              (6,975)
                                                                              ------------         ------------
         Total operating expenses                                                  253,004              192,221
                                                                              ------------         ------------

OPERATING INCOME (LOSS)                                                            (17,469)                 132

OTHER INCOME (EXPENSE)
     Interest expense                                                               (4,748)              (4,068)
     Interest income                                                                   380                  803
     Other, net                                                                        185                  211
                                                                              ------------         ------------
         Total other expense                                                        (4,183)              (3,054)
                                                                              ------------         ------------

EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
        ACCOUNTING CHANGE                                                          (21,652)              (2,922)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE                                                  --               22,224
                                                                              ------------         -------------
NET EARNINGS (LOSS)                                                           $    (21,652)        $     19,302
                                                                              ============         -------------
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
     Earnings (loss) before cumulative effect of accounting change            $      (2.02)        $      (0.31)
     Cumulative effect of accounting change                                             --                 2.36
                                                                              ------------         ------------
         Net earnings (loss)                                                  $      (2.02)        $       2.05
                                                                              ============         ============

WEIGHTED AVERAGE SHARES OUTSTANDING                                                 10,726                9,431
                                                                              ============         ============
</TABLE>

            See accompanying Notes to Condensed Financial Statements

                                       6
<PAGE>

                              WORLD AIRWAYS, INC.
                        CONDENSED STATEMENTS OF CHANGES
                          IN STOCKHOLDERS' DEFICIENCY
                     Nine Months Ended September 30, 2001
                      (in thousands except share amounts)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                 Common Additional        Deferred  Accumulated    Treasury         Total
                                                  Stock    Paid-in    Compensation      Deficit   Stock, at Stockholders"
                                                           Capital                                     Cost    Deficiency
                                                -------  ---------    -----------   -----------   ---------    ----------
<S>                                             <C>      <C>          <C>           <C>           <C>          <C>
Balance at December 31, 2000                    $    12  $  23,980    $    (1,735)  $   (16,387)  $ (13,150)   $   (7,280)

Amortization of deferred compensation and
accrual of changes in Employee Salary
Exchange Program                                      -          -          1,735             -         311         2,046
                                                                 -
Common Stock Repurchases                              -                         -             -         (18)          (18)

Amortization of warrants                              -        139              -             -                       139
                                                                                -       (21,652)
Net loss                                              -          -                                        -       (21,652)

                                                -------  ---------    -----------   -----------   ---------    ----------
Balance at September 30, 2001                   $    12  $  24,119    $         -   $   (38,039)  $ (12,857)   $  (26,765)
                                                -------  ---------    -----------   -----------   ---------    ----------
</TABLE>

            See accompanying Notes to Condensed Financial Statements.

                                       7
<PAGE>

                               WORLD AIRWAYS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 2001 and 2000
                                  (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                          2001              2000
                                                                                 -------------    --------------
<S>                                                                              <C>              <C>
CASH AND CASH EQUIVALENTS AT BEGINNING                                           $      14,386    $       11,725
     OF PERIOD

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ( loss)                                                                   (21,652)           19,302
Adjustments to reconcile net earnings (loss) to cash
     provided (used) by operating activities:
     Cumulative effect of accounting change                                                  -           (22,224)
     Depreciation and amortization                                                       4,730             4,970
     Deferred gain recognition                                                          (1,130)             (931)
     Other                                                                               2,114             2,250
     Increase (decrease) in cash resulting from changes
       in operating assets and liabilities net of
         effects of non-cash transactions:
       Accounts receivable                                                              (8,419)               69
       Deposits, prepaid expenses and other assets                                          40               914
       Accounts payable, accrued expenses and other liabilities                         10,258            (8,537)
       Unearned revenue                                                                 (5,128)             (295)
                                                                                 -------------    --------------
     Net cash provided (used) by operating activities                                  (19,187)           (4,482)
                                                                                 -------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to equipment and property                                                     (3,253)           (2,259)
Proceeds from disposal of equipment and property                                           477               215
Sales and maturities of marketable investments                                           1,685               681
                                                                                 -------------    --------------
     Net cash provided (used) by investing activities                                   (1,091)           (1,363)
                                                                                 -------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in line of credit borrowing arrangement, net                         3,058               358
Repayment of debt                                                                       (9,356)           (5,237)
Issuance of debt                                                                             -               675
Proceeds of sale leaseback transactions                                                 15,505             6,100
                                                                                 -------------    --------------
     Net cash provided (used) by financing activities                                    9,207             1,896
                                                                                 -------------    --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   (11,071)           (3,949)
                                                                                 -------------    --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $       3,315    $        7,776
                                                                                 =============    ==============
</TABLE>

