FIVE-YEAR FINANCIAL AND OPERATING DATA

MIDWEST EXPRESS HOLDINGS, INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                      1999          1998           1997           1996          1995
                                                  -----------   -----------    -----------    -----------    ------------
Statement of Income Data:
<S>                                               <C>           <C>            <C>            <C>            <C>
Total operating revenues                          $   447,552   $   388,874    $   344,557    $   304,746    $    259,155
Total operating expenses                              386,800       333,219        306,087        270,387         227,781
Operating income                                       60,752        55,655         38,470         34,359          31,374
Net income                                             38,791        35,869         24,940         21,750          19,129
Net income per share - basic (1)                         2.75          2.54           1.76           1.51            1.23
Net income per share - diluted (1)                       2.71          2.51           1.74           1.50            1.23

Balance Sheet Data:
Property and equipment, net                           211,449       160,583         89,156         70,903          55,919
Total assets                                          263,829       220,477        166,748        129,135          92,833
Intercompany receivable (2)                                 -             -              -              -              61
Long-term debt                                          3,068         3,206          3,333              -               -
Shareholders' equity                              $   133,539   $    97,632    $    63,398    $    40,341    $     21,264

Selected Operating and Other Data (3):
Midwest Express Airlines:
  Revenue  passenger miles (000s)                   1,958,510     1,623,659      1,409,528      1,239,966       1,150,338
  Available seat miles (000s)                       2,993,765     2,498,543      2,198,179      1,954,151       1,794,924
  Passenger load factor (%)                              65.4%         65.0%          64.1%          63.5%           64.1%
  Revenue yield (cents per RPM)                          18.5          19.2           19.4           19.3            17.8
  Cost per total ASM (cents  per mile)                   11.5          11.8           12.1           12.0            11.0
  Aircraft  in service at  year-end                        32            27             24             22              19
  Average aircraft utilization (hours per day)            8.8           9.1            9.3            9.2             9.0
  Number of FTE employees at year-end                   2,449         2,133          1,889          1,624           1,411

Astral Aviation, d/b/a  Skyway  Airlines:
  Revenue passenger miles (000s)                       84,517        77,547         69,277         71,165          66,415
  Available seat miles (000s)                         170,428       160,772        158,912        160,488         156,113
  Passenger load factor (%)                              49.6%         48.2%          43.6%          44.3%           42.5%
  Revenue yield (cents per RPM)                          52.7          52.9           55.1           52.7            49.9
  Cost per total ASM (cents per mile)                    25.2          23.7           23.8           21.6            19.4
  Aircraft in service at year-end                          19            15             15             15              15
  Average aircraft utilization (hours per day)            8.2           8.1            7.7            7.8             7.9
  Number of FTE employees at year-end                     424           322            277            245             217



(1)  Net income per share data is presented on a pro forma basis for 1995 results.

(2)  Intercompany  receivable reflects amounts receivable from Kimberly-Clark in connection with the Company's  participation
     in Kimberly-Clark's cash management program prior to the Company's initial public offering.

(3)  Revenue  passenger  miles,  available  seat miles,  passenger  load factor and revenue yield are for  scheduled  service
     operations. The other statistics include charter operations.
</TABLE>


PAGE 18     MIDWEST EXPRESS HOLDINGS
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                             Results of Operations

1999 Overview
1999 operating  income for Midwest  Express  Holdings,  Inc. (the "Company") was
$60.8  million,  an  increase  of $5.1  million  over  1998.  Net income in 1999
increased by $2.9 million to $38.8  million.  The favorable  change in financial
results was  primarily  caused by an increase  in capacity  coupled  with strong
passenger demand, increased revenue from the Midwest Express MasterCard program,
and improved unit costs.

The  Company  increased  traffic,  as  measured  by  scheduled  service  revenue
passenger miles (RPMs), by 20.1%,  while capacity increased 19.0%. This resulted
in a load factor increase of .6 percentage  points.  Midwest  Express  Airlines,
Inc. ("Midwest  Express")  increased traffic by placing five additional aircraft
into service. The principal new routes include Kansas City-San Antonio (May) and
Milwaukee-Washington   Dulles   (September).   Additionally,   Midwest   Express
significantly  expanded service in a number of markets:  Milwaukee-Kansas  City,
Kansas   City-La   Guardia,   Milwaukee-Phoenix,   Milwaukee-   La  Guardia  and
Milwaukee-Orlando.  Astral  Aviation,  Inc.  ("Skyway")  placed  four  Fairchild
Aerospace  328JETs in service in the fourth quarter.  The 32-passenger  aircraft
replaced DC-9 jet service in Grand Rapids and Toronto,  and provided new service
between Milwaukee and Pittsburgh (November).

Midwest Express' credit card and frequent flyer partnership  programs  generated
$4.1 million, or 37.3%, more revenue in 1999 than 1998.

Operating  expenses  increased  16.1%,  primarily  due to a  19.0%  increase  in
capacity.  On a per available seat mile basis,  costs  decreased 2.7% at Midwest
Express and  increased  6.1% at Skyway.  Higher fuel  prices  reduced  operating
income $4.0 million in 1999, but were offset by lower ticket  distribution costs
and a  reduction  in the  cost  of the  Company's  profit  sharing  program  and
management  incentive  plan.  Cost changes are further  explained in  subsequent
sections.


The following  table  provides  operating  revenues and expenses for the Company
expressed as cents per total  available  seat miles ("ASM"),  including  charter
operations,  and as a percentage of total operating  revenues for 1999, 1998 and
1997:
<TABLE>
<CAPTION>
                                                1999                      1998                       1997
                                      -----------------------   -----------------------    -----------------------
                                        Per                      Per                        Per
                                        Total                    Total                      Total
                                        ASM              %       ASM                %       ASM               %
                                      ------------     ------   -----------      ------    ------           ------
Operating revenues:
<S>                                   <C>              <C>     <C>                <C>     <C>               <C>
  Passenger service.................    12.75(cent)     90.9%    13.12(cent)       90.8%    12.95(cent)      90.3%
  Cargo.............................     0.37            2.7%     0.44              3.0%     0.48             3.3%
  Other.............................     0.91            6.4%     0.90              6.2%     0.92             6.4%
Total operating revenues............    14.03          100.0%    14.46            100.0%    14.35           100.0%
Operating expenses:
  Salaries, wages and benefits......     3.95           28.2%     4.18             28.9%     3.84            26.7%
  Aircraft fuel and oil.............     1.67           11.9%     1.60             11.0%     2.09            14.5%
  Commissions.......................     0.96            6.8%     1.12              7.7%     1.31             9.2%
  Dining services...................     0.75            5.3%     0.73              5.0%     0.72             5.0%
  Station rental/landing/other fees      0.96            6.8%     0.96              6.7%     1.02             7.1%
  Aircraft maintenance materials/
   repairs..........................     1.44           10.3%     1.37              9.5%     1.17             8.2%
  Depreciation and amortization.....     0.63            4.5%     0.72              5.0%     0.73             5.1%
  Other.............................     1.35            9.7%     1.34              9.3%     1.51            10.5%
Total operating expenses............    12.12(cent)     86.4%    12.39(cent)       85.7%    12.75(cent)      88.8%

Total ASMs (millions)...............  3,190.4                  2,689.7                    2,401.3

</TABLE>

Note: Numbers in this table may not be recalculated due to rounding.
<PAGE>


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

Operating Revenues
The  Company's  operating  revenues  totaled  $447.6  million  in 1999,  a $58.7
million, or 15.1%,  increase over 1998. Passenger revenue accounted for 90.9% of
total  revenues  and  increased  $53.9  million,  or 15.3%,  from 1998 to $406.8
million.  The  increase  was  primarily  attributable  to a  20.1%  increase  in
passenger  volume,  as measured  by revenue  passenger  miles,  offset by a 4.0%
decrease in revenue yield.

Midwest Express' passenger revenue of $362.3 million increased $50.4 million, or
16.2%,  from 1998.  This  increase was caused by a 16.8%  increase in passengers
carried.  Total  capacity  increased  19.8% due to five  additional  aircraft in
scheduled  service.  Also, load factor  increased from 65.0% in 1998 to 65.4% in
1999 due to continued  strong travel demand.  Revenue yield  decreased  3.7%, to
18.5(cent)  in 1999,  from  19.2(cent)  in 1998 due to  longer  aircraft  flight
segments,  competitive  pricing pressure in several markets and operating larger
aircraft on certain routes.

Passenger  revenue at Skyway  increased $3.5 million,  or 8.4%, in 1999 to $44.5
million.  This  increase was caused by a 9.2%  increase in  passengers  carried,
offset by a .5% decrease in revenue yield.  Total capacity increased 6.0% due to
four  additional  jet aircraft in service in fourth  quarter  1999.  Load factor
increased from 48.2% to 49.6% in 1999 due to continued strong travel demand.

Revenue from other services  increased $4.7 million,  or 19.3%, in 1999. Midwest
Express  benefited  from  revenue  increases  of $3.1  million  from the Midwest
Express  MasterCard  program,  $1.0  million  from  Frequent  Flyer  partnership
programs, $.8 million in fees from ticket exchanges and $.2 million in ground

ANNUAL REPORT 1999     PAGE 19
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATION

handling services for other airlines.  Partially offsetting these increases were
decreases  of $.3  million in charter  revenue  and $.2  million in  maintenance
services for other airlines.

Operating Expenses
1999 operating expenses increased $53.6 million, or 16.1%, from 1998,  primarily
due to an increase in flight  segments.  On a cost per total ASM basis,  Midwest
Express' operating expenses decreased 2.7%, from 11.82(cent) to 11.50(cent),  in
1999,  and cost per total  ASM at Skyway  increased  6.1%  from  23.70(cent)  to
25.15(cent) in 1999.

Salaries,  wages and benefits increased $13.9 million, or 12.3%, from 1998. On a
cost per total ASM basis,  these  costs  decreased  from  4.18(cent)  in 1998 to
3.95(cent), or 5.5%, in 1999. Major contributors to the labor cost increase were
the addition of 418 full-time equivalent employees from 1998, increases in labor
rates and increased  benefit costs.  Midwest Express added employees  throughout
the  organization to support  aircraft  placed in service in 1999;  Skyway added
employees to support ramp and gate  operations at the Milwaukee  airport and the
start-up of the  regional  jet  program.  The labor rate  increase was due to an
increase  in pay  scales  for  most  operations  employees  at  Midwest  Express
effective January 1999, as well as merit increases for salaried employees. These
rate  adjustments  were  implemented   based  on  industry  salary  surveys  and
management's desire to increase pay scales to maintain a competitive position in
the industry.  These increases were partially offset by a $5.0 million reduction
in the employee  profit sharing  program and management  incentive  plan.  These
plans, which are payable annually, are generally based upon increasing operating
income  year over year.  The  incremental  change in  operating  income for 1999
versus  1998 was  significantly  less than the  incremental  change from 1998 to
1997. Therefore, accruals for these programs were $5.0 million less in 1999.

