##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---

FORM 10-K/A

(Amendment No. 1)



---



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

For the fiscal year ended December 31, 2006



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

For the transition period from  to

Commission file number 1-15991



---

LOGO

AIRTRAN HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 58-2189551                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

9955 AirTran Boulevard

Orlando, Florida 32827

(Address, including zip code, of registrants
principal executive offices)

(407) 318-5600

Registrants telephone number, including area code

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

Common Stock, $0.001 par value

(Title of class)

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

None



---

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  x    No ̈

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes ̈No  x

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                           |  |                    |  |                       
|-------------------------- |  | ------------------ |  | ----------------------
|Large accelerated filer  x |  | Accelerated filer ̈ |  | Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).    Yes ̈No  x

The aggregate market value of common stock held by non-affiliates of the registrant as of February 16, 2007, was approximately $1,044,000,000
(based on the last reported sale price on the New York Stock Exchange on that date). The number of shares outstanding of the registrants common stock as of February 16, 2007 was 91,332,760 shares.



---



---

##### Table of Contents

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement, to be used in connection with the solicitation of proxies to be voted at the registrants annual meeting of stockholders to be held on May 23, 2007 and to be filed with the
Commission, are incorporated by reference into this Report on Form 10-K/A.



2



---

##### Table of Contents

TABLE OF CONTENTS



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | PAGE
|PART I   |  |                                                                                                              |  |     
|Item 1   |  | Business                                                                                                     |  | 6   
|Item 1A  |  | Risk Factors                                                                                                 |  | 12  
|Item 1B  |  | Unresolved Staff Comments                                                                                    |  | 17  
|Item 2   |  | Properties                                                                                                   |  | 18  
|Item 3   |  | Legal Proceedings                                                                                            |  | 19  
|Item 4   |  | Submission of Matters to Vote of Security Holders                                                            |  | 19  
|PART II  |  |                                                                                                              |  |     
|Item 5   |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 20  
|Item 6   |  | Selected Financial and Operating Data                                                                        |  | 21  
|Item 7   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 22  
|Item 7A  |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 32  
|Item 8   |  | Financial Statements and Supplementary Data                                                                  |  | 33  
|Item 9   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 58  
|Item 9A  |  | Controls and Procedures                                                                                      |  | 58  
|Item 9B  |  | Other Information                                                                                            |  | 60  
|PART III |  |                                                                                                              |  |     
|Item 10  |  | Directors, Executive Officers and Corporate Governance                                                       |  | 60  
|Item 11  |  | Executive Compensation                                                                                       |  | 60  
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 60  
|Item 13  |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 60  
|Item 14  |  | Principal Accountant Fees and Services                                                                       |  | 60  
|PART IV  |  |                                                                                                              |  |     
|Item 15  |  | Exhibits and Financial Statement Schedule                                                                    |  | 61  

Amendment No. 1 Overview

AirTran Holdings, Inc. is filing this Amendment No. 1 on Form 10-K/A to our Form 10-K for the year ended December 31, 2006 to reflect the restatement of our previously issued financial statements and other
information to correct our accounting for passenger revenues. For further discussion of the restatement, see Note 1 to our consolidated financial statements and Item 9A contained herein.

In late July 2007, we identified possible errors in our accounting for a specific type of passenger revenue transaction. Upon completion of our investigation and
analysis of these items, on August 7, 2007, our management concluded that we would amend our previously filed Annual Report on Form 10-K for the year ended December 31, 2006 and our previously filed Quarterly Report on Form 10-Q for
the quarter ended March 31, 2007 to correct our previously reported passenger revenues for the impact of these errors. The Audit Committee of our Board of Directors concurred with managements decision to amend our previously filed reports
on August 9, 2007. We do not believe the rollover impact of the errors is material to our results of operations for any individual interim or annual period. However, because the cumulative effect of the errors is material to our most recently
completed fiscal year, we are restating our previously issued financial statements in accordance with the guidance provided in SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.

The information contained in this Amendment, including the financial statements and the notes
hereto, amends only Items 6, 7, 8, 9A and 15 of our originally filed Annual Report on Form 10-K for the year ended December 31, 2006 and no other items in our originally filed Form 10-K are amended hereby. This Form 10-K/A does not materially
modify or update other disclosures in the original Form 10-K, including the nature and character of such disclosure to reflect events occurring after March 1, 2007, the filing date of the original Form 10-K. Accordingly, this Form 10-K/A should
be read in conjunction with our filings made with the Securities and Exchange Commission, or the SEC. In addition, currently-dated certifications from our Chief Executive Officer and Chief Financial Officer have been included as exhibits to this
amendment.

The following table sets forth the effects of the restatement on certain line items within our previously reported financial statements (in
thousands, except per share data):



|                                     |  |                         |           |                    |   |           |  |                    |           |  |   |          
|------------------------------------ |  | ----------------------- | --------- | ------------------ | - | --------- |  | ------------------ | --------- |  | - | ---------
|                                     |  | Year Ended December 31,
|                                     |  | 2006                    |           | 2006               |   | 2005      |  | 2005              
|(in 000s, except per share data)     |  | Restated                |           | PreviouslyReported |   | Restated  |  | PreviouslyReported
|Consolidated Statement of Operations |  |                         |           |                    |   |           |  |                    |           |  |   |          
|Passenger revenues                   |  | $                       | 1,814,907 |                    | $ | 1,816,179 |  | $                  | 1,396,451 |  | $ | 1,397,295
|Operating income                     |  | $                       | 40,861    |                    | $ | 42,133    |  | $                  | 22,646    |  | $ | 23,490   
|Income before income taxes           |  | $                       | 24,657    |                    | $ | 25,929    |  | $                  | 12,180    |  | $ | 13,024   
|Net income                           |  | $                       | 14,714    |                    | $ | 15,514    |  | $                  | 7,545     |  | $ | 8,076    
|Income per common share:             |  |                         |           |                    |   |           |  |                    |           |  |   |          
|Basic                                |  | $                       | 0.16      |                    | $ | 0.17      |  | $                  | 0.09      |  | $ | 0.09     
|Diluted                              |  | $                       | 0.16      |                    | $ | 0.17      |  | $                  | 0.08      |  | $ | 0.09     



3



---

##### Table of Contents

|                                     |  |          |           |                    |   |  |  |          
|------------------------------------ |  | -------- | --------- | ------------------ | - |  |  | ---------
|                                     |  | 2004     |           | 2004              
|(in 000s, except per share data)     |  | Restated |           | PreviouslyReported
|Consolidated Statement of Operations |  |          |           |                    |   |  |  |          
|Passenger revenues                   |  | $        | 1,004,835 |                    | $ |  |  | 1,005,263
|Operating income                     |  | $        | 29,073    |                    | $ |  |  | 29,501   
|Income before income taxes           |  | $        | 16,252    |                    | $ |  |  | 16,680   
|Net income                           |  | $        | 9,834     |                    | $ |  |  | 10,103   
|Income per common share:             |  |          |           |                    |   |  |  |          
|Basic                                |  | $        | 0.12      |                    | $ |  |  | 0.12     
|Diluted                              |  | $        | 0.11      |                    | $ |  |  | 0.11     



|                              |  |                  |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|----------------------------- |  | ---------------- | --------- | - | ------------------- | - | --------- | ---------------- |  | - | ------------------- | - |  | - | --------- | -
|                              |  | December 31,2006 |           |   | December 31,2006    |   |           | December 31,2005 |  |   | December 31,2005    |  
|(in 000s)                     |  | Restated         |           |   | Previously Reported |   |           | Restated         |  |   | Previously Reported |  
|Consolidated Balance Sheet    |  |                  |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|Deferred income taxes-current |  | $                | 8,854     |   |                     | $ | 6,856     |                  |  | $ | 7,204               |   |  | $ | 5,678     |  
|Total assets                  |  | $                | 1,603,582 |   |                     | $ | 1,601,584 |                  |  | $ | 1,161,543           |   |  | $ | 1,160,017 |  
|Accrued and other liabilities |  | $                | 127,254   |   |                     | $ | 121,709   |                  |  | $ | 99,180              |   |  | $ | 94,907    |  
|Accumulated deficit           |  | $                | (4,599    | ) |                     | $ | (1,052    | )                |  | $ | (19,313             | ) |  | $ | (16,566   | )

The restatement also resulted in an increase in accumulated deficit of $1.9 million as of January 1, 2004 and
changes to the consolidated statements of cash flows and stockholders equity in addition to Notes 1, 4, 7, 9 and 14.



4



---

##### Table of Contents

FORWARD-LOOKING INFORMATION

Statements in this Form 10-K/A report (or otherwise made by AirTran or on AirTrans behalf) contain various forward-looking statements, including, except in connection with AirTrans offer to exchange
with respect to Midwest Air Group, Inc (Midwest), within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, which represent our managements beliefs and assumptions concerning future events. When used in this document and in documents incorporated by reference, forward-looking statements include, without limitation, statements regarding
financial forecasts or projections, our expectations, beliefs, intentions or future strategies that are signified by the words expects, anticipates, intends, believes or similar language. These
forward-looking statements are subject to risks, uncertainties and assumptions that could cause our actual results and the timing of certain events to differ materially from those expressed in the forward-looking statements. All forward-looking
statements included in this report are based on information available to us on the date of this report. It is routine for our internal projections and expectations to change as the year or each quarter in the year progress, and therefore it should
be clearly understood that the internal projections, beliefs and assumptions upon which we base our expectations may change. Although these expectations may change, we may not inform you if they do, except as required by law. Our policy is generally
to provide our expectations only once per quarter, and not to update that information until the next quarter.

You should understand that many important
factors, in addition to those discussed in this report, could cause our results to differ materially from those expressed in the forward-looking statements. Potential factors that could affect our results include, in addition to others not described
in this report, those described in Item 1A of our report on Form 10-K/A under Risk Factors. In light of these risks and uncertainties, the forward-looking events discussed in this report might not occur.



5



---

##### Table of Contents

PART I

ITEM 1. BUSINESS

The Company

All of the operations of AirTran Holdings, Inc. (the Company, AirTran, we or us) are conducted by our wholly-owned subsidiary, AirTran Airways, Inc. (AirTran Airways or Airways). AirTran Airways is one of the largest low cost scheduled
airlines in the United States in terms of departures and seats offered. We operate scheduled airline service primarily in short-haul markets principally in the eastern United States, with a majority of our flights originating and terminating at our
hub in Atlanta, Georgia. As of February 1, 2007, we operated 87 Boeing 717-200 (B717) and 41 Boeing 737-700 (B737) aircraft offering approximately 700 scheduled flights per day to 51 locations in United States as well as to Freeport, Grand
Bahamas.