            See accompanying Notes to Condensed Financial Statements

                                       8
<PAGE>

                              WORLD AIRWAYS, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (unaudited)


1.   Management believes that all adjustments necessary for a fair statement of
     results, including those related to September 11, 2001, have been included
     in the Condensed Financial Statements for the interim periods presented,
     which are unaudited. The preparation of financial statements in conformity
     with accounting principles generally accepted in the United States of
     America requires management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates and the results of
     operations for the nine months ended September 30, 2001 are not necessarily
     indicative of the results to be expected for the year ending December 31,
     2001.

     On September 11, 2001, the Federal Aviation Administration (FAA) ordered
     all civilian aircraft operating in U.S. airspace grounded due to terrorist
     attacks. This grounding of aircraft lasted nearly three days. This resulted
     in the temporary delay of the Company's flights during this period. These
     flights were completed at a later date in September. In the aftermath of
     September 11, 2001 and as discussed in Management's Discussion and Analysis
     of Financial Condition and Results of Operations, the Company plans to
     implement several measures aimed at modifications in its operations to
     better match capacity with anticipated demand. As a result, the Company
     will evaluate whether provisions and/or charges for items such as early
     termination of aircraft leases are required during the fourth quarter of
     2001.

     These interim period Condensed Financial Statements and accompanying
     footnotes should be read in conjunction with the Financial Statements
     contained in World Airways' Annual Report on Form 10-K for the year ended
     December 31, 2000.

2.   Financial Statement Reclassifications

     Certain items in prior period financial statements included herein have
     been reclassified to conform to the 2001 financial statement presentation.

3.   Capital Stock

     At September 30, 2001, World Airways had 10.9 million shares of Common
     Stock outstanding, including 4.7 million shares related to the Employee
     Salary Exchange Program, which began in February 2000.

     In June 2001, World Airways was informed by NASDAQ that the Company's
     common stock had not maintained a closing bid price of $1.00 for thirty
     consecutive trading days as required by a NASDAQ SmallCap Market rule.
     According to NASDAQ, World Airways needed to meet the $1.00 price
     requirements within 90 days (by September 18, 2001). If the closing bid
     price for the stock had been $1.00 or more for ten consecutive trading days
     anytime before September 18, 2001, NASDAQ would have determined if
     compliance with continued listing requirements had been achieved. If by
     September 18, 2001, the Company had been unable to demonstrate compliance,
     and had not requested a hearing before NASDAQ on a proposed delisting, the
     stock would have been delisted from the SmallCap Market. In such a case,
     the Company would have taken action to be listed on the over-the-counter
     Bulletin Board. In October 2001, the Company received official notice from
     NASDAQ that a moratorium had been placed on the minimum bid price and
     market value of public float requirements in response to the extraordinary
     market conditions following the September 11, 2001 terrorist attacks on the
     United States. The moratorium will last until January 2, 2002.

4.   Transactions with Malaysia Airlines

     World Airways provided service to Malaysian Airline System Berhad
     ("Malaysia Airlines" or "MAS") from 1981 to 1999 and also leased aircraft
     from MAS during that time frame. In the second quarter of 1999, the Company
     returned the last aircraft that it had leased from MAS and effective
     October 1999 ceased operating other aircraft for MAS. In May 2000, the
     Company received $7.0 million as a result of a comprehensive settlement
     with Malaysian Airlines. The settlement related to a number of aircraft
     lease and operating agreements, the last of which terminated in 1999.

                                       9
<PAGE>

5.   Accounting Change

     Effective January 1, 2000, the Company changed its method of accounting for
     certain aircraft maintenance costs from the accrual method of accounting to
     the direct expense method. Under the new accounting method, maintenance
     costs are recognized as expense as maintenance services are performed and
     as flight hours are flown for non-refundable maintenance payments required
     by lease agreements. The Company believes that the new accounting principle
     is preferable because the direct expense method is the predominant method
     used in the airline industry and there has not been an obligating event
     prior to the maintenance checks actually being performed or flight hours
     being flown. The cumulative effect of the accounting change recorded in the
     first quarter of 2000 was $22.2 million.

