<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the fiscal year ended: December 31, 2000
                        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)


          Securities registered pursuant to Section 12(b) of the Act:

    Title of Each Class            Name of Each Exchange on Which Registered
    -------------------            -----------------------------------------
                                                     NONE

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $.001 per share

              Convertible Senior Subordinated Debentures due 2004

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____
                                       ---

State by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ________


The aggregate market value of the Common Stock held by non-affiliates of the
registrant on January 31, 2001, was approximately $12,473,000.

The number of shares of the registrant's Common Stock outstanding on January 31,
2001 was 10,434,000.


                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of World Airways, Inc.'s Notice of Annual Stockholder's Meeting and
Proxy Statement, to be filed within 120 days after the end of the registrant's
fiscal year, are incorporated by reference into Part III of this Report.
<PAGE>

                              WORLD AIRWAYS, INC.
                        2000 ANNUAL REPORT ON FORM 10-K

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                  <C>
PART I
------

Item 1  Business..................................................................    3

Item 2  Properties................................................................    9

Item 3  Legal Proceedings.........................................................    9

Item 4  Submission of Matters to a Vote of Securities Holders.....................   10


PART II
-------

Item 5  Market for Registrant's Common Equity and Related Stockholders Matters....   10

Item 6  Selected Financial Data...................................................   11

Item 7  Management's Discussion and Analysis of Financial Condition and Results
         of Operations............................................................   12

Item 7a Quantitative and Qualitative Disclosures About Market Risk................   15

Item 8  Financial Statements and Supplementary Data...............................   16

Item 9  Changes in and Disagreements with Accountants on Accounting and Financial
         Disclosure...............................................................   36


PART III
--------

Item 10 Directors and Executive Officers of the Registrant........................   37

Item 11 Executive Compensation....................................................   38

Item 12 Security Ownership of Certain Beneficial Owners and Management............   38

Item 13 Certain Relationships and Related Transactions............................   38


PART IV
-------

Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K...........   39
</TABLE>

                                       2
<PAGE>

PART I

Item 1.  Business

World Airways, Inc. ("World Airways" or the "Company") was organized in March
1948 and is a U.S. certificated air carrier. Airline operations account for 100%
of the Company's operating revenue. World Airways provides long-range passenger
and cargo charter and wet lease air transportation, serving the U.S. Government,
international passenger and cargo air carriers, tour operators, international
freight forwarders and cruise ship companies. The principal executive offices of
World Airways are presently located near Washington Dulles International Airport
in The Hallmark Building, 13873 Park Center Road, Herndon, Virginia 20171 and
the Company's telephone number is (703) 834-9200. The Company will be moving the
principal executive offices from its current location to 101 World Drive,
Peachtree City, Georgia 30269 in the second quarter of 2001.


In August 1997 the Company issued $50.0 million of 8% Convertible Senior
Subordinated Debentures (the "Debentures") due in 2004. Net proceeds of the
Debentures were used to purchase 4 million shares of Common Stock for $30.6
million, repay certain indebtedness aggregating approximately $3.8 million,
increase working capital and for general corporate purposes. During 1999 $1.2
million of the Debentures were converted into Common Stock and the Company
purchased $8.2 million principal amount of Debentures at a discount of
approximately 75% for a combination of cash and treasury stock.

The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (the "Act"). This report
contains forward looking statements that are subject to risks and uncertainties
including, but not limited to, the impact of competition in the market for air
transportation services, the cyclical nature of the air carrier business,
reliance on key marketing relationships, fluctuations in operating results and
other risks detailed from time to time in the Company's periodic reports filed
with the Securities and Exchange Commission (which reports are available from
the Company upon request). These various risks and uncertainties may cause the
Company's actual results to differ materially from those expressed in any of the
forward looking statements made by, or on behalf of, the Company in this
release.

Ownership

The Company became a wholly owned subsidiary of WorldCorp, Inc. ("WorldCorp") in
a holding company reorganization in 1987. In 1994 WorldCorp sold 24.9% of its
ownership of the Company to Naluri Berhad ("Naluri"), a Malaysian aviation
company. In October 1995, the Company became a publicly owned company following
the completion of an initial public offering in which 2,000,000 shares and
900,000 shares of Common Stock were sold by the Company and WorldCorp,
respectively.


In 1997 and 1998 the Company purchased 4 million shares of its Common Stock from
WorldCorp and Naluri from the proceeds of the Debentures issued in 1997 in
accordance with a shareholders agreement. In 1998, the Company also acquired
150,000 of its Common Stock from WorldCorp for approximately $682,000 as payment
towards principal, interest, and expenses of a loan to WorldCorp. Also in 1998
and 2000, the Company acquired 80,000 shares and 224,000 shares, respectively,
of its Common Stock in open market purchases.


In February 1999, WorldCorp filed a petition for protection from its creditors
under Chapter 11 of the U. S. Bankruptcy laws in the United States Bankruptcy
Court for the District of Delaware. In August 1999 the Company concluded an
agreement with WorldCorp to settle a secured loan and other amounts totaling
approximately $1.8 million that WorldCorp owed the Company when WorldCorp filed
for bankruptcy protection. In connection with the agreement, that was approved
by the Bankruptcy Court overseeing WorldCorp's bankruptcy proceedings, WorldCorp
returned 1,069,000 shares of the Company's Common Stock (based on market value
at date of settlement) it owned in exchange for the $1.8 million owed.


In May 2000 the bankruptcy court overseeing WorldCorp's bankruptcy proceeding
approved a liquidation plan for WorldCorp. In July 2000 all remaining World
Airways Common Stock owned by WorldCorp was distributed to creditors of
WorldCorp and the final remaining relationship between the two companies was
severed. At December 31, 2000, Naluri owned 11.8% of the outstanding Common
Stock of World Airways and the balance was publicly held.


Overview & Operating Environment


For more than 52 years World Airways has been a global provider of long-range
passenger and cargo charter and wet lease air transportation to the U.S. Air
Force ("USAF"), international passenger and cargo air carriers, tour operators,
international freight forwarders and cruise ship companies. As of December 31,
2000 the Company operated 11 wide-body long-range aircraft.

                                       3
<PAGE>

Historically most of the Company's contracts have required the Company to supply
aircraft, crew, maintenance, and insurance ("ACMI" or "wet lease") and the
Company's customers were responsible for other operating costs, including fuel.
In recent years the Company has increased its operations under "full service"
contracts whereby, in addition to ACMI costs, the Company is responsible for
most other costs associated with flight operations including landing, handling
and fuel. Under both types of contracts, the customer bears the risk of
utilizing the aircraft's passenger and/or cargo capacity. World Airways' airline
customers have determined that outsourcing a portion of their wide-body
passenger and cargo requirements can be less expensive, and offer greater
operational and financial flexibility, than expanding their aircraft fleet.

Although the Company's customers bear the financial risk of utilizing the
aircraft, the Company can be affected adversely if its customers are unable to
operate the aircraft profitably, or if one or more of the Company's customers
experience a material adverse change in their market demand, financial condition
or results of operations. Under these circumstances, the Company could be
adversely affected by customer demands for rate and utilization reductions,
flight cancellations, or early termination of their agreements.

World Airways focuses its marketing efforts on the USAF Air Mobility Command
("AMC"), freight operators, cruise ship companies, tour operators and
international airlines. The Company believes that its fleet of aircraft is well
suited to the needs of its customers and provides superior economics as compared
to other popular aircraft. The Company increases its potential customer base by
being able to serve both passenger and cargo customers with its passenger,
cargo, and passenger/cargo convertible aircraft.


The Company generally charges customers other than AMC on a block hour basis
rather than on a per seat, per pound or seat mile basis. "Block hours" are
defined as the elapsed time from the moment wheel blocks are removed from the
aircraft at the point of origin to the time when the wheel blocks are again put
in place at the aircraft's destination. Revenue from AMC contracts are based on
"available seat miles", which are defined as the number of miles an aircraft
flies times the number of seats on the aircraft. The Company generally charges a
lower rate per block hour for ACMI contracts than full service contracts,
although it does not necessarily earn a lower profit.

Factors that affect the Company's ability to achieve high utilization of its
aircraft include the compatibility of the Company's aircraft with customer needs
and the Company's ability to react on short notice to customer requirements
(which can be unpredictable due to changes in traffic rights, aircraft delivery
schedules and aircraft maintenance requirements). Other factors that affect the
Company include domestic and foreign regulatory requirements, as well as a trend
toward aviation deregulation that is increasing alliances and code share
arrangements.

The market for ACMI and full service charter business is highly competitive.
Certain of the air carriers that the Company competes with have substantially
greater financial resources and more extensive facilities and equipment than the
Company. The Company believes that the most important bases for competition in
the charter business include the passenger, range and payload capacities of the
aircraft, in addition to the price, flexibility, quality and reliability of the
air transportation service provided. Competitors in the passenger charter market
include Martinair, Omni Air International and American Trans Air and in the
cargo charter market include all-cargo carriers Atlas Air, Gemini Air Cargo,
Polar Air Cargo, Evergreen and Kitty Hawk, and scheduled and non-scheduled
passenger carriers that have substantial belly capacity. The ability of the
Company to compete depends, in part, upon its success in convincing customers
that outsourcing a portion of their business is cost-effective.

The Company operates in a challenging business environment. The air
transportation industry is highly sensitive to general economic conditions.
Since a substantial portion of passenger airline travel (both business and
personal) is discretionary, the industry tends to experience adverse financial
results during general economic downturns and can be adversely affected by
unexpected global political developments. The financial results of air cargo
carriers are also adversely affected by general economic downturns that result
in reduced demand for air cargo transportation.


Prior to 1999, the Company derived a significant percentage of its revenues and
block hours from its operations in the Pacific Rim region. In 1997 through 1999
economic conditions in Malaysia, Indonesia and other countries in the Asia
Pacific region adversely affected these operations. Those conditions included
national liquidity crises, significant depreciation in the value of the ringgit
and rupiah, higher domestic interest rates, reduced opportunity for refinancing
or refunding of maturing debts, and a general reduction in spending throughout
the region. Although the Company does not now have significant operations in
this region, economic conditions have started to improve and the company will
seek opportunities for new business in the region.

Similarly to other airlines, the Company's business is seasonal. During the
early part of the first quarter, the Company typically experiences lower levels
of utilization and revenue per block hour ("yield"), due to lower demand
relative to other times of the year. The Company experiences higher levels of
utilization and yields in the middle of the first quarter continuing into the
second quarter, principally due to higher demand for passenger services
associated with the annual Hadj pilgrimage. 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. In 2001, the
Company's flight operations associated with the Hadj pilgrimage will occur from
late January to early April.

                                       4
<PAGE>

Due to the high fixed costs of leasing and maintaining aircraft and costs for
cockpit crewmembers and flight attendants, the Company's aircraft must have high
utilization in order for the Company to operate profitably. Although World
Airways' preferred strategy is to enter into long-term contracts with customers,
the terms of existing customer contracts are shorter than the terms of the
Company's lease obligations with respect to its aircraft. There is no assurance
that the Company 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 position and results of
operations could be materially adversely affected by periods of low aircraft
utilization and yields.

World Airways' operating philosophy is to build on its existing relationships to
achieve a strong platform for future growth while at the same time grow its full
service and cargo business. The Company's strategy is based, first and foremost,
upon providing the highest level of service to its customers, thereby
maintaining and expanding the amount of business being done with existing
customers. The Company perceives a number of opportunities created by a growing
global economy, particularly demand for cargo services. World Airways attempts
to maximize profitability by combining ACMI contracts with full service
agreements that meet the peak seasonal requirements of its customers. The
Company can respond to rapidly changing market conditions and requirements
because its fleet of aircraft can be deployed in a variety of configurations.

Consistent with prior years, the Company has unsold capacity in the fourth
quarter of 2001 and beyond; however, historically it has been successful in
obtaining new business to utilize available capacity. Although there can be no
assurance that it will be able to secure additional business to utilize unsold
capacity, the Company is actively seeking additional business for 2001 and
beyond.

Customers


In 2000, the Company's principal customers were the USAF, P.T. Garuda Indonesia
("Garuda") and Renaissance Cruises ("Renaissance"), providing approximately
42.9%, 8.4%, and 14.0%, respectively, of revenue and 29.9%, 11.1%, and 11.7%,
respectively of block hours flown. In 1999, the Company's principal customers
were the USAF and Malaysian Airline System Berhad ("Malaysia Airlines" or
"MAS"). For the year ended December 31, 1999, these customers provided
approximately 51.0%, and 9.0%, respectively, of the Company's revenues, and
35.1%, and 11.1%, respectively, of total block hours flown. In 1998, the
Company's principal customers were the USAF, MAS, and Garuda. For 1998, these
customers provided approximately 40.9%, 18.6%, and 11.7%, respectively, of
revenues and 27.1%, 18.2%, and 12.8%, respectively, of total block hours flown.


U.S. Air Force.  The Company has provided air transportation services,
--------------
principally on an international basis, to the USAF since 1956. In exchange for
requiring pledges of aircraft to the Civil Reserve Aircraft Fleet ( "CRAF ") for
use in times of national emergency, the USAF grants awards to CRAF participants
for peacetime transportation of personnel and cargo. The U.S. military places a
premium on the mobility of the U.S. armed forces.


The USAF awards points to air carriers acting alone or through teaming
arrangements in proportion to the number and type of aircraft made available to
CRAF. The Company utilizes teaming arrangements to maximize the value of
potential awards. Until 1999, the Company led a contractor teaming arrangement
that enjoyed a large market share of the USAF's overall commercial airlift
requirement. In 2000 Emery Worldwide Airlines took over the role of team leader.
The Company's portion of the fixed USAF award was $86 million for the
government's 1998-99 fiscal year. Although the Company's teaming agreement for
fiscal year 2000 (October 1999 to September 2000) resulted in a substantially
reduced share of the AMC fixed commercial airlift requirement (originally $27
million), the Company's AMC revenue for fiscal year 2000 totaled $113.3 million.
The increase primarily resulted from expansion flying ($49.8 million) as well as
being requested by the AMC to replace another carrier that had previously been
awarded the contract for flying for two three-month periods. For fiscal year
2001, beginning October 1, 2000, the Company's teaming arrangement resulted in
an award of approximately $127 million of the fixed-buy contract. The Company
believes it will continue to be in a position to obtain an increased share of
expansion flying which is customarily awarded by the AMC over and above the
fixed contract flying. The Company cannot determine how future military spending
budgets, airlift requirements, national security considerations for a continued
strong and balanced CRAF and teaming arrangements will combine to affect future
business with the USAF.

Garuda. The Company has flown for Garuda periodically since 1973. The Company
------
operated six aircraft for Garuda during the 1998 pilgrimage. The Company did not
operate any aircraft for Garuda for the 1999 Hadj; however, the Company operated
four aircraft for Garuda for the 2000 Hadj and will operate three aircraft for
the 2001 Hadj.


Sonair. In November 2000, the Company began operating regular private charter
------
air service for Sonair Serviceo Aereo ("Sonair") between Houston, Texas and
Luanda, Angola. The new service supports Angola's emerging petroleum industry.
Sonair is a subsidiary of Angola's National Oil Company, SONANGOL. The initial
term of the agreement is for 14 months and includes options for Sonair to renew
the agreement for up to two additional years.