We have created what we believe to be a successful business model by targeting value oriented business and leisure travelers with high quality
service at affordable fares. Our service is designed not only to satisfy the transportation needs of our target customers, but also to provide customers with a travel experience worth repeating. The success of this strategy is evidenced by the
20.1 million revenue passengers who flew AirTran Airways during 2006, a 20.5 percent increase from the 16.6 million revenue passengers we served in the prior year. We achieved these results with a cost structure that ranks among the lowest
in the airline industry.

Our principal executive offices are located at 9955 AirTran Boulevard, Orlando, Florida 32827, and our telephone number is
(407) 318-5600. Our official website address is www.airtran.com. Our audit committee charter, code of conduct and ethics, and filings with the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to these reports, are accessible free of charge at www.airtran.com. Any waiver of the terms of our code of conduct and ethics for the chief executive officer, the chief financial officer, any
accounting officer and all other executive officers will be disclosed on our website. During 2006, we posted in a timely manner all Exchange Act reports required to be filed during the period.

The reference to our website does not constitute incorporation by reference of any information contained at that site.

Proposed Acquisition of Midwest Air Group

We believe that a
combination of AirTran Airways and Midwest Air Group (Midwest) would provide substantial benefits to the shareholders, customers, employees and other stakeholders of the two companies. On January 11, 2007, we commenced an exchange offer for all
of the outstanding shares of Midwest, for $13.25 per Midwest share, based on the closing price of our common stock on January 8, 2007. The offer consists of $6.625 in cash and 0.5884 share of AirTran common stock for each Midwest share. The
total equity value of the exchange offer is approximately $345 million. The offer, which is being made through a wholly-owned subsidiary of the Company, has been extended and is scheduled to expire on March 8, 2007. The exchange offer is
subject to specified and customary conditions. On January 25, 2007, the board of directors of Midwest announced that it had unanimously recommended that Midwests shareholders reject our offer to acquire all outstanding shares of Midwest
and not tender their shares to us. Because we believe a combination of the two airlines would strengthen both airlines, we are continuing to pursue the acquisition of Midwest. We have filed a registration statement (Form S-4 No. 333-139917)
with the Securities and Exchange Commission which contains additional information regarding the exchange offer and the benefits and risks related to the proposed acquisition.

Business Strategy

Quality Low Fare Service. We established our competitive position by providing affordable
fares that appeal to price conscious travelers. We have grown our business through innovative product offerings designed to enhance the entire airline travel experience of our customers while maintaining affordable fares. The AirTran experience
features:



| |  |  | competitive fares offered in an easy to understand fare structure
| | - |  | -----------------------------------------------------------------



| |  |  | user-friendly automated services for reservations, ticketing and check-in through our
| | - |  | -------------------------------------------------------------------------------------



| |  |  | award winning website, airtran.com
| | - |  | ----------------------------------



| |  |  | Bye-Pass airport self-service kiosks
| | - |  | -------------------------------------



| |  |  | customer friendly services, including
| | - |  | -------------------------------------



| |  |  | a highly affordable business class
| | - |  | ----------------------------------



| |  |  | advance seat assignments
| | - |  | ------------------------



| |  |  | special amenities, including XM Satellite Radio, which we introduced to the air travel industry and have now deployed across our entire fleet
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | some of the industrys fastest growing customer loyalty programs, including our
| | - |  | -------------------------------------------------------------------------------



| |  |  | unique A+ Rewards program
| | - |  | --------------------------



| |  |  | A2B corporate travel program
| | - |  | -----------------------------

Through the AirTran experience, we have created an air travel product with broad appeal which generates a growing number of repeat customers.

We believe our comparatively low-cost structure will enable us to continue our existing successful strategies, expand our network, provide us with opportunities to
further enhance the AirTran experience in innovative ways and stimulate increased demand for air travel from existing and new customers.

New and Modern
Fleet. Our entire fleet is comprised of B717 and B737 aircraft. We were the launch customer for the B717, which was designed specifically for efficient short-haul service. As of February 1, 2007, our fleet included 87 B717 aircraft. We
believe the B717 remains ideally suited for the short-haul, high-frequency service that we primarily operate and provides operating efficiencies which support our low cost structure. The manufacturer of the B717 discontinued the production of the
aircraft in 2006.

We took delivery of our first B737-700 aircraft in June 2004 and, as of February 1, 2007, our fleet included 41 B737 aircraft. In
addition to the 41 B737 aircraft, we hold firm orders for 59 B737 aircraft to be delivered through 2011. We believe the B737 is an ideal complement to our B717 aircraft, offering us a larger aircraft, increased range and even lower unit operating
cost per available seat mile flown. The B737 aircraft has allowed us to extend our network to selected cities in the western United States and offers us the ability to expand our international operations to locations in Canada, Mexico, Central
America and the Caribbean should we chose to do so. We believe the B737 aircraft enhances the AirTran brand while offering improvements in our operating performance.

We had a combined total of 128 aircraft on February 1, 2007, giving us an average fleet age among the lowest in the industry at approximately three years.



6



---

##### Table of Contents

Growing Atlanta Hub and Expanding Network System. As the second largest carrier at Hartsfield Jackson
Atlanta International Airport, the worlds busiest airport, we have a strong presence in Atlanta. The Metropolitan Atlanta population base represents one of the largest travel markets in the United States and its geographic position provides a
strong hub from which we continue to expand our route network. In 2006, we increased service to a number of existing locations and added two new cities, Seattle, Washington and White Plains, New York. In the fourth quarter of 2006, we announced
service to three new locations; Newburgh, New York; Daytona Beach, Florida; and Phoenix, Arizona, which commenced in the first quarter of 2007. In January 2007 we announced service to two additional new locations, San Diego, California and St.
Louis, Missouri, which will commence in the second quarter of 2007.

We believe that there are a number of markets in the United States that are
underserved or overpriced by major airlines that present opportunities for expanding our quality low fare service. As a result, we intend to grow our network by increasing the number of flights in markets we currently serve, by adding new routes
between cities already in our system and service to new cities as opportunities arise. Expansion of our network allows us to build upon our existing infrastructure, which should reduce unit costs and improve productivity and aircraft utilization.

Diversification of Route Network. Since 2000, we have expanded the scope of our route structure to include coast to coast flying and have increased
the number of flights both from our Atlanta hub as well as other airports. We have diversified our route structure by increasing the amount of non-Atlanta related operations from approximately 10 percent of our daily departures as of
December 31, 2001 to approximately 34 percent of daily operations in January 2007 (see table below). For example, our expansion at Baltimore/Washington International Airport enabled us to initiate many new non-stop routes. In the future, we may
selectively add new point-to-point routes between cities other than Atlanta that we currently serve, as well as create additional hubs or additional focus cities similar to our operations at Baltimore/Washington and Orlando.



|                           |  |                   |  |                        |  |                         |  
|-------------------------- |  | ----------------- |  | ---------------------- |  | ----------------------- | -
|Airport                    |  | Daily Operations* |  | Nonstop Markets Served |  | % of System Operations* |  
|Atlanta (ATL)              |  | 454               |  | 50                     |  | 66                      | %
|Orlando (MCO)              |  | 96                |  | 24                     |  | 14                      | %
|Baltimore-Washington (BWI) |  | 66                |  | 10                     |  | 10                      | %
|Chicago (MDW)              |  | 52                |  | 8                      |  | 8                       | %
|Boston (BOS)               |  | 54                |  | 9                      |  | 8                       | %
|Philadelphia (PHL)         |  | 32                |  | 5                      |  | 5                       | %
|Tampa (TPA)                |  | 48                |  | 13                     |  | 7                       | %
|New York (LGA)             |  | 16                |  | 3                      |  | 4                       | %
|Dallas/Fort Worth (DFW)    |  | 16                |  | 3                      |  | 2                       | %
|Fort Lauderdale (FLL)      |  | 48                |  | 12                     |  | 7                       | %

---

|* | Operations is defined as a take-off and landing at each city; percentage of system operations will be greater than 100%
|- | -----------------------------------------------------------------------------------------------------------------------

Increase Sales Through Our Website. We utilize the Internet as an integral part of our distribution network and emphasize our website,www.airtran.com,
prominently in all of our marketing. Sales booked directly on airtran.com represent our most cost-effective form of distribution. In addition to being user-friendly and simple, our website is designed to sell tickets efficiently. We continue to add
functionality to airtran.com that allows customers to easily book and manage their travel including a new fare and schedule display, the ability to retrieve and change future flight reservations and seat selection and on-line check-in. The
airtran.com website is an important distribution channel, producing 60% of our revenues during 2006.

Seasonality

Our financial and operating results for any interim period are not necessarily indicative of those for the entire year. Air travel in our markets tends to be seasonal,
with the highest levels occurring during the winter months to Florida and the summer months to the northeastern and western United States. Advertising and promotional expenses may be greater in lower traffic periods, as well as when entering a new
market, as we seek to stimulate demand and promote the AirTran Airways brand.

Competitive Strengths

Low Cost Structure. Our cost structure ranks among the lowest in the domestic airline industry in terms of cost per available seat mile, providing a competitive
advantage compared to higher cost carriers. Our low operating costs are made possible through a company-wide focus on cost controls with emphasis on high labor productivity, lower distribution cost and, higher asset utilization. In addition, we
realize efficiencies from the operation of only two aircraft types from a single manufacturer as well as enhanced efficiencies from the introduction of new modern B737 aircraft to our fleet.

Attractive Atlanta Hub and Route Network. We operate 22 gates from a single concourse under long-term leases at Hartsfield-Jackson Atlanta International Airport,
the worlds busiest airport, and have use agreements for additional gates on an adjacent concourse and potential for expansion. With our 2006 expansion to Seattle and White Plains, and our 2007 expansion to Newburg, N.Y., San Diego, St. Louis
and Phoenix, we now offer quality low fare service to 53 destinations from Atlanta, including most of the largest travel markets within the United States.

Diversified Traffic Base. We serve both the leisure and business traveler and continue to see strong demand for our product. Our revenue base grew by more than 39 percent in 2005 and more than 31 percent in 2006. Over the past four
years, we have also diversified our network increasing operations in key business markets like Baltimore/Washington (BWI), Chicago-Midway (MDW) and Indianapolis (IND), as well as adding a number of new direct routes from Florida. As a percentage of
total operations, Atlanta represents approximately 66 percent of our network, down from approximately 90 percent at the end of 2001. This market diversification provides a number of marketing and cost synergies and adds stability to our revenues by
protecting against risks that may impact individual markets.

Flexibility. We have consistently demonstrated our ability to adjust to changes in the
economy, market conditions and a competitive industry environment. We responded rapidly to the effects on our business from the September 11, 2001 terrorist attacks by reducing capacity approximately 20 percent. Working with our labor groups,
we quickly reached agreement on a variety of temporary cost reduction measures, including both pay and work rule changes, which reduced our costs consistent with capacity. By retaining our workforce we were able to quickly respond to market
opportunities and expand service to a number of new markets including Florida to points throughout our network. The ability to move quickly to meet the changing market was demonstrated with our 2001 expansion into BWI and more recently with our
announcement of expanded service to/from Westchester County Airport in White Plains, N.Y, following the demise of Independence Air, as well as expansion to Stewart International Airport in Newburg, New York, Daytona Beach International Airport, and
Phoenix Sky Harbor International Airport. In the upcoming months we will also initiate service to St. Louis and San Diego from out Atlanta hub.