6.   Sale Leaseback Transaction

     In August 2001, the Company entered into a sale and leaseback transaction,
     whereby two DC-10 engines were sold for a total consideration of $3.7
     million and will be leased back for a term of five years. This transaction
     resulted in a deferred gain of $2.3 million. In June 2001, the Company
     entered into a sale and leaseback transaction, whereby two MD-11 engines
     were sold for a total consideration of $12.6 million and resulted in a
     deferred gain of $2.2 million. These engines will also be leased back for a
     term of five years. All deferred gains related to these transactions will
     be amortized against rent expense on a straight-line basis over the lease
     terms. The Company used a portion of the sale proceeds to repay debt
     obligations then outstanding of $6.9 million and to pay prepayment
     penalties of $0.7 million, all of which related to the MD-11 engines.

7.   Air Transportation Safety and System Stabilization Act

     The Air Transportation Safety and System Stabilization Act (Stabilization
     Act) was enacted on September 22, 2001 in direct response to the September
     11, 2001 terrorist attacks on the United States. The Act provides for:

          a.  Compensation to air carriers for direct and incremental losses
              incurred resulting from the September 11 events;
          b.  Loan guarantees to air carriers by the U.S. Government;
          c.  Reimbursement for increases in certain insurance premiums incurred
              by air carriers; and
          d.  Limitations on liabilities incurred or to be incurred by air
              carriers as a result of the September 11 events.

     Under the Stabilization Act, each air carrier is entitled to receive the
     lesser of (1) its direct and incremental losses for the period September
     11, 2001 to December 31, 2001 or (2) its available seat mile allocation of
     the $5 billion compensation available under the Stabilization Act. On
     October 12th, 2001, the Company received $3.2 million and the Company
     expects to receive additional payments in the fourth quarter of 2001,
     aggregating approximately $5.2 million. During the fourth quarter of 2001,
     the Company expects to recognize approximately $8.4 million as compensation
     under the Stabilization Act. As of September 30, 2001, the Company did not
     recognize any compensation since the direct and incremental losses for the
     period September 11, 2001 through September 30, 2001 were insignificant.

     No action has been taken at this time on Item b. Item d. is not applicable
     to the Company.

                                       10
<PAGE>

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

Part I, Item 2 of this report should be read in conjunction with Part II, Item 7
of World Airways, Inc. ("World Airways" or the "Company") Annual Report on Form
10-K for the year ended December 31, 2000.  The information contained herein is
not a comprehensive management overview and analysis of the financial condition
and results of operations of the Company, but rather updates disclosures made in
the aforementioned filing.

The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (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 2001 and beyond to
differ materially from those expressed in any forward looking statements made
by, or on behalf of, the Company.

On September 11, 2001, the Federal Aviation Administration (FAA) ordered all
civilian aircraft operating in U.S. airspace grounded due to terrorist attacks.
On September 22, 2001, President Bush signed into law the Air Transportation
Safety and System Stabilization Act (Stabilization Act), which provides, among
other things, for  (1) $5 billion in payments to compensate U. S. air carriers
for losses incurred as a result of the terrorist attacks that occurred on
September 11, 2001;  (2) $10 billion in federal credit instruments (loan
guarantees) to U.S. air carriers to guarantee loans from lenders to those air
carriers, subject to certain conditions and fees;  (3) the authority of the
Secretary of Transportation to reimburse air carriers (which authority expires
180 days after enactment of the Stabilization Act) for the increase in the cost
of insurance;   (4) deferral of the payment by U.S. air carriers of certain
taxes; and (5) a $100 million liability limit for U.S. air carriers, at the
discretion of the Secretary of Transportation, for acts of terrorism committed
during a 180-day period following enactment of the Stabilization Act.