                                       5
<PAGE>

Emery World Wide Airlines. The Company has provided an MD-11F freighter aircraft
-------------------------
to Emery World Wide Airlines since October 1998. The program for the aircraft,
which has been extended through December 2002, is that it primarily operates
five days per week flying round trip between Dayton, Ohio and Brussels, Belgium.


Renaissance Cruises. The Company flew one aircraft for Renaissance Cruises
-------------------
("Renaissance") from August 1999, providing exclusive air service to Europe from
New York, until the agreement was mutually terminated in late 2000.

Malaysia Airlines. World Airways provided wet lease services to Malaysia
-----------------
Airlines from 1981 to 1999 for MAS' scheduled passenger and cargo operations as
well as transporting passengers for annual Hadj pilgrimages. Naluri, which owns
11.8% of World Airways' Common Stock at December 31, 2000, also owned 29% of MAS
that it sold in February 2001. In 1999 and 1998, the Company received
approximately $7.3 million and $19.5 million, respectively, in revenue
associated with minimum guarantee payments from MAS for aircraft that were not
utilized. Effective October 1999 the Company ceased operating for MAS and in May
2000, the Company received $7 million from MAS in settlement of all aircraft
lease and operating agreements between the two companies.

The Company had a contract backlog at December 31, 2000 of $207 million,
compared to $370 million at December 31, 1999. Approximately $185 million of the
backlog relates to operations during 2001. Approximately 49% of the backlog
relates to its contracts with AMC. The decrease in the total contract backlog
reflects the termination of the agreement with Renaissance that was partially
offset by the new agreement with Sonair and the increase in the AMC fixed-buy
contract award. See Note 12 of the Company's "Notes to Financial Statements" in
Item 8 for additional information regarding major customers and foreign source
revenue.


Information concerning the classification of the Company's revenues comprising
10% or more of total operating revenues is presented in the following table (in
millions):

                                           Year Ended December 31,
                                    ------------------------------------
                                        2000         1999        1998
                                    -----------  -----------  ----------


    Passenger Charter Operations     $  211.0      $ 195.6     $ 221.9
    Cargo Charter Operations             53.0         67.6        47.7


Aircraft Fleet

As of December 31, 2000 the Company's operating fleet consisted of eight MD-11
and three DC-10-30 aircraft, all of which are operated under operating leases.
The MD-11 aircraft include five passenger aircraft (two of which are long-range
versions), one freighter aircraft and two convertible aircraft. The DC-10-30
aircraft include one freighter aircraft, one passenger aircraft, and one
convertible aircraft. The Company also has one other DC-10-30 passenger aircraft
it has removed from service and is in the process of returning it to the lessor.
In 2001, the Company is planning to take delivery of four additional DC-10-30
freighter aircraft and one additional passenger aircraft under operating leases.


Maintenance

Airframe and engine maintenance costs that account for most of the Company's
maintenance expenses typically increase as the aircraft fleet ages. The Company
outsources major airframe maintenance and engine work to several suppliers. The
Company has agreements expiring in 2005 with Delta Airlines for all off-wing
maintenance on the PW 4462 engines that power its MD-11 aircraft and repair of
MD-11 aircraft and its components.


Aviation Fuel

The Company's primary sources of aviation fuel are major oil companies at
commercial airports and from United States military organizations at military
bases. The Company's current fuel purchasing policy consists of the purchase of
fuel within seven days in advance of all flights based on current prices set by
individual suppliers. More than one supplier is under contract at several
locations. The Company purchases no fuel under long-term contracts nor does the
Company enter into futures or fuel swap contracts.

The price and availability of aviation fuel in general affects the air
transportation industry. Both the cost and availability of aviation fuel are
subject to many economic and political factors and events occurring throughout
the world and remain subject to the various unpredictable economic and market
factors that affect the supply of all petroleum products. Fluctuations in the
price of fuel have not had a significant impact on the Company's operations
because, in general, the Company's contracts with its customers that cover 93.5%
of fuel purchased limit the Company's exposure to increases in fuel prices.
However, a substantial increase in the price or the unavailability of aviation
fuel could have a material adverse effect on the air transportation industry in
general.

                                       6
<PAGE>

Regulatory Matters

Since it was founded in 1948, the Company has been authorized to engage in
commercial air transportation by the U.S. Department of Transportation ("DOT")
or its predecessor agencies. The Company is currently authorized to engage in
scheduled and charter air transportation to provide combination (persons,
property and mail) and all-cargo services between all points in the U.S., its
territories and possessions. It also holds worldwide charter authority for both
combination and all-cargo operations. In addition, the Company is authorized to
conduct scheduled combination services to the foreign points listed in its DOT
certificate. The Company also holds certificates of authority to engage in
scheduled all-cargo services to a limited number of foreign destinations. The
Company does not operate any scheduled services on its own behalf.


The Company is subject to the jurisdiction of the Federal Aviation
Administration ("FAA") with respect to aircraft maintenance, flight operations,
equipment, aircraft noise, ground facilities, dispatch, communications,
training, weather observation, flight time, crew qualifications, aircraft
registration and other matters affecting air safety. The FAA requires air
carriers to obtain an operating certificate and operations specifications
authorizing the carriers to operate to particular airports on approved
international routes using specified equipment. These certificates and
specifications are subject to amendment, suspension, revocation, or termination
by the FAA. In addition, all of the Company's aircraft must have and maintain
certificates of airworthiness issued or approved by the FAA. The Company
currently holds an FAA air carrier operating certificate and operations
specifications under Part 121 of the Federal Aviation Regulations. The FAA has
the authority to suspend temporarily or revoke permanently the authority of the
Company or its licensed personnel for failure to comply with regulations
promulgated by the FAA and to assess civil penalties for such failures.

Under the Airport Noise and Capacity Act of 1990 and related FAA regulations,
the Company's aircraft must comply with certain Stage 3 noise restrictions. All
of the Company's aircraft meet the Stage 3 noise restrictions, which is
currently the most stringent FAA noise requirement. FAA regulations also require
compliance with the Traffic Alert and Collision Avoidance System ("TCAS"),
approved airborne windshear warning system and aging aircraft regulations, all
of which the Company is currently in compliance with.

In 2000, the FAA issued an Airworthiness Directive ("AD") that will require the
replacement of insulation blankets on the Company's MD-11 aircraft by June 2005.
The Company has begun replacement of the affected insulation blankets on MD-11
aircraft. This is being accomplished in phases, during scheduled maintenance
work, to minimize the impact on operational availability. The Company presently
estimates that the cost of the replacement, including labor and material will
total less than $2.0 million per aircraft.

As of December 31, 2000, the FAA has also issued a modification requirement that
all aircraft have expanded recording capabilities by August 2001 through the
installation of Digital Flight Data Recorders. The Company estimates the cost of
installing such recorders in its fleet will be approximately $0.5 million. It is
also expected that the FAA will issue a rule that will require the Company to
install Enhanced Ground Proximity Warning Systems in its aircraft. The Company
currently estimates the cost of such installation will be approximately $65,000
per aircraft. The FAA has also issued a proposed rule that will require the
Company to modify the engine thrust reversers on its DC-10 aircraft. It is
expected the modifications will have to be completed by February 2005 and will
cost approximately $0.6 million per aircraft.

Additional laws and regulations have been considered from time to time which
could significantly increase the cost of airline operations by imposing
additional requirements or restrictions on operations. Laws and regulations have
been considered from time to time that would prohibit or restrict the ownership
and transfer of airline routes. There is no assurance that laws and regulations
currently enacted or enacted in the future will not adversely affect the
Company's ability to maintain its current level of operations.

Several aspects of airline operations are subject to regulation or oversight by
Federal agencies other than the DOT or FAA. For instance, labor relations in the
air transportation industry are generally regulated under the Railway Labor Act,
which vests in the National Mediation Board certain regulatory powers with
respect to disputes between airlines and labor unions arising under collective
bargaining agreements. In addition, the Company is subject to the jurisdiction
of other governmental entities, including (i) the Federal Communications
Commission ("FCC") regarding its use of radio facilities pursuant to the Federal
Communications Act of 1934, as amended, (ii) the Commerce Department, the
Customs Service, the Immigration and Naturalization Service, and the Animal and
Plant Health Inspection Service of the Department of Agriculture regarding the
Company's international operations, (iii) the Environmental Protection Agency
(the "EPA") regarding compliance with standards for aircraft exhaust emissions
and (iv) the Department of Justice regarding certain merger and acquisition
transactions. The EPA regulates operations, including air carrier operations,
which affect the quality of air in the U.S. The Company believes it is in full
compliance with all applicable regulatory requirements.


The Company's international operations are generally governed by a network of
bilateral civil air transport agreements providing for the exchange of traffic
rights between governments which then select and designate air carriers
authorized to exercise such rights. In the absence of a bilateral agreement,
such international air services are governed by principles of comity and
reciprocity. Bilateral provisions pertaining to the wet lease services in which
the Company is engaged vary considerably depending on the particular country.
Most bilateral agreements into which the U.S. has entered permit either country
to terminate the agreement with one year's notifi-

                                       7
<PAGE>

cation to the other. In the event a bilateral agreement is terminated,
international air service between the affected countries is governed by the
principles of comity and reciprocity.

Pursuant to federal law, no more than 25% of the voting interest in the Company
may be owned or controlled by foreign citizens. In addition, under existing
precedent and policy, actual control must reside in U.S. citizens. As a matter
of regulatory policy, the DOT has stated that it would not permit aggregate
equity ownership of a domestic air carrier by foreign citizens in an amount in
excess of 49%. The Company believes it fully complies as of the date hereof with
U.S. citizen ownership requirements.

Due to its participation in the CRAF program of the USAF, the Company is subject
to inspections approximately every two years by the military as a condition of
retaining its eligibility to perform military charter flights. The last such
inspection was undertaken in 2000 and the next is anticipated to occur in 2002.
As a result of such inspections, the Company has been required to implement
measures, such as the establishment of a crew resource management course, beyond
those required by the DOT, FAA and other government agencies. The USAF may
terminate its contract with the Company if the Company fails to pass such
inspection or otherwise fails to maintain satisfactory performance levels, if
the Company loses its airworthiness certificate or if the aircraft pledged to
the contracts lose their U.S. registry or are leased to unapproved carriers.

The Company believes it is in compliance in all material respects with all
requirements necessary to maintain in good standing its operating authority
granted by the DOT and its air carrier operating certificate issued by the FAA.
A modification, suspension, or revocation of any of the Company's DOT or FAA
authorizations or certificates could have a material adverse effect upon the
Company. The Company also is subject to state and local laws and regulations at
locations where it operates and the regulations of various local authorities,
which operate the airports it serves. Certain airport operations have adopted
local regulations that, among other things, impose curfews and noise abatement
regulations. While the Company 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 the Company therewith or the
revocation or suspension of licenses or authorities could have a material
adverse effect on the Company.


Employees

As of December 31, 2000, the Company had 955 full time equivalent employees
classified as follows:

    Classification                       Employees        %
    --------------                       ----------     ------
    Management                                12           1.3
    Administrative and Operations            274          28.7
    Cockpit Crew                             295          30.9
    Flight Attendants                        374          39.1
                                           -----        ------
         Total Employees                     955         100.0
                                           =====        ======


The Company's cockpit crewmembers are represented by the International
Brotherhood of Teamsters (the "Teamsters") and are subject to a collective
bargaining agreement that will be amendable June 30, 2003.

The Company's flight attendants are also represented by the Teamsters and are
subject to a four-year collective bargaining agreement that became amendable
June 30, 2000. In 1994, the Company's flight attendants argued that the "scope
clause" of the collective bargaining agreement has been violated by the
Company's use of foreign flight attendant crews on the Company's flights for
Garuda Indonesia which has historically been the Company's operating procedure.
In contracts with certain customers, the Company is obligated to permit its
customers to deploy their own flight attendants. While the arbitrator in this
matter denied in 1997 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. Since
1997, the flight attendants have filed a number of similar "scope clause"
grievances with respect to other wet-lease contracts and in January 2000 they
filed another "scope clause" grievance with respect to the 2000 Garuda Hadj
agreement. An adverse decision on one or more of the grievances could have a
material adverse impact on the financial condition or results of operations of
World Airways.


The Company's aircraft dispatchers, who are represented by the Transport Workers
Union (the "TWU") are subject to a collective bargaining agreement that will be
amendable December 31, 2003. Fewer than 15 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 will elect to be represented by a labor union or
collective bargaining unit. The Company is not aware of any parties or group of
employees who have indicated any intent of petitioning for such an election. The
election by such employees of representation in such an organization could
result in

                                       8
<PAGE>

employee compensation and working condition demands that could have a material
adverse effect on the financial results of the Company.

Item 2.  Properties

Flight Equipment

At December 31, 2000, the Company's operating fleet consisted of 11 leased
aircraft as follows:

<TABLE>
<CAPTION>
                                                         Capacity
                                          -------------------------------------
           Aircraft(a)                    Passenger (Seats)/(b)/   Cargo (Tons)     Total
           -----------                    ---------------------    ------------     -----
<S>                                       <C>                      <C>              <C>
    McDonnell Douglas MD-11                       409                     --           3
    McDonnell Douglas MD-11F                       --                     95           1
    McDonnell Douglas MD-11CF                     410                     90           2
    McDonnell Douglas MD-11ER                     409                     --           2
    McDonnell Douglas DC-10-30                    355                     --           1
    McDonnell Douglas DC-10-30F                    --                     74           1
    McDonnell Douglas DC-10-30CF                  380                     64           1
                                                                                    -----
       Total                                                                          11
                                                                                    =====
</TABLE>

Notes
(a) "F" aircraft are freighters; "CF" are convertible freighters and may operate
    in either passenger or freight configurations. "ER" aircraft have
    extended-range capabilities.

(b) Based on maximum operating configurations. Other configurations are
    occasionally used.


The lease terms for six of the MD-11 aircraft expire in 2005 and 2006, and in
2020 for the two MD-11ER aircraft (assuming the exercise of 12-year lease
extensions). In 1999, in conjunction with amending the leases for the two
MD-11ER aircraft, the lessor obtained the right, if the Company fails to meet
certain financial performance requirements, that allows the lessor to cancel the
lease of the aircraft with 12 months notice. At December 31, 2000, the Company
was in compliance with the financial performance requirements. The lease terms
for the DC-10-30 aircraft expire in 2003. The Company also had one other
DC-10-30 passenger aircraft it had removed from service in 2000 and returned to
the lessor in February 2001.

In 2001, the Company is scheduled to take delivery of four additional DC-10-30
freighter aircraft - two under three-year operating leases and two under
seven-year operating leases - and an additional DC-10-30 passenger aircraft
under a three-year operating lease.


Ground Facilities

The Company leases office space located near Washington Dulles International
Airport, which houses its corporate headquarters and substantially all of the
administrative employees of the Company. In 2000, the Company announced that it
would be moving these offices to Peachtree City near Atlanta, GA. It is expected
the move will be completed in the second quarter of 2001 and in connection
therewith the Company signed a 15-year lease for an office facility there.

Also, the Company leases office and warehouse space in New York, New York;
Wilmington, Delaware; Los Angeles, California; Yokota, Japan; and Frankfurt,
Germany. Additional small office and maintenance material storage space is
leased at often frequented airports to provide administrative and maintenance
support for commercial and military contracts.