Innovative Marketing. Our marketing efforts target both business and leisure travelers. We have developed a number of unique and innovative programs designed to stimulate demand for travel, create customer loyalty, highlight our
unique product attributes, like affordable Business Class, and target both business and leisure travelers. Our popular leisure programs include Net Escapes Internet specials and newly branded AirTran U student travel program. Our A2B Corporate
Program and Event Savers Meeting & Convention Program effectively attract and retain business customers.

A+ Rewards. Our A+ Rewards
frequent flyer program offers a number of ways to earn free travel including the use of the AirTran VISA card, Hertz car rentals and bonus earnings for business class travel. We believe this program creates strong brand loyalty and provides
opportunities for incremental revenue through credit sales and partnerships.



7



---

##### Table of Contents

In November 2006, we announced that we teamed up with Frontier Airlines to create a landmark low cost carrier referral
and marketing relationship that enables passengers to earn frequent flyer rewards in both airlines through AirTran Airways A+ Rewards program and Frontiers EarlyReturns(R) program. In this exclusive relationship, both airlines include an
integrated route map and full list of destination options on their web pages, doubling the destinations available to our customers. This integrated model between two of the leading U.S.-based low cost carriers offers travelers the ability to reach
more than 100 destinations across four countries with low fares, aboard two of the youngest fleets in the industry.

The agreement between AirTran Airways
and Frontier consists of three key components:



| |  |  | Refer- a web and phone-based reservations referral system that refers customers to the partner airline when they are looking for a destination that is currently not
offered by the carrier initially contacted.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Earn- the ability to earn frequent flyer miles in either AirTran Airways A+ Rewards program or Frontiers EarlyReturns (R) program.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Redeem- the ability to redeem frequent flyer miles in either program.
| | - |  | ---------------------------------------------------------------------

Competition

The airline industry is highly competitive. Airlines compete on the basis of markets served, price,
schedule (frequency and flight times), quality of service, amenities, frequent flyer programs and other services. We compete with other airlines primarily on the basis of price, which is made possible by our low cost structure relative to other
airlines and by focusing on selected markets across the United States. We may face greater competition from existing or new carriers in the future that could negatively impact our financial and operating results.

Competitors with greater liquidity and access to capital may price their fares at or below our fares or increase the frequency of their service. This competition could
prevent us from attaining a share of the passenger traffic necessary to sustain profitable operations. Our ability to meet price competition is dependant on operating with costs equal to or lower than our competitors or potential competitors.

We believe that our competitive strengths are our low cost structure, friendly service, competitive fares and strong route network anchored by our hub at
Hartsfield-Jackson Atlanta International Airport. Our growing brand and our presence in Baltimore/Washington, Chicago and a number of Florida markets augment operations from our Atlanta hub and provide us with a strong and defensible route system.

Fares, Route System and Scheduling

The majority of
markets we currently serve are located in the eastern United States. These markets are attractive due to the concentration of major population centers within relatively short distances from Atlanta, Baltimore/Washington and Florida, the historically
high airfares charged by our competitors in these markets and the significant number of both current and potential business and leisure customers.

As of
February 2007, we serve or have announced service to 53 cities from Atlanta, 24 from Orlando, and 10 from Baltimore/Washington. Our schedules are designed to provide convenient nonstop service and connections for our business and leisure travelers
to our hubs and focus cities and to facilitate connections for our passengers traveling through our hubs and focus cities. Our network strength in Atlanta provides a strong base of local and connecting traffic as we expand the hub and increase the
range and scope of the markets we serve.

We offer an easy to understand fare structure with a variety of fares at differing advance purchase intervals of
fourteen days, seven days, and three days as well as walk-up fares. We manage the availability of seats at each fare level by day of week and by flight to maximize revenue. All of our fares are one-way and most tickets are nonrefundable
but can be changed prior to departure with a service charge. Our fares never require a round trip purchase or a minimum stay (e.g., Saturday night stay). Our fare offerings are in direct contrast to prevalent pricing policies in the industry which
typically feature many different price offerings and restrictions for seats on any one flight. We have established interline ticketing and baggage agreements with United Airlines, US Airways, Frontier Airlines, Midwest Airlines, Icelandair, Aer
Lingus and British Airways which can increase our revenue opportunities and assist us with accommodating passengers during irregular operations.

In the
future, we may add new markets to our existing routes and/or additional service between cities that are already served by us. If necessary, we may exit unprofitable routes. Our selection of markets depends on a number of factors existing at the time
we consider service. In our city selection process, we evaluate the market demographics, the potential for service diversification, the ability to stimulate air travel and various competitive factors. Consequently, there can be no assurance that we
will continue to provide service to all of the markets we currently serve.

Distribution, Marketing and e-Commerce

Our marketing efforts are focused on price-sensitive business travelers and leisure travelers, who are vital to our success, as we seek to position our product and
stimulate new customer demand. These are the market segments in which consumers seek value and which we believe offer the greatest opportunity for growing our revenue base.

The primary objective of our marketing activities is to develop an innovative brand identity that is visibly unique and easily contrasted with our competitors. We communicate regularly and frequently with existing and
potential customers through the use of advertisements in newspapers, radio, television, billboards, direct mail, e-mail, movie theatres and the Internet, as well as public relations efforts. These communications typically feature our destinations,
quality of product such as business class, XM radio, our young all Boeing aircraft fleet and assigned seating, everyday affordable fares and special sales promotions. We promote the use of our airtran.com website.

Customers may book flights with us through our website, other Internet websites, travel agencies booking via global distribution systems (GDS) and our own reservation
call centers. The Internet is our primary distribution channel, and during 2006, it represented more than 58 percent of our total bookings. Our Internet sales reflect both bookings made directly through airtran.com, as well as sales transacted
through third-party websites such as Travelocity.com and Orbitz.com. Traditional travel agencies represented approximately 25 percent of our bookings while our reservation call centers generated the remainder.

Our award-winning website is a recognized leader in the field of airline e-commerce. Passengers can select their seats, check-in and print their own boarding passes,
purchase trip insurance, and book hotel accommodations and car rentals with Hertz.com. Our Bye-Pass self service kiosks facilitate check-ins at the airport and provide our customers with an additional opportunity to purchase business class upgrades.
Over half of our customers now check-in using airtran.com or Bye-Pass self-service kiosks.

During the fourth quarter of 2006, we implemented a new
convenience fee for bookings made using our internal call centers. We believe this fee is consistent with other booking channels that provide interactive travel assistance, namely travel agents, and has had no discernible impact on overall demand at
call centers. We also introduced the Bill-Me-Later payment option for call center and online bookings at airtran.com. This option will provide even greater convenience to our customers and help reduce our distribution costs going forward.



8



---

##### Table of Contents

We offer our customers an affordable business class product. The business class cabin is configured with 2 by 2 oversized
seats with more leg and seat room than the typical coach cabin. Our business class is currently available for $40-$80 over the full coach fare on a confirmed basis and for certain other fares on a walk-up, standby basis. Members of our A2B Corporate
program and Elite members in our A+ Rewards program receive complimentary business class upgrades when purchasing certain fares.

In contrast to other low
cost airlines, we offer our customers the ability to select seats in advance. Full fare passengers, A+ Reward Elite members and members of our A2B Corporate travel program, many of whom tend to purchase tickets at the last minute, are allowed to
reserve seats at the time of purchase. All other customers may reserve seats at the time they check-in, either at the airport or online at airtran.com.

We
also offer our automated frequent flier program known as A+ Rewards. Our customers may earn either free roundtrip travel or business class upgrades on AirTran Airways, or under certain circumstances, free travel on other airlines. A+
Rewards credits can also be earned for purchases made with an AirTran Airways A+ Visa card, when renting from Hertz, other A+ Rewards partners and in conjunction with marketing promotions that we may run from time to time.

We perform all of our marketing, promotional and media relations in-house and utilize an outside firm for advertising and public relations.

Computer Reservations

We are a participant in the major travel
agency GDSs, including Amadeus, Galileo, SABRE, and WorldSpan. These systems provide flight schedules and pricing information and allow travel agents to electronically book a flight reservation without contacting our reservations facility. We pay
booking fees for the completed transactions made in the GDS systems.

For direct reservations, either through our call centers or airtran.com, we provide
our customers with a confirmation number, similar to the systems used by hotels and car rental agencies. At the airport this information is used for customer check-in either at the ticket counter or by use of the self-service kiosks, which helps to
alleviate long lines and improve customer service.

Employees

As of December 31, 2006, we employed approximately 7,700 employees representing approximately 7,400 full-time equivalents.

Both initial and
recurrent training are provided for all employee groups. The average training period for new employees ranges from approximately one to eight weeks depending on job classification. Both pilot and mechanic training are provided by in-house training
instructors.

Federal Aviation Administration (FAA) regulations require pilots to have commercial licenses with specific ratings for the aircraft to be
flown, and to be medically certified as physically fit to fly. FAA and medical certifications are subject to periodic renewal requirements including recurrent training and recent flying experience. Mechanics, quality-control inspectors and flight
dispatchers must be certificated and qualified for specific aircraft. Flight attendants must have initial and periodic competency training and qualification. Training programs are subject to approval and monitoring by the FAA. Management personnel
directly involved in the supervision of flight operations, training, maintenance and aircraft inspection must also meet experience standards prescribed by FAA regulations. Management personnel attend management training classes to meet government
mandated requirements as well as skills development training. All safety-sensitive employees are subject to pre-employment, random and post-accident drug testing.

We have employee groups that are represented by labor unions and are covered by collective bargaining agreements. The Railway Labor Act governs our relations with these labor organizations. The agreement with our dispatchers, who are
represented by the Transport Workers Union (TWU), was ratified in October 2004 and becomes amendable in January 2009. Our agreement with our pilots, who are represented by the National Pilots Association (NPA), was ratified in August 2001 and became
amendable in 2005. The agreement is currently in mediation under the auspices of the National Mediation Board.

We have four separate agreements with
employee groups represented by the International Brotherhood of Teamsters (IBT). Our agreement with our maintenance technicians and inspectors was ratified in October 2005 and becomes amendable in October 2009. The agreement with our technical
training instructors was ratified in March 2006 and becomes amendable in March 2011. The agreement with our stock clerks was ratified in June 2006 and becomes amendable in June 2011. Our agreement with our ground service mechanic employees was
effective September 2006 and becomes amendable in September 2011.