In response to the expected substantial drop in future demand, the Company plans
to modify its operations in order to better match capacity with the lower demand
and implement measures to conserve cash. The impact of the terrorist attacks of
September 11, 2001 and their aftermath on the Company and the sufficiency of its
financial resources to absorb this impact  will depend on a number of factors,
including: (1)  the adverse impact of the terrorist attacks on the economy in
general;  (2) the level of air travel demand, mix of cargo and passenger travel
and related revenues; (3) the Company's ability to reduce its operating costs
and conserve its financial resources, taking into account the increased costs
that it will incur as a consequence of the attacks;  (4) the higher costs
associated with new FAA security directives and any other increased regulation
of air carriers; (5) the significantly higher costs of aviation insurance
coverage, and the extent to which such insurance will continue to be
commercially available to the Company and its vendors; (6) the ability of the
Company to reduce its costs and the timing of those cost reductions; (7) the
ability of the Company to raise financing in light of the various factors
referred to herein; (8) the Company's ability to renegotiate its aircraft lease
rates and the early termination of certain aircraft leases; and (9) the extent
of the benefits received by the Company under the Stabilization Act or
regulations issued pursuant thereto. Presently, due in part to the lack of
predictability of future demand, cargo-passenger mix and related revenues, the
Company is unable to estimate the entire impact of the events of September 11,
2001, and the sufficiency of its financial resources to absorb that impact,
including the mitigating effects of the Stabilization Act and other actions
taken by the Company. However, given the magnitude of these unprecedented events
and the possible subsequent effects, the adverse impact to the Company's
financial condition, results of operations and its prospects will be material.


OVERVIEW

General

For the third quarter ended September 30, 2001, the Company's operating revenues
were $85.2 million, the operating loss was $1.7 million, the net loss was $2.3
million and the loss per share was $0.21 for both basic and diluted earnings per
share  ("EPS") computed on an average of 10.9 million shares.  For the third
quarter ended September 30, 2000, the Company's operating revenues were $67.5
million, operating income was $1.1 million and net earnings was $43,000.
Earnings per share, both basic and diluted, was $0.00 computed on an average of
10.2 million shares.

For the first nine months of 2001, the Company's operating revenues were $235.5
million, the operating loss was $17.5 million, the net loss was $21.7 million,
and the loss per share was $2.02 for both basic and diluted EPS based on 10.7
million average shares.  For the first nine months of 2000, the Company's
operating revenues were $192.3 million, the operating profit was $0.1 million
and the net loss before the cumulative effect of a change in the method of
accounting was $2.9 million. The loss per share before the cumulative effect of
the accounting change was $0.31 for both basic and diluted EPS based on 9.4
million average

                                       11
<PAGE>

shares. Net earnings after the cumulative effect of the accounting change was
$19.3 million and earnings per share, both basic and diluted, after the
cumulative effect of the accounting change was $2.05.

Significant Customer Relationships

During the first nine months of 2001, the Company's business relied heavily on
its contracts with the U. S. Air Force's ("USAF") Air Mobility Command ("AMC")
and Garuda Indonesia ("Garuda").  In 2001, these customers provided
approximately 61% and 8%, respectively, of the Company's revenues and 46% and
11%, respectively, of block hours flown.  In 2000, AMC and Garuda provided
approximately 39% and 12%, respectively, of the Company's revenues and 27% and
15%, respectively, of block  hours flown.

Because of the September 11th events, the Company does not expect to fly the
2002 Hadj for security and safety issues. The Company's service to AMC is not
expected to be adversely impacted by the September 11th events.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000

Total block hours increased 810 hours or 9.6% to 9,221 in the third quarter of
2001 from 8,411 hours in 2000, with an average of 13.7 available aircraft in
2001 compared to an average of 10 aircraft in 2000.   Average daily utilization
(block hours flown per day per aircraft) was 7.3 hours in the third quarter of
2001 compared to 9.1 hours for the same period in 2000.

Operating Revenues.  Revenues from flight operations increased $17.6 million, or
------------------
26.2%, to $84.9 million in 2001 from $67.3 million in 2000.  This increase is
primarily due to a higher average yield, or revenue per block hour, as a result
of more full service AMC flying in 2001 compared to 2000, and the increase in
block hours flown in 2001.

Operating Expenses.  Total operating expenses increased $20.4 million, or 30.7%
------------------
in 2001 to $86.9 million from $66.5 million in 2000.

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 $4.3 million, or 17.0%, in
2001.  This increase resulted primarily from an increase of  $4.5 million in
pilot and flight attendant costs caused by increased staffing levels
necessitated by the increase in full service AMC flying and additional cargo
aircraft.  Pilot costs also increased due to contractual wage increases.