Item 3.  Legal Proceedings

A claim has been filed in Germany against the Company by a tour operator seeking
approximately $3.5 million in compensation related to the cancellation of a
summer program in 1996. The Company believes it has substantial defenses to this
action, although no assurance can be given of the eventual outcome of this
litigation.

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

                                       9
<PAGE>

Item 4.  Submission Of Matters To A Vote Of Securities Holders

No matters were submitted to a vote of securities holders during the fourth
quarter of 2000.

PART II


Item 5.  Market For Registrant's Common Equity And Related Stockholder Matters

The Company's Common Stock currently trades on the Nasdaq SmallCap Market of The
Nasdaq-Amex Market Group/SM/ under the symbol: WLDAC. The high and low bid
prices of the Company's Common Stock, as reported by Nasdaq, for each quarter in
the last two fiscal years are as follows:

<TABLE>
<CAPTION>
                                                   Common Stock
                                               ----------------------
                                                High            Low
                                               -------        -------
<S>                                            <C>            <C>
      2000
      ----
      Fourth Quarter........................    1 5/8           5/8
      Third Quarter.........................    1 3/16          5/8
      Second Quarter........................    1 1/32          1/2
      First Quarter.........................    1 1/2           23/32

      1999
      ----
      Fourth Quarter........................    1 3/16          3/4
      Third Quarter.........................    1 5/8           1
      Second Quarter........................    2 1/4           1
      First Quarter.........................    1 1/2           1
</TABLE>

The Company has not declared or paid any cash dividends or distributions on its
Common Stock since 1992. The Company currently intends to retain future earnings
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, capital expenditure plans
of the Company, provisions of certain financing instruments as well as such
other factors as the Board of Directors, in its sole discretion, may consider
relevant.

A Credit Agreement with GMAC Financial Corporation (the "Credit Agreement")
contains restrictions on the Company's ability to pay dividends or make any
distributions of Common Stock in excess of 5% of the total aggregate outstanding
amount of stock, except that the Company may make quarterly dividends so long as
in any six month period, such dividends do not exceed 50% of the Company's
aggregate net income for the previous six months.


The approximate number of shareholders of record at December 31, 2000 is 622,
and does not include those shareholders who hold shares in street name accounts.

                                       10
<PAGE>

Item 6.   Selected Financial Data

The following selected financial data are derived from the audited financial
statements of the Company. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and notes thereto.


                              WORLD AIRWAYS, INC.
                            Selected Financial Data

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                       ----------------------------------------------------------------------
                                                          2000           1999           1998           1997           1996
                                                          ----           ----           ----           ----           ----
                                                                        (in thousands except per share data)
<S>                                                    <C>             <C>            <C>            <C>            <C>
Results of operations:
Operating revenues                                     $  264,033      $ 263,998      $ 271,149      $ 309,412      $ 309,587
Operating expenses                                        262,926        274,247        274,317        292,555        287,942
Operating income (loss)                                     1,107        (10,249)        (3,168)        16,857         21,645
Earnings (loss) from continuing
    operations before income taxes,
    extraordinary item and accounting change               (3,159)       (13,653)       (10,905)        12,230         19,032
Earnings (loss) from continuing operations
    before extraordinary item and
    accounting change                                      (3,159)       (13,653)       (11,032)        11,967         18,353
Discontinued operations                                        --             --             --           (515)       (32,375)
Extraordinary item                                             --          6,030             --             --             --
Accounting change                                          22,744             --             --             --             --
Net earnings (loss)                                        19,585         (7,623)       (11,032)        11,452        (14,022)
Cash dividends                                                 --             --             --             --             --
Basic earnings (loss) per common share:
    Continuing operations                                   (0.33)         (2.04)         (1.54)          1.16           1.55
    Discontinued operations                                    --             --             --          (0.05)         (2.74)
    Extraordinary item                                         --           0.90             --             --             --
    Accounting change                                        2.36             --             --             --             --
    Net earnings (loss)                                      2.03          (1.14)         (1.54)          1.11          (1.19)
    Weighted average Common Stock outstanding               9,641          6,692          7,161         10,302         11,806
Diluted earnings (loss) per common share:
    Continuing operations                                   (0.33)         (2.04)         (1.54)          1.09           1.55
    Discontinued operations                                    --             --             --          (0.05)         (2.74)
    Extraordinary item                                         --           0.90             --             --             --
    Accounting change                                        2.36             --             --             --             --
    Net earnings (loss)                                      2.03          (1.14)         (1.54)          1.04          (1.19)
    Weighted average Common Stock and common
        equivalent shares outstanding                       9,641          6,692          7,161         12,279         11,806
Pro forma amounts assuming new method
    of accounting is applied retroactively
    (unaudited):
        Earnings (loss) before discontinued
           operations and extraordinary item           $   (3,159)     $  (7,810)     $  (5,236)     $   8,035      $  23,714
        Net earnings (loss)                                (3,159)        (1,780)        (5,236)         7,257         (9,340)
    Basic earnings (loss) per share:
        Before discontinued operations and
           extraordinary item                               (0.33)         (1.17)         (0.73)          0.78           2.01
        Net earnings (loss)                                 (0.33)         (0.27)         (0.73)          0.70          (0.79)
    Diluted earnings (loss) per share:
        Before discontinued operations and
           extraordinary item                               (0.33)         (1.17)         (0.73)          0.65           2.01
        Net earnings (loss)                                 (0.33)         (0.27)         (0.73)          0.59          (0.79)
</TABLE>

                                       11
<PAGE>

<TABLE>
<S>                                                    <C>             <C>            <C>            <C>            <C>
Financial Position:
Cash and short-term investments                        $   15,682      $  12,406      $  16,893      $  25,887      $   8,075
Total assets                                              113,890        109,736        116,437        149,148        127,524
Notes payable and long-term obligations including
    current maturities                                     64,024         63,287         80,492         88,966         50,538
Stockholders' equity (deficiency)                          (7,280)       (29,838)       (23,627)        (4,771)         8,362
</TABLE>

Item 7.   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 as
reflected in its financial statements.

Results Of Operations

General

While the Company generated operating income in 1996, 1997 and in 2000, it
sustained operating losses in 1998 and 1999. For 1998, the Company had an
operating loss of $3.2 million and a net loss of $11.0 million. For 1999, the
Company had an operating loss of $10.2 million and a loss before extraordinary
item of $13.7 million. The Company's net loss after extraordinary gains on the
extinguishment of debt of $6.0 million was $7.6 million. For 2000 the Company
had operating income of $1.1 million and a loss of $3.2 million before the $22.7
million cumulative effect of a change in accounting. For 2000 after the
cumulative effect of the accounting change, the Company had net income of $19.6
million.


Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

During the third quarter ended September 30, 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 nonrefundable 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 was $22.7 million.

Total block hours decreased 2,286 hours, or 6.8 %, to 31,309 hours in 2000 from
33,595 hours in 1999, with an average of 10.1 available aircraft per day in 2000
compared to 10.9 in 1999. Average daily utilization (block hours flown per day
per aircraft) increased to 8.5 hours in 2000 from 8.4 hours in 1999. In 2000,
the Company obtained a higher percentage of its revenues under full service
contracts than in 1999. In 2000, full service contracts accounted for 46.1% of
total block hours and 63.0% of total revenues, compared to 40.1% and 57.3%,
respectively, in 1999.

Operating Revenues. Although operating revenues were the same each year at $264
------------------
million, revenue per block hour flown increased to $8,433 in 2000 from $7,858 in
1999. Also, in 1999 the Company received approximately $7.3 million in revenue
associated with minimum guarantee payments from MAS. No similar payments were
received in 2000.

Operating Expenses. Total operating expenses decreased to $262.9 million in 2000
------------------
from $274.2 million in 1999. Total operating expenses for 2000 were reduced by a
$7.0 million contract dispute settlement received from a former customer.

Flight expenses include all expenses related directly to the operation of the
aircraft other than maintenance, aircraft rent, and fuel. Also included are
expenses related to flight dispatch and flight operations administration. Flight
expenses increased $9.4 million, or 12%, in 2000 to $88.2 million from $78.8
million in 1999. This increase resulted primarily from increases in flight
attendant costs and passenger food costs due to more full service flying.

Maintenance expenses decreased $13.5 million, or 27.8%, in 2000 to $34.9 million
from $48.4 million in 1999. This decrease resulted from a number of reasons
including the change in accounting, the reduction in block hours flown and a
decrease in the average number of aircraft from 10.9 to 10.1. If the new method
of accounting that was adopted effective January 1, 2000 had been implemented
for 1999, maintenance expenses for 1999 would have been $5.8 million lower.
The Company also recorded a credit of $3.0 million for engine parts that were
recovered in the fourth quarter of 2000. These parts are included in equipment
and property at December 31, 2000.

Aircraft costs decreased $5.6 million, or 7.3%, in 2000 to $70.5 million from
$76.1 million in 1999. This decrease principally reflects reductions in the
lease rates for the fleet of MD-11 aircraft and the return of two DC 10-30
aircraft in the second quarter of 1999.

                                       12
<PAGE>

Fuel expenses increased $5.0 million, or 21.7%, in 2000 to $28 million from
$23.0 million in 1999. This increase reflects the increase in full service block
hours flown together with an increase in average fuel prices per gallon to $0.76
in 2000 from $0.68 in 1999. The Company is generally able to pass fuel cost
increases through to its customers.

Depreciation and amortization decreased $1.6 million, or 19.3%, in 2000 to $6.6
million from $8.2 million in 1999. This decrease resulted primarily from a
decrease resulting from the sale and leaseback of an engine in the first quarter
of 2000 and the ending of amortization of an intangible asset in 1999.

Sales, general and administrative expenses decreased $2.3 million, or 7.5%, in
2000 to $28.3 million from $30.6 million in 1999. This decrease principally
reflects the effect of cost control measures the Company has implemented in
personnel costs in recent years.

Interest expense decreased $0.9 million in 2000 to $5.4 million from $6.3 in
1999. This decrease resulted from reductions in the average amount of debt
outstanding.

Other non-operating income in 1999 includes gains of approximately $2 million on
the sale of the Company's interest in an unaffiliated communications company.
There were no comparable gains in 2000.


Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Total block hours decreased 1,938 hours, or 5.5%, to 33,595 hours in 1999 from
35,533 hours in 1998, with an average of 10.9 available aircraft per day in 1999
compared to 12 in 1998. Average daily utilization (block hours flown per day per
aircraft) increased to 8.4 hours in 1999 from 8.1 hours in 1998. In 1999, the
Company continued to obtain a higher percentage of its revenues under wet lease
contracts as opposed to full service contracts. In 1999, full service contracts
accounted for 40.1% of total block hours compared with 27.6% in 1998.

Operating Revenues. Operating revenues decreased $7 million, or 2.6%, to $264
------------------
million in 1999 from $271 million in 1998. This decrease was primarily
attributable to the decrease in block hours flown, partially offset by a shift
in business from ACMI flying to full service flying. Also, in 1999 the Company
received approximately $7.3 million in revenue associated with minimum guarantee
payments from MAS versus approximately $19.5 million in 1998.

Operating  Expenses. Total operating expenses were flat year over year, $274.2
-------------------
million in 1999 compared to 274.3 million in 1998

Flight expenses include all expenses related directly to the operation of the
aircraft other than maintenance, aircraft rent, and fuel. Also included are
expenses related to flight dispatch and flight operations administration. Flight
expenses increased $10.4 million, or 15.2%, in 1999 to $78.8 million from $68.4
million in 1998. This increase resulted primarily from increases in flight
attendant costs and passenger food due to the shift to more full service flying.

Maintenance expenses decreased $2.0 million, or 4.0%, in 1999 to $48.4 million
from $50.4 million in 1998. This decrease resulted primarily from a decrease in
the average number of aircraft from 12 to 10.9 and the reduction in hours flown.
This was partially offset by the normal increase in maintenance costs generally
experienced with aging aircraft. In addition, the Company experienced an
increase in costs associated with the MD-11 aircraft and related engines as a
result of certain manufacturer guarantees and warranties that expired in 1998
and maintenance costs that increased pursuant to contractual agreements.

Aircraft costs decreased $8.7 million, or 10.3%, in 1999 to $76.1 million from
$84.8 million in 1998. This decrease principally reflects reductions in the
lease rates for the fleet of MD-11 aircraft and the return of two DC 10-30
aircraft in the second quarter of 1999.

Fuel expenses increased $4 million, or 21%, in 1999 to $23 million from $19.0
million in 1998. This increase reflects the increase in full service block hours
flown partially offset by a decrease in average fuel prices from $0.85 in 1998
to $0.68 in 1999. The Company is generally able to pass fuel cost increases
through to its customers.

Commissions decreased $2.3 million in 1999 to $6.6 million from $8.9 million in
1998. This decrease resulted from the end of a Philippine Airlines contract in
February 1998 and reduced expenses incurred in connection with reduced revenues
relating to a decrease in AMC flying.

Depreciation and amortization decreased $0.3 million, or 4%, in 1999 to $8.2
million from $8.5 million in 1998. This decrease resulted primarily from a
decrease in both the depreciation of DC-10 leasehold improvements and
amortization of other assets, partially offset by an increase in the
depreciation of owned engines.

                                       13
<PAGE>

Sales, general and administrative expenses decreased $2.3 million, or 7.2%, in
1999 to $30.6 million from $32.9 million in 1998. This decrease principally
reflects a $1.3 million decrease in general insurance costs.

Interest expense decreased $1.1 million in 1999 to $6.3 million from $7.4 in
1998. This decrease resulted from reductions in the average amount of debt
outstanding.

Other non-operating income includes gains of approximately $2 million on the
sale of the Company's interest in an unaffiliated communications company. There
were no comparable gains in 1998.

Extraordinary Gain. In 1999, the Company acquired $8.2 million of its
------------------
outstanding 8% Debentures for cash and Treasury Stock at a discount of
approximately 75% resulting in extraordinary gains of $6 million.


Liquidity and Capital Resources

World Airways' cash and short-term investments at December 31, 2000 totaled
$15.7 million. As is common in the airline industry, the Company operates with a
working capital deficit. At December 31, 2000, World Airways' current assets
were $39.4 million and current liabilities were $53.6 million.

World Airways is highly leveraged. As of December 31, 2000, the Company had
outstanding long-term debt and capital leases of $49 million, and notes payable
and current maturities of long-term obligations of $15 million. In addition, the
Company has significant long-term obligations relating to operating leases for
aircraft.

The Company has historically financed working capital and capital expenditure
requirements out of cash flow from operating activities, sales of Common Stock,
secured borrowings, and other financings. The degree to which the Company is
leveraged could have important consequences including: (i) World Airways'
ability to obtain additional financing in the future for working capital,
capital expenditures 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, may make it more vulnerable than some of its
competitors in a prolonged economic downturn; and (iv) World Airways' financial
position may restrict its ability to pursue new business opportunities and limit
its flexibility in responding to changing business conditions.

Although there can be no assurances, World Airways believes that the combination
of its existing contracts and additional business which it expects to obtain,
along with its existing cash, and financing arrangements, will be sufficient to
allow the Company to meet its cash requirements related to operating and capital
requirements for 2001.