Aircraft fuel, oil and associated taxes increased $10.3 million,  or 24.0%, from
1998.  Fuel  consumption  increased 14.4% from 1998,  primarily  because Midwest
Express  operated 13.0% more aircraft flight hours and used larger aircraft with
higher  fuel  useage per hour.  Into-plane  fuel  prices  (which  represent  the
Company's cost after the effect of hedging)  increased  8.1% in 1999,  averaging
61.4(cent)  per  gallon  versus  56.8(cent)  per  gallon  in 1998.  The  Company
experienced  continued high fuel costs in January 2000, averaging 84.8(cent) per
gallon.  The Company  manages  the price risk of fuel  primarily  by  purchasing
commodity  options  that  establish  ceiling  prices.  The  Company  has  hedged
approximately 25% of first quarter 2000 forecasted fuel requirements,  albeit at
significantly higher prices than realized in 1999.

Commissions to travel agents and credit card companies increased by $.4 million,
or 1.4%. Commissions as a percent of passenger revenue decreased to 7.5% in 1999
from  8.5% in 1998.  Most of this  reduction  was due to a cap  placed on travel
agent  commissions  of $25 one way and $50  roundtrip,  implemented  February 1,
1999, and a new commission rate structure that reduced base commissions from
8% to 5% effective October 19, 1999. In addition, more ticket sales
were generated in 1999 from direct sales via the Company's  reservation  center,
Web site and ticket counters.

The Company's dining services increased by $4.3 million, or 21.7%, primarily due
to a 16.8%  increase  in  passenger  volume at  Midwest  Express.  Total  dining
services  costs  (including  food,  beverages,  linen,  catering  equipment  and
supplies)  increased from $11.17 per Midwest Express passenger in 1998 to $11.60
in 1999.

Station  rental,  landing and other fees  increased $4.6 million,  or 17.6%,  in
1999.  Midwest Express  incurred  higher ground handling fees,  landing fees and
facility costs due to expanded operations.

Aircraft  maintenance,  materials and repairs increased $9.1 million,  or 24.7%,
from 1998. Midwest Express'  maintenance costs increased $8.0 million, or 25.0%,
and  Skyway's  maintenance  costs  increased  $1.1  million,  or 22.5%.  Midwest
Express'  increase was caused by a significant  number of airframe  maintenance,
aircraft  refurbishment  and heavy checks  requiring  extensive  use of contract
labor,  more flight hours at Midwest  Express,  and higher material and aircraft
component  repair  costs.  Increased  costs at Skyway were caused by more flight
hours,  utilization  of contract  mechanics,  and higher  material  and aircraft
component repair costs.
<PAGE>

Depreciation  and  amortization  increased by $3.2 million,  or 31.8%,  in 1999,
primarily as a result of the  depreciation  associated  with four MD-80 aircraft
placed in service during 1999.

Aircraft  rental costs  increased  $.7 million,  or 3.8%, in 1999 as a result of
Skyway leasing five 328JETs in the second half
of the year and Midwest  Express  leasing one MD-80  aircraft.  Those costs were
partially  offset by lower lease costs for two leased MD-88  aircraft  that were
re-negotiated in 1999.

Other operating expenses  increased by $7.1 million,  or 19.8%, from 1998. Other
operating  expenses consist  primarily of advertising and promotion,  insurance,
property taxes,  reservation fees,  administration and other items. The increase
was primarily due to higher  professional and financial  services costs,  higher
booking fees associated with record passenger volume, an increase in advertising
and promotion to support new service,  higher flight  simulator  rental costs to
support increased pilot training,  increased costs for crew hotel rooms,  higher
legal fees and a $1.1 million  nonrecurring  airport rental credit received from
Milwaukee county in 1998.

Interest Income
Interest  income  reflects  interest  earned  on the  Company's  cash  and  cash
equivalents.

Provision for Income Taxes
Income tax expense in 1999 was $22.9  million,  an increase of $1.7 million from
1998.  The  effective  tax rate for 1999 and 1998 was  37.1%.  For  purposes  of
calculating the Company's income tax expense and effective tax rate, the Company
treats amounts payable to Kimberly-Clark  Corporation under a tax allocation and
separation  agreement  entered into in  connection  with the  Company's  initial
public offering, as if they were payable to taxing authorities.

Net Income
Net income  increased  $2.9  million,  or 8.1%,  in 1999.  The net income margin
decreased to 8.7% in 1999 from 9.2% in 1998.


ANNUAL REPORT 1999     PAGE 20
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATION

                          Year Ended December 31, 1998
                    Compared to Year Ended December 31, 1997

Operating Revenues
The  Company's  operating  revenues  totaled  $388.9  million  in 1998,  a $44.3
million, or 12.9%, increase over 1997. Passenger revenues accounted for 90.8% of
total  revenues  and  increased  $41.9  million,  or 13.5%,  from 1997 to $352.9
million.  The  increase  was  primarily  attributable  to a  15.0%  increase  in
passenger  volume,  as measured  by revenue  passenger  miles,  offset by a 1.4%
decrease in revenue yield.

Midwest Express' passenger revenue increased $39.0 million,  or 14.3%, to $311.9
million from 1997.  The increase  was caused by a 13.7%  increase in  passengers
carried and a 1.3% increase in passenger trip length,  partially offset by a .8%
decrease in revenue yield.  Midwest Express' capacity,  as measured by scheduled
service  ASMs,  increased  13.7%.  The increase in capacity was primarily due to
three  additional jet aircraft added to scheduled  service during the year. Load
factor  increased  to 65.0% in 1998 from 64.1% in 1997.  The slight  decrease in
revenue yield was caused by increased competitive pricing in some markets.

Passenger revenue at Skyway increased $2.9 million, or 7.7%, to $41.1 million in
1998. The increase was caused by a 14.3% increase in passengers carried,  offset
by a 3.8% decrease in revenue  yield.  Total capacity  increased by 1.2%,  while
load factor increased from 43.6% to 48.2% in 1998.  Skyway's  results  benefited
from  several  schedule  changes  and  traffic  diverted  to Skyway  during  and
following Northwest Airlines' pilots' strike.

Mail and cargo revenue  increased  $.3 million,  or 2.6%, in 1998 due to the new
markets added during the year.

Revenue from other services  increased $2.1 million,  or 9.6%, in 1998.  Midwest
Express  benefited  from  increased  revenue of $2.7  million  from the  Midwest
Express  MasterCard  program  and $1.2  million in fees from  ticket  exchanges.
Charter  service  revenue  decreased  $2.0  million  due to delays  placing  new
aircraft  in  scheduled  service,  requiring  the use of the  dedicated  charter
aircraft.  Since Midwest Express  provides charter service to several NBA teams,
the delayed startup of the NBA season also negatively  affected  charter service
revenue.

Operating Expenses
1998 operating expenses increased $27.1 million,  or 8.9%, from 1997,  primarily
due to higher labor costs,  increased profit sharing,  higher maintenance costs,
and expenses associated with expanded operations. On a cost per total ASM basis,
Midwest  Express'   operating  expenses  decreased  2.6%,  from  12.14(cent)  to
11.82(cent) in 1998. Cost per total ASM at Skyway decreased .2% from 23.75(cent)
to 23.70(cent) in 1998.

Salaries,  wages and benefits increased $20.1 million, or 21.8%, from 1997. On a
cost per total ASM basis,  these  costs  increased  from  3.84(cent)  in 1997 to
4.18(cent),  or 8.7%,  in 1998.  Major  contributors  to the labor cost increase
included additional  employees necessary for expanded service and administrative
requirements throughout the system,  increased labor rates and increased benefit
costs.  The labor rate  increase  was due to an  increase in pay scales for most
operations employees at Midwest Express effective January 1998, as well as merit
increases for salaried employees.  These rate adjustments were implemented based
on industry  salary  surveys and  management's  desire to increase pay scales to
maintain a competitive  position in the industry.  Salaries,  wages and benefits
were  adversely  affected by  unanticipated  delays in  completing  new aircraft
modifications  and  refurbishments as initially  scheduled.  This delay caused a
temporary  excess in aircraft  flight crews.  Profit  sharing and incentive plan
costs  increased $5.0 million in 1998.  The profit  sharing and incentive  plans
benefit  substantially all employees and are based entirely on achieving certain
levels of profitability.

Aircraft fuel and oil and associated  taxes  decreased  $7.2 million,  or 14.3%,
from 1997.  The  decrease was  primarily  the result of  into-plane  fuel prices
decreasing 22.3% in 1998,  averaging  56.8(cent) per gallon versus 73.1(cent) in
1997. The decrease was partially offset by fuel consumption that increased 10.4%
in 1998 primarily because Midwest Express operated 9.4% more aircraft hours.

Commissions  to travel  agents  and  credit  card  companies  decreased  by $1.5
million,  or 4.6%,  in 1998.  Commissions,  as a percent of  passenger  revenue,
decreased to 8.5% in 1998 from 10.1% in 1997. Most of the reduction was due to
the commission rate structure implemented in the third quarter
of 1997,  which lowered  travel agent  commissions  from 10% to 8%. In addition,
more  revenue  was  realized  in  1998  from  direct  sales  via  the  Company's
reservation center, Web site and ticket counters.
<PAGE>

Dining services increased by $2.5 million,  or 14.3%, due to a 13.7% increase in
passenger  volume at Midwest  Express.  Total dining  services costs  (including
food,  beverages,  linen, catering equipment and supplies) increased from $11.11
per Midwest Express passenger in 1997 to $11.17 in 1998.

Station  rental,  landing and other fees increased by $1.4 million,  or 5.7%, in
1998.  Midwest  Express'  airport costs  increased $1.3 million as a result of a
7.6%  increase in flight  segments.  In addition,  the Company  incurred  higher
facility costs and landing fees.

Aircraft maintenance, materials and repairs increased by $8.8 million, or 31.1%,
from 1997.  Midwest  Express'  maintenance  costs increased by $9.4 million,  or
41.5%,  and Skyway's  maintenance  costs  decreased $.6 million,  or 10.9%.  The
increase was attributable to more flight hours at Midwest Express,  higher costs
for major aircraft maintenance that required outsourcing, an increase in accrual
rates for future engine and aircraft  overhauls,  and higher aircraft  component
repair costs.