We have a collective bargaining agreement with our flight attendants who are represented
by the Association of Flight Attendants (AFA). Our agreement with the flight attendants was ratified in June 2005 and becomes amendable in December 2008. We also have many employees who are not represented by labor unions. Our customer service, ramp
and reservations agents are not represented by labor unions and rejected unionization, for the third time, by a substantial margin in December 2005. We are unable to predict whether any of our non-union employee groups will elect to be represented
by a labor union or become covered by a collective bargaining agreement in the future. The election of a bargaining representative could result in employee compensation and/or working condition demands that could impact operating performance and
expenses.

Fuel

Aircraft fuel is our largest
expenditure and accounted for 36.5 percent, 32.4 percent and 24.8 percent of our 2006, 2005 and 2004 operating expenses, respectively. Increases in fuel prices or a shortage of supply could have a material adverse effect on our operations and
operating results. We utilize fuel purchase contracts consisting of both fixed-price and cap arrangements. Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party supplier at defined
prices. Cap arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party using pricing mechanisms that are designed to minimize our exposure to fuel price fluctuations. Approximately 44% of our fuel usage,
as measured in gallons, was purchased using either fixed price or cap arrangements during 2006. In addition, during 2007, the Company began using hedge agreements with a non-supplier third party to partially mitigate the impact of fluctuating jet
fuel prices.

Subject to market conditions, we may implement fare increases to offset increases in the price of fuel. Due to competitive pressures, the
airline industry has frequently been unable to pass on such fuel price increases through higher fares. There can be no assurance that any such fare increases will completely offset the effect of higher fuel costs or not adversely impact our
competitive position. The impacts of high fuel prices have been mitigated somewhat by the addition of new, fuel-efficient B717 and B737 aircraft which consume significantly less fuel than the aircraft that have been replaced. In September 2005, we
began installing winglets on a number of our B737s which further improves their fuel efficiency. While we believe the fuel efficiency of our fleet offers us an advantage over many of our competitors who operate less fuel-efficient aircraft,
increases in fuel costs which are not offset by our fuel purchase arrangements or fare increases will have an adverse effect on our future operating margins.

Maintenance, Repairs and Training

As of February 1, 2007, our operating fleet consisted of 87 B717s and 41 B737s having a
weighted-average age of approximately three years. Our B737 airframes and engines are under warranty for a minimum of three years from the date of delivery. We believe the long-term estimated cost of maintenance to fly our aircraft will be within
industry norms. We will be required to comply with new FAA regulations or Airworthiness Directives that may be promulgated in the future however; there can be no assurance that we will not encounter unexpected maintenance expenses or that our
maintenance expense will remain within industry norms.



9



---

##### Table of Contents

Aircraft airframe maintenance and repair consists of routine and non-routine daily maintenance and heavy maintenance
checks. Routine and non-routine maintenance is performed in Atlanta, Orlando, Baltimore, Fort Lauderdale, Dallas and Tampa by our employees and by qualified third party contractors at the other cities we serve. Heavy maintenance is performed by
qualified outside maintenance contractors. Maintenance repair costs for major components on our B717 and B737 aircraft, including engines and auxiliary power units (APUs) are covered under maintenance agreements with FAA approved contractors and are
expensed as incurred. As new aircraft come out of their warranty period and as they age, maintenance costs tend to increase. They also increase as the maintenance, repair, and overhaul providers escalate their pricing. We expect maintenance costs to
increase as aircraft come out of warranty but these increased costs will be partially offset by the addition of newly delivered aircraft into the fleet.

Our maintenance technicians undergo extensive initial and ongoing training to ensure the safety of our aircraft. The FAA recently awarded us with the Air Maintenance Technical Diamond Certificate of Excellence for Maintenance Training, the
FAAs highest maintenance award. This marks the eleventh consecutive year we have received this award for exceeding the required levels of safety training for our maintenance technicians.

Insurance

We carry customary levels of passenger liability
insurance, aircraft insurance for aircraft loss or damage, war-risk insurance and other business insurance. We believe our insurance coverage in these areas is adequate. We are exposed to potential catastrophic losses that may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair or replacement of a damaged aircraft and its consequent temporary or permanent loss from service but also significant potential claims of injured passengers and others.
We currently maintain liability insurance in amounts and of the type which we believe are consistent with industry practice. Although we currently believe our insurance coverage is adequate, there can be no assurance that the amount of such coverage
will not be changed or that we will not be forced to bear substantial losses from accidents. Substantial claims resulting from an accident in excess of related insurance coverage or not covered by our insurance could have a material adverse effect
on us.

Congress passed the Homeland Security Act of 2002, which mandated the federal government to provide third party, passenger, and hull war-risk
insurance coverage to commercial carriers through August 31, 2003. Coverage under this Act has been extended and currently we have received certification of coverage through August 31, 2007.

Airport Operations

Ground handling services, provided by third
parties, typically are of two types: under-wing only and complete ground handling. Under-wing ground handling services include, but are not limited to, directing the aircraft into and out of the gate, baggage and mail loading and unloading, lavatory
and water servicing, de-icing and certain other services. Complete ground handling consists of public contact and under-wing services combined.

Using
AirTran employees we conduct complete ground handling services at 33 airports, including Atlanta. At other airports, the operations not conducted by our employees are contracted to other air carriers, ground handling companies or fixed base
operators. We have employees at each of these cities to oversee our operations.

Government Regulations and Airline Industry Taxation

The airline industry is highly competitive, primarily due to the effects of the Airline Deregulation Act of 1978, which substantially eliminated government authority to
regulate domestic routes and fares. Deregulation has increased the ability of airlines to compete with respect to destination, flight frequencies and fares. Nevertheless, the airline industry remains highly regulated in other aspects, as more fully
described below.

DOT Oversight. Although the Airline Deregulation Act of 1978 abolished regulation of domestic routes and fares, the United States
Department of Transportation (DOT) retains the authority to alter or amend any airlines certificate or to revoke such certificate for intentional failure to comply with the terms and conditions of the certificate. In addition, the DOT has
jurisdiction over international tariffs and pricing, international routes, computer reservation systems, and economic and consumer protection matters such as advertising, denied boarding compensation, smoking and codeshare arrangements and has the
authority to impose civil penalties for violation of the United States Transportation Code or DOT regulations.

Aircraft Maintenance and Operations.
We are subject to the jurisdiction of the FAA with respect to aircraft maintenance and operations, including equipment, dispatch, communications, training, flight personnel and other matters affecting air safety. In 2006, the FAA converted the
oversight of AirTran to the ATOS (Aviation Transportation Oversight System) programs. The ATOS process assesses the safety of air carrier operating systems using system safety principles, safety attributes, risk management, and structured system
engineering practices. ATOS utilizes structured, automated tools to develop a dynamic, flexible, air carrier-specific comprehensive surveillance plan (CSP). The air carrier assessment tool (ACAT) looks for indicators of risk in the air
carriers systems. The results of ACAT determine the frequency of the inspections in AirTrans CSP.

The FAA has the authority to issue new or
additional regulations. To ensure compliance with its regulations, the FAA conducts regular safety audits and requires all airlines to obtain operating, airworthiness and other certificates, which are subject to suspension or revocation for cause.

We cannot predict the cost of compliance with all present and future rules and regulations and the effect of such compliance on our business, particularly
our expansion plans and aircraft acquisition program.

Federal Aviation Taxes and Passenger Facility Charges. In 1997, a law was enacted imposing
new aviation ticket taxes as part of larger tax legislation designed to balance the nations budget and provide targeted tax relief as well as fund air traffic control, other FAA programs and airport development. As enacted, these new taxes
will be imposed through September 30, 2007. Currently, the federal excise tax on tickets is 7.5 percent of the base fare with a segment fee of $3.30 per passenger enplanement, up to $6.60 each way or $13.20 per round trip. Beginning in January
2007, the segment fee was increased to $3.40 per passenger enplanement up to $6.80 each way or $13.60 per round trip.

During 1990, Congress enacted
legislation to permit airport authorities, with prior approval from the DOT, to impose passenger facility charges as a means of funding local airport projects. These charges, which are intended to be collected by the airlines from their passengers,
range from $3.00 to $4.50 per enplanement up to $18 per round trip.

Fuel Taxes. We pay federal, state, and other taxes on fuel. We paid
approximately $46.2 million, $41.4 million, and $28.8 million in fuel taxes during 2006, 2005 and 2004, respectively.



10



---

##### Table of Contents

Security and Safety Measures. The Aviation and Transportation Security Act, was enacted in November 2001 and
federalized substantially all aspects of civil aviation security and required, among other things, the creation of the Transportation Security Administration, or the TSA, to oversee all aviation security and the implementation of certain security
measures by airlines and airports, such as the requirement that all passenger bags be screened for explosives. Funding for airline and airport security under the law is partially provided by a per enplanement ticket tax of up to $5.00 each way or
$10.00 per round trip, with authority granted to the TSA to impose additional fees on the air carriers if necessary to cover additional federal aviation security costs. The security tax is currently $2.50 per enplaned passenger each way and has been
imposed since February 18, 2002, the date the TSA began taking responsibility for airport security. Pursuant to its authority, the TSA may revise the way it assesses this fee, which could result in increased costs for us. We cannot forecast
what additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be associated with complying with such requirements.

Miscellaneous. All air carriers are subject to certain provisions of the Communications Act of 1934, as amended, because of their extensive use of radio and other communication facilities, and are required to
obtain an aeronautical radio license from the Federal Communications Commission (FCC). To the extent we are subject to FCC requirements, we have taken and will continue to take all necessary steps to comply with those requirements.

Our labor relations are covered under Title II of the Railway Labor Act of 1926, as amended, and are subject to the jurisdiction of the National Mediation Board. During
a period of past fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by the Department of Energy. We are also subject to state and local laws and regulations at locations where we operate and the
regulations of various local authorities that operate the airports we serve. Our operations may become subject to additional federal regulatory requirements in the future.

All international service is subject to the regulatory requirements of the appropriate authorities of the other country involved. We currently operate scheduled international service to Grand Bahamas Island. To the
extent we seek to provide additional international air transportation in the future, we will be required to obtain necessary authority from the DOT and the applicable foreign government.

Environmental Regulations. The Airport Noise and Capacity Act of 1990 (ANCA) generally recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they
do not interfere unreasonably with interstate or foreign commerce or the national air transportation system. The ANCA generally requires FAA approval of local noise restrictions on Stage 3 aircraft. While we have had sufficient scheduling
flexibility to accommodate local noise restrictions imposed to date, our operations could be adversely affected if locally-imposed regulations become more restrictive or widespread.

The Environmental Protection Agency (EPA) regulates operations, including air carrier operations, which affect the quality of air in the United States. We believe the aircraft in our fleet meet all emission standards
issued by the EPA.



11



---

##### Table of Contents

ITEM 1A. RISK FACTORS

In addition to the risk factors set forth elsewhere in this annual report, including, without
limitation, in Items 1, 7, 7a, and 9a, investors should carefully consider the following risk factors before making investment decisions regarding our securities.