Also, in February 2000, the Company implemented an 18-month salary exchange
program for most of its employees. Under the program, participating employees
are exchanging up to 10% of wages for Common Stock on the basis of one share of
stock for each $1.19375 of wages exchanged. The exchange rate was determined
from average stock prices coinciding to when the Board of Directors approved the
program. It is expected the program will produce total cash savings of
approximately $5.4 million during the 18-month program and result in the
issuance of approximately 4.5 million shares of Common Stock. Approximately 3.7
million shares were issued as restricted shares following the beginning of the
program. Employees are able to vote the restricted shares but are not able to
sell the shares until the end of the program. Expense associated with the value
of the shares is being recognized over the 18-month period. If an employee
leaves the Company during the program, a pro-rata portion of the shares are
returned to the Company.


Cash Flows from Operating Activities

Operating activities used $2.3 million in cash for the year ended December 31,
2000 compared to providing $7.8 million in 1999. The decrease in cash in 2000
resulted from the reduced loss from continuing operations in 2000 that was
partially offset by increases in accounts receivables, prepaid expenses and
aircraft lease deposits.


Cash Flows from Investing Activities

Investing activities used $1.6 million in cash for the year ended December 31,
2000, compared to $3.1 million in 1999. In 2000, $2.5 million of cash was used
primarily for the purchase of aircraft parts and $0.7 million was generated by
the maturing of marketable securities. In 1999, $2.1 million of cash was used
for the acquisition of aircraft parts and $2.4 million was used to purchase
marketable securities.


Cash Flows from Financing Activities

                                       14
<PAGE>

Financing activities generated $6.6 million in cash for the year ended December
31, 2000 compared to using $9.9 million in 1999. In 2000, $7.1 million of cash
was generated through increased borrowings, $6.1 million was generated through
the sale/leaseback transaction of an engine and $6.4 million was used for the
repayment of debt. In 1999, cash was principally used for the repayment of debt.


Capital Commitments/Financing Developments

The FAA has issued and proposed a number of Airworthiness Directives ("AD's")
that will require the Company to make modifications to its aircraft. One AD
requires the replacement of insulation blankets on the Company's MD-11 aircraft
by June 2005 that is expected to cost less than $2.0 million per aircraft. One
proposed AD would require the modification of thrust reversers on the Company's
DC-10-30 aircraft by February 2005 that is estimated to cost approximately $0.6
million per aircraft. See "Regulatory Matters" in Item 1. The Company expects to
finance the cost of the AD's through internally generated funds.

World Airways' capital expenditures for 2001 other than the cost of AD's are
currently expected to be approximately $1.5 million, principally for the
purchase of aircraft related assets, which it expects to finance from working
capital.

At December 31, 2000, the Company has placed deposits for four DC-10-30F
freighter aircraft that it is scheduled to take delivery of in 2001. Two of the
aircraft will be leased under three-year operating leases and two under seven-
year operating leases. In the event that World Airways leases additional
aircraft, particularly if they are of a different type than currently operated,
the Company may have to make expenditures for deposits and additional spare
engines and parts. No assurances can be given, however, that the Company will
obtain all of the financing required for such capital expenditures.

The Company is scheduled to relocate its corporate headquarters from Virginia to
Peachtree City, near Atlanta, Georgia in 2001. It is expected the move, which is
planned to be completed in the second quarter, will be financed from internally
generated funds. In connection therewith the company signed a 15-year lease for
the facility beginning May 1, 2001.

In 1996, in conjunction with leasing two MD-11ER aircraft the Company agreed to
assume leases of one or two MD-11F freighter aircraft for the remainder of their
24-year leases (that commenced in November and December 1995), in the event that
the existing lessee terminates its lease with the lessor. As of the date hereof,
the Company does not know if the existing lessee intends to terminate the
existing lease or not. As part of the agreement for the aircraft, the lessor
provided spare parts financing of which approximately $1.1 million is still
available.


Other Matters

Inflation

The Company believes that neither inflation nor changing prices have had a
material effect on the Company's revenues during the past three years.


Item 7a.   Quantitative And Qualitative Disclosures About Market Risk

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

With respect to interest rate risks, at December 31, 2000 interest rates on all
of the Company's long-term debt and capitalized lease obligations aggregating
$52.5 million are fixed. Borrowings under the Company's Credit Agreement, $11.5
million at December 31, 2000, bear interest at prime plus 1%. Based on the
average outstanding month-end balances during 2000 each 1% change in the prime
rate would have increased or decreased the Company's interest cost by
approximately $66,700. Based on the balance outstanding at December 31, 2000
each 1% change in the prime rate will increase or decrease the Company's
interest cost by approximately $115,300 on an annual basis. See Notes 7 and 8 of
"Notes to Financial Statements" in Item 8. The Company has not entered into any
obligations for trading purposes.

With respect to foreign currency exchange rate risks, although a significant
percentage of the Company's revenues are derived from foreign customers, all
revenues and substantially all expenses are denominated in U.S. dollars. The
Company maintains minimal balances in foreign bank accounts to facilitate the
payment of expenses. See Note 13 of "Notes to Financial Statements" in Item 8.

The Company is not exposed to commodity price risks except with respect to the
purchase of aviation fuel. However, fluctuations in the price of fuel have not
had a significant impact on the Company's operations in recent years because, in
general, the Company's contracts with its customers limit the Company's exposure
to increases in fuel prices. The Company purchases no fuel under long-term
contracts nor does the Company enter into futures or swap contracts.

                                       15
<PAGE>

Item 8.  Financial Statements And Supplementary Data

                              WORLD AIRWAYS, INC.
                                BALANCE SHEETS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                             ------------
                                                                           2000        1999
                                                                           ----        ----
<S>                                                                    <C>            <C>
ASSETS
Current assets
    Cash and cash equivalents, including restricted cash of $2,828
        in 2000 and $2,387 in 1999                                     $  14,386      $ 11,725
    Short-term marketable investments                                      1,296           681
    Accounts receivable, less allowance for doubtful accounts
        of $331 in 2000 and $1,848 in 1999                                15,758        11,225
    Prepaid expenses and other current assets                              7,922         6,647
                                                                       ---------      --------
        Total current assets                                              39,362        30,278

Equipment and property
    Flight and other equipment                                            88,845        90,150
    Equipment under capital leases                                         9,463        10,262
                                                                       ---------      --------
                                                                          98,308       100,412
    Less: accumulated depreciation and amortization                       41,974        38,306
                                                                       ---------      --------
        Net equipment and property                                        56,334        62,106

Assets held for sale                                                       1,215         1,315

Long-term deposits                                                        15,848        13,414

Marketable investments                                                       389         1,688

Other assets and deferred charges, net of amortization of $817
    in 2000 and $624 in 1999                                                 742           935
                                                                       ---------      --------
Total assets                                                           $ 113,890      $109,736
                                                                       =========      ========
</TABLE>

                                       16
<PAGE>

                              WORLD AIRWAYS, INC.
                                BALANCE SHEETS
                      (in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                         ------------
                                                                                     2000           1999
                                                                                     ----           ----
<S>                                                                               <C>           <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
    Notes payable                                                                 $  11,532     $   5,079
    Current maturities of long-term obligations                                       3,523         6,096
    Accounts payable                                                                 19,138        19,453
    Unearned revenue                                                                  6,278         4,152
    Accrued maintenance                                                               2,182        22,807
    Accrued salaries and wages                                                        8,250         8,510
    Accrued taxes                                                                     1,539         2,835
    Other accrued liabilities                                                         1,121         1,127
                                                                                  ---------     ---------
        Total current liabilities                                                    53,563        70,059
                                                                                  ---------     ---------

Long-term obligations, net of current maturities                                     48,969        52,112

Other liabilities
    Deferred gain from sale-leaseback transactions, net of accumulated
        amortization of $10,313 in 2000 and $22,269 in 1999                           3,351         3,083
    Accrued post-retirement benefits                                                  2,992         2,907
    Deferred rent                                                                    12,295        11,413
                                                                                  ---------     ---------
        Total other liabilities                                                      18,638        17,403
                                                                                  ---------     ---------
Total liabilities                                                                   121,170       139,574
                                                                                  ---------     ---------
Stockholders' deficiency
    Preferred Stock, $.001 par value (5,000,000 shares
         authorized and no shares issued or outstanding)                                 --            --
    Common Stock, $.001 par value (40,000,000 shares authorized;
        12,147,141 shares issued; 10,334,480 outstanding in
        2000 and 6,446,416 outstanding in 1999)                                          12            12
    Additional paid-in capital                                                       23,980        46,857
    Deferred compensation, employee salary exchange program                          (1,735)           --
    Accumulated deficit                                                             (16,387)      (35,972)
    Treasury stock, at cost (Common Stock--1,812,661 shares in 2000
        and 5,700,725 shares in 1999)                                               (13,150)      (40,735)
                                                                                  ---------     ---------
           Total stockholders' deficiency                                            (7,280)      (29,838)
                                                                                  ---------     ---------
Commitments and contingencies

Total liabilities and stockholders' deficiency                                    $ 113,890     $ 109,736
                                                                                  =========     =========
</TABLE>

                 See accompanying Notes to Financial Statements

                                       17
<PAGE>

                              WORLD AIRWAYS, INC.
                           STATEMENTS OF OPERATIONS
                    (in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                     ------------------------
                                                                   2000        1999      1998
                                                                   ----        ----      ----
<S>                                                            <C>         <C>         <C>
Operating revenues
    Flight operations                                          $ 263,067   $ 263,156   $ 270,630
    Other                                                            966         842         519
                                                               ---------   ---------   ---------
        Total operating revenue                                  264,033     263,998     271,149
                                                               ---------   ---------   ---------
Operating expenses
    Flight                                                        88,238      78,802      68,422
    Maintenance                                                   34,930      48,411      50,444
    Aircraft costs                                                70,508      76,079      84,850
    Fuel                                                          27,972      22,986      19,012
    Flight operations subcontracted to other carriers              6,943       2,650       1,295
    Commissions                                                    6,450       6,594       8,855
    Depreciation and amortization                                  6,590       8,165       8,503
    Sales, general, and administrative                            28,270      30,560      32,936
    Settlement of contract dispute                                (6,975)         --          --
                                                               ---------   ---------   ---------
        Total operating expenses                                 262,926     274,247     274,317
                                                               ---------   ---------   ---------
Operating income (loss)                                            1,107     (10,249)     (3,168)
Other income (expense)
    Interest expense                                              (5,442)     (6,299)     (7,363)
    Interest income                                                1,021         917         873
    Other, net                                                       155       1,978      (1,247)
                                                               ---------   ---------   ---------
        Total other, net                                          (4,266)     (3,404)     (7,737)
                                                               ---------   ---------   ---------
Earnings (loss) before income taxes, extraordinary item
    and cumulative effect of accounting change                    (3,159)    (13,653)    (10,905)
Income tax expense                                                    --          --        (127)
                                                               ---------   ---------   ---------
Earnings (loss) before extraordinary item and
    accounting change                                             (3,159)    (13,653)    (11,032)
Extraordinary item - gain on extinguishment of debt                   --       6,030          --
Cumulative effect of change in method of accounting
    for certain maintenance costs                                 22,744          --          --
                                                               ---------   ---------   ---------
    Net earnings (loss)                                        $  19,585   $  (7,623)  $ (11,032)
                                                               =========   =========   =========
Basic and diluted earnings (loss) per share:
    Earnings (loss) before extraordinary item and cumulative
        effect of accounting change                            $   (0.33)  $   (2.04)  $   (1.54)
    Extraordinary item                                                --        0.90          --
    Cumulative effect of accounting change                          2.36          --          --
                                                               ---------   ---------   ---------
        Net earnings (loss)                                    $    2.03   $   (1.14)  $   (1.54)
                                                               =========   =========   =========
Weighted average shares outstanding                                9,641       6,692       7,161
                                                               =========   =========   =========
Pro forma amounts assuming new method of accounting is
    applied retroactively (unaudited):
        Earnings (loss) before extraordinary item              $  (3,159)  $  (7,810)  $  (5,236)
        Net earnings (loss)                                       (3,159)     (1,780)     (5,236)
    Basic and diluted earnings (loss) per share:
        Before extraordinary item                                  (0.33)      (1.17)      (0.73)
        Net earnings (loss)                                        (0.33)      (0.27)      (0.73)
</TABLE>

                 See accompanying Notes to Financial Statements

                                       18
<PAGE>

                              WORLD AIRWAYS, INC.
                             STATEMENTS OF CHANGES
                          IN STOCKHOLDERS' DEFICIENCY
                 Years ended December 31, 2000, 1999, and 1998
                      (in thousands except share amounts)

<TABLE>
<CAPTION>
                                                Additional                                 Treasury                     Total
                                     Common      Paid-In       Deferred      Accumulated    Stock,                    Stockholders'
                                     Stock       Capital      Compensation    Deficit      at Cost        Other       Deficiency
                                     -----       -------      ------------    -------      -------        -----       ----------
<S>                               <C>           <C>           <C>           <C>            <C>           <C>          <C>
Balance at
   December 31, 1997              $      12     $  45,522     $      --     $(17,554)      $(32,524)     $   (227)     $ (4,771)
Common Stock purchases
   (1,003,000 shares)                    --            --            --           --         (6,857)           --        (6,857)
Issuance of note receivable-
   WorldCorp, net                        --            --            --          152             --        (1,346)       (1,194)
ESSOP Guaranteed Bank
   Loan Payments                         --            --            --           --             --           227           227
Net earnings (loss)                      --            --            --      (11,032)            --            --       (11,032)
                                  ---------     ---------     ---------     --------       --------      --------      --------
Balance at
   December 31, 1998                     12        45,522            --      (28,434)       (39,381)       (1,346)      (23,627)
8% Debentures converted
   into 137,000 shares of
   Common Stock                                     1,207                                                                 1,207
Reclassification of
   WorldCorp receivables                 --            --            --           85             --          (399)         (314)
Settlement of receivables-
   WorldCorp, net
   (1,069,000 shares of
      Common Stock                       --            --            --           --         (1,745)        1,745            --
      received)
Exercise of 10,000 stock
   options                               --            10            --           --             --            --            10
Amortization of warrants                 --           118            --           --             --            --           118
Treasury stock (368,000
shares) issued to acquire
   8% Debentures                         --            --            --           --            391            --           391
Net earnings (loss)                      --            --            --       (7,623)            --            --        (7,623)
                                  ---------     ---------     ---------     --------       --------      --------      --------
Balance at
   December 31, 1999                     12        46,857            --      (35,972)       (40,735)           --       (29,838)
Issuance of 3,733,000 shares
   of restricted Common Stock
   under Employee Salary
   Exchange Program                      --       (23,072)       (4,456)          --         27,528            --            --
Common stock purchases
     (224,000 shares)                    --            --            --           --           (286)           --          (286)
Amortization of deferred
   Compensation, accrual
   of changes in Employee
   Salary Exchange
   Program and other
   (379,000 shares)                      --            --         2,721           --            343            --         3,064
Amortization of warrants                 --           195            --           --             --            --           195
Net earnings                             --            --            --       19,585             --            --        19,585
                                  ---------     ---------     ---------     --------       --------      --------      --------
Balance at
   December 31, 2000              $      12     $  23,980     $  (1,735)    $(16,387)      $(13,150)     $     --      $ (7,280)
                                  =========     =========     =========     ========       ========      ========      ========
</TABLE>