Depreciation  and  amortization  increased by $1.4 million,  or 15.9%,  in 1998,
primarily as a result of the  depreciation  associated  with aircraft  placed in
service,  capitalized  maintenance,  and aircraft  engine hush kits installed in
1998.

Aircraft rental costs  increased $1.8 million,  or 10.5%, in 1998 as a result of
Midwest Express leasing two additional aircraft.

Other  operating  expenses  decreased by $.2 million,  or .5%, from 1997.  Other
operating  expenses consist  primarily of advertising and promotion,  insurance,
property taxes,  reservation fees,  administration and other items. The decrease
was due to a $1.1 million  non-recurring  airport  rental  credit  received from
Milwaukee County, and lower hull and liability  insurance costs. This was offset
by higher passenger booking fees, property taxes, and professional and financial
services. Other operating expenses on a cost per total ASM basis decreased 11.2%
to 1.34(cent) in 1998 from 1.51(cent) in 1997.


ANNUAL REPORT 1999     PAGE 21
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Interest Income
Interest  income  reflects  interest  earned  on the  Company's  cash  and  cash
equivalents.

Provision for Income Taxes
Income tax expense in 1998 was $21.2  million,  an increase of $6.5 million from
1997. The effective tax rate for 1998 and 1997 was 37.1%.

Net Income
Net income  increased  $10.9 million,  or 43.8%,  in 1998. The net income margin
increased to 9.2% in 1998 from 7.2% in 1997.

                        Liquidity and Capital Resources

The Company's  cash and cash  equivalents  totaled $16.0 million at December 31,
1999  compared  to $13.5  million at December  31,  1998.  Net cash  provided by
operating  activities  totaled  $58.6  million  during  1999.  Net cash  used in
investing   activities   totaled  $71.5   million,   primarily  due  to  capital
expenditures  of $70.2 million,  including $3.0 million of purchase  deposits on
flight  equipment.  Net cash  provided by  financing  activities  totaled  $15.5
million during 1999.

The Company had a working capital deficit of $37.1 million
as of December 31, 1999,  versus a $42.5  million  deficit on December 31, 1998.
The  working  capital  deficit is  primarily  due to the  Company's  air traffic
liability  (which  represents  deferred  revenue for advance  bookings,  whereby
passengers have purchased  tickets for future flights,  which is recognized when
the passenger  travels).  Because of this,  the Company  expects to operate at a
working capital deficit, which is not unusual for the industry.

As of December 31, 1999,  the Company's two credit  facilities,  a $55.0 million
revolving bank credit facility and a $20.0 million  secondary  revolving  credit
facility with  Kimberly-Clark,  have not been used, except for letters of credit
totaling  approximately $9.7 million that reduce the amount of available credit.
The  letters  of credit  are used to  support  financing  on the  Company's  new
maintenance facility and for various other purposes.

Capital  expenditures  totaled $70.2  million for the period ended  December 31,
1999,   including  $3.0  million  of  purchase  deposits  on  flight  equipment.
Expenditures  consisted primarily of aircraft purchases and refurbishment costs.
Other capital  expenditures  included  aircraft  engine hush kit  components and
capitalized  engine  overhauls.  In 1999,  the Company  completed the process of
installing seven noise hush kits on its fleet of DC-9 aircraft to meet Stage III
noise  regulations.  The Company expects to incur about $50.0 million of capital
spending in 2000,  $21.0 million of which is associated with the acquisition and
refurbishment of MD-80 aircraft.  The remaining  capital  spending  includes the
completion of the Company's training facility,  the acquisition of spare engines
and other  capitalized  aircraft and engine  overhauls and spare parts,  airport
facility  improvements,  and costs associated with improving and maintaining the
Company's information technology infrastructure.

During 1997, the Company executed definitive purchase documents to acquire eight
previously owned McDonnell  Douglas MD-80 series aircraft.  The Company financed
four deliveries and $13.4 million in refurbishment costs during 1999,  primarily
using  internal cash flow; a  sale-leaseback  was completed in the third quarter
for one MD-80.  Financing  alternatives  are currently  being  evaluated for the
remaining aircraft scheduled to enter service in 2000.

During 1999,  the Company  signed a purchase  agreement to acquire four preowned
MD-80  series  aircraft.  Deliveries  of the  aircraft  are expected to begin in
September 2000 and continue  through November 2001.  Financing  alternatives are
currently being evaluated.

Leases  relating  to three  Midwest  Express  jet  aircraft  are  guaranteed  by
Kimberly-Clark  Corporation.  The Company pays  Kimberly-Clark  a guarantee  fee
equal to 1.25% annually of the  outstanding  lease  commitments.  Kimberly-Clark
will  continue  to  guarantee  the  leases  for the  three  aircraft  until  the
expiration of their initial lease terms.  The first of these jet aircraft leases
expires in 2001. Aircraft lease guarantee fees will be immaterial in 2000.
<PAGE>

The  Company's  Board of Directors has  authorized a $15.0 million  common stock
repurchase  program.  During 1999,  the Company  repurchased  147,100  shares of
common  stock  totaling  $4.3  million.  As of December  31,  1999,  the Company
purchased a total of 565,725  shares of common stock at a cost of $11.0  million
under the share repurchase program.

In October  1998,  Midwest  Express moved into a newly  constructed  maintenance
facility  that is owned by  Milwaukee  County and  located  at General  Mitchell
International  Airport.  To  finance  the  $8.2  million  project,  the  City of
Milwaukee issued variable-rate demand industrial  development revenue bonds. The
Company's  variable rent payments are based on the current  interest rate of the
City of Milwaukee's outstanding bonds over the 32-year lease term. The bonds are
secured by a promissory  note between Midwest Express and the City of Milwaukee,
with further security provided by Firstar Bank, National Association.

The  Company  believes  existing  cash  and cash  equivalents,  cash  flow  from
operations,  funds  available  from credit  facilities  and available  long-term
financing  for the  acquisition  of jet  aircraft  will be  adequate to meet its
current and anticipated working capital requirements and capital expenditures.


                                  Market Risk

Quantitative  and  Qualitative  Disclosures  about  Market Risk - The  Company's
primary market risk exposures include  commodity price risk (i.e.  aircraft fuel
prices)  and  interest   rate  risk.   The  Company's   operating   results  are
significantly  impacted  by changes in the price and  availability  of  aircraft
fuel.  The  Company  manages  the price  risk of fuel  primarily  by  purchasing
commodity options that establish ceiling prices. Any premiums paid to enter into
option  contracts are recorded as prepaid  expense and amortized to fuel expense
over their respective  option life. For 1999,  aircraft fuel, oil and associated
taxes (including the effect of any hedging)  represented  13.8% of the Company's
total operating  expenses.  Based on the Company's  fiscal 2000 fuel consumption
estimate of 97 million gallons,  a one-cent increase in the average annual price
per gallon of  aviation  fuel  would  increase  the  Company's  fuel  expense by
approximately  $1.0  million.  As of December 31,  1999,  the Company has hedged
approximately 25% of its first quarter 2000 fuel requirements.

Exposure  to  interest  rate  risk  relates  primarily  to  the  Company's  cash
equivalents and short-term investment portfolios, and

ANNUAL REPORT 1999     PAGE 22
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATION

interest  expense from floating rate debt  instruments.  Market risk  associated
with the  Company's  long-term  debt is the  potential  increase  in fair  value
resulting  from a decrease  in  interest  rates.  A 10% change  would not have a
material  impact on the  Company's  interest  expense  associated  with fixed or
variable rate debt. If short-term  interest  rates average 10% more in 2000 than
they did  during  1999,  there  would be no  material  impact  on the  Company's
interest income.

                              Pending Developments

Forward-Looking  Statements  - This Annual  Report,  particularly  this  Pending
Developments  section,  contains  forward-looking  statements that may state the
Company's  or  management's   intentions,   hopes,   beliefs,   expectations  or
predictions for the future. The Company's actual results could differ materially
from those projected results due to factors that include, but are not limited to
uncertainties  related to general economic factors,  industry conditions,  labor
relations, scheduling developments, government regulations, aircraft maintenance
and refurbishment schedules, potential delays related to acquired aircraft, fuel
costs and interest rates.  Additional  information concerning factors that could
cause  actual  results to differ  materially  from those in the  forward-looking
statements  is  contained  from  time  to  time in the  Company's  SEC  filings,
including  but not  limited  to the  Company's  prospectus  dated  May 23,  1996
included in the Registration Statement on Form S-1 No. 333-03325.

MD-80 Series  Aircraft - During 1999,  Midwest  Express placed into service five
MD-80 series  aircraft the Company  agreed to purchase in 1997. Two MD-80 series
aircraft  were  received  in the fourth  quarter  and will enter  service in the
second and third quarter 2000. In November  1999,  the Company signed a purchase
agreement  to  acquire  four  MD-80  series  aircraft   currently   operated  by
Scandinavian  Airlines System.  Delivery of the aircraft is expected to begin in
September 2000 and continue  through  November  2001.  After  refurbishment  and
modification, three aircraft are expected to enter scheduled service in 2001 and
the  last  in  2002.  The  Company  expects  this  project,  including  aircraft
refurbishment,  modification and support equipment, will cost $60 million. These
aircraft will be used to increase capacity on the Company's  high-traffic routes
and expand service in existing and new markets.

Regional Jet Aircraft - In 1999, five Fairchild  Aerospace  328JET aircraft were
financed via  operating  leases.  Four  aircraft  were placed in service and the
remaining  aircraft  was  placed  into  service  in first  quarter  2000.  These
32-passenger  aircraft  replaced  DC-9 jet service in Grand  Rapids and Toronto.
They also provide new service between  Milwaukee and Pittsburgh,  and supplement
turboprop service on select flights to several Midwest cities. Additional routes
are  expected  to be  added  in  mid-2000.  The  Company  holds  options  for 10
additional regional jet aircraft to support future growth. Those options are for
aircraft deliveries beginning after January 1, 2001.

Labor  Relations - Pilots at the Company are  represented by the Air Line Pilots
Association,  a labor union, for  representation  in collective  bargaining.  In
February 2000,  Midwest Express pilots ratified a five-year  contract.  In April
1999,  Midwest  Express  flight  attendants  elected the  Association  of Flight
Attendants, AFL-CIO, a labor union, for representation in collective bargaining.
Negotiations began in January 2000.