AirTran has a significant amount of aircraft related fixed obligations that could impair its ability to make principal and interest payments on its debt obligations and lease payments on its lease obligations.

AirTran has significant obligations including debt and lease obligations related to aircraft purchase commitments, aircraft delivery obligations and aircraft leases, debt
and lease obligations for operating facilities, including existing facilities and planned new facilities, and other cash obligations including future funding obligations for other potential acquisitions. AirTrans total indebtedness as of
December 31, 2006 was approximately $811.1 million, of which $672.3 million was aircraft related.

During 2005, AirTran paid $93.5 million in aircraft
pre-delivery deposits and was refunded $29.8 million in previously paid aircraft pre-delivery deposits. During 2006, AirTran paid $89.2 million in aircraft pre-delivery deposits and was refunded $102.8 million in previously paid aircraft
pre-delivery deposits. Since January 1, 2006, AirTrans total indebtedness has increased by $338.5 million to approximately $811.1 million as of December 31, 2006. The net increase in indebtedness was attributable to $451.6 million
borrowed to finance B737 aircraft deliveries less $113.1 million of debt repayments. AirTrans debt service obligations with respect to its existing or increased indebtedness could have an adverse impact on its earnings and cash flows for as
long as the indebtedness is outstanding.

The ability of AirTran to make scheduled payments of principal and interest for its financing obligations depends
on its future performance and financial results. These results are subject to general economic, financial, competitive, legislative, regulatory and other factors that are, to some extent, beyond the control of AirTran.

The amount of AirTrans existing debt, its high level of fixed obligations, and potential increases in the amount of its debt and level of fixed obligations could
have important consequences to investors and could:



| |  |  | require a substantial portion of cash flows from operations for debt service payments, thereby reducing the availability of its cash flow to fund working capital,
capital expenditures, acquisitions and other general corporate purposes;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit the ability of AirTran to obtain additional financing for aircraft purchases, capital expenditures, working capital or general corporate purposes;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | make it more difficult for AirTran to pay its debts as they become due during general adverse economic and market industry conditions because any related decrease
in revenues could cause AirTran to not have sufficient cash flows from operations to make its scheduled debt payments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit the flexibility of AirTran in planning for, or reacting to, changes in its business and the industry in which it operates and, consequently, place AirTran at
a competitive disadvantage to its competitors with less debt;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | result in a downgrade in the rating of either AirTrans existing indebtedness or future indebtedness, which could limit the ability of AirTran to borrow
additional funds or increase the interest rates applicable to the indebtedness; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | result in higher interest expense in the event of increases in interest rates since some of AirTrans existing borrowings are, and some of its future
obligations may be, at variable rates of interest.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the substantial fixed costs associated with the existing obligations
of AirTran and which may be associated with future obligations of AirTran:



| |  |  | a decrease in revenues would result in a disproportionately greater percentage decrease in earnings;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | AirTran may not have sufficient liquidity to fund all of these fixed costs if its revenues decline or costs increase;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | AirTran may have to use its working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | AirTran may not have sufficient liquidity to respond to competitive developments and adverse economic conditions.
| | - |  | -----------------------------------------------------------------------------------------------------------------

Certain existing AirTran indebtedness is secured by certain of its assets, which may limit the utility of such assets in obtaining additional financing.

Based upon current levels of operations and anticipated growth, AirTran expects to be able to generate sufficient cash flow to make all of the principal and interest
payments when such payments are due under AirTrans existing indebtedness, including the indenture governing AirTrans existing notes, and any proposed indebtedness but there can be no assurance that AirTran will be able to repay such
borrowings. However, the ability of AirTran to pay the fixed costs associated with its contractual obligations will depend on its operating performance and cash flow, which will in turn depend on general economic and political conditions. A failure
to pay its fixed costs or a breach of its contractual obligations could result in a variety of adverse consequences, including the acceleration of its indebtedness, the withholding of credit card proceeds by one or more credit card processors, and
the exercise of remedies of its creditors and lessors. In such a situation, it is unlikely that AirTran would be able to fulfill its obligations under or repay the accelerated indebtedness, make required lease payments or otherwise cover its fixed
costs.

Covenants in AirTrans existing debt instruments and potential future indebtedness could limit how AirTran conducts its business, which
could affect its long-term growth potential. A failure by AirTran to comply with any of its existing or prospective restrictions could result in acceleration of AirTrans existing or potential future debt. Were this to occur, AirTran might not
have, or be able to obtain, sufficient cash to pay its accelerated indebtedness.

AirTrans existing debt instruments and financing
agreements contain covenants that, among other things, limit its ability to:



| |  |  | pay dividends and/or other distributions; and
| | - |  | ---------------------------------------------



| |  |  | enter into mergers, consolidations or other business combinations
| | - |  | -----------------------------------------------------------------

In connection with a potential acquisition of Midwest, the operating and financial restrictions and covenants in AirTrans proposed credit facility to finance a portion of the consideration being offered in such
transaction (the Acquisition Credit Facility) and potential assumed Midwest indebtedness may adversely affect AirTrans ability to finance future operations or capital needs or to engage in new business activities. In connection
with a potential acquisition of Midwest, the proposed credit agreement and assumed Midwest indebtedness would limit AirTrans ability to, among other things:



| |  |  | declare dividends or redeem or repurchase capital stock;
| | - |  | --------------------------------------------------------



12



---

##### Table of Contents

| |  |  | prepay, redeem or repurchase other debt;
| | - |  | ----------------------------------------



| |  |  | incur liens;
| | - |  | ------------



| |  |  | make loans, guarantees, acquisitions and investments;
| | - |  | -----------------------------------------------------



| |  |  | incur additional indebtedness;
| | - |  | ------------------------------



| |  |  | engage in sale and leaseback transactions;
| | - |  | ------------------------------------------



| |  |  | amend or otherwise alter debt and other material agreements; and
| | - |  | ----------------------------------------------------------------



| |  |  | engage in mergers, acquisitions or asset sales.
| | - |  | -----------------------------------------------

AirTrans proposed Acquisition Credit Facility would require AirTran to:



| |  |  | maintain certain financial ratios; and
| | - |  | --------------------------------------



| |  |  | maintain certain minimum cash levels.
| | - |  | -------------------------------------

Further, unless amended, existing Midwest indebtedness may require AirTran to maintain certain cash levels.

For a description of the terms of the
commitments for such proposed Acquisition Credit Facility, see the section captionedThe Offer  Source and Amount of Funds  Commitments in the prospectus in the registration statement on Form S-4 and all amendments
thereto filed with the SEC in connection with AirTrans Exchange Offer. The failure of AirTran to comply with the covenants and restrictions contained in its indentures and other financing agreements could lead to a default under the terms of
those agreements. AirTran cannot assure you that its future operating results will be sufficient to ensure compliance by it with any covenants in its proposed Acquisition Credit Facility or in any assumed Midwest indebtedness or to remedy any such
default. In addition, in the event of an acceleration, AirTran may not have or be able to obtain sufficient funds to make any accelerated payments. If such a default occurs, all amounts borrowed and all amounts due under other instruments that
contain provisions for cross-acceleration or cross-default due and payable could be triggered. If that occurs, AirTran may not be able to make payments on its debt, meet its working capital and capital expenditure requirements, or be able to find
additional alternative financing on favorable or acceptable terms.

The liquidity of AirTran could be adversely impacted in the event one or more of its
credit card processors were to impose holdbacks on payments due to the company from credit card transactions.

AirTran currently has agreements with
organizations that process credit card transactions arising from purchases of air travel tickets by its customers utilizing American Express, Discover and MasterCard/VISA. Credit card processors have financial risk associated with tickets purchased
for travel because, although the processor generally forwards the cash related to the purchase to AirTran soon after the purchase is completed, the air travel generally occurs after that time, and the processor would have liability if AirTran does
not ultimately provide the air travel. Each of our agreements with the organizations that process American Express,

Discover, and MasterCard/Visa
transactions allows, under specified conditions, the credit card processor to retain cash that such processor otherwise would deliver to AirTran, i.e., a holdback. Generally, in all of AirTrans agreements, the holdbacks can be
imposed at the discretion of the processor upon the occurrence of specified events, including material adverse changes in its financial condition, or if the processor reasonably believes AirTran will be unable to perform its obligations. AirTran
believes it currently has adequate levels of unrestricted cash and short-term investments that are sufficient to prevent the imposition of holdbacks under ordinary circumstances. As of December 31, 2006, AirTran was in compliance with its
credit card agreements and it had holdbacks with only one processor, which holdbacks were in amounts that were not material to AirTrans cash balances.

A majority of AirTrans revenues relate to credit card transactions processed by the MasterCard/Visa processor. AirTrans agreement with the MasterCard/Visa credit card processor contains covenants that permit the processor to
holdback cash remittances to AirTran, if AirTran does not maintain aggregate prescribed levels of unrestricted cash and short-term investments; the processor determines that there has been a material adverse occurrence; or certain other events
occur. The amount which the processor may be entitled to withhold varies over time and is equal to the estimated liability for future air travel purchased with Visa and MasterCard cards. As of December 31, 2006, AirTran was in compliance with
the agreement and no remittances had been withheld. As of December 31, 2006, had such processor been entitled to withhold future remittances, the amount of such withholding entitlement would have been up to $95 million.

In the event material holdbacks are imposed, the liquidity of AirTran in the form of unrestricted cash and short-term investment assets would be reduced by the amount of
the holdbacks. AirTran believes it has, and will continue to have, alternatives to address any requirement for holdbacks by such processors, including seeking to obtain letters of credit in lieu of accepting a holdback or providing a cash deposit.

AirTrans agreement with its MasterCard/Visa processor expires March 31, 2008. AirTrans other credit card processing agreements generally
have no fixed term but are terminable without cause after 30 days notice and immediately upon the occurrence of various specified adverse events. The inability to enter into credit card processing agreements would have a material adverse
effect on the business of AirTran. AirTran believes that it will be able to continue to renew its existing credit card processing agreements or will be able to enter into new credit card processing agreements with other processors, although it can
not assure you that it will always have these options in the future should it seek to exercise them.

AirTrans business is, and will continue to
be, dependent on the availability and price of aircraft fuel.

Aircraft fuel is a significant expenditure and, as a percentage of AirTrans
operating expenses, accounted for 36.5 percent in 2006 and 32.4 percent, and 24.8 percent in 2005, and 2004, respectively. Due to the effect of economic events on the price and availability of oil, the future availability and cost of aircraft fuel
cannot be predicted with any degree of certainty. Although AirTran is currently able to obtain adequate supplies of aircraft fuel, it is impossible to predict the future availability or price of aircraft fuel. Political disruptions or wars involving
oil-producing countries, changes in government policy concerning the production, transportation or marketing of aircraft fuel, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in fuel
supply shortages and additional fuel price increases in the future. For 2007, if jet fuel increased $1 per barrel, AirTrans fuel expense, net of fuel contract arrangements, would increase approximately $9.3 million based on current and
projected operations, without taking into account any potential acquired Midwest operations.