                See accompanying Notes to Financial Statements

                                       19
<PAGE>

                              WORLD AIRWAYS, INC.
                           STATEMENTS OF CASH FLOWS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                       Years Ended December 31,
                                                                                       ------------------------
                                                                                   2000         1999           1998
                                                                                   ----         ----           ----
<S>                                                                            <C>          <C>          <C>
Cash and cash equivalents at beginning of year                                 $ 11,725     $ 16,893     $   25,887
Cash flows from operating activities:
  Net earnings (loss)                                                            19,585       (7,623)       (11,032)
  Adjustments to reconcile net earnings (loss) to cash
    provided (used) by operating activities:
        Depreciation and amortization                                             6,590        8,165          8,503
        Deferred gain recognition                                                (1,248)      (1,057)        (1,055)
        Extraordinary gain                                                           --       (6,030)            --
        Cumulative effect of accounting change                                  (22,744)          --             --
        Recovered parts                                                          (3,000)          --             --
        Writedown of assets held for sale                                            --           --          1,160
        Provision for doubtful accounts                                              --          450          1,129
        Deferred compensation and other                                           3,434          533            469
        Increase (decrease) in cash resulting from changes
           in operating assets and liabilities:
           Accounts receivable                                                   (4,533)      (3,799)        10,698
           Deposits, prepaid expenses and other assets                           (3,709)        (626)         4,872
           Accounts payable, accrued expenses and other liabilities               1,209       15,963         (4,168)
           Unearned revenue                                                       2,126        1,823           (157)
                                                                               --------     --------     ----------
        Net cash provided (used) by operating activities                         (2,290)       7,799         10,419
                                                                               --------     --------     ----------

Cash flows from investing activities:
  Additions to equipment and property                                            (2,508)      (2,103)        (3,234)
  Proceeds from disposals of equipment and property                                 227        1,398            698
  Maturities (purchase) of marketable investments, net                              681       (2,373)            --
                                                                               --------     --------     ----------
        Net cash used by investing activities                                    (1,600)      (3,078)        (2,536)
                                                                               --------     --------     ----------

Cash flows from financing activities:
  (Decrease) increase in line of credit, net                                      6,452         (134)         5,212
  Issuance of debt                                                                  675           --             --
  Repayment of debt                                                              (6,390)      (9,765)       (13,933)
  Proceeds of sale/leaseback transaction                                          6,100           --             --
  Issuance of note receivable to WorldCorp, net                                      --           --         (1,416)
  Acquisition of Common Stock, at cost                                             (286)          --         (6,635)
  Proceeds from exercise of stock options                                            --           10             --
  Debt issuance costs                                                                --           --           (105)
                                                                               --------     --------     ----------
        Net cash provided (used) by financing activities                          6,551       (9,889)       (16,877)
                                                                               --------     --------     ----------

Net increase (decrease) in cash and cash equivalents                              2,661       (5,168)        (8,994)
                                                                               --------     --------     ----------

Cash and cash equivalents at end of year                                       $ 14,386     $ 11,725     $   16,893
                                                                               ========     ========     ==========
</TABLE>

                See accompanying Notes to Financial Statements

                                       20
<PAGE>

                              WORLD AIRWAYS, INC.
                         NOTES TO FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

Organization

World Airways, Inc. ("World Airways" or the "Company") was organized in March
1948 and is a U.S. certificated air carrier. Airline operations account for 100%
of the Company's operating revenue. World Airways provides long-range passenger
and cargo charter and wet lease air transportation, serving the U.S. Government,
international passenger and cargo air carriers, tour operators, international
freight forwarders and cruise ship companies (see Note 12).

Financial Statement Reclassifications

Certain items in prior year financial statements included herein have been
reclassified to conform to the 2000 financial statement presentation.

Segment Information

World Airways operates within one industry, air transportation, therefore no
segment information is provided.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

Cash Equivalents

The Company considers all liquid investments purchased with an original or
remaining maturity of ninety days or less to be cash equivalents.

Cash includes prepayments from customers that the Company classifies as
restricted cash. Such prepayments are generally for flights that are scheduled
to be flown within 30 days of the balance sheet date.

Marketable Investment Securities

Investments generally consist of commercial paper and municipal debt that the
Company accounts for as "available for sale" in accordance with Statement of
Financial Accounting Standards No. 115 (SFAS 115). At December 31, 2000, the
investments' carrying value approximated market value. Investments that mature
within 12 months are classified as current assets. All investments mature within
two years.

Revenue Recognition

Contract flight revenues are recognized as the services are provided.

Income Taxes

The Company provides for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the financial
statements in the period that includes the enactment date.

                                       21
<PAGE>

Earnings (Loss) Per Common Share

Basic earnings (loss) per Common Share is computed by dividing net earnings
(loss) by the weighted average number of Common Shares outstanding during the
period. Diluted earnings (loss) per Common Share include the effects of common
equivalent shares outstanding during a period when there are earnings from
continuing operations. Basic and diluted earnings (loss) per share are the same
for each of the years in the three-year period ended December 31, 2000 since the
Company had a loss before extraordinary item and the cumulative effect of
accounting change. The Company's common equivalent shares consist of shares
issuable for stock options, convertible debentures and warrants.

Equipment and Property

Equipment and property are stated at cost or, if acquired under capital leases,
at the present value of minimum lease payments.

Provisions for depreciation and amortization of equipment and property are
computed over estimated useful lives or the term of the lease, if shorter, for
capital leases, by the straight-line method, with estimated salvage values of 0
-15%. Estimated useful lives of equipment and property are as follows:

    DC10 and MD-11 flight equipment     15-16 years
    Other equipment and property         5-10 years

Major modifications and improvements including those performed in response to
Airworthiness Directives issued by the Federal Aviation Administration are
capitalized at cost. Routine maintenance and repairs are expensed as incurred.

Deferred gains realized in connection with the sale and leaseback of aircraft
and equipment are amortized over the periods of the respective leases.

Aircraft Maintenance

Airframe and engine maintenance costs are recognized using the direct expense
method of accounting. Under this method, maintenance costs are recognized as
expense as maintenance services are performed and as flight hours are flown for
nonrefundable maintenance payments required by lease agreements (see Note 3).

Assets Held for Sale

Assets Held for Sale are recorded at the lower of cost or estimated net
realizable value. Net realizable value is based on the estimated fair value
(measured by using a current selling price for similar assets) less estimated
selling costs.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. To the extent that the future undiscounted net cash flows expected
to be generated from an asset are less than the carrying amount of the asset, an
impairment loss will be recognized based on the difference between the asset's
carrying amount and its estimated fair market value.

Other Assets and Deferred Charges

Debt issuance costs are amortized on a straight-line basis over the period the
related debt is expected to be outstanding.

Post-retirement Benefits Other Than Pensions

World Airways' cockpit crewmembers and eligible dependents are covered under
post-retirement health care benefits to age 65. The Company accounts for the
benefit costs in accordance with Statement of Financial Accounting Standards No.
106, "Employers" Accounting for Post-retirement Benefits Other Than Pensions"
("FAS No. 106"). The Company funds the benefit costs on a pay-as-you-go (cash)
basis.

                                       22
<PAGE>

Accounting for Stock-Based Compensation

The Company applies the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, by recording
compensation expense on the date of grant if the current market price of the
underlying Common Stock exceeds the exercise price. The company provides the pro
forma disclosures of FAS No. 123, Accounting for Stock-Based Compensation, by
providing pro forma net earnings (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants as if the fair-value-based method
of FAS No. 123 had been applied.

2.  Operating Environment

At December 31, 2000, cash and cash equivalents and short-term marketable
investments totaled $15.7 million, the working capital deficit was $14.2
million, and the Company had long-term obligations, net of current maturities of
$50.0 million. The Company also has significant long-term obligations relating
to aircraft operating leases. The Company anticipates that its capital
expenditures in 2001 will approximate $1 million.


The Company has historically financed working capital and capital expenditure
requirements out of cash flow from operating activities, sales of its Common
Stock, secured borrowings, and other financings. The degree to which the Company
is leveraged could have important consequences including: (i) World Airways'
ability to obtain additional financing in the future for working capital,
capital expenditures 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, may make it more vulnerable than some of its
competitors in a prolonged economic downturn; and (iv) World Airways' financial
position may restrict its ability to pursue new business opportunities and limit
its flexibility in responding to changing business conditions.

Factors that affect the Company's ability to achieve high utilization of its
aircraft include the compatibility of the Company's aircraft with customer needs
and the Company's ability to react on short notice to customer requirements
(which can be unpredictable due to changes in traffic rights, aircraft delivery
schedules and aircraft maintenance requirements). Other factors that affect the
Company include domestic and foreign regulatory requirements, as well as a trend
toward aviation deregulation that is increasing alliances and code share
arrangements.

Due to the high fixed costs of leasing and maintaining aircraft and costs for
cockpit crewmembers and flight attendants, the Company's aircraft must have high
utilization in order for the Company to operate profitably. Although World
Airways' preferred strategy is to enter into long-term contracts with customers,
the terms of existing customer contracts are shorter than the terms of the
Company's lease obligations with respect to its aircraft. There is no assurance
that the Company 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 position and results of
operations could be materially adversely affected by periods of low aircraft
utilization and yields.

World Airways' operating philosophy is to build on its existing relationships to
achieve a strong platform for future growth while at the same time grow its full
service and cargo business. The Company's strategy is based, first and foremost,
upon providing the highest level of service to its customers, thereby
maintaining and expanding the amount of business being done with existing
customers. The Company perceives a number of opportunities created by a growing
global economy, particularly demand for cargo services. World Airways attempts
to maximize profitability by combining ACMI contracts with full service
agreements that meet the peak seasonal requirements of its customers. The
Company can respond to rapidly changing market conditions and requirements
because its fleet of aircraft can be deployed in a variety of configurations.

Consistent with prior years, the Company has unsold capacity in the fourth
quarter of 2001 and beyond; however, historically it has been successful in
obtaining new business to utilize available capacity. Although there can be no
assurance that it will be able to secure additional business to utilize unsold
capacity, the Company is actively seeking additional business for 2001 and
beyond.

Although the Company's customers bear the financial risk of utilizing the
aircraft, the Company can be affected adversely if its customers are unable to
operate the Company's aircraft profitably, or if one or more of the Company's
customers experience a material adverse change in their market demand, financial
condition or results of operations. Under these circumstances, the Company would
be adversely affected by customer demands for rate and utilization reductions,
flight cancellations, or early termination of their agreements.

Prior to 1999, the Company derived a significant percentage of its revenues and
block hours from its operations in the Pacific Rim region. In 1997 through 1999
economic conditions in Malaysia, Indonesia and other countries in the Asia
Pacific Region adversely affected these operations. These conditions included
national liquidity crises, significant depreciation in the value of the ringgit
and

                                       23
<PAGE>

rupiah, higher domestic interest rates, reduced opportunity for refinancing or
refunding of maturing debts, and a general reduction in spending throughout the
region. Although the Company does not now have significant operations in this
region, economic conditions have started to improve and the Company will seek
opportunities for new business in the region.

Although there can be no assurances, the Company believes that the combination
of its existing contracts and additional business which it expects to obtain,
along with its existing cash, and financing arrangements, will be sufficient to
allow the Company to meet its cash requirements related to operating and capital
requirements for 2001.

In February 2000, the Company implemented an 18-month salary exchange program
for most of its employees. Under the program, participating employees are
exchanging up to 10% of wages for Common Stock on the basis of one share of
stock for each $1.19375 of wages exchanged. The exchange rate was determined
from average stock prices coinciding to when the Board of Directors approved the
program. It is expected the program will produce total cash savings of
approximately $5.4 million during the 18-month program and result in the
issuance of approximately 4.5 million shares of Common Stock. Approximately 3.7
million shares were issued as restricted shares following the beginning of the
program. The employees are able to vote the restricted shares, but are not able
to sell the shares until the end of the program. Expense associated with the
value of the shares is being recognized over the 18-month period. If an employee
leaves the Company during the program, a pro-rata portion of the shares are
returned to the Company.

3.  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 nonrefundable 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 was $22.7 million.

4.  WorldCorp and Naluri Ownership  & Transactions with Malaysia Airlines

The Company became a wholly owned subsidiary of WorldCorp, Inc. ("WorldCorp") in
a holding company reorganization in 1987. In 1994 WorldCorp sold 24.9% of its
ownership of the Company to Naluri Berhad ("Naluri"), a Malaysian aviation
company. In October 1995, the Company became a publicly owned company following
the completion of an initial public offering in which 2,000,000 shares and
900,000 shares of Common Stock were sold by the Company and WorldCorp,
respectively.

In 1997 and 1998 the Company purchased 4 million shares of its Common Stock from
WorldCorp and Naluri from the proceeds of the Debentures issued in 1997 in
accordance with a shareholders agreement. In 1998, the Company also acquired
150,000 of its Common Stock from WorldCorp for approximately $682,000 as payment
towards principal, interest, and expenses of a loan to WorldCorp.

In February 1999, WorldCorp filed a petition for protection from its creditors
under Chapter 11 of the U. S. Bankruptcy laws in the United States Bankruptcy
Court for the District of Delaware. In August 1999 the Company concluded an
agreement with WorldCorp to settle a secured loan and other amounts totaling
approximately $1.8 million that WorldCorp owed the Company when WorldCorp filed
for bankruptcy protection. In connection with the agreement, that was approved
by the Bankruptcy Court overseeing WorldCorp's bankruptcy proceedings, WorldCorp
returned 1,069,000 shares of the Company's Common Stock (based on market value
at date of settlement) it owned in exchange for the $1.8 million owed.

In May 2000 the bankruptcy court overseeing WorldCorp's bankruptcy proceeding
approved a liquidation plan for WorldCorp. In July 2000 all remaining World
Airways Common Stock owned by WorldCorp was distributed to creditors of
WorldCorp and the final remaining relationship between the two companies was
severed. At December 31, 2000, Naluri owned 11.8% of the outstanding Common
Stock of World Airways with the balance publicly held.

World Airways provided wet lease services to Malaysian Airline System Berhad
("Malaysia Airlines" or "MAS") from 1981 to 1999 for MAS' scheduled passenger
and cargo operations as well as transporting passengers for annual Hadj
pilgrimages. Naluri, which owns 11.8% of World Airways' Common Stock at December
31, 2000, also owned 29% of MAS that it sold to the Government of Malaysia in
February 2001. In 1999 and 1998, the Company received approximately $7.3 million
and $19.5 million, respectively, in revenue associated with minimum guarantee
payments from MAS for aircraft that were not utilized. Effective October 1999
the Company ceased operating for MAS. In May 2000, the Company received $7
million from MAS in settlement of all aircraft lease and operating agreements
between the two companies.

                                       24
<PAGE>

5.  Supplemental Information -- Statements of Cash Flows

Additional information pertaining to certain cash payments and non-cash
investing and financing activities is as follows (in thousands):

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                                  ------------------------
                                               2000         1999          1998
                                               ----         ----          ----
    <S>                                    <C>          <C>          <C>
    Cash paid for:
        Interest ........................  $  4,549     $  5,755     $   6,819
</TABLE>

The Company recorded a credit of $3.0 million for engine parts that were
recovered in the fourth quarter of 2000. These parts are included in equipment
and property at December 31, 2000.