Sales Taxes - During 1996,  the Wisconsin  Department  of Revenue  asserted that
Wisconsin  sales  taxes  should  be paid in  connection  with  Midwest  Express'
purchase of meals from its food caterer.  While Midwest Express does not believe
any such sales tax is payable, if the Department of Revenue successfully asserts
its  position,  Midwest  Express  would be liable for back taxes and  associated
interest of approximately  $.9 million,  and would have to pay approximately $.3
million in additional sales taxes annually in the future.

Year 2000 - The  Company  successfully  completed  the Year 2000  rollover.  The
Company  spent  approximately  $.8 million to achieve Year 2000  readiness.  The
Company  estimates lost revenue as a result of passengers  not traveling  during
the last week of December due to the  millennium  change was  approximately  $.7
million.  The  Company  had  no  significant  occurrences  associated  with  the
millennium  rollover  and  does  not  anticipate  any  future  interruptions  in
operations as a result of the processing or display of date/time data.
<PAGE>

Headquarters  Building  Expansion - In July 1999, the Company  announced it will
add  a  55,000-square-foot   training  facility  to  its  Oak  Creek,  Wisconsin
headquarters.  Ground-breaking for the building took place in October 1999, with
facility  completion  anticipated in the third quarter 2000. The Company expects
the cost of this  project  to be  approximately  $6.0  million  and  anticipates
funding this project with cash flows from operations.

Maintenance  Program - Midwest  Express is planning a new program for performing
airframe  maintenance  overhauls  that may  necessitate  a change in  accounting
principles.  This proposed change will eliminate  accruals of heavy  maintenance
expense and  capitalization  and amoritization of maintenance  costs.  Under the
proposed program,  major airframe maintenance will be performed at more frequent
intervals, and many duplicate tasks will be eliminated.  The Company expects FAA
approval of the revised  maintenance  program in the second  quarter  2000.  The
Company is currently evaluating the impact of the change.

Pension Plan - In 1999,  Midwest  Express  approved a plan whereby the qualified
defined benefit plan that covers  substantially  all Midwest  Express  employees
will be  terminated  on March 31,  2000.  This is subject to approval by Pension
Benefit  Guaranty   Corporation  (PBGC),  the  federal  agency  responsible  for
supervising pension plan terminations.  The obligations  reported as of December
31, 1999 assume the pension plan is ongoing.

Subject  to  approval  of the  pension  plan  termination,  on  April  1,  2000,
substantially  all Midwest Express employees will be covered by a money purchase
pension plan. Midwest Express will make monthly  contributions,  primarily based
on employee compensation and employee age.

ANNUAL REPORT 1999     PAGE 23
<PAGE>

                              REPORT OF MANAGEMENT

To the Shareholders of Midwest Express Holdings, Inc.:

The  management  of  Midwest  Express  Holdings,  Inc.  is  responsible  for the
preparation,  content, integrity and objectivity of the financial statements and
other information contained in this annual report. The financial statements were
prepared using generally accepted accounting principles, applied on a consistent
basis.  The statements  have been audited by Deloitte & Touche LLP,  independent
auditors, whose report appears on the next page.

The Company  maintains a system of internal control that is supported by written
policies and  procedures,  and is monitored by management and the internal audit
function.  Although all internal  control  systems  have  inherent  limitations,
including the possibility of circumvention and overriding  controls,  management
believes the Company's internal control system provides reasonable  assurance as
to the integrity and reliability of the financial statements and that its assets
are  safeguarded   against   unauthorized   acquisition,   use  or  disposition.
Appropriate actions are taken by management to correct  deficiencies as they are
identified.

The Audit  Committee of the Board of  Directors is composed  entirely of outside
directors.  The Committee meets  periodically with the Company's  management and
internal audit function and with its  independent  auditors to review  auditing,
internal control and financial reporting matters.

Based on its assessment of internal control as of December 31, 1999,  management
believes  its system of  internal  control  over the  preparation  of  financial
statements and the safeguarding of assets is effective.



/s/ Timothy E. Hoeksema
Timothy E. Hoeksema
Chairman, President and Chief Executive Officer



/s/ Robert S. Bahlman
Robert S. Bahlman
Senior Vice President, Chief Financial Officer and Controller

PAGE 24     MIDWEST EXPRESS HOLDINGS
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of Midwest Express Holdings, Inc.:

We have audited the accompanying  consolidated balance sheets of Midwest Express
Holdings,  Inc. and its  subsidiary  as of December  31, 1999 and 1998,  and the
related consolidated  statements of income,  shareholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Midwest Express Holdings,  Inc. and
its  subsidiary  as of  December  31,  1999 and 1998,  and the  results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.



/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
January 28, 2000


ANNUAL REPORT 1999     PAGE 25
<PAGE>

                       CONSOLIDATED STATEMENTS OF INCOME

MIDWEST EXPRESS HOLDINGS, INC.
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                          1999         1998        1997
                                                       ----------   ----------   ---------
Operating revenues:
<S>                                                    <C>          <C>          <C>
    Passenger service..................................$  406,803   $  352,933   $ 311,022
    Cargo..............................................    11,912       11,761      11,466
    Other..............................................    28,837       24,180      22,069
                                                       ----------   ----------   ---------
         Total operating revenues......................   447,552      388,874     344,557
                                                       ----------   ----------   ---------

Operating expenses:
    Salaries, wages and benefits.......................   126,167      112,315      92,207
    Aircraft fuel and oil..............................    53,226       42,925      50,107
    Commissions........................................    30,499       30,080      31,535
    Dining services....................................    23,892       19,633      17,181
    Station rental, landing and other fees.............    30,510       25,933      24,526
    Aircraft maintenance materials and repairs.........    46,076       36,961      28,190
    Depreciation and amortization......................    13,211       10,021       8,645
    Aircraft rentals...................................    20,014       19,290      17,453
                                                       ----------   ----------   ---------
    Other..............................................    43,205       36,061      36,243
                                                       ----------   ----------   ---------
         Total operating expenses......................   386,800      333,219     306,087
                                                       ----------   ----------   ---------
Operating income                                           60,752       55,655      38,470

Other income (expense):
    Interest income....................................     1,117        1,727       1,419
    Interest expense...................................      (270)        (280)        (95)
    Other, net.........................................        68          (75)       (162)
                                                       ----------   ----------   ---------
         Total other income (expense)..................       915        1,372       1,162
                                                       ----------   ----------   ---------

Income before income taxes.............................    61,667       57,027      39,632
Provision for income taxes.............................    22,876       21,158      14,692
                                                       ----------   ----------   ---------

Net income.............................................$   38,791   $   35,869    $ 24,940
                                                       ==========   ==========   =========
Net income per share - basic...........................$     2.75   $     2.54    $   1.76
                                                       ==========   ==========   =========
Net income per share - diluted.........................$     2.71   $     2.51    $   1.74
                                                       ==========   ==========   =========

</TABLE>

See notes to consolidated financial statements.

PAGE 26     MIDWEST EXPRESS HOLDINGS

<PAGE>

                          CONSOLIDATED BALANCE SHEETS

MIDWEST EXPRESS HOLDINGS, INC.
AS OF DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      1999          1998
                                   ASSETS                                          ----------    ----------
Current assets:
<S>                                                                                <C>           <C>
   Cash and cash equivalents.....................................................  $   16,049    $   13,455
   Accounts receivable:
       less allowance for doubtful accounts of $166 in 1999 and $251 in 1998.....      10,237         9,254
   Inventories...................................................................       7,270         4,020
   Prepaid expenses:
       Commissions...............................................................       2,168         2,931
       Other.....................................................................       2,477         3,427
                                                                                   ----------    ----------
            Total prepaid expenses...............................................       4,645         6,358
   Aircraft and modifications intended to be financed
       by sale and leaseback transactions........................................           -           951
   Deferred income taxes.........................................................       4,687         5,521
                                                                                   ----------    ----------
            Total current assets.................................................      42,888        39,559
                                                                                   ----------    ----------
Property and equipment, net......................................................     211,449       160,583
Landing slots and leasehold rights, less accumulated amortization
   of $2,505 in 1999 and $2,178 in 1998..........................................       4,244         4,572
Purchase deposits on flight equipment............................................       2,000        13,383
Other assets.....................................................................       3,248         2,380
                                                                                   ----------    ----------
Total assets.....................................................................  $  263,829    $  220,477
                                                                                   ==========    ==========

                              LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable..............................................................  $    4,796    $    5,064
   Air traffic liability.........................................................      36,428        35,285
   Accrued liabilities:
       Scheduled maintenance expense.............................................       3,897         5,182
       Accrued profit sharing....................................................       4,957         9,518
       Vacation pay..............................................................       4,840         4,066
       Frequent Flyer awards.....................................................       4,001         3,653
       Other.....................................................................      21,023        19,253
                                                                                   ----------    ----------
            Total current liabilities............................................      79,942        82,021
                                                                                   ----------    ----------
Long-term debt...................................................................       3,068         3,206
Deferred income taxes............................................................      14,283        13,647
Noncurrent scheduled maintenance expense.........................................      16,991        12,082
Accrued pension and other postretirement benefits................................       9,115         6,201
Other noncurrent liabilities.....................................................       6,891         5,688
                                                                                   ----------    ----------
Total liabilities................................................................     130,290       122,845
                                                                                   ----------    ----------
Shareholders' equity:
   Preferred stock, without par value, 5,000,000 shares authorized,
       no shares issued or outstanding...........................................           -             -
   Common stock, $.01 par value, 25,000,000 shares authorized,
       14,543,231 shares issued in 1999 and 14,464,056 in 1998...................         145           145
   Additional paid-in capital....................................................      11,147         9,680
   Treasury stock, at cost; 531,104 shares in 1999 and 381,015 shares in 1998....     (10,752)       (6,401)
   Retained  earnings............................................................     132,999        94,208
                                                                                   ----------    ----------
Total shareholders' equity.......................................................     133,539        97,632
                                                                                   ----------    ----------
Total liabilities and shareholders' equity.......................................  $  263,829    $  220,477
                                                                                   ==========    ==========
</TABLE>

See notes to consolidated financial statements.