Maintenance expenses increased $5.7 million, or 83.7%, in 2001. The third
quarter of 2001 included $1.1 million of additional expense due to the MD-11
power by the hour engine maintenance agreement and the wheel/brake cost per
landing maintenance agreement, $0.3 million of deductibles for three insurance
claims, and additional work of $0.3 million required on APU overhauls. The
Company also incurred increased maintenance of $2.3 million due to required
lease reserve maintenance payments related to the net three additional DC-10
aircraft added to the fleet as well as more total block hours flown.  The third
quarter of 2000 included credits of $1.0 million for the reversal of maintenance
accruals and $0.6 million for the cumulative interest on security deposits for
two MD-11 aircraft. The remainder of the increase is primarily due to higher
wage and personnel expenses for mechanics.

Aircraft rent and insurance costs increased $2.2 million, or 12.4%, in 2001.
This was primarily due to the increase in the number of average aircraft from 10
in the third quarter of last year to 13.7 in the third quarter of this year,
offset by reductions in the lease rates for the fleet of MD-11 aircraft.

Fuel expenses increased $3.5 million, or 42.8%, in 2001 reflecting a 10%
increase in the average cost of fuel per gallon and a 32% increase in the number
of gallons of fuel consumed as a result of an increase in full service flying in
2001. The Company is generally able to pass fuel cost increases through to its
customers.

Commissions increased $2.8 million in 2001 principally as a result of the
increase in AMC business in 2001 and an increase in the commission rate on the
AMC business.

Sales, general and administrative expenses increased $2.7 million, or 45.0%, in
2001, primarily as a result of costs associated with the relocation of the
Company's headquarters from Virginia to Georgia as well as additional expense
for outside legal fees, manuals, equipment and space rentals, employment
advertising, audit services, overnight delivery and reserve for bad debt. In
addition, the third quarter of 2000 included a credit of  $0.3 million for the
reversal of a tax accrual that was no longer needed.

Total other expense, net decreased by $0.4 million in the third quarter of 2001
compared to the same period in 2000. The

                                       12
<PAGE>

Company received proceeds of $0.5 million from the sale of shares due to the
dissolution of the SITA Foundation.

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

Total block hours increased 1,746 hours, or 7.5%, to 25,154 hours in the first
nine months of 2001 from 23,408 hours in 2000, with an average of 12.3 available
aircraft in 2001 and 10 available aircraft in 2000.   Average daily utilization
(block hours flown per day per aircraft) was 7.5 hours in 2001 and 8.5 hours in
2000. A decrease in cargo ACMI and commercial full-service flying was more than
offset by an increase in block hours for AMC flying and commercial passenger
ACMI flying.

Operating Revenues.  Revenues from flight operations increased $43.2 million, or
------------------
22.5%, to $234.8 million in 2001 from $191.6 million in 2000.  This increase was
due primarily to higher revenue per block hour, principally as a result of
increased flying  under the current 2001 fiscal year contract with AMC that
began October 1, 2000.

Operating Expenses.  Total operating expenses increased $60.8 million, or 31.6%,
------------------
in 2001 to $253.0 million from $192.2 million in 2000.  Operating expenses for
2000 included a  $7 million credit related to a contract settlement received
from MAS.

Flight operations expenses increased $14.9 million, or 23.4%, in 2001.  This
increase resulted primarily from an increase of  $14.6 million in pilot and
flight attendant costs caused by increased staffing levels necessitated by the
increase in full service AMC flying and additional cargo aircraft. Pilot costs
also increased due to contractual wage increases.

Maintenance expenses increased $17.4 million, or 62.8%, in 2001.  In the first
nine months of 2001, maintenance included $3.5 million of thrust reverser and
landing gear overhauls, $1.4 million for the overhaul of an owned engine, and
$0.6 million for additional work required on APU overhauls. The Company also
incurred increased maintenance of $2.3 million due to required  lease reserve
maintenance payments related to the net three additional DC-10 aircraft added to
the fleet as well as more block hours flown.  Maintenance expense for 2001
included an increase of $4.3 million in aircraft component repairs, of which
approximately $2.0 million are not anticipated to be incurred in future periods.
This $2.0 million of costs are related to the initiation of the power-by-the-
hour maintenance agreement for MD-11 aircraft components. The remainder of the
increase is primarily due to more component removals, seat refurbishments, the
MD-11 power by the hour engine maintenance agreement and the wheel/brake cost
per landing agreement.  In 2001, the Company incurred approximately $0.5 million
for the installation of insulation blankets related to an Airworthiness
Directive (AD) issued in 2000.  Maintenance expenses in 2000 included credits of
$1.0 million for the reversal of maintenance accruals and $0.6 million for the
cumulative interest on security deposits for two MD-11 aircraft.  The remainder
of the increase in 2001 is primarily due to scheduled maintenance checks, the
repair of an inlet with foreign object damage, insurance deductibles and higher
wage as well as personnel expenses for mechanics.