In 1999 the Company acquired 1,069,000 shares of its Common Stock owned by
WorldCorp as settlement of all amounts owed to the Company by WorldCorp (see
Note 4). Also in 1999, the Company issued 368,000 shares of Treasury Stock with
a fair market value of $391,000 as consideration given to acquire $1.5 million
of the Company's outstanding 8% Debentures and $1.2 million of the 8% Debentures
were converted by the holders into 137,000 shares of Common Stock.

In 1998 the Company acquired 150,000 shares of the Company's Common Stock valued
at $682,000 owned by WorldCorp as payment towards principal and interest on a
loan to WorldCorp (see Note 4) and 80,000 shares in open market transactions for
$264,000. Also, in 1998 the Company financed the acquisition of approximately
$152,000 of office furniture.

6.  Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in
thousands):

                                              December 31,
                                              ------------
                                            2000       1999
                                            ----       ----
    Prepaid rent                         $ 2,490    $ 3,465
    Deposits                               3,481      2,465
    Other                                  1,951        717
                                         -------    -------
        Total                            $ 7,922    $ 6,647
                                         =======    =======

7.  Notes Payable

The Company has a Credit Agreement with GMAC Financial Corporation ("GMAC")
expiring in March 2004. The Agreement has a borrowing capacity of up to $25.0
million, subject to borrowing base amounts related to receivables and spare
parts, as defined, which collateralize borrowings. The Agreement provides for an
unused facility fee of 1/4 of 1% and interest on outstanding borrowings at prime
plus 1%. Prime was 9 1/2% at December 31, 2000. Further, the receivables
facility allows for the issuing of Letters of Credit to a sub-limit of $4
million for an issuance fee and interest of 1/8 of 1%. The Agreement contains
dividend and borrowing restrictions as well as covenants related to the
Company's financial condition and operating results. At December 31, 2000 the
outstanding balance under the Agreement was $11.5 million. At that date the
Company did not have any additional borrowing capacity under this Agreement,
other than outstanding Letters of Credit aggregating approximately $1.5 million,
principally for deposits for facility leases.

                                       25
<PAGE>

8.   Long-term Obligations

Long-Term Debt

<TABLE>
<CAPTION>
The Company's long-term obligations at December 31 are as follows (in thousands):                       2000       1999
                                                                                                   ---------  ---------
<S>                                                                                                <C>        <C>
    Convertible senior subordinated debentures due 2004 --with interest at 8% payable
        semi-annually                                                                              $  40,545  $  40,545
    Note payable due 2003--with principal and interest at 9.98% payable monthly,
        collateralized by one engine                                                                   3,392      4,048
    Note payable due 2004--with principal and interest at 8.18% payable monthly,
        with a final payment of $2.2 million due June 2004, collateralized by one engine               4,176      4,757
    Spare parts loan due 2003--with principal and interest at 10% payable monthly,
        collateralized by certain MD-11 spare parts                                                    2,632      3,848
    Spare parts loan due 2003--with principal and interest at 8.5% payable monthly,
        collateralized by certain MD-11 spare parts                                                    1,063      1,492
    Capital lease obligations                                                                             91      2,996
    Other                                                                                                593        522
                                                                                                   ---------  ---------
        Total                                                                                         52,492     58,208
    Less: current maturities                                                                           3,523      6,096
                                                                                                   ---------  ---------
        Total long-term obligations, net of current maturities                                     $  48,969  $  52,112
                                                                                                   =========  =========
</TABLE>

The estimated fair value of the 8% Convertible Senior Subordinated Debentures
(the "Debentures") at December 31, 2000 approximated $16 million as determined
by quoted market price. The Company believes that the carrying values of its
other outstanding debt approximate fair value.

In 1999 the Company acquired $8.2 million of the outstanding 8% Debentures for
$1.8 million and Treasury Stock with a fair market value of $0.4 million
resulting in extraordinary gains of $6 million. Additionally, $1.2 million of
the 8% Debentures were converted into 137,000 shares of Common Stock.

The Debentures are unsecured obligations, convertible into shares of the
Company's Common Stock at $8.90 per share, subject to adjustment in certain
events, and subordinated to all present and future senior indebtedness of the
Company. In certain circumstances including the Company's Common Stock being
delisted from trading and a change in control of the Company, as defined, the
holders of the Debentures could require the Company to repurchase the
outstanding Debentures.

The Company has $1.1 million available for additional borrowings at December 31,
2000 under the 10% spare parts loan due 2003.

The following table shows annual amounts of scheduled principal maturities of
debt outstanding at December 31, 2000 (in thousands):


        2001                       $   3,523
        2002                           3,025
        2003                           2,967
        2004                          42,977
        2005                              --
                                   ---------
           Total                   $  52,492
                                   =========

Operating Leases

The Company's operating fleet consists of eight MD-11 and three DC-10-30
aircraft, all of which are leased under operating leases. The MD-11 aircraft
included five passenger aircraft (two of which are long-range versions), one
freighter aircraft and two convertible aircraft. The DC-10-30 aircraft included
one passenger aircraft, one freighter aircraft, and one convertible aircraft.
The Company has also placed deposits for four DC-10-30F freighter aircraft that
are scheduled to be delivered under operating leases - two for three years and
two for seven years - in 2001. The Company also had one other DC-10-30 passenger
aircraft it had removed from service in 2000 and returned to the lessor in
February 2001.

Lease terms for MD-11 aircraft expire between 2005 and 2020 (assuming the
exercise of a 12-year lease extension for two MD-11ER aircraft). Lease terms for
DC-10 aircraft all expire in 2003.

                                       26
<PAGE>

In 1999, in conjunction with amending the leases for the two MD-11ER aircraft,
the lessor obtained the right, in the event the Company is unable to meet
certain financial requirements, that allow the lessor to cancel the lease of the
aircraft with 12 months notice. At December 31, 2000 the Company was in
compliance with the financial performance requirements. In addition, the Company
granted warrants to each of the two MD-11 aircraft lessors to purchase up to one
million shares of Common Stock (see Note 9). The fair value of the warrants at
the time of issuance is being amortized as rent expense over the remaining terms
of the related aircraft lease agreements.

Rental expense, primarily relating to aircraft leases, totaled approximately
$71.1 million, $74.4 million, and $81.5 million for the years ended December 31,
2000, 1999 and 1998, respectively.

As of December 31, 2000, future annual minimum lease payments for operating
leases that have initial or remaining lease terms in excess of one year were as
follows (in thousands):

        2001                       $  72,854
        2002                          77,390
        2003                          70,753
        2004                          65,037
        2005                          52,437
        Thereafter                   288,248
                                     -------
           Total                   $ 626,719
                                     =======

9.   Capital Stock

At December 31, 2000, 12,029,000 shares of Common Stock are reserved for
issuance for outstanding convertible debt (4,556,000 shares), stock option plans
(4,440,000 shares), warrants (2,000,000 shares), and an employee salary exchange
program (1,033,000 shares).

In 1999, pursuant to amendments to lease agreements for the Company's MD-11
aircraft, the Company granted warrants to each of two lessors to purchase up to
1,000,000 shares of Common Stock at an exercise price of $2.50 per share. The
warrants were vested and fully exercisable at the date of grant. One million
warrants expire in August 2004 and the other million expire in March 2005. The
per share weighted-average fair value of the warrants was $0.90 on the date of
grant using the Black Scholes option-pricing model with the following
assumptions: expected dividend yield of 0.0%, risk free interest rate of 5.735%,
expected life of 5 years and expected volatility of 78%.

At December 31, 2000 the Company's outstanding Debentures are convertible into
an aggregate of 4,556,000 shares of Common Stock at $8.90 per share, subject to
adjustment in certain events.

In February 2000, the Company implemented an 18-month salary exchange program
for most of its employees pursuant to which 5,000,000 shares of Common Stock
were initially reserved for issuance. Under the program, participating employees
will exchange up to 10% of wages for Common Stock on the basis of one share of
stock for each $1.19375 of wages exchanged. The exchange rate was determined
from average stock prices coinciding to when the Board of Directors approved the
program. It is expected the program will produce total cash savings of
approximately $5.4 million during the 18-month program and result in the
issuance of up to 4.5 million shares of Common Stock. Approximately 3,733,000
shares were issued as restricted shares at the beginning of the program. The
recipients are able to vote the shares received but are not able to sell the
shares until the end of the program. Expense associated with the value of the
shares is being recognized over the 18-month period. If an employee leaves the
Company during the program, a pro-rata portion of the shares are returned to the
Company.

Stock Option Plans

Under a 1995 Stock Option Plan, as amended (the "1995 Plan"), members of the
Company's Board of Directors, employees, and consultants to the Company or its
affiliates are eligible to receive stock options. The Company has reserved
3,290,000 shares of Common Stock for issuance under the 1995 Plan. Options
expire at the earlier of the stated expiration, which shall not exceed ten years
from the date of grant, or one year after the termination of a grantee's
employment with the Company. Options are granted with an exercise price that
shall not be less than 85% of the fair market value of the Common Stock on the
date of grant. Outstanding options become vested and fully exercisable at
various times through October 2008.

Under a Non-Employee Directors' Stock Option Plan (the "Directors' Plan"),
non-affiliate directors are offered options to purchase 10,000 shares of Common
Stock upon election or appointment to the Board of Directors of the Company. The
Company has reserved 250,000 shares of Common Stock for issuance under the
Directors' Plan. On the third anniversary of an initial award, the director will

                                       27
<PAGE>

be given an option for 5,000 additional shares. Options granted under the
Directors' Plan vest in 36 equal monthly installments following the award, as
long as the individual remains a director of the Company. The exercise price for
options granted is the average closing price of the Common Stock during the 30
trading days immediately preceding the date of grant.

Under a 1999 Chief Executive Stock Option Plan (the "CEO Plan"), the Chief
Executive Officer (the "CEO") of the Company was granted an option to purchase
900,000 shares of Common Stock at $1.00 per share in conjunction with the CEO's
acceptance of an offer of employment in 1999. The option was granted at fair
market value and will expire April 1, 2007. Options become exercisable in
increments of 300,000 on December 31, 2000, May 1, 2001, and December 31, 2001.

The per share weighted-average fair value of stock options granted during 2000,
1999 and 1998 was $0.72, $1.15 and $2.13, respectively, on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions:

                                      2000      1999           1998
                                      ----      ----           ----
        Expected dividend yield        0%        0%             0%
        Risk-free interest rate       6.6%   6.6% - 6.7%    4.8% - 4.9%
        Expected life (in years)       6.5      7 - 8          6 - 8
        Expected volatility           102%      61%             78%

The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost is recognized for stock options in the
financial statements. Had the Company determined compensation cost based on the
fair value at the grant date for its stock options under FAS No. 123, the
Company's earnings (loss) would have been the pro forma amounts below (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                 2000             1999            1998
                                                                 ----             ----            ----
    <S>                                     <C>             <C>              <C>             <C>
    Net earnings (loss)                     As reported     $  19,585        $  (7,623)      $ (11,032)
                                            Pro forma          18,476           (8,636)        (12,084)

    Basic and diluted earnings              As reported     $    2.03        $   (1.14)      $   (1.54)
        (loss) per common share             Pro forma            1.91            (1.29)          (1.69)
</TABLE>

Stock option activity during the last three years is as follows (in thousands,
except per share amounts):

                                           Number of         Weighted
                                            Options           Average
                                          Outstanding     Exercise Prices

    Balance at December 31, 1997              1,470          $    9.20
        Granted                                 255               2.75
        Forfeited                             (302)              11.00
                                            -------
    Balance at December 31, 1998              1,423               7.66
        Granted                               2,170               1.18
        Exercised                              (10)               1.00
        Forfeited                             (464)               6.69
                                            -------
    Balance at December 31, 1999              3,119               3.30
        Granted                               1,491               0.85
        Forfeited                             (696)               6.54
                                            -------
    Balance at December 31, 2000              3,914               1.78
                                            =======

                                       28
<PAGE>

At December 31, 2000, the range of exercise prices and weighted-average
remaining life of outstanding options was $0.69--$12.50 and 6.5 years,
respectively. The following table summarizes stock options outstanding and
exercisable at December 31, 2000 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                        Outstanding                                       Exercisable
                                 --------------------------------------------------------      -------------------------------
                                                         Weighted
                                                          Average             Weighted                            Weighted
     Range of                      Number             Remaining Life           Average           Number            Average
  Exercise Price                 of Options                Years           Exercise Price      of Options      Excercise Price
  --------------                 ----------           --------------       --------------      ----------      ---------------
<S>                              <C>                  <C>                  <C>                 <C>             <C>
 $  0.00 -  1.25                      2,699                     6.9               $  0.91             647              $  1.02
    1.26 -  2.50                        780                     6.4                  1.51             320                 1.51
    5.00 -  6.25                         40                     5.3                  5.55              35                 5.59
    6.26 -  7.50                        298                     4.9                  7.07             148                 7.01
    7.51 -  8.75                         20                     3.9                  8.63              20                 8.63
    8.76 - 10.00                          5                     2.4                 10.00               5                10.00
   10.01 - 11.25                         61                     2.0                 10.96              41                10.94
   11.26 - 12.50                         11                     2.5                 12.06              11                12.06
                                      -----                                                         -----
                                      3,914                                                         1,227
                                      =====                                                         =====
</TABLE>

At December 31, 2000, 1999 and 1998, the number of options exercisable was
1,227,000, 1,028,000, and 444,000, respectively, and the weighted-average
exercise price of the options was $2.59, $1.89, and $8.01, respectively.

10.   Employee Benefit Plans

The World Airways' Crewmembers Target Benefit Plan is a defined contribution
plan covering cockpit crewmembers with contributions based upon wages, as
defined. It is a tax-qualified retirement plan under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Pension expense for the
Target Benefit plan totaled $1.4 million, $1.5 million, and $1.7 million for the
years ended December 31, 2000, 1999 and 1998, respectively.

The Company also sponsors a Crewmembers Deferred Income Plan. It is a
tax-qualified retirement plan under Section 401(k) of the Code. Under the plan,
crewmembers may elect to invest salary deferrals of up to $10,500 or 15% of
their salary in selected investment funds. The Company does not make any
contributions to the plan.

The Company's flight attendants participate in a pension plan maintained by the
International Brotherhood of Teamsters ("Teamsters"). Pension contributions made
to the Teamsters on behalf of the flight attendants totaled $0.5 million, $0.5
million, and $0.3 million for the years ended December 31, 2000, 1999 and 1998,
respectively.

In 1998 an Employee Savings and Stock Ownership Plan (the "ESSOP") the Company
implemented in 1996 was amended and changed to The Employee 401(k) Savings Plan
(the "401(k) Plan") and a stock purchase feature of the former plan was
eliminated. The 401(k) Plan continues to hold shares of World Airways Common
Stock that were allocated to the participants' accounts prior to termination of
the stock purchase feature.

Under the 401(k) Plan, employees may elect to invest salary deferrals of up to
$10,500 or 15% of their salary in selected investment funds. The Company
contributes matching funds to the 401(k) Plan equal to 33% of participants'
voluntary deferrals up to 10%. The Company expensed approximately $0.2 million
annually for its contributions to the 401(k) Plan during 2000, 1999 and 1998.