ANNUAL REPORT 1999     PAGE 27
<PAGE>

                           CONSOLIDATED STATEMENTS OF CASH FLOWS

MIDWEST EXPRESS HOLDINGS, INC.
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                          1999          1998          1997
                                                                       -----------   -----------   -----------
Operating activities:
<S>                                                                    <C>           <C>           <C>
   Net income......................................................... $   38,791    $   35,869    $   24,940
   Items not involving the use of cash:
       Depreciation and amortization..................................     13,211        10,021         8,645
       Deferred income taxes..........................................      1,470           272         1,294
       Other..........................................................      5,565         4,974         4,335
   Changes in operating assets and liabilities:
       Accounts receivable............................................       (629)       (3,704)         (319)
       Inventories....................................................     (3,250)          (78)         (820)
       Prepaid expenses...............................................      1,713        (2,990)          833
       Accounts payable...............................................       (168)         (496)        1,876
       Accrued liabilities............................................        789        11,769         1,059
       Air traffic liability..........................................      1,143         6,352         6,891
                                                                       -----------   -----------   -----------
   Net cash provided by operating activities..........................     58,635        61,989        48,734
                                                                       -----------   -----------   -----------

Investing activities:
   Capital expenditures...............................................    (67,206)      (74,332)      (27,617)
   Aircraft acquisitions and modifications financed by or
       intended to be financed by sale and leaseback transactions.....          -           557       (12,520)
   Purchase  deposits on flight equipment.............................     (2,983)      (10,800)      (14,500)
   Proceeds from sale of property and equipment.......................         89           336           196
   Other..............................................................     (1,438)          451        (2,128)
                                                                       -----------   -----------   -----------
   Net cash used in investing activities..............................    (71,538)      (83,788)      (56,569)
                                                                       -----------   -----------   -----------

Financing activities:
   Proceeds from sale and leaseback transactions .....................     15,951         4,492        15,566
   Purchase of treasury stock.........................................     (4,253)       (2,003)       (1,977)
   Other..............................................................      3,799           699        (1,277)
                                                                       -----------   -----------   -----------
   Net cash provided by financing activities..........................     15,497         3,188        12,312
                                                                       -----------   -----------   -----------

   Net increase (decrease) in cash and cash equivalents...............      2,594       (18,611)        4,477
   Cash and cash equivalents, beginning of year.......................     13,455        32,066        27,589
                                                                       -----------   -----------   -----------
   Cash and cash equivalents, end of year............................. $   16,049    $   13,455    $   32,066
                                                                       ===========   ===========   ===========

   Supplemental cash flow information:
       Cash paid for:
         Income taxes................................................. $   20,668*   $   22,754*   $   11,948*
         Interest..................................................... $      270    $      280    $       95

   Supplemental schedule of non-cash financing activities:
       Long-term debt assumed in connection with capital expenditures. $        -    $        -    $    3,487

   Supplemental schedule of investing activities:
       Transfer of flight equipment from purchase deposits
         to property and equipment.................................... $   14,366    $   11,917    $        -
   Accrued capital expenditures.......................................      1,372             -             -
   Spare parts credit.................................................      1,350             -             -


*    Included in taxes paid are amounts paid to Kimberly-Clark in accordance with the Tax Agreement totaling $4,047
     in 1999, $4,535 in 1998 and $5,996 in 1997.
</TABLE>

See notes to consolidated financial statements.

PAGE 28     MIDWEST EXPRESS HOLDINGS
<PAGE>

                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

MIDWEST EXPRESS HOLDINGS, INC.
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                            Common       Additional                               Total
                                                            Stock, $.01   Paid-in      Treasury     Retained    Shareholders'
                                                            par value     Capital       Stock       Earnings      Equity
                                                           ------------  ----------    --------    ----------   -------------
<S>                                                        <C>           <C>           <C>         <C>          <C>
Balances at December 31, 1996..............................   $  64       $ 9,545       $(2,672)   $   33,404    $   40,341
   Net income..............................................       -             -             -        24,940        24,940
   Stock split effected in the form of a dividend..........      32           (31)            -            (1)            -
   Purchase  of 80,000 shares of treasury stock............       -             -        (1,977)            -        (1,977)
   Issuance of treasury stock upon exercise................
     of stock options and related tax benefits.............       -             3            52             -            55
   Other...................................................       -            14            25             -            39
                                                           ------------  ----------    --------    ----------   -------------

Balances at December 31, 1997..............................      96         9,531        (4,572)       58,343        63,398
   Net income..............................................       -             -             -        35,869        35,869
   Stock split effected in the form of a dividend..........      49           (49)            -             -             -
   Purchase of 65,300 shares of treasury stock.............       -             -        (2,003)            -        (2,003)
   Issuance of treasury stock upon exercise
     of stock options and related tax benefits.............       -           122           132             -           254
   Other...................................................       -            76            42            (4)          114
                                                           ------------  ----------    --------    ----------   -------------

Balances at December 31, 1998..............................     145         9,680        (6,401)       94,208        97,632
   Net income..............................................       -             -             -        38,791        38,791
   Purchase of 147,100 shares of treasury stock............       -             -        (4,253)            -        (4,253)
   Issuance (receipt) of common stock upon exercise........
     of stock options and related tax benefits.............       -         1,395          (104)            -         1,291
   Other...................................................       -            72             6             -            78
                                                           ------------  ----------    --------    ----------   -------------

Balances at December 31, 1999..............................   $ 145       $11,147      $(10,752)     $132,999      $133,539
                                                           ============  ==========    ========    ==========   ==============
</TABLE>


See notes to consolidated financial statements.


ANNUAL REPORT 1999     PAGE 29
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MIDWEST EXPRESS HOLDINGS, INC.
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


Note 1. Business and Basis of Presentation
Basis of Presentation
---------------------
The accompanying  Consolidated Financial Statements of Midwest Express Holdings,
Inc. (the  "Company")  include the accounts of Midwest  Express  Airlines,  Inc.
("Midwest  Express"),  a wholly  owned  subsidiary  of the  Company,  and Astral
Aviation,  Inc.  ("Astral"),  a wholly owned  subsidiary of Midwest Express that
does business as Skyway  Airlines.  All  intercompany  balances and transactions
have been eliminated.

Nature of Operations
--------------------
Midwest Express is a U.S. air carrier providing  scheduled  passenger service to
28 major  destinations  in North  America.  The Company also  provides  aircraft
charter services,  air freight and other airline services.  In May 1994, Midwest
Express established Omaha,  Nebraska, as its first base of operations outside of
Milwaukee,  and currently  provides  nonstop jet service  between Omaha and five
destinations.  Astral provides  regional  scheduled  passenger service to cities
primarily in the Midwest.

Stock Splits
------------
On April  23,  1997,  the  Company  announced  that its Board of  Directors  had
approved a plan to split its stock 3-for-2 in the form of a 50% stock  dividend.
The new shares were issued May 28, 1997, to shareholders of record as of May 12,
1997.

On April  22,  1998,  the  Company  announced  that its Board of  Directors  had
approved a plan to split its stock 3-for-2 in the form of a 50% stock  dividend.
The new shares were issued May 27, 1998, to shareholders of record as of May 11,
1998.

Note 2. Accounting Policies
The accounting  policies of the Company conform to generally accepted accounting
principles  and to  accounting  practices  generally  followed  in  the  airline
industry. Significant policies followed are described below.

Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with purchased maturities of
three  months or less to be cash  equivalents.  They are carried at cost,  which
approximates market.

Inventories
-----------
Inventories  consist  primarily  of  aircraft  maintenance  parts,   maintenance
supplies and fuel stated at the lower of cost on the first-in,  first-out (FIFO)
method or market, and are expensed when used in operations.

Property and Equipment
----------------------
Property and equipment is stated at cost and is depreciated on the straight-line
method applied to each unit of property for financial  reporting purposes and by
use of accelerated methods for income tax purposes.  Aircraft are depreciated to
estimated  residual  values,  and any gain or loss on disposal is  reflected  in
income. The depreciable lives for the principal asset categories are as follows:

   Asset Category                    Depreciable Life
   --------------                    ----------------
   Flight equipment                  10 to 15 years
   Other equipment                   5 to 8 years
   Office furniture and equipment    5 to 20 years
   Buildings                         40 years
   Building improvements             Lesser of 20 years or
                                     remaining life of building
<PAGE>

Other Assets
------------
Airport  takeoff and landing  slots have an unlimited  life,  have  historically
appreciated  in  value,  and  are  occasionally  traded,  sold or  leased  among
airlines.   The  cost  of  takeoff  and  landing   slots  is  amortized  on  the
straight-line method over 20 years,  consistent with industry practice. The cost
of airport  leasehold rights is amortized on the  straight-line  method over the
term of the  lease.  The  cost  of  capitalized  software  is  amortized  on the
straight-line method over five years or less.

Revenue Recognition
-------------------
Passenger  and cargo  revenues are  recognized in the period when the service is
provided.  Contract maintenance revenue is recognized when work is completed and
invoiced.  The estimated liability for sold, but unused,  tickets is included in
current liabilities as air traffic liability.

Maintenance and Repair Costs
----------------------------
Routine  maintenance  and repair costs for owned and leased aircraft are charged
to expense when incurred.  Depending on the particular aircraft or engine, major
airframe and engine  maintenance  costs are either (1) accrued to expense on the
basis of estimated future costs and the estimated number of future flight hours,
or  the  number  of  future  takeoffs  and  landings  between  overhauls  or (2)
capitalized  when incurred and amortized on the basis of the estimated number of
future  flight  hours,  or the number of future  takeoffs and  landings  between
overhauls.  The actual  maintenance and repair costs to be incurred could differ
from the Company's estimates.

Frequent Flyer Program
----------------------
The estimated incremental cost of providing future transportation in conjunction
with the  Company's  Frequent  Flyer  program  is  accrued  based  on  estimated
redemption  percentages applied to actual mileage recorded in members' accounts.
The ultimate cost will depend on the actual  redemption of Frequent  Flyer miles
and may be greater or less than amounts accrued at December 31, 1999.

Postretirement Health Care and Life Insurance Benefits
------------------------------------------------------
The costs of health care and life insurance  benefit plans for retired employees
are accrued over the working lives of employees in accordance  with Statement of
Financial  Accounting  Standards  (SFAS) No.  106,  "Employers'  Accounting  for
Postretirement Benefits Other Than Pensions."

Income Taxes
------------
The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting  for Income Taxes." SFAS No. 109 requires that deferred income taxes
be determined under the asset and liability  method.  Deferred income taxes have
been  recognized  for the future tax  consequences  of temporary  differences by
applying  enacted  statutory  tax rates  applicable to  differences  between the
financial reporting and the tax bases of assets and liabilities.

Income tax expense and deferred  income tax assets and liabilities are reflected
in the Company's financial statements in accordance with SFAS No. 109.