Aircraft rent and insurance costs increased $4.0 million, or 7.7%, in 2001.
This was primarily due to the increase in the number of average aircraft from 10
in 2000 to 12.3 in 2001, offset by reductions in the lease rates for the fleet
of MD-11 aircraft.

Fuel expenses increased $8.5 million, or 40.4%, in 2001 due to a 21% increase in
the average cost of fuel per gallon and a 25% increase in the number of gallons
of fuel consumed as a result of an increase in full service flying in 2001. The
Company is generally able to pass fuel cost increases through to its customers.

Subcontract flying costs decreased $5.0 million to $0.9 million in 2001 from
$5.9 million in 2000. The higher costs in 2000 resulted from outsourcing flights
during 2000 due to aircraft being out of service for maintenance.

Commissions increased $7.9 million in 2001 principally as a result of the
increase in AMC business in 2001 and an increase in the commission rate on the
AMC business.

Sales, general and administrative expenses increased $6.3 million, or 31.5%, in
2001, primarily as a result of costs associated with the relocation of the
Company's headquarters from Virginia to Georgia as well as additional expense
for outside legal fees, equipment and space rentals, outside services,
employment advertising, overnight delivery, property taxes and reserve for bad
debt. In addition, 2000 expenses included a credit of $0.3 million for the
reversal of a tax accrual that was no longer needed.

Total other expense, net increased by $1.1 million in 2001 compared to 2000.
This increase was primarily due to $0.7 million of prepayment penalties incurred
due to the early repayment of debt in connection with a  sale leaseback of two
owned engines in June 2001, and $0.2 million related to the write-off of
property and equipment in 2001. These additional expenses in 2001 were offset by
$0.5 million of proceeds from the sale of shares due to the dissolution of the
SITA Foundation. The first nine  months of 2000 included a gain of approximately
$0.2 million related to insurance proceeds for which there was no comparable
gain in 2001.

                                       13
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company is highly leveraged.  At September 30, 2001, the Company's cash and
cash equivalents totaled $3.3 million, which included restricted cash of  $0.4
million, and the ratio of the Company's current assets to its current
liabilities ("current ratio") was 0.6:1.   Also, as of September 30, 2001, the
Company had outstanding long-term debt and capital leases of $41.3 million and
notes payable and current maturities of long term obligations of $16.4 million.
In addition, the Company has significant long-term obligations relating to
operating leases for aircraft and spare engines. At  September 30, 2001, the
Company had submitted all of its available qualified receivables under its
Accounts Receivable Management and Security Agreement and the Company had $7.5
million additional available capacity.

Cash Flows from Operating Activities

Operating activities used $19.2 million in cash for the nine months ended
September 30, 2001 compared to using $4.5 million in the comparable period of
2000.  The cash used in 2001 principally reflects the $21.7 million loss, net
non-cash income statement charges of $5.7 million, an $8.4 million increase in
trade accounts receivable, and a net increase in cash of $5.2 million due to
other changes in operating assets and liabilities. The cash generated in 2000
principally reflects the $2.9 million loss prior to the accounting change, net
non-cash income statement charges of $6.3 million, and a net decrease in cash of
$7.9 million due to changes in operating assets and liabilities.

Cash Flows from Investing Activities

Investing activities used $1.1 million in cash for the nine months ended
September 30, 2001, compared to using $1.4 million in the comparable period of
2000.   In 2001, cash was generated by the sale and maturity of marketable
investments, net of purchases of rotable spare parts, computer equipment,
leasehold improvements and other fixed assets.  In 2000, cash was used primarily
for the purchase of spare parts.