AirTrans operations are, and will continue to be,
largely dependant upon the availability of fuel in the Gulf Coast area.

AirTrans operations are largely concentrated in the Southeast United
States with Atlanta being the highest volume fueling point in the AirTran system. In addition, over 70 percent of AirTrans fuel contracts are based on prices of jet fuel produced in the Gulf Coast area. Any disruption to the oil production or
refinery capacity in the Gulf Coast, as a result of weather or any other disaster could, among other potential effects, have a material adverse effect on the financial condition and results of operations of AirTran, not only in East Coast routes but
across the network due to disruptions in supply of jet fuel, dramatic escalations in the costs of jet fuel, and/or the failure of fuel providers to perform under fixed-price fuel purchase agreements of AirTran.



13



---

##### Table of Contents

We endeavor to manage and mitigate the risks of changes in aviation fuel prices, where we believe appropriate, by
entering into hedging arrangements. We do not enter into fuel hedge contracts for speculative purposes.

To the extent we do not hedge our aviation fuel
risk or correspondingly adjust our fare levels, fluctuations in the market prices of jet fuel will have the effect of reducing or increasing the amount of profit we earn or loss we incur. Conversely, by entering into hedging contracts, we may, in
exchange for minimizing the risk of potential cost increases associated with aviation jet fuel costs, also thereby necessarily minimize the potential for additional gain associated with decreases in the price of such fuel. While we have generally
been able to enter into hedging transactions when we have sought such arrangements, no assurances can be given that our ability to enter into such transactions will not adversely be affected in the future by (i) limited interest in the
provision of hedging arrangements by financial or other institutions, and (ii) the inability to procure hedging agreements as the result of some crisis (financial or other) associated with the supply of aviation fuel, political instability in
oil producing countries or other developments which have otherwise affected the interest of financial or other institutions in entering into fuel hedging transactions in general. Likewise, we can not assure you that counter parties to hedging
agreements will always perform. For a more detailed discussion of our current aviation fuel hedging activities, please see Item 7A QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  MARKET RISK SENSITIVE INSTRUMENTS AND
POSITIONS  AVIATION FUEL.

AirTrans business is dependent on technology. AirTran will continue to rely heavily on automated systems to
operate its business. Any failure of these systems, or the failure to integrate them successfully with any acquired operations could harm the business of AirTran.

AirTran is increasingly dependent on technology initiatives to reduce costs and to maintain and enhance customer
service in order to compete in the current business environment. AirTran depends on automated systems to operate its business, including computerized airline reservation systems, flight operations systems, telecommunication systems and websites.
AirTran has made significant investments in its website technology and Bye-Pass check-in kiosks, and related initiatives across the system. The performance and reliability of
AirTrans technology is critical to its ability to attract and retain customers and its ability to effectively compete.

Website and reservation
systems must be able to accommodate a high volume of traffic and deliver important flight information. Substantial or repeated website, reservations systems or telecommunication systems failures could reduce the attractiveness of services and could
cause customers to purchase tickets from another airline. Furthermore, AirTran may need to utilize the technology systems of any acquired entity from and to the extent AirTrans existing systems are not immediately scalable or until any
acquired operations can be fully integrated.

Any internal technology error or failure, or large scale external interruption in technology infrastructure
on which AirTran is dependent, such as power, telecommunications or the Internet, may disrupt its technology network, result in the loss of data or the failure to capture data. Any individual, sustained or repeated failure of the technology of
AirTran could impact its customer service and result in increased costs and expenses and generally harm the business of AirTran. Like all companies, AirTrans technology systems may be vulnerable to a variety of sources of interruption due to
events beyond its control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. While AirTran has in place and continues to invest in technology security initiatives and
disaster recovery plans, these measures may not be adequate or implemented properly to prevent a business disruption and adverse financial consequences to the business of AirTran.

Increased labor costs, union disputes, employee strikes and other labor-related disruption may adversely affect operations of AirTran.

Labor costs constitute a significant percentage of AirTrans total operating costs. A substantial portion of AirTrans workforce is represented by labor unions and covered by collective bargaining
agreements.

AirTrans business plan includes assumptions about labor costs. AirTran believes that its labor costs currently are competitive; however,
AirTran cannot assure you that its labor costs going forward will remain competitive because: labor agreements may be amended or become amendable, competitors may significantly reduce their labor costs, reducing or eliminating any comparative
advantages as to one or more competitors, or labor costs may increase in connection with potential acquisitions.

Relations between air carriers and labor
unions in the United States are governed by the Railway Labor Act, or the RLA. Under the RLA, collective bargaining agreements generally contain amendable dates rather than expiration dates, and the RLA requires that a carrier maintain
the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board, or NMB. This process continues until either the parties
have reached agreement on a new collective bargaining agreement, or the parties have been released to self-help by the NMB. Although in most circumstances the RLA prohibits strikes, after release by the NMB, carriers and unions are free
to engage in self-help measures such as strikes and lock-outs.

AirTrans pilots are represented by the National Pilots Association, or NPA.
AirTrans agreement with its pilots became amendable in 2005 and is currently in mediation under the auspices of the National Mediation Board. AirTrans flight attendants are represented by the Association of Flight Attendants, or AFA.
AirTrans agreement with the flight attendants becomes amendable in December 2008. AirTrans dispatchers are represented by the Transport Workers Union, or TWU and its agreement with its dispatchers becomes amendable in January 2009.
AirTran has four separate agreements with employee groups represented by the International Brotherhood of Teamsters, or IBT. AirTrans agreement with its maintenance technicians and inspectors becomes amendable in October 2009. Its agreement
with its technical training instructors becomes amendable in March 2010. Its agreement with its stores clerks becomes amendable in June 2010. AirTrans agreement with its ground service equipment employees becomes amendable in September 2011.

While AirTran believes that its relations with labor are generally good, any strike or labor dispute with its unionized employees may adversely affect its
ability to conduct business. The outcome of its collective bargaining negotiations cannot presently be determined. If AirTran is unable to reach agreement with any of its unionized work groups on future negotiations regarding the terms of their
collective bargaining agreements or if additional segments of its workforce become unionized, AirTran may be subject to work interruptions or stoppages.

If AirTran incurs problems with any of its third party airport services providers, its operations could be adversely affected by a resulting decline in revenue or negative public perception about its services.

AirTran conducts complete ground handling services at 33 of the 52 airports it serves, including at its Atlanta hub. Ground handling services provided by third parties at
the remaining 19 airports typically are of two types: under-wing only and complete ground handling. Under-wing ground handling services include, but are not limited to, directing the aircraft into and out of the gate, baggage and mail loading and
unloading, lavatory and water servicing, de-icing and certain other services. Complete ground handling consists of public contact and under-wing services combined. Operations not conducted by AirTran employees are contracted to other air carriers,
ground handling companies or fixed-base operators with such operations overseen by AirTran employees.

Reliance by AirTran on third party service providers
will continue in the foreseeable future and may result in the relative inability to control the efficiency and timeliness of all of AirTrans outsourced ground handling operations. Although AirTran does not anticipate any material problems with
the efficiency and timeliness of its existing contract services, problems in connection with such third party services could have a material adverse effect on the business, financial condition and results of operations of AirTran.

Interruption or disruptions in service at AirTrans existing or future hub airports could have a material adverse impact on operations.

AirTrans business strategy has historically focused on adding flights to and from its Atlanta base of operations. AirTran continues to expand its route network to
increase the amount of non-Atlanta flights: going from approximately 10 percent of daily departures



14



---

##### Table of Contents

outside of Atlanta in 2000 to approximately 34 percent of daily departures at year-end 2006. While AirTran has reduced
its dependence on Atlanta, a non-strategic, external reduction in its share of the Atlanta market or reduced passenger traffic to or from Atlanta could have a material adverse effect on its financial condition and results of operations. A
significant interruption or disruption in service at one of AirTrans existing or potential future hubs or, to a lesser degree, a secondary hub/focus city could result in the cancellation or delay of a significant portion of flights and, as a
result, could have a severe impact on the business, operations and financial performance of AirTran.

AirTrans business is and will continue to be
subject to weather factors and seasonal variations in airline travel, which cause results to fluctuate.

AirTrans operations will continue to be
vulnerable to weather conditions in different parts of its network that could disrupt service, create air traffic control problems, decrease revenue, and increase costs, such as during hurricane season in the Caribbean and Southeast United States,
and, if AirTrans operations in the Midwest and Northeast United States expand, snow and severe winters in such regions. In addition, the air travel business historically fluctuates on a seasonal basis. Due to the greater demand for air and
leisure travel during the summer months, revenues in the airline industry in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year. The results of operations of AirTran reflect
weather factors and seasonality, and therefore quarterly results are not necessarily indicative of those for an entire year and the prior results of AirTran are not necessarily indicative of the companys future results. In addition, the
dependence of AirTran on a primary hub and on a route network operating largely on the East Coast make and will continue to make AirTran more susceptible to adverse weather conditions and other traffic delays along the East Coast than some of its
competitors that may be better able to spread these traffic risks over larger route networks.

AirTran is subject to various risks as a result of its
fleet concentration in B717s.

As of January 1, 2007, AirTran has 87 B717 aircraft, which represent approximately 69 percent of the fleet. Although
AirTran does derive certain benefits in terms of reduced maintenance, training and other costs as a result, a concentration of its fleet in primarily one aircraft type may expose AirTran to certain risks in the event of, among other things, FAA
action to ground that aircraft generally if actual or suspected defects were discovered in the future unique to that aircraft. Certain other carriers operating with more diversified fleets could be better able to withstand any such future event. The
manufacturer of the B717 discontinued the production of B717 aircraft in 2006. As a result, AirTran expects to experience increased costs in later years in connection with parts acquisition and/or maintenance for such aircraft. In the event AirTran
acquires Midwest, the concentration of AirTrans fleet in B717 can be expected to temporarily increase due to the operation of B717 aircraft by Midwest until such time as additional deliveries of B737 aircraft to AirTran occur.

The maintenance costs of AirTran are expected to increase.

AirTrans recent maintenance expenses have been lower than what it expects to incur in the future because of the young age of its B717 and B737 aircraft fleet. AirTrans maintenance costs are expected to increase as these aircraft
age and utilization increases.

AirTrans reputation and financial results could be negatively affected in the event of a major aircraft accident.

An accident involving one of AirTrans aircraft could involve not only repair or replacement of the damaged aircraft and its consequent temporary
or permanent loss from service, but also significant potential claims of injured passengers and others. Moreover, any aircraft accident, even if fully insured, could cause a public perception that AirTrans aircraft are less safe or reliable
than other airlines, and that could have a negative effect on AirTrans business. The occurrence of one or more incidents or accidents involving AirTrans aircraft could have a material adverse effect on the publics perception of
AirTran and its future operations.