Leases
------
Rental obligations under operating leases for aircraft, facilities and equipment
are charged to expense on the straight-line method over the term of the lease.

Hedging Transactions
--------------------
The Company has entered  into  hedging  arrangements  to reduce its  exposure to
fluctuations in the price of jet fuel.  Contracts entered into were not material
as of December 31, 1999. Net settlements are recorded as adjustments to aircraft
fuel expense.


PAGE 30     MIDWEST EXPRESS HOLDINGS
<PAGE>

Use of Estimates
-----------------
The  preparation  of  consolidated   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 year.
Future results could differ from those estimates.

Accounting Standard to Be Adopted
---------------------------------
In  1998  the  Financial   Accounting  Standards  Board  issued  SFAS  No.  133,
"Accounting for Derivative  Instruments and Hedging  Activities." The Company is
currently in the process of evaluating the accounting and disclosure  effects of
this  Statement and  anticipates  adopting the Statement in the first quarter of
2001.

Reclassifications
-----------------
Certain  reclassifications  have been made in prior year financial statements to
conform to the current year presentation.

Note 3. Property and Equipment
As of December  31,  1999 and 1998,  property  and  equipment  consisted  of the
following (in thousands):

                                         1999          1998
                                     ------------   ------------
Flight equipment..................      $230,341      $150,622
Other equipment...................       12,611         10,143
Buildings and improvements........       19,111         17,746
Office furniture and equipment....       12,067         10,140
Construction in progress..........       34,288         54,633
                                     ------------   ------------
                                        308,418        243,284
Less accumulated depreciation.....      (96,969)       (82,701)
                                     ------------   ------------
Property and equipment, net.......     $211,449       $160,583
                                     ============   ============


Note 4. Leases
The Company leases aircraft,  terminal space,  office space and warehouse space.
Future minimum lease payments  required under operating leases having initial or
remaining  noncancelable  lease terms in excess of one year as of  December  31,
1999 were as follows (in thousands):


          Year ended December 31,
          2000....................................    $  27,244
          2001....................................       25,035
          2002....................................       23,309
          2003....................................       22,528
          2004....................................       22,470
          2005 and thereafter.....................      150,963
                                                      ---------
                                                      $ 271,549
                                                      =========

As of December 31, 1999, the Company had 13 of its jet aircraft in service under
operating  leases,  three  of  which  have  been  guaranteed  by  Kimberly-Clark
Corporation.  Prior to 1995,  the  Company  was a member  of the  Kimberly-Clark
Corporation  consolidated group. These leases have expiration dates ranging from
2000 through 2011 and can  generally be renewed,  based on the fair market value
at the end of the lease term, for one to three years.  All of the leases include
purchase  options at or near the end of the lease term at fair market value, but
generally not in excess of the lessor's defined cost of the aircraft.

As of December 31,  1999,  the  Company's  turboprop  fleet was  financed  under
operating  leases with initial lease terms of five to 12 years,  and  expiration
dates  ranging from 2001 through 2008.  These leases permit  renewal for various
periods at rates approximating fair market value and purchase options at or near
the end of the lease term at fair market value.
<PAGE>

In the fourth quarter 1999, the Company entered into lease agreements to finance
the acquisition of five Fairchild  Aerospace 328JETs.  The leases run for a term
of 16.5 years,  with expiration for all leases  occurring in 2015.  These leases
permit renewal for various periods at rates  approximating fair market value and
purchase options at or near the end of the lease term at fair market value.

In October  1998,  Midwest  Express moved into a newly  constructed  maintenance
facility  that is owned by  Milwaukee  County and  located  at General  Mitchell
International  Airport.  To  finance  the  $8.2  million  project,  the  City of
Milwaukee issued variable-rate demand industrial  development revenue bonds. The
Company's  variable rent payments are based on the current  interest rate of the
City of Milwaukee's outstanding bonds over the 32-year lease term. The bonds are
secured by a promissory  note between Midwest Express and the City of Milwaukee,
with further security provided by Firstar Bank, National Association.

Rent expense for all operating leases,  excluding landing fees, was $31,096,000,
$28,088,000 and $25,435,000 for 1999, 1998 and 1997 respectively.

Note 5. Financing Agreements
At December 31, 1999,  the Company had  available two credit  facilities:  (1) a
$55.0 million revolving credit facility with three banks and (2) a $20.0 million
secondary  revolving credit facility with  Kimberly-Clark.  Borrowings under the
Kimberly-Clark  facility  must be repaid prior to  repayments on the bank credit
facility.  The bank credit  facility  requires an annual  commitment fee of 12.5
basis  points on the average  unused  commitment  with  interest  payable on the
outstanding  principal balance at LIBOR plus 50 basis points. The Kimberly-Clark
facility does not require a commitment fee, and interest will be at a rate equal
to the  then-current  rate of interest  under the bank credit  facility plus 100
basis points.  There were no outstanding  borrowings  under these  agreements at
December 31, 1999, except for letters of credit totaling  $9,707,000 that reduce
the amount of available credit.

In August 1997, the Company  purchased its headquarters  building,  which it had
previously leased. As part of the transaction, the Company assumed $3,487,000 of
long-term  debt.  The mortgage note has an interest rate of 8.25% and is payable
in monthly  installments through April 2011. Future maturities of long-term debt
for the next five years are as follows (in thousands):

          Year ended December 31,
          2000....................................    $ 138
          2001....................................      182
          2002....................................      214
          2003....................................      233
          2004....................................      253


The fair value of the Company's borrowing under this agreement  approximates its
carrying value as of December 31, 1999.

Note 6. Retirement and Benefit Plans
Defined Benefit Plans
---------------------
Midwest Express has two defined  benefit  pension plans which,  in total,  cover
substantially  all of its  employees.  The  benefits  for these  plans are based
primarily on years of service and employee compensation.  It is Midwest Express'
policy to  annually  fund at least the minimum  contribution  as required by the
Employee Retirement Income Security Act (ERISA) of 1974.


ANNUAL REPORT 1999     PAGE 31
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following  table sets forth the funded status of the plans as of December 31
(in thousands):

                                                  Midwest Express
                                                   Pension Plan
                                                   1999         1998
                                               ----------     --------
Change in Benefit Obligation
Net benefit obligation at beginning of year....  $ 27,614     $ 18,552
Service cost...................................     3,266        2,456
Interest cost..................................     2,092        1,676
Actuarial (gain) loss..........................    (6,129)       4,953
Gross benefits paid............................       (31)         (23)
                                               ----------     --------
Net benefit obligation at end of year..........  $ 26,812     $ 27,614
                                               ==========     ========

Change in Plan Assets
Fair value of assets at beginning of year......  $ 17,739     $ 12,331
Actual return on plan assets...................     2,147        1,705
Employer contributions.........................     2,474        3,726
Gross benefits paid............................       (31)         (23)
                                               ----------     --------
Fair value of plan assets at end of year.......  $ 22,329     $ 17,739
                                               ==========     ========

Funded status at end of year...................  $ (4,483)    $ (9,875)
Unrecognized net actuarial loss................     1,017        7,900
Unrecognized prior service cost................       (26)         (28)
Unrecognized net transition obligation.........        63           86
                                               ----------     --------
Accrued benefit liability......................  $ (3,429)    $ (1,917)
                                               ==========     ========

Amounts  recognized in the balance sheet consist of an accrued benefit
liability of $3,429,000  and $1,917,000 on December 31, 1999 and 1998,
respectively.

Weighted-average assumptions
Discount rate..................................      7.75%        7.00%
Expected return on plan assets.................     10.00%       10.00%
Rate of compensation increase..................      4.25%        4.25%

                                                      Supplemental
                                                      Pension Plan
                                                  1999          1998
                                               ----------     --------
Change in Benefit Obligation
Net benefit obligation at beginning of year....  $  1,290      $ 1,152
Service cost...................................        68           52
Interest cost..................................       106           81
Actuarial (gain) loss..........................      (121)           5
                                               ----------     --------
Net benefit obligation at end of year..........  $  1,343      $ 1,290
                                               ==========     ========

Funded status at end of year...................  $ (1,343)     $(1,290)
Unrecognized net actuarial loss................       483          641
Unrecognized prior service cost................        45           50
Unrecognized net transition obligation.........        11           15
                                               ----------     --------
Accrued benefit liability......................  $   (804)     $  (584)
                                               ==========     ========

Amounts  recognized in the balance sheet consist of an accrued benefit
liability  of $804,000  and  $584,000  on December  31, 1999 and 1998,
respectively.

Weighted-average assumptions
Discount rate..................................     7.75%       7.00%
Rate of compensation increase..................     4.25%       4.25%
<PAGE>

The net periodic benefit cost of defined benefit pension plans for the
years ending December 31 includes the following (in thousands):

                                                 Midwest Express
                                                  Pension Plan
                                            1999        1998        1997
                                           --------   --------   --------
Components of Net Periodic Benefit Cost
Service cost..........................     $  3,266   $ 2,456     $ 1,656
Interest cost.........................        2,092     1,676       1,132
Expected return on assets.............       (1,802)   (1,175)       (994)
Amortization of:
   Transition obligation..............           23        23          23
   Prior service cost.................           (2)       (3)         (2)
   Actuarial loss.....................          409       379          37
                                           --------   --------   --------
Total net periodic benefit cost.......     $  3,986   $ 3,356     $ 1,852
                                           ========   ========   =========

                                                    Supplemental
                                                    Pension Plan
                                            1999        1998        1997
                                           --------   --------   --------
Components of Net Periodic Benefit Cost
Service cost..........................     $     68   $    52     $    45
Interest cost.........................          106        81          73
Amortization of:
   Transition obligation..............            4         4           4
   Prior service cost.................            5         5           5
   Actuarial loss.....................           36        36          30
                                           --------   --------   --------
Total net periodic benefit cost.......     $    219   $   178     $   157
                                           ========   ========   ========


Postretirement Health Care and Life Insurance Benefits
------------------------------------------------------
Midwest Express allows retirees to participate in unfunded health care
and life  insurance  benefit  plans.  Benefits  are  based on years of
service   and  age  at   retirement.   The   plans   are   principally
noncontributory  for current  retirees,  and are contributory for most
future retirees.