The Company has adopted a profit sharing bonus plan (the "Profit Sharing Plan")
for its cockpit crewmembers and flight attendants pursuant to agreements with
the unions representing the two groups. It is not a tax-qualified plan under the
Code. Distributions under the Profit Sharing Plan are equal to 20% of earnings,
as defined, subject to an annual limitation of 10% of the total annual aggregate
compensation of World Airways employees participating in the Profit Sharing Plan
in that year. No distributions were made for 1998 through 2000.

World Airways' cockpit crewmembers and eligible dependents are covered under a
post-retirement health care benefits plan to age 65. The Company accrues for the
cost of health benefits in accordance with FAS No. 106 but funds the benefit
costs on a pay-as-you-go (cash) basis.

                                       29
<PAGE>

A summary of the net periodic post-retirement benefit costs is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                                -----------------------
                                                                          2000          1999            1998
                                                                       -------        ------         -------
    <S>                                                                <C>            <C>            <C>
    Service cost                                                       $   148        $  162         $   144
    Interest cost on accumulated post-retirement
       benefit obligation                                                  141           105              98
    Net amortized (gain) loss                                               61           (54)            (64)
                                                                       -------        ------         -------
    Net periodic post-retirement benefit cost                          $   350        $  213         $   178
                                                                       =======        ======         =======
</TABLE>

The reconciliation of the accumulated post-retirement benefit obligation was as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                        2000            1999
                                                                                        ----            ----
    <S>                                                                            <C>             <C>
    Accumulated post-retirement benefit obligation, beginning of year              $   1,889       $   1,758
       Service cost                                                                      148             162
       Interest cost                                                                     141             105
       Benefits paid                                                                    (132)           (150)
       Actuarial loss                                                                    404              14
                                                                                   ---------       ---------
    Accumulated post-retirement benefit obligation, end of year                    $   2,450       $   1,889
                                                                                   =========       =========
</TABLE>

The reconciliation of the accrued post-retirement benefits of year end was as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                        2000            1999
                                                                                        ----            ----
    <S>                                                                            <C>             <C>
    Unfunded status                                                                $   2,450       $   1,889
    Unrecognized net gain                                                                542           1,018
                                                                                   ---------       ---------
    Accrued post-retirement benefits                                               $   2,992       $   2,907
                                                                                   =========       =========
</TABLE>

The assumed discount rate used to measure the accumulated post-retirement
benefit obligation for 2000 and 1999 was 7.25% and 7.75%, respectively. The
medical cost trend rate in 2001 was 10% trending down to an ultimate rate in
2028 of 5.0%. A one percentage point increase in the assumed health care cost
trend rates for each future year would have increased the aggregate of the
service and interest cost components of 2000 net periodic post-retirement
benefit cost by $30,000 and would have increased the accumulated post-retirement
benefit obligation as of December 31, 2000 by $186,000. A one percentage point
decrease in the assumed health care cost trend rates for each future year would
have decreased the aggregate of the service and interest cost components of 2000
net periodic post-retirement benefit cost by $25,000 and would have decreased
the accumulated post-retirement benefit obligation as of December 31, 2000 by
$167,000.

In order to ensure the performance of certain key functions, in December 1998
the Company adopted a plan which provides for the payment of retention
incentives to encourage certain members of management to remain in the
employment of the Company through the year 2000. The obligation for retention
payments at December 31, 2000 was approximately $1.7 million. The plan also
provides for the payment of certain severance benefits in the event there is a
change in control of the Company, as defined, and employment of a participant in
the plan is terminated within 24 months of the occurrence of a change in
control.

                                       30
<PAGE>

11.   Federal and State Income Taxes

Income tax expense in 1998 consisted of $127,000 for state income taxes. There
was no deferred tax expense or benefit for the years ended December 31, 2000,
1999, and 1998.

Income tax expense attributable to earnings (loss) from continuing operations
before extraordinary item and accounting change differed from the statutory
income tax rate as a result of the following (in thousands):

<TABLE>
<CAPTION>
                                                                      Years    ended    December 31,
                                                                 ----------------------------------------
                                                                 2000              1999              1998
                                                                 ----              ----              ----
<S>                                                        <C>               <C>               <C>
Expected Federal income tax (benefit)
    at the statutory rate                                  $   (1,074)       $   (4,779)       $   (3,861)
Generation of the net operating
    loss carryforward                                             108             3,791             2,828
State income tax expense, net of Federal benefit                   --                --                83
Other:
    Meals and entertainment                                       790               773               850
    Other                                                         176               215               227
                                                           ----------        ----------        ----------
Income tax expense                                         $       --        $       --        $      127
                                                           ==========        ==========        ==========
  </TABLE>

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at December 31 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                   2000              1999
                                                                                   ----              ----
<S>                                                                          <C>              <C>
Deferred tax assets:
    Net operating loss carryforwards                                            $21,176          $ 24,951
    Recognition of sales/leaseback gains                                          1,173             1,048
    Accrued maintenance in excess of reserves paid, primarily
        due to accrual for financial statement purposes                             518             7,963
    Accrued post-retirement benefit obligation, due to accrual
        or financial statement purposes                                           1,047               988
    Compensated absences, primarily due to accrual for
        financial statement purposes                                                701             1,220
    Accrued rent                                                                  4,303             3,880
    Alternative minimum tax credit carryforward                                   2,790             2,790
    Other                                                                           239               182
                                                                                -------          --------
    Gross deferred tax assets                                                    31,947            43,022
        Less:   valuation allowance                                              19,973            30,419
                                                                               --------          --------
    Net deferred tax assets                                                      11,974            12,603
    Deferred tax liabilities:
        Property and equipment                                                   11,974            12,603
                                                                                -------          --------
    Net deferred income taxes                                                   $    --          $     --
                                                                                =======          ========
</TABLE>

The net changes in the total valuation allowance for the years ended December
31, 2000 and 1999 were due to the generation or expiration of net operating loss
("NOL") carryforwards, tax credit carryforwards and the realization of other
deferred tax assets. In assessing the realizability of the deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
(including reversals of deferred tax liabilities) during the periods in which
those temporary differences will become deductible. Management believes it is
not likely that all of the deferred tax assets will be realized.

The availability of NOL carryforwards, alternative minimum tax credits and
investment tax credit carryforwards to reduce the Company's future federal
income tax liability is subject to limitations under Section 382 of the Code.
Generally, these limitations restrict the availability of NOL and investment tax
credit carryforwards upon certain changes in stock ownership by five percent
shareholders which, in aggregate, exceed 50 percentage points in value in a
three-year period ("Ownership Change").

The Company experienced an ownership change on July 17, 2000 primarily due to
vesting of restricted shares that were issued in February 2000 under the
Company's Employee Salary Exchange Program and the liquidation of WorldCorp,
Inc. in July 2000.

                                       31
<PAGE>

As of December 31, 2000, the Company had NOL carryforwards for federal income
tax purposes of $60.5 million. Substantially all of this amount, approximately
$60.4 million, is subject to a $343,000 annual limitation resulting from the
2000 Ownership Change. The Company's NOL's expire as follows (in millions):

    2004                  $   4.0
    2007                     19.8
    2008                      5.3
    2009                     17.3
    2011                      2.2
    2018                      7.1
    2019                      4.5
    2020                      0.3
                          -------
                          $  60.5
                          =======

The application of 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. The 382 limitation may be increased if certain built-in-gain items,
as defined under Section 382, are realized on or before July 17, 2005.


12.   Major Customers

The Company operates in one business segment, the air transportation industry.
Information concerning customers for years in which their revenues comprised 10%
or more of the Company's operating revenues is presented in the following table
(in thousands):

<TABLE>
<CAPTION>
                                                            Years ended December 31,
                                                            ------------------------
                                                        2000          1999         1998
                                                    -----------   -----------   -----------
<S>                                                 <C>           <C>           <C>
    U.S. Air Force Air Mobility Command              $ 113,323     $ 134,601     $ 110,912
    Renaissance Tours                                   36,862        11,181            --
    Malaysia Airlines (see Note 4)                          --        23,824        50,319
    P.T. Garuda Indonesia                               22,248            --        31,790
    Philippine Airlines                                     --            --         7,264
</TABLE>

U.S. Air Force. The Company has provided air transportation services,
--------------
principally on an international basis, to the USAF since 1956. In exchange for
requiring pledges of aircraft to the Civil Reserve Aircraft Fleet ( "CRAF ") for
use in times of national emergency, the U.S. Air Force grants awards to CRAF
participants for peacetime transportation of personnel and cargo. The overall
downsizing of the U.S. military places a premium on the mobility of the U.S.
armed forces.


The USAF awards points to air carriers acting alone or through teaming
arrangements in proportion to the number and type of aircraft made available to
CRAF. The Company utilizes teaming arrangements to maximize the value of
potential awards. Until 1999, the Company led a contractor teaming arrangement
that enjoyed a large market share of the USAF's overall commercial airlift
requirement. The Company's portion of the fixed USAF award was $86 million for
the government's 1998-99 fiscal year. Although the Company's teaming agreement
for fiscal year 2000 (October 1999 to September 2000) resulted in a
substantially reduced share of the AMC fixed commercial airlift requirement
(originally $27 million) the Company's AMC revenue for fiscal year 2000 totaled
$113.3 million. The increase primarily resulted from expansion flying ($49.8
million) as well as being requested by the AMC to replace another carrier that
had previously been awarded the contract for flying for two three-month periods.
For fiscal year 2001, beginning October 1, 2000, the Company's teaming
arrangement resulted in an award of approximately $127 million of the fixed-buy
contract. The Company believes it will continue to be in a position to obtain an
increased share of expansion flying which is customarily awarded by the AMC over
and above the fixed contract flying. The Company cannot determine how future
military spending budgets, national security considerations for a continued
strong and balanced CRAF and the teaming arrangements will combine to affect
future business with the USAF.

Garuda. The Company has flown for Garuda periodically since 1973. The Company
------
operated six aircraft for Garuda during the 1998 pilgrimage. The Company did not
operate any aircraft for Garuda for the 1999 Hadj; however, the Company operated
four aircraft for Garuda for the 2000 Hadj and will operate three aircraft for
the 2001 Hadj.


Sonair. In November 2000, the Company began operating regular private charter
------
air service for Sonair Serviceo Aereo ("Sonair") between Houston, Texas and
Luanda, Angola. The new service supports Angola's emerging petroleum industry.
Sonair is a subsidiary of Angola's National Oil Company, SONANGOL. The initial
term of the agreement is for 14 months and includes options for Sonair to renew
the agreement for up to two additional years.

                                       32
<PAGE>

Renaissance Cruises. The Company flew one aircraft for Renaissance Cruises
-------------------
("Renaissance") from August 1999, providing exclusive air service to Europe from
New York, until the agreement was mutually terminated in late 2000.

The classification between domestic and export revenues is based on entity
definitions prescribed in the economic regulations of the Department of
Transportation. Information concerning the Company's export revenues is
presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                                              Years Ended December 31,
                                                              ------------------------
                                                          2000          1999           1998
                                                      -----------    -----------   -----------
<S>                                                   <C>            <C>           <C>
Operating Revenues:
    Domestic                                          $   218,887    $   201,779   $   142,948
    Export- Malaysia                                           --         33,749        50,319
          - Philippines                                        --             --         7,264
          - Indonesia                                      22,248             --        31,790
          - Belgium                                            --             --         3,597
          - United Kingdom                                     --          1,659        24,032
          - Other                                          22,898         26,811        11,199
                                                      -----------    -----------   -----------
        Total                                         $   264,033    $   263,998   $   271,149
                                                      ===========    ===========   ===========
</TABLE>

13. Related Party Transactions

In 2000, the Company announced that it is relocating its corporate headquarters
to Peachtree City, near Atlanta, Georgia. The move is expected to be completed
in the second quarter of 2001. Hollis L. Harris, World Airways' Chairman and
CEO, is a principal in the company that will own the building, for which the
Company signed a lease for a 15-year term beginning May 1, 2001. Obligations for
rent under the new lease aggregating $16.4 million are included with future
annual minimum lease payments for operating leases in Note 8.


At December 31, 2000, Naluri owned approximately 11.8% of the outstanding Common
Stock of World Airways and approximately 29% of the outstanding Common Stock of
Malaysian Airlines. In February 2001 Naluri sold the Malaysian Airlines stock to
the Government of Malaysia. See Notes 4 and 12 for further information about the
Company's transactions with Naluri and Malaysian Airlines.


14. Commitments and Contingencies


The Company's flight attendants, approximately 39% of the Company's employees,
who are represented by the International Brotherhood of Teamsters, are subject
to a four-year collective bargaining agreement that became amendable June 30,
2000.


In 1994, the Company's flight attendants argued that the "scope clause" of the
collective bargaining agreement has been violated by the Company's use of
foreign flight attendant crews on the Company's flights for Garuda which has
historically been the Company's operating procedure. In contracts with certain
customers, the Company is obligated to permit its customers to deploy their own
flight attendants. While the arbitrator in this matter denied in 1997 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. Since 1997, the flight attendants
have filed "scope clause" grievances with respect to other wet-lease contracts
and in January 2000 they filed another "scope clause" grievance with respect to
the 2000 Garuda Hadj agreement. An adverse decision on one or more of the
grievances could have a material adverse impact on the financial condition or
results of operations of World Airways.

A claim has been filed in Germany against the Company by a tour operator seeking
approximately $3.5 million in compensation related to the cancellation of a
summer program in 1996. The Company believes it has substantial defenses to this
action, although no assurance can be given of the eventual outcome of this
litigation.

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

                                       33
<PAGE>

In 1993, the Company returned certain DC10-30 aircraft to the lessor. As a
result of this early lease termination, the Company is responsible, until 2004
for one aircraft and 2005 for the second aircraft, for one-third of any deficit
in rent incurred in future leases of the aircraft, up to $100,000 monthly per
plane, with an overall combined cap. The Company's remaining contingent
liability related to this matter approximates $866,000.

15.  Valuation and Qualifying Accounts (in thousands)

<TABLE>
<CAPTION>
                                               Allowances
                                              for Doubtful      Deferred
                                                Accounts       Tax Assets
                                              ------------    ------------
<S>                                           <C>             <C>
    Balance at December 31, 1997               $     973       $  38,256
        Additions charged to expense               1,129              --
        Amounts charged to allowance                (542)         (2,894)
                                              ----------       ---------
    Balance at December 31, 1998                   1,560          35,362
        Additions charged to expense                 450              --
        Amounts charged to allowance                (162)         (4,943)
                                              ----------       ---------
    Balance at December 31, 1999                   1,848          30,419
        Additions charged to expense                  --              --
        Amounts charged to allowance              (1,517)        (10,796)
                                              ----------       ---------
    Balance at December 31, 2000               $     331       $  19,623
                                              ==========       =========
</TABLE>

                                       34
<PAGE>

16. Unaudited Quarterly Results

The results of the Company's quarterly operations (unaudited) for 2000 and 1999
are as follows (in thousands except share data).