AirTran is required by the DOT to carry liability insurance on each of its aircraft. AirTran currently maintains
liability insurance in amounts and of the type consistent with industry practice. Although AirTran currently believes its insurance coverage is adequate, the amount of such coverage may be changed in the future or AirTran may be forced to bear
substantial losses from accidents. Substantial claims resulting from an accident in excess of related insurance coverage could have a material adverse impact on AirTrans business and financial results.

AirTran is subject to extensive regulation by the FAA, the DOT, and other governmental agencies, compliance with which could cause AirTran to incur increased costs
and negatively affect its business and financial results.

AirTran and airlines in general are subject to a wide range of governmental regulation,
including regulation by the FAA. A modification, suspension or revocation of any of the FAA authorizations or certificates of AirTran could adversely impact its business.

In the last several years, Congress has passed laws and the FAA has issued a number of maintenance directives and other regulations. These requirements impose substantial costs on airlines. Additional laws and
regulations have been proposed from time to time that could significantly increase the cost of airline operations or reduce revenues by imposing additional requirements or restrictions on operations. Laws and regulations have also been considered
that would prohibit or restrict the ownership and/or transfer of airline routes or takeoff and landing slots. Also, the availability of international routes to United States carriers is regulated by treaties and related agreements between the United
States and foreign governments that may be amended from time to time, or because appropriate slots or facilities may not be available. AirTran cannot assure you that laws or regulations enacted in the future will not adversely affect its operating
costs, or its ability to conduct existing or future operations outside of the United States. AirTran cannot predict what laws and regulations may be adopted or their impact, and AirTran cannot guarantee that laws or regulations currently proposed or
enacted in the future will not adversely affect it.

Increases in insurance costs or reduction in insurance coverage may adversely impact the operations
and financial results of AirTran.

The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease
in the insurance coverage available to commercial airline carriers. Accordingly, AirTrans insurance costs increased significantly. Likewise, the ability of AirTran to continue to obtain insurance even at current prices will remain uncertain.
Pursuant to the Airline Transportation and System Stabilization Act, the federal government stepped in to provide supplemental third-party war-risk insurance coverage to commercial carriers for renewable 60-day periods, at substantially lower
premiums than prevailing commercial rates and for levels of coverage not available in the commercial market. In November 2002, Congress passed the Homeland Security Act of 2002, which mandated the federal government to provide third-party,
passenger, and hull war-risk insurance coverage to commercial carriers through August 31, 2003, and which permitted such coverage to be extended by the government through December 31, 2003. The Emergency Wartime Supplemental Appropriations
Act extended the governments mandate to provide war-risk insurance until December 31, 2004. Pursuant to the Consolidated Appropriations Act of 2005, Congress further extended the governments mandate to provide war-risk insurance
until August 31, 2005 at the discretion of the Secretary of Transportation. During 2006, the coverage was extended in six month increments. Currently, AirTran has received certification of coverage through August 31, 2007. If the federal
insurance program terminates, AirTran would likely face a material increase in the cost of war-risk insurance or such insurance might not be available. Because of the competitive pressures in the industry, the ability of AirTran to pass along
additional insurance costs to passengers may be limited. As a result, further increases in insurance costs or reductions in available insurance coverage could harm earnings. Any coverage that might be available to AirTran through commercial aviation
insurers also could have substantially less desirable terms, and might not be adequate to protect its risk, which could harm our business.

The travel
industry, which was materially adversely affected by the September 11, 2001 terrorist attacks, continues to face on-going security concerns and cost burdens associated with security.

The terrorist attacks of September 11, 2001 materially impacted and continue to impact air travel beyond insurance costs. In November 2001, the President signed into
law the Aviation and Transportation Security Act, or the Aviation Security Act. This law federalized substantially all aspects of civil aviation security, creating a new Transportation Security Administration, or TSA. Under



15



---

##### Table of Contents

the Aviation Security Act, substantially all security screeners at airports are now federal employees and significant
other elements of airline and airport security are now overseen and performed by federal employees, including federal security managers, federal law enforcement officers, federal air marshals and federal security screeners. Among other matters, the
law mandates improved flight deck security, deployment of federal air marshals onboard flights, improved airport perimeter access security, airline crew security training, enhanced security screening of passengers, baggage, cargo, mail, employees
and vendors, enhanced training and qualifications of security screening personnel, additional provisions of passenger data to U.S. Customs and enhanced background checks. These increased security procedures introduced at airports since the attacks
have increased costs to airlines.

Future acts of terrorism or escalation of U.S. military involvement overseas could adversely affect the airline
industry.

Even if not directed at the airline industry, a future act of terrorism, the threat of such acts or escalation of United States military
involvement overseas could have an adverse effect on the airline industry. In the event of a terrorist attack, the airline industry would likely experience significantly reduced demand. AirTran cannot assure you that these actions, or consequences
resulting from these actions, will not harm its business or the airline industry generally.

The airline industry has incurred significant losses
resulting in airline restructurings and bankruptcies, which could result in changes in the industry.

Since 2001, as a result of slower general economic
conditions, the continuing impact of the September 11, 2001 terrorist attacks, attempted terrorist attacks, the high price of fuel, military action overseas and intense competition, the airline industry experienced a decline in demand which
resulted in record financial losses. In response to the adverse financial results the airline industry has experienced, most airlines have taken actions in an effort to reduce losses, such as reducing capacity, reducing employee headcount, limiting
service offerings, renegotiating labor contracts and reconfiguring flight schedules, as well as other efficiency and cost-cutting measures. Despite these actions, financial losses in the airline industry continued into 2006 and it is foreseeable
that further airline reorganizations, bankruptcies or consolidations may occur, which could serve to reduce AirTrans cost advantage. AirTran cannot assure you that the occurrence of these events or potential changes resulting from these events
will not harm its business or the airline industry generally.

Major airlines are reducing their cost structures through various methods and these changes
could reduce AirTrans cost advantage.

The airline industry is intensely competitive.

The airline industry in general and the low-fare sector in particular, is highly competitive. The competitors of AirTran include other major domestic airlines as well as
foreign, regional and new entrant airlines, some of which will have more financial resources and/or could have lower cost structures than AirTran, and other forms of transportation, including rail and private automobiles. In most of the markets
which AirTran currently serves, and in most of the markets which it expects to serve within the coming year, AirTran competes or expects to compete with at least one other low-cost air carrier and one or more major legacy carriers. AirTrans
revenues are, and will continue to be sensitive to numerous competitive factors, and the actions of other carriers in the areas of pricing, scheduling and promotions, all of which can have a substantial adverse impact on individual airline and
overall industry revenues. These factors may become even more significant in periods when the industry experiences large losses, as airlines under financial stress or in bankruptcy, may institute pricing structures intended to achieve near-term
survival rather than long-term viability.

AirTran may face greater competition in the future from existing and new competitors. Any increased competition
could have a negative impact on its business and operating results.

The profitability of the operations of AirTran are, and will continue to be,
influenced by economic conditions as demand for discretionary travel diminishes during economic downturns.

The profitability of AirTrans
operations is influenced by the condition of the United States economy, which may impact the demand for discretionary travel and AirTrans competitive pricing position. A substantial portion of its business is discretionary travel, which
declines during economic downturns.

Airline strategic combinations or industry consolidations could have an impact on AirTrans competitive
environment in ways yet to be determined.

The environment in the airline industry changes from time to time as carriers implement varying strategies in
pursuit of profitability, including consolidation to expand operations and increase market strength and entering into global alliance arrangements. Similarly, the bankruptcy or reorganization of one or more of AirTrans competitors may result
in rapid changes to the identity of AirTrans competitors in particular markets, a substantial reduction in the operating costs of AirTrans competitors or the entry of new competitors into some or all of the markets AirTran serves or
currently is seeking to serve. AirTran is unable to predict exactly what effect, if any, changes in the strategic landscape might have on its business, financial condition and results of operations.

If AirTran loses key senior management or is unable to attract and retain the talent required for its business, its operating results could suffer.

AirTrans performance depends largely on the efforts and abilities of its members of senior management. These executives have substantial experience and expertise in
AirTrans business and have made significant contributions to its growth and success. The unexpected loss of services of one or more of these individuals could have an adverse effect on AirTrans business. AirTran will need to attract and
retain additional qualified personnel and develop, train and manage an increasing number of management-level employees. AirTran cannot assure you that it will be able to attract and retain personnel as needed in the future.

AirTrans stock price may fluctuate significantly and you could lose all or part of your investment as a result.

The price of AirTran common stock may fluctuate significantly, regardless of whether or not it acquires Midwest, as a result of many factors in addition to the factors
discussed in the these risk factors. These factors, some or all of which are beyond AirTrans control, include:



| |  |  | actual or anticipated fluctuations in AirTrans operating results;
| | - |  | ------------------------------------------------------------------



| |  |  | changes in expectations as to AirTrans future financial performance or changes in financial estimates of securities analysts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | success of AirTrans operating and growth strategies;
| | - |  | -----------------------------------------------------



| |  |  | investor anticipation of competitive and industry threats, whether or not warranted by actual events;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | operating and stock price performance of other comparable companies; and
| | - |  | ------------------------------------------------------------------------



| |  |  | realization of any of the risks described in these risk factors.
| | - |  | ----------------------------------------------------------------

In addition, the stock market recently has experienced extreme volatility that often has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry
fluctuations may adversely affect the trading price of AirTran common stock, regardless of AirTrans actual operating performance.

AirTrans
anti-takeover provisions may delay or prevent a change of control of AirTran, which could adversely affect the price of AirTran common stock.

The
existence of some provisions in AirTrans corporate documents and Nevada law may delay or prevent a change in control of AirTran, which could adversely affect the price of AirTran common stock. AirTrans certificate of incorporation and



16



---

##### Table of Contents

AirTrans bylaws contain some provisions that may make the acquisition of control of AirTran more difficult,
including provisions relating to the nomination, election and removal of directors, the structure of the board of directors, and limitations on actions by AirTran shareholders. In addition, Nevada law also imposes some restrictions on mergers and
other business combinations between AirTran and any holder of 10% or more of its outstanding common stock.

Risks Factors relating to AirTran and
potential acquisitions, including the potential acquisition of Midwest.