Cash Flows from Financing Activities

Financing activities provided $9.2 million in cash for the nine months ended
September 30, 2001 compared to generating $1.9 million in the comparable period
of 2000. In 2001, the Company received $15.5 million of proceeds from sale
leaseback transactions. The repayment of debt on engines subject to the sale and
leaseback transactions, along with scheduled debt payments, resulted in
repayment of $9.4 million of debt. In 2000, the principal transactions were $6.1
million of cash generated by a sale leaseback transaction offset by $5.2 million
of debt repayments.

As of September 30, 2001, the Company is in compliance with the financial
covenants in the Company's Accounts Receivable Management and Security
Agreement. However, it is likely that a loss in the fourth quarter
of 2001 together with write-downs associated with the events of September 11th
could cause the Company to violate its covenants, unless they are modified.

The impact of the terrorist attacks of September 11, 2001 and their aftermath on
the Company, and the sufficiency of its financial resources to absorb that
impact, will depend on a number of factors including: (1) the magnitude and
duration of the adverse impact of the terrorist attacks on the economy in
general, and the airline industry in particular; (2) the level of air travel
demand, mix of cargo and passenger travel and related revenues; (3) the
Company's ability to reduce its operating costs and conserve its financial
resources, taking into account the higher costs it will incur as a consequence
of the attacks; (4) the increased costs associated with new airline security
directives and any other increased regulation of air carriers; (5) the
significantly higher costs of aviation insurance coverage for future claims
caused by acts of war, terrorism, sabotage, hijacking and other similar perils,
and the extent to which such insurance will continue to be available; (6) the
ability of the Company to reduce its costs and the timing of those cost
reductions; (7) the Company's ability to raise additional financing; (8) the
Company's ability to renegotiate its aircraft lease rates and the early
termination of certain aircraft leases; and (9) the extent of the benefits
received by the Company under the Stabilization Act.

At this point, due in part to the lack of predictability of future demand, the
Company is unable to fully estimate the financial impact of the events of
September 11, 2001 and their consequences, and the sufficiency of its financial
resources to absorb that impact, including the mitigating effects of the
Stabilization Act and other actions taken by the Company to reduce its costs.
However, given the magnitude of these unprecedented events and the possible
subsequent effects, the Company expects that the adverse impact to the Company's
financial condition, its operations and its prospects will be material.


RECENT ACCOUNTING PRONOUNCEMENTS

In October 2001, the Emerging Issues Task Force (EITF) issued EITF 01-10,
"Accounting for the Impact of the Terrorist Attacks

                                       14
<PAGE>

of September 11, 2001." The EITF reached a consensus that the federal assistance
received by air carriers pursuant to the Stabilization Act should not be netted
against losses or costs incurred by air carriers as a result of the September
11th events or reported as operating revenues. Furthermore, the federal
assistance should be recognized by each air carrier as the compensated losses
are incurred not to exceed the lesser of the actual direct and incremental
losses incurred or each carriers maximum allocation of the aggregate
compensation provided for under the legislation.

In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment and
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 supercedes SFAS 121
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of" and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, " Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," for the disposal of
a segment of business (as previously defined in that Opinion). SFAS 144 retains
the requirements of SFAS 121 whereby an impairment loss is recognized in an
amount equal to the difference between carrying value and fair value if the
carrying value of an asset is not recoverable based on estimated undiscounted
future cash flows. The Company will be required to adopt this statement no later
than January 1, 2002 and believes that it will not alter the timing nor
magnitude of future impairment losses, if any, than would be recognized under
the pre-SFAS 144 authoritative accounting literature.


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

Part I, Item 3 of this report should be read in conjunction with Part II, Item
7a of World Airways, Inc. ("World Airways" or "the Company") Annual Report on
Form 10-K for the year ended December 31, 2000.  The information contained
herein is not a quantitative and qualitative discussion about market risk the
Company faces, but rather updates disclosures made in the aforementioned filing.

World Airways continues to not have any material exposure to market risks.


                                        PART II


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------  ---------------------------------------------------

None.


ITEM 6.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

(a)  Exhibits

No.    Description
---    -----------

   None



(b)  Reports on Form 8-K

   None
                         * * * * * * * * * * * * * * *

                                       15
<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/ Gilberto M. Duarte, Jr
                                        --------------------------
                                    Principal Accounting and Financial Officer


Date: November 14, 2001