The following  table sets forth the status of the plans as of December
31 (in thousands):


                                                       1999       1998
                                                     --------    --------
Change in Benefit Obligation
Net benefit obligation at beginning of year......    $  2,725    $  2,151
Service cost.....................................         430         270
Interest cost....................................         266         176
Actuarial loss...................................         159         128
                                                     --------    --------
Net benefit obligation at end of year............    $  3,580    $  2,725
                                                     ========    ========

Funded status at end of year.....................    $ (3,580)   $ (2,725)
Unrecognized net actuarial loss..................         503         380
                                                     --------    --------
Accrued benefit liability........................    $ (3,077)   $ (2,345)
                                                     ========    ========

Amounts  recognized in the balance sheet consist of an accrued benefit
liability of $3,077,000  and $2,345,000 on December 31, 1999 and 1998,
respectively.

Weighted-average assumptions
Discount rate....................................       7.75%        7.00%
Rate of compensation increase....................       4.25%        4.25%


PAGE 32     MIDWEST EXPRESS HOLDINGS
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The net periodic benefit cost of  postretirement  health care and life insurance
benefits for the years ending December 31 includes the following (in thousands):


Components of Net Periodic                        1999    1998     1997
Benefit Cost
Service cost................................... $  430  $  270    $  211
Interest cost..................................    266     176       141
Actuarial loss.................................     37       2         -
                                                 -----  ------    ------
Total net periodic benefit cost................ $  733     448       352
                                                 =====  ======    ======


The assumed health care cost trend rate was approximately 8%, declining annually
to a rate of 6% by the year 2005, and remaining  level  thereafter.  A change of
one percentage point would not be significant.

Defined Contribution Plans
--------------------------
The Company has two voluntary  defined  contribution  investment  plans covering
substantially all employees. Under these plans, the Company matches a portion of
an employee's contributions.  Amounts expensed and reflected in the accompanying
income  statements were $1,642,000,  $1,471,000 and $1,498,000 in 1999, 1998 and
1997, respectively.

Profit Sharing Plans
--------------------
The Company has three profit sharing plans:  an employee profit sharing plan for
substantially all employees of Midwest Express,  an employee profit sharing plan
for substantially all employees of Astral,  and an Annual Incentive Plan for key
management employees.  Company contributions for all plans are based entirely on
achieving  specified levels of profitability.  The Company expensed  $4,951,000,
$9,984,000  and  $4,938,000  under  these  plans  during  1999,  1998 and  1997,
respectively.

Plan Termination
----------------
In 1999, the Company  approved a plan whereby the Midwest  Express  Pension Plan
which covers  substantially  all Midwest Express employees will be terminated on
March 31, 2000 subject to approval of the Pension Benefit  Guaranty  Corporation
(the federal agency responsible for supervising pension plan terminations).  The
obligations  reported  as of December  31, 1999 assume that the pension  plan is
ongoing.

Note 7. Net Income Per Share
The Company has adopted SFAS No.128, "Earnings Per Share," which established new
standards for the  calculation of net income per share.  Reconciliations  of the
numerator and  denominator of the basic and diluted per share  computations  are
summarized as follows (in thousands, except per share amounts):


                                                 1999        1998      1997
                                               --------   ---------   --------
Net Income Per Share - Basic:
   Net income (numerator).....................$  38,791   $  35,869   $ 24,940
   Weighted average shares outstanding
     (denominator)............................   14,121      14,102     14,197
                                               --------   ---------   --------
   Net income per share - basic...............$    2.75   $    2.54   $   1.76
                                               ========   =========   ========
Net Income Per Share - Diluted:
   Net income (numerator).....................$  38,791   $  35,869   $ 24,940
   Weighted average shares outstanding........   14,121      14,102     14,197
   Effect of dilutive securities:
   Stock options..............................      160         196        113
   Shares issuable under the 1995 Stock
    Plan for Outside Directors................       12           8          5
                                               --------   ---------   --------
   Weighted average shares outstanding
    assuming dilution (denominator)...........   14,293      14,306     14,315
                                               --------   ---------   --------
   Net income per share - diluted.............$    2.71   $    2.51   $   1.74
                                               ========   =========   ========
<PAGE>

Note 8. Shareholders' Equity
In 1996,  the Board of Directors  adopted a  shareholder  rights plan and made a
dividend  distribution  of one Preferred  Share Purchase Right ("Right") on each
outstanding  share of the  Company's  common  stock.  As a result of the 3-for-2
stock  splits  effected  in May 1997  and  1998,  four-ninths  of a Right is now
associated with each share of common stock. The Rights are exercisable only if a
person or entity  acquires  15% or more of the  common  stock of the  Company or
announces  a  tender  offer  for 15% or more of the  common  stock.  Each  Right
initially  entitles its holders to buy one one-hundredth  share of the Company's
Series A Preferred Stock at an exercise price of $100, subject to adjustment. If
a person or entity acquires 15% or more of the Company's common stock, then each
Right will entitle its holder to purchase,  at the Right's then-current exercise
price,  Company  common stock valued at twice the exercise  price.  The Board of
Directors is also  authorized to reduce the 15% thresholds  referred to above to
not less than 10%. The Rights expire in 2006.

Under the Company's  1995 Stock Option Plan, the  Compensation  Committee of the
Board of Directors may grant options, at its discretion, to certain employees to
purchase  shares of common  stock.  An aggregate  of 1,548,900  shares of common
stock is reserved for issuance under the Plan.  Under the Plan,  options granted
have an exercise  price equal to 100% of the fair market value of the underlying
stock at the date of grant.  Granted  options become  exercisable at the rate of
30% after the first year,  30% after the second year and the remaining 40% after
the third  year,  unless  otherwise  determined,  and have a maximum  term of 10
years.

Transactions  with respect to the Plan have been  adjusted to reflect the effect
of the two stock splits and are summarized
as follows:
                                                               Weighted
                                                               Average
                                                 Shares     Exercise Price
                                                -------     --------------
Options outstanding at January 1, 1997......    266,625         $  8.51
   Granted..................................    285,750           16.04
   Exercised................................     (6,750)           8.00
   Forfeited................................     (4,500)          16.11
                                               --------         -------
Options outstanding at December 31, 1997....    541,125         $ 12.43
   Granted..................................    285,750           30.50
   Exercised................................    (19,000)          11.90
   Forfeited................................    (45,900)          24.41
                                               --------         -------
Options outstanding at December 31, 1998....    761,975         $ 18.49
   Granted..................................    309,250           29.27
   Exercised................................    (77,150)          11.01
   Forfeited................................    (72,850)          27.62
                                               --------         -------
Options outstanding at December 31, 1999....    921,225         $ 22.02
                                               ========         =======
Options exercisable at December 31, 1999....    391,200         $ 14.76
                                               ========         =======


Options  exercisable  at December  31, 1999  included  179,000  options  with an
exercise price of $8.00, 22,500 options with an exercise price of $14.00, 13,500
options with an exercise price of $15.14, 108,025 options with an exercise price
of $16.11, and 68,175 options with an exercise price of $30.52.


ANNUAL REPORT 1999     PAGE 33
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table  summarizes  information  concerning  currently  outstanding
options:
                                              Weighted
                                               Average         Weighted
                                              Remaining         Average
                               Number        Contractual       Exercise
Range of Exercise Prices     Outstanding         Life            Price
                             ------------    -----------       ---------
$8.00                          179,000        5.7 years         $  8.00
$14.00 - $16.11                234,925        7.1 years           15.82
$25.00 - $29.22                258,800        9.2 years           29.04
$30.00 - $33.63                248,500        8.2 years           30.66
Options outstanding at
December 31, 1999              921,225        7.7 years         $ 22.02
                               =======        =========         =======

The Company has adopted the disclosure requirements
of SFAS No. 123,  "Accounting  for  Stock-Based  Compensation"  (SFAS 123).  The
Company  has  elected  to  continue  to  follow  the  provisions  of  Accounting
Principles  Board No. 25,  "Accounting  for Stock Issued to  Employees"  and its
related interpretations; accordingly, no compensation cost has been reflected in
the financial  statements for its stock option plan. Had  compensation  cost for
the Company's stock option plan been  determined  based on the fair value at the
grant dates for awards under those plans consistent with the method of SFAS 123,
the Company's net income and net income per share would have been reduced to the
pro forma amounts indicated below (in thousands, except per share amounts):

                                      1999        1998         1997
Net income:
    As reported                     $ 38,791    $  35,869     $  24,940
    Pro forma                       $ 36,920    $  34,514     $  24,461
Net income per share - basic:
    As reported                     $   2.75    $    2.54     $    1.76
    Pro forma                       $   2.61    $    2.45     $    1.72
Net income per share - diluted:
    As reported                     $   2.71    $    2.51     $    1.74
    Pro forma                       $   2.58    $    2.41     $    1.71

For  purposes of these  disclosures,  the fair value of each option  granted was
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:

                              1999       1998        1997
Expected volatility           30.9%      31.6%        27.4%
Risk-free interest rate        6.5%       4.5%         5.4%
Forfeiture rate                5.0%       5.0%         5.0%
Dividend rate                  0.0%       0.0%         0.0%
Expected life in years          5          5            5

Note 9. Income Taxes
The provision for income taxes for the years ended  December 31, 1999,  1998 and
1997 consisted of the following (in thousands):

                                      1999           1998            1997
Current provision:
Federal                            $  18,122      $  17,611      $  11,314
State                                  3,284          3,275          2,084
                                      21,406         20,886         13,398
Deferred provision:
Federal                                1,272            246          1,169
State                                    198             26            125
                                       1,470            272          1,294
Total provision for income taxes    $ 22,876      $  21,158      $  14,692

A reconciliation  of income taxes at the U.S. federal  statutory tax rate to the
effective tax rate follows:

                                         1999     1998     1997
Tax at statutory U.S. tax rates          35.0%    35.0%       35.0 %
State income taxes,
  net of federal benefit                  3.8      3.8         3.8
Other, net                               (1.7)    (1.7)       (1.7)
Provision for income taxes               37.1%    37.1%       37.1%
<PAGE>

Deferred tax assets and  liabilities  resulting from temporary  differences  are
comprised of the following (in thousands):

                                           1999         1998
Current deferred income tax assets
attributable to:
Accrued liabilities                      $  3,102     $   2,550
Maintenance expense liability               1,317         2,633
Other                                         268           338
Net current deferred tax assets          $  4,687     $   5,521

Noncurrent deferred income tax assets
(liabilities) attributable to:
Excess of tax over book depreciation     $(25,585)    $ (20,467)
Maintenance expense liability               6,304         3,692
Pension liability                           2,831         1,794
Other                                       2,167         1,334
Net noncurrent deferred tax liabilities  $(14,283)    $ (13,647)


In  connection  with  the  Company's   initial  public  offering  in  1995  (the
"Offering"),  the Company,  Midwest Express,  Astral and Kimberly-Clark  entered
into a Tax Allocation and Separation  Agreement (`'Tax Agreement").  Pursuant to
the Tax  Agreement,  the Company is treated for tax  purposes as if it purchased
all of Midwest Express' assets at the time of the Offering, and as a result, the
tax bases of Midwest Express' assets were increased to the deemed purchase price
of the assets.  The tax on the amount of the gain on the deemed  asset  purchase
was paid by  Kimberly-Clark.  This  additional  basis is  expected  to result in
increased  income tax  deductions  and,  accordingly,  may reduce  income  taxes
otherwise  payable by the Company.  Pursuant to the Tax  Agreement,  the Company
will pay to  Kimberly-Clark  the amount of the tax benefit  associated with this
additional basis (retaining 10% of the tax benefit),  as realized on a quarterly
basis,  calculated  by comparing  the  Company's  actual taxes to the taxes that
would have been owed had the  increase  in basis not  occurred.  In the event of
certain business  combinations or other acquisitions  involving the Company, tax
benefit  amounts   thereafter   will  not  take  into  account,   under  certain
circumstances,  income,  losses,  credits or carryovers of businesses other than
those historically  conducted by Midwest Express or the Company.  Except for the
10% benefit,  the effect of the Tax  Agreement is to put the Company in the same
financial  position  it would have been in had there been no increase in the tax
bases of Midwest  Express'  assets.  The effect of the  retained  10% benefit is
reflected in the financial  statements as a reduction in the Company's provision
for income taxes.