<TABLE>
<CAPTION>
                                                                                 Quarter Ended
                                                              -------------------------------------------------
                                                                 Mar 31       Jun 30      Sep 30       Dec 31
                                                              ----------    ---------   ---------    ----------
<S>                                                           <C>           <C>         <C>          <C>
2000
Operating revenues                                             $  62,006    $  62,818   $  67,529    $  71,680
Operating income (loss)                                           (3,332)       2,381       1,073          975
Earnings (loss) before cumulative effect of
    accounting change                                             (4,332)       1,267          43         (237)
    Cumulative effect of accounting change                        22,224           --          --          520
    Net earnings (loss)                                           17,992        1,267          43          283


Basic and diluted earnings (loss) per common share:
    Before cumulative effect of accounting change                  (0.54)        0.12          --        (0.02)
    Cumulative effect of accounting change                          2.82           --          --         0.05
                                                              ----------    ---------   ---------    ---------
    Net earnings (loss)                                             2.28         0.12          --         0.03
                                                              ----------    ---------   ---------    ---------

1999
Operating revenues                                             $  65,326    $  67,492   $  67,517    $  63,663
Operating income (loss)                                           (2,189)      (1,724)     (1,904)      (4,432)
Earnings (loss) before extraordinary item                         (2,706)      (3,093)     (3,125)      (4,729)
Extraordinary item                                                    --        4,176          --        1,854
Net earnings (loss)                                               (2,706)       1,083      (3,125)      (2,875)

Basic and diluted earnings (loss) per common share:
    Before extraordinary item                                      (0.39)       (0.44)      (0.47)       (0.74)
    Extraordinary item                                                --         0.59          --         0.29
                                                              ----------    ---------   ---------    ---------
Net earnings (loss)                                                (0.39)        0.15       (0.47)       (0.45)
                                                              ==========    =========   =========    =========

Pro forma amounts assuming new method of accounting is
    applied retroactively
        Earnings (loss) before extraordinary item              $      11    $  (1,938)  $  (2,744)   $  (3,139)
        Net earnings (loss)                                           11        2,238      (2,744)      (1,285)
    Basic and diluted earnings (loss) per share:
        Before extraordinary item                                     --        (0.27)      (0.42)       (0.49)
        Net earnings (loss)                                           --         0.32       (0.42)       (0.20)
</TABLE>


The sum of the four quarterly earnings (loss) per share amounts may not agree
with the earnings (loss) per share amounts for the full year due to the fact
that the full year calculation uses a 12-month weighted average number of
shares.

The quarterly data presented above for the first and second quarters of 2000
differ from amounts previously reported to reflect the effect of the change in
accounting principle and an increase in maintenance expense of $400,000 in the
first quarter.

The fourth quarter of 2000 reflects a $520,000 reversal of income taxes related
to the cumulative effect of the change in accounting principle. The Company also
recorded a credit of $3.0 million for engine parts that were recovered in the
fourth quarter of 2000. These parts are included in equipment and property at
December 31, 2000.


                                       35
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
World Airways, Inc.:

We have audited the accompanying balance sheets of World Airways, Inc. ("World
Airways") as of December 31, 2000 and 1999, and the related statements of
operations, changes in stockholders' deficiency and cash flows for each of the
years in the three-year period ended December 31, 2000. These financial
statements are the responsibility of World Airways' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of World Airways as of December
31, 2000 and 1999, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the financial statements, effective January 1, 2000,
the Company changed its method of accounting for certain aircraft maintenance
costs.


KPMG LLP
McLean, Virginia
March 21, 2001

Item 9.  Changes In and Disagreements with Accountants on Accounting and
         Financial Disclosure

Not applicable.

                                       36
<PAGE>

PART III

Item 10.  Directors and Executive Officers of the Registrant

Directors

The Company incorporates herein by reference the information concerning
directors contained in its Notice of Annual Stockholder's Meeting and Proxy
Statement to be filed within 120 days after the end of the Company's fiscal year
(the "2001 Proxy Statement").

Executive Officers

The following table sets forth the names and ages of all executive officers of
the Company and all positions and offices within the Company presently held by
such executive officers:

Hollis L. Harris          69    Chairman of the Board and Chief Executive
                                Officer
Andrew G. Morgan, Jr.     44    President and Chief Operating Officer
Gilberto M. Duarte, Jr.   56    Chief Financial Officer
Randy J. Martinez         45    Chief Information Officer
Cathy Sigalas             48    General Counsel and Secretary

Hollis L. Harris currently serves as Chairman and Chief Executive Officer of the
Company having been appointed Chairman, President, and CEO on May 1, 1999. Prior
to joining World Airways, Mr. Harris was Chairman, President, and CEO of HLH
Corporation from November 1998. From August 1996 to May 1998, he was Chairman
and CEO of CalJet Airline. From 1992 to 1996, Mr. Harris served as Chairman,
President, and CEO of Air Canada. From September 1990 to October 1991, Mr.
Harris served as Chairman, President, and CEO of Continental Airlines and
President and CEO of Continental Holdings, Inc. Prior to joining Continental
Airlines Mr. Harris worked with Delta Air Lines for 36 years, last serving as
President and Chief Operating Officer for several years and as a member of the
Board of Directors.

Andrew G. Morgan, Jr. joined the Company as President and Chief Operating
Officer effective June 1, 1999. From February 1998 until he joined World
Airways, Mr. Morgan served as regional director and general manager of
properties for Delta Air Lines. From 1993 until 1998, Mr. Morgan worked for
AirTran Airlines and its predecessor, ValuJet, serving as Vice President for
Engineering and Quality Assurance and Vice President for Contracts. From 1980
until 1993, Mr. Morgan worked at Delta Air Lines in a number of managerial
positions and he served in the engineering department of Southern Airways from
1975 through 1979.

Gilberto M. Duarte, Jr. serves as Chief Financial Officer. He joined the company
in August 1998 as Vice President and Controller and was named Chief Financial
Officer, effective December 1998. Mr. Duarte's career spans 30 years in the
airline industry having held positions with Eastern Airlines as Division
Controller and Vice President of Airport Operations. From 1992 - 1995, he served
as Executive Vice President of Universal Aviation Services. From 1995 - 1997, he
served as Executive Vice President of BWIA International, based in Trinidad &
Tobago. Prior to joining World Airways, Gil served as President for Inktel
Marketing from 1997 - 1998.

Randy J. Martinez became the Chief Information Officer of World Airways on
August 9, 1999. He joined the airline in October 1998 as the Director of Crew
Resources and was later appointed to be the Special Assistant to the Chairman in
May 1999. Mr. Martinez came to World after a distinguished 21 year career with
the United States Air Force (Colonel retired and Command Pilot). Prior to his
leaving the military, he was the Principal Advisor to the Chief of Staff of the
North Atlantic Treaty Organization's (NATO) senior-most Strategic Planning
Staff. Mr. Martinez also served as the Senior Aide-de-Camp to the Chairman of
the Joint Chiefs of Staff at the Pentagon, Commander of the 457th Airlift
Squadron at Andrews Air Force Base (AFB) in Maryland and Chief of the Wing
Standardization & Evaluation Division in DESERT STORM for C-130's. He is a
combat experienced pilot and decorated officer.

Cathy Sigalas has served as General Counsel and Corporate Secretary since her
appointment in September 1999. She joined the Company in August 1995 as
Assistant General Counsel, after having served as Assistant General Counsel for
WorldCorp for one year, and from 1991 through 1993 in various managerial and
sales positions with US Order. Prior to joining US Order, Ms. Sigalas worked for
the law firm of Jackson & Campbell, PC in Washington, DC, the Vice Chairman of
the Fairfax County Board of Supervisors and the Legislative Affairs Office at
NASA Headquarters. She obtained her J.D. from George Mason University School of
Law in 1984.

                                       37
<PAGE>

Beneficial Ownership Reporting

The Company incorporates herein by reference the information required by Item
405 of Regulation S-K contained in its 2001 Proxy Statement.

Item 11.  Executive Compensation

The Company incorporates herein by reference the information concerning
executive compensation contained in the 2001 Proxy Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The Company incorporates herein by reference the information concerning security
ownership of certain beneficial owners and management contained in the 2001
Proxy Statement.

Item 13.  Certain Relationships and Related Transactions

The Company incorporates herein by reference the information concerning certain
relationships and related transactions contained in the 2001 Proxy Statement.

                                       38
<PAGE>

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements

    The following financial statements of World Airways, Inc. are filed
herewith:

    -   Balance Sheets, December 31, 2000 and 1999
    -   Statements of Operations, Years Ended December 31, 2000, 1999 and 1998
    -   Statements of Changes in Stockholders' Deficiency, Years Ended December
        31, 2000, 1999 and 1998
    -   Statements  of Cash Flows, Years Ended December 31, 2000, 1999 and 1998
    -   Notes to Financial Statements
    -   Independent Auditors' Report

(2) Financial Statement Schedules

NOTE:   All schedules are omitted because the requisite information is
        either presented in the financial statements or notes thereto or
        is not present in amounts sufficient to require submission of
        the schedules.

(3) Index to Exhibits

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

   3.1    Amended and Restated Certificate of Incorporation (Exhibit 3.1
          to the Company's Registration Statement on Form S-1, Commission
          file no. 33-95488, filed August 8, 1995)                           *

   3.2    Amended and Restated Bylaws (Exhibit 3.2 to the Company's
          Registration Statement on Form S-1, Commission file no.
          33-95488, filed August 8, 1995)                                    *

   4.1    Article IV of the Amended and Restated Certificate of
          Incorporation and Section 6 of the Amended and Restated Bylaws
          (Exhibits 3.1 and 3.2 to the Company's Registration Statement on
          Form S-1, Commission file no. 33-95488, filed August 8, 1995)      *

   4.2    Stock Purchase Agreement among Malaysian Helicopter Services
          Berhad, WorldCorp, Inc., and the Company (Exhibit 10.1 to the
          Current Report on Form 8-K of WorldCorp, Inc., Commission file
          no. 1-9591, filed March 14, 1994)                                  *

   4.3    Stock Registration Rights Agreement between Malaysian Helicopter
          Services Berhad and the Company (Exhibit 10.2 to the Current
          Report on Form 8-K of WorldCorp, Inc., Commission file no.
          1-9591, filed March 14, 1994)                                      *

   4.4    Shareholders Agreement among Malaysian Helicopter Services
          Berhad, WorldCorp, Inc., and the Company, as amended (Exhibits
          10.3 and 10.4 to the Current Report on Form 8-K of WorldCorp,
          Inc., Commission file no. 1-9591, filed March 14, 1994)            *

   4.5    Indenture between the Company and First Union National Bank,
          as Trustee (Exhibit 4.1 to the Company's Registration Statement
          on Form S-3, Commission file no. 333-39673, filed November 6,
          1997)                                                              *

   4.6    Form of 8% Convertible Subordinated Debenture due 2003, included
          in the Indenture (Exhibit 4.1 to the Company's Registration
          Statement on Form S-3, Commission file no. 333-39673, filed
          November 6, 1997)                                                  *

   4.7    Registration Rights Agreement among the Company and the Initial
          Purchasers of the Debentures (Exhibit 4.3 to the Company's
          Registration Statement on Form S-3, Commission file no.
          333-39673, filed November 6, 1997)                                 *

                                       39
<PAGE>

   4.8    Purchase Agreement among the Company and the Initial Purchasers
          of the Debentures (Exhibit 4.4 to the Company's Registration
          Statement on Form S-3, Commission file no. 333-39673, filed
          November 6, 1997)                                                  *

  10.1    Restated and Amended Accounts Receivable Management and Security
          Agreement dated as of March 23, 1998 between the Company and BNY
          Financial Corporation                                              *

  10.2    Amendment (No. 1) dated as of August 1, 1998 to Restated and
          Amended Accounts Receivable Management and Security Agreement
          between the Company and BNY Financial Corporation                  *

  10.3    Amendment (No. 2) dated as of March 1, 1999 to Restated and
          Amended Accounts Receivable Management and Security Agreement
          between the Company and BNY Financial Corporation                  *

  10.4    Amendment (No. 3) dated as of September 3, 1999 to Restated and
          Amended Accounts Receivable Management and Security Agreement
          between the Company and BNY Financial Corporation                  *

  10.5    Second Amended and Restated Employment Agreement dated June 1,
          2000 between Hollis L. Harris and the Company (Exhibit 10.1 to
          the Company's Quarterly Report on Form 10-Q filed November 13,
          2000)                                                              *

  10.6    Employment Agreement dated June 1, 1999 between Andrew Gilbert
          Morgan, Jr. and the Company (Exhibit 10.20 to the Company's
          Quarterly Report on Form 10-Q filed November 13, 2000)             *

  10.7    Amended and Restated Employment Agreement dated January 22,
          1999 between Gilberto M. Duarte, Jr. and the Company (Exhibit
          10.16 to the Company's Quarterly Report on Form 10-Q filed May
          10, 1999)                                                          *

  10.8    Employment Agreement dated September 1, 1999 between Randy J.
          Martinez and the Company                                           *

  10.9    Employment Agreement dated September 1, 1999 between Cathy
          Sigalas and the Company                                            *

  18      Letter from KPMG LLP regarding change in accounting principle
          (Exhibit 18 to the Company's Quarterly Report on Form 10-Q filed
          November 13, 2000)                                                 *

  23.1    Consent of Independent Auditors

---------------
*    Incorporated by reference pursuant to Rule 12b-32.

(b)  Reports on Form 8-K
     None

Status of Prior Documents

World Airways' Annual Report on Form 10-K for the year ended December 31, 2000,
at the time of filing with the Securities and Exchange Commission, shall modify
and supersede all prior documents filed pursuant to Sections 13, 14, and 15(d)
of the Securities Exchange Act of 1934 for purposes of any offers or sales of
any securities after the date of such filing pursuant to any Registration
Statement or Prospectus filed pursuant to the Securities Act of 1933, as
amended, which incorporates by reference such Annual Report on Form 10-K.

                                       40
<PAGE>

                           * * * * * * * * * * * * *

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                             /s/ Gilberto M. Duarte, Jr.
                                             -------------------------------
                                             By: Gilberto M. Duarte, Jr.
                                                 Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


Signature                      Title                           Date
---------                      -----                           ----

/s/ Hollis L. Harris           Chairman and Chief Executive    February 28, 2001
---------------------------     Officer
Hollis L. Harris

/s/ Andrew G. Morgan, Jr.      President and Chief Operating   February 28, 2001
---------------------------     Officer
Andrew G. Morgan, Jr.

/s/ Gilberto M. Duarte, Jr.    Chief Financial Officer         February 28, 2001
---------------------------
Gilberto M. Duarte, Jr.

/s/ Daniel J. Altobello        Director                        February 28, 2001
---------------------------
Daniel J. Altobello

/s/ A. Scott Andrews           Director                        February 28, 2001
---------------------------
A. Scott Andrews

/s/ Joel H. Cowan              Director                        February 28, 2001
---------------------------
Joel H. Cowan

/s/ Ronald R. Fogleman         Director                        February 28, 2001
---------------------------
Ronald R. Fogleman

/s/ Wan Malek Ibrahim          Director                        February 28, 2001
---------------------------
Wan Malek Ibrahim

/s/ Russell L. Ray, Jr.        Director                        February 28, 2001
---------------------------
Russell L. Ray, Jr.

/s/ Peter M. Sontag            Director                        February 28, 2001
---------------------------
Peter M. Sontag

/s/ Lim Kheng Yew              Director                        February 28, 2001
---------------------------
Lim Kheng Yew

                                       41