Note 10. Commitments and Contingencies
In February 1997,  Midwest Express  committed to pay $9.25 million over 15 years
for the naming  rights to the Midwest  Express  Center,  an  800,000-square-foot
convention center in Milwaukee that opened in July 1998.

In July  1999,  the  Company  announced  the  addition  of a  55,000-square-foot
training facility to its Oak Creek, Wisconsin  headquarters.  Groundbreaking for
the building took place in October 1999,  with facility  completion  expected in
third  quarter  2000.  The  Company  expects  the  cost  of  the  project  to be
approximately  $6 million,  and anticipates  funding the project with cash flows
from operations.

PAGE 34     MIDWEST EXPRESS HOLDINGS
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 1999, the Company signed a purchase  agreement to acquire four MD-80
series aircraft currently operated by Scandinavian Airlines System.  Delivery of
the  aircraft  is  expected  to begin in  September  2000 and  continue  through
November 2001. After refurbishment and modification, three aircraft are expected
to enter  scheduled  service in 2001, and the last in 2002. The Company  expects
that this project,  including aircraft  refurbishment,  modification and support
equipment,  will cost $60 million.  Financing  alternatives  are currently being
evaluated.

The Company is party to routine litigation incidental to its
business.  In the opinion of management,  the final disposition of these matters
will have no material adverse effect on the consolidated financial statements.

Note 11. Segment Reporting
Midwest Express and Astral,  doing business as Skyway  Airlines,  constitute the
two reportable  segments of the Company.  The Company's  reportable segments are
strategic units that are managed  independently  because they provide  different
services with different  cost  structures  and marketing  strategies.  No single
customer accounted for more than 10% of revenue.  The accounting policies of the
reportable segments are the same as those described in Note 2.

Midwest  Express offers jet service to 28 major  destinations  throughout  North
America by offering single-class, premium service at competitive coach fares. As
of December 31, 1999, Midwest Express operated a fleet of 32 aircraft - 24 DC-9s
and eight MD-80s.

Astral offers point-to-point service in select markets and increases traffic for
Midwest Express by providing  passengers with connecting service to jet flights.
As of December 31,  1999,  Astral  operated a fleet of 15 Beech 1900D  turboprop
aircraft and four Fairchild Aerospace 328JETs.

Revenue for passengers who travel on both carriers within a single  itinerary is
allocated to each entity based on a formula that is dependent upon the fare type
paid by the  passenger.  There were 100,848;  88,154;  and 76,508  passengers in
1999, 1998 and 1997, respectively, under the aforementioned pricing agreement.

Although Astral is independent from an operational perspective,  Midwest Express
performs  a number  of  services  for  Astral  including,  but not  limited  to,
coordinating  aircraft  scheduling,  pricing,  reservations,  yield  management,
advertising,  fuel  procurement  and  revenue  accounting.  Astral is  charged a
marketing  service fee for these services - 9% of the revenue for passengers who
travel  exclusively on Astral and  approximately $2 per passenger for passengers
who connect between the carriers.  These service charges  comprise a majority of
the intercompany revenue and expense between the two segments.

Midwest Express also performs treasury functions for Astral, including centrally
controlling  cash.  Astral  earns  interest  income at market rates for any cash
managed by Midwest  Express.  This interest  income  comprises the  intercompany
interest income and expense shown as eliminations in the subsequent information.
The total asset elimination  consists primarily of the intercompany  payable and
receivable balances.

Reportable  segments,  as defined,  are components of an enterprise  about which
separate financial  information is available that is evaluated  regularly by the
chief operating  decision-maker  in deciding  resource  allocation and assessing
performance.
<PAGE>

Financial information on the two operating segments, Midwest Express and Astral,
follows (in thousands):

                           Midwest
1999                       Express    Astral    Elimination     Consolidated
----                       --------   ------    -----------     ------------
Operating revenues         $406,127  $ 44,887   $  (3,462)       $ 447,552
Operating income             58,847     1,905           -           60,752
Depreciation and
   amortization expense      12,336       875           -           13,211
Interest income               1,033       706        (622)           1,117
Interest expense                892         _        (622)             270
Income before
   income taxes              58,854     2,813           -           61,667
Provision for
   income taxes              21,869     1,007           -           22,876

Total assets                253,354    25,406     (14,931)         263,829
Capital expenditures         66,894     3,295           -           70,189

1998
----
Operating revenues         $351,357   $41,478   $  (3,961)       $ 388,874
Operating income             52,390     3,265           -           55,655
Depreciation and
   amortization expense       9,334       687           -           10,021
Interest income               1,727       587        (587)           1,727
Interest expense                867         _        (587)             280
Income before
   income taxes              53,175     3,852           -           57,027
Provision for
   income taxes              19,714     1,444           -           21,158
                                                        -
Total assets                213,119    21,319     (13,961)         220,477
Capital expenditures         83,630     1,502           -           85,132


1997
----
Operating revenues        $ 309,912  $ 38,484    $ (3,839)      $  344,557
Operating income             37,793       677           -           38,470
Depreciation and
   amortization expense       8,056       589           -            8,645
Interestincome                1,419       462        (462)           1,419
Interest expense                557         _        (462)              95
Income before
   income taxes              38,495     1,137           -           39,632
Provision for
   income taxes              14,266       426           -           14,692

Total assets                160,027    17,962     (11,241)         166,748
Capital expenditures         40,552     1,565           -           42,117


ANNUAL REPORT 1999     PAGE 35
<PAGE>
<TABLE>
                                           MIDWEST EXPRESS HOLDINGS, INC.
                                      Quarterly Financial Summary (Unaudited)
                                       (In Thousands, Except Per Share Data)
<CAPTION>
                                                               Three Months Ended
-------------------------------------------------------------------------------------------------------------------
1999                                             March 31          June 30         September 30        December 31
-------------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>                  <C>                <C>
Operating revenues                                $98,881         $117,662             $115,837           $115,172
Operating expenses                                 87,616           96,858               98,343            103,983
Operating income                                   11,265           20,804               17,494             11,189
Income before income taxes                         11,365           20,896               17,795             11,611
Income taxes                                        4,262            7,836                6,673              4,105
Net income                                          7,103           13,060               11,122              7,506
Net Income per share - basic                         0.50             0.92                 0.79               0.53
Net income per share - diluted                       0.50             0.91                 0.78               0.53

<CAPTION>
                                                               Three Months Ended
-------------------------------------------------------------------------------------------------------------------
1998                                             March 31          June 30         September 30        December 31
-------------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>                  <C>                 <C>
Operating revenues                                $88,412         $100,097             $103,823            $96,542
Operating expenses                                 79,009           83,266               86,907             84,037
Operating income                                    9,403           16,831               16,916             12,505
Income before income taxes                          9,728           17,217               17,242             12,840
Income taxes                                        3,648            6,456                6,447              4,607
Net income                                          6,080           10,761               10,795              8,233
Net Income per share - basic                         0.43             0.76                 0.77               0.58
Net income per share - diluted                       0.43             0.75                 0.75               0.58

-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                              SHAREHOLDER INFORMATION
<S>                                              <C>
Headquarters                                     Annual Meeting
Midwest Express Holdings, Inc.                   The annual Meeting of Midwest Express Holdings, Inc. will be held at 10
6744 South Howell Avenue                         a.m. on Wednesday, April 26, 2000 at The Midwest Express Center, 400
Oak Creek, Wisconsin  53154-1402                 West Wisconsin Avenue, Milwaukee.  Shareholders of record on March 9,
(414) 570-4000                                   2000 will be mailed an official notice of the meeting.

Web Site                                         Financial Reports
www.midwestexpress.com                           Form 10-K (without exhibits) and other reports filed with the Securities
                                                 and Exchange Commission are available without charge upon written
Transfer Agent and Registrar                     request from the Company's Investor Relations department at the
Firstar Bank, National Association               headquarters  address.   Company documents filed electronically with
Corporate Trust Department                       the U.S. Securities and Exchange Commission (SEC) can also be found
Milwaukee, Wisconsin                             on the SEC's Web site at www.sec.gov.

Independent Auditors                             Common Stock
Deloitte & Touche LLP                            Midwest Express Holdings, Inc. (symbol: MEH) common stock
Milwaukee, Wisconsin                             trades on the New York Stock Exchange.  As of December 31, 1999,
                                                 there were 14,543,231 shares of common stock issued and
                                                 782 registered shareholders.
</TABLE>

                   Following are low and high prices per share
                   for the past two years, adjusted to reflect
                     a 3-for-2 stock split on May 27, 1998.

                                  1999                          1998
First Quarter               $24-1/8 - 30-15/16           $24-1/4 - 34-43/64
Second Quarter              $28-5/16 - 34-3/8            $27-37/64 - 36-3/16
Third Quarter               $26-3/16 - 34-11/16          $26-3/4 - 37-9/16
Fourth Quarter              $25-13/16 - 32-5/8           $24-1/8 - 32-3/8

The Company has not paid a cash dividend since its initial public offering.

ANNUAL REPORT 1999     PAGE 36