AirTran has sought to acquire other carriers, as well as gates and other assets
from other carriers. In the event AirTran completes one or more acquisitions including, or in addition to, the acquisition of Midwest, it may be subject to a variety of risks. AirTran intends, to the extent possible, to integrate the operations of
acquired assets and entities with those of AirTran Airways. Depending on the nature of the acquired entity or operations, integration of acquired operations into AirTrans present operations may present substantial difficulties. Even where
material difficulties are not anticipated, there can be no assurance that AirTran will not encounter such difficulties in integrating acquired operations with AirTrans operations, which may result in a delay or the failure to achieve
anticipated synergies, increased costs and failures to achieve increases in earnings or cost savings. The difficulties of combining the operations of acquired companies may include, among other things:



| |  |  | possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures between AirTran and an acquired entity;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the consolidation of sales and marketing operations;
| | - |  | ----------------------------------------------------



| |  |  | the retention of existing customers and attraction of new customers;
| | - |  | --------------------------------------------------------------------



| |  |  | the retention of key employees;
| | - |  | -------------------------------



| |  |  | employee strikes and other labor-related disruptions in connection with union representation and seniority integration issues;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | employee strikes and other labor-related disruptions in connection with seniority questions with respect to both union and non-union employees;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the consolidation of corporate and administrative infrastructures;
| | - |  | ------------------------------------------------------------------



| |  |  | the integration and management of the technologies and products of the acquired entity, including the consolidation and integration of computer information systems;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the identification and elimination of redundant and underperforming operations and assets;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | costs associated with the termination of the assumed contractual obligations and the timing thereof;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the minimization of the diversion of managements attention from ongoing business concerns;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the possibility of tax costs or inefficiencies associated with the integration of the operations;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | the possible need to modify internal controls over financial reporting in order to comply with the Foreign Corrupt Practices Act, the Sarbanes-Oxley Act of 2002 and
the rules and regulations promulgated thereunder; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loss of customer goodwill.
| | - |  | --------------------------

For these reasons,
AirTran may fail to successfully complete the integration of an acquired entity, or to realize the anticipated benefits of the integration of an acquired entity. Actual cost savings and synergies which may be achieved from an acquired entity may be
lower than AirTran expects and may take a longer time to achieve than AirTran anticipates. Other acquisition related risks include risks associated with higher costs or unexpected difficulties or problems with acquired assets or entities including
different flight equipment, outdated or incompatible technologies, labor difficulties, or an inability to realize anticipated synergies and efficiencies. Whether within anticipated timeframes or at all, one or more of such acquisition-related risks,
if realized, could have an adverse impact on AirTrans business, financial condition, results of operations, or operations. For a discussion of the particular risks and uncertainties associated with a potential acquisition of Midwest, see the
section captioned RISK FACTORS  Risk Factors Relating to AirTran and the Combined Company in the prospectus in registration statement on Form S-4 and all amendments thereto filed with the SEC in connection with
AirTrans Exchange Offer, which is incorporated herein by reference.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.



17



---

##### Table of Contents

I TEM 2. PROPERTIES

Operating Aircraft Fleet

We operated the following owned and leased aircraft as of December 31, 2006:



|              |  |                           |  |       |  |        |  |       |  |                             
|------------- |  | ------------------------- |  | ----- |  | ------ |  | ----- |  | ----------------------------
|Aircraft Type |  | Number of Passenger Seats |  | Owned |  | Leased |  | Total |  | Weighted-Average Age (Years)
|B717          |  | 117                       |  | 8     |  | 79     |  | 87    |  | 4.3                         
|B737-700      |  | 137                       |  | 18    |  | 22     |  | 40    |  | 1.2                         
|              |  |                           |  |       |  |        |  |       |  |                             
|Total         |  |                           |  | 26    |  | 101    |  | 127   |  | 3.3                         
|              |  |                           |  |       |  |        |  |       |  |                             

As of December 31, 2006, we had 60 Boeing 737 aircraft on order scheduled to be delivered in the year
indicated:



|      |  |                              
|----- |  | -----------------------------
|      |  | Firm Aircraft Deliveries B737
|2007  |  | 12                           
|2008  |  | 15                           
|2009  |  | 18                           
|2010  |  | 14                           
|2011  |  | 1                            
|      |  |                              
|Total |  | 60                           
|      |  |                              

The above schedule includes two B737 aircraft scheduled for delivery in the second quarter 2007 which we have
agreed to sell to an airline which operates outside of the United States. We anticipate recognizing a gain if and when each sale occurs.

Of the 60 B737
aircraft on order, we have secured debt financing for ten B737 aircraft scheduled for delivery in 2007 and for five of the aircraft scheduled to be delivered in 2008 through arrangements with financial institutions. While our intention is to finance
the remainder of the aircraft on order via a combination of debt and lease financing we have not yet arranged for such financing. Additionally, we have sale/leaseback commitments from an aircraft leasing company with respect to six spare engines to
be delivered through 2010. During 2006, we entered into a sale/leaseback agreements related to one of these spare engines.

There can be no assurance that
sufficient financing will be available for all B737 aircraft deliveries or for other capital expenditures not covered by firm financing commitments. Should fuel prices remain high and if we are unable to generate revenues to cover our costs, we may
slow our growth, including the sale, lease or sublease of certain numbers of our aircraft.

As of December 31, 2006, all of our owned aircraft were
encumbered under debt agreements. For information concerning the estimated useful lives, residual values, lease terms, operating rent expense and firm orders for additional aircraft, see Notes 1, 2, 5 and 6 to the consolidated financial statements.

Ground Facilities

We have signatory status on the
lease of facilities at Hartsfield-Jackson Atlanta International Airport. This lease covers use of 22 gates and expires in September 2010. We also have signatory status at several other airports. The lease at Baltimore/Washington International (BWI)
covers six gates and expires in June 2008. The current lease at Orlando International Airport, which expires in September 2008, previously included five gates and increased to six gates in early 2006. The check-in-counters, gates and airport office
facilities at each of the other airports we serve are leased from the appropriate airport authority or subleased from other airlines. These arrangements may include baggage handling, station operations, cleaning and other services. If facilities at
any additional cities to be served by us are not available at acceptable rates, or if such facilities become no longer available to us at acceptable rates, then we may choose not to serve those markets.

Our principal corporate offices are located at the Orlando International Airport in a leased facility consisting of approximately 34,000 square feet of office space. The
facility houses our executive offices as well as our operations staff, general administrative staff, computer systems and personnel training facility. The lease agreement for this facility expires at the end of 2007 and may be extended an additional
10 years through the exercise of options in five-year increments.

We rent an aircraft hangar measuring approximately 70,000 square feet at the Orlando
International Airport, subject to a ground lease with the Greater Orlando Aviation Authority. The ground lease agreement for this facility expires in 2011 and may be extended an additional 10 years through the exercise of options in five-year
increments. The hangar houses a portion of our maintenance staff, and parts inventory.

In May 2004, we opened a two bay hangar facility at
Hartsfield-Jackson Atlanta International Airport. The 56,700 square-foot hangar can hold four B717 aircraft simultaneously and has a 20,000 square-foot; two-story office building attached to the hangar to house maintenance and engineering staff. We
have a 20 year lease on the facility which expires in 2024.

We also lease space in the following facilities:



| |  |  | Approximately 22,000 square feet of office space in Atlanta for use as a reservations center under a lease which expires in May 2010;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately 27,000 square feet of space in Atlanta for use as a training center under a lease which expires in October 2008;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately 13,000 square feet of space in Savannah, Georgia for a reservations center under a lease which expires in February 2009;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately 91,000 square feet of space in Atlanta for a warehouse and engine repair facility under a lease that expires in August 2009; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately 7,200 square feet of space in Carrollton, Georgia for a third reservation center opened in 2004. The lease expires in March 2009.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

We believe we will be able to obtain lease renewals or substitute facilities for our leased facilities upon the expiration of the
applicable lease.



18



---

##### Table of Contents

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.



19



---

##### Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock, $.001 par value per share, is traded on the New York Stock Exchange under the symbol AAI.
The following table sets forth the reported high and low sale prices for our common stock for each quarterly period during 2006 and 2005:



|        |  |      |       |      |   |       |  |     |       |  |   |      
|------- |  | ---- | ----- | ---- | - | ----- |  | --- | ----- |  | - | -----
|        |  | 2006 |       | 2005
|Quarter |  | High |       | Low  |   | High  |  | Low
|1st     |  | $    | 18.85 |      | $ | 13.51 |  | $   | 11.02 |  | $ | 7.40 
|2nd     |  | $    | 18.20 |      | $ | 11.54 |  | $   | 10.65 |  | $ | 7.85 
|3rd     |  | $    | 15.10 |      | $ | 9.06  |  | $   | 12.70 |  | $ | 8.72 
|4th     |  | $    | 13.77 |      | $ | 9.51  |  | $   | 16.70 |  | $ | 12.63

Holders

As of
February 16, 2007, there were approximately 4,290 stockholders of record of common stock.

Dividends

Historically, we have not declared cash dividends on our common stock. In addition, our debt indentures restrict our ability to pay cash dividends. We intend to retain
earnings to finance the development and growth of our business. Accordingly, we do not anticipate that any cash dividends will be declared on our common stock for the foreseeable future. Future payments of cash dividends, if any, will depend on our
financial condition, results of operations, business conditions, capital requirements, restrictions contained in agreements, future prospects and other factors deemed relevant by our Board of Directors.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12 of this Report on Form 10-K/A below.

Issuance of Unregistered Securities and Repurchase of AirTran Equity Securities

During the forth quarter of the year ended December 31, 2006, we did not issue any unregistered equity securities nor did we purchase any of our
equity securities, exclusive of any net option exercises to pay withholding taxes and/or the exercise price of the applicable option.



20



---

##### Table of Contents

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA (RESTATED)

The following financial information for the five years ended
December 31, 2006 has been derived from our consolidated financial statements. This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere herein.



|                                                                                      |  |      |            |   |      |   |            |      |  |   |            |      |  |      |            |      |  |   |           |  
|------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | ---- |  | ---- | ---------- | ---- |  | - | --------- | -
|Financial Data:                                                                       |  |      |            |   |      |   |            |      |  |   |            |      |  |      |            |      |  |   |           |  
|(in thousands, except per share data)                                                 |  | 2006 |            |   | 2005 |   |            | 2004 |  |   | 2003       |      |  | 2002 |           
|Operating revenues                                                                    |  | $    | 1,892,083  |   |      | $ | 1,449,700  |      |  | $ | 1,040,994  |      |  | $    | 917,404    |      |  | $ | 732,732   |  
|Net income                                                                            |  | $    | 14,714     |   |      | $ | 7,545      |      |  | $ | 9,834      | (10) |  | $    | 100,935    | (11) |  | $ | 10,107    |  
|Earnings per common share:                                                            |  |      |            |   |      |   |            |      |  |   |            |      |  |      |            |      |  |   |           |  
|Basic                                                                                 |  | $    | 0.16       |   |      | $ | 0.09       |      |  | $ | 0.12       |      |  | $    | 1.34       |      |  | $ | 0.14      |  
|Diluted                                                                               |  | $    | 0.16       |   |      | $ | 0.08       |      |  | $ | 0.11       |      |  | $    | 1.22       |      |  | $ | 0.14      |  
|Total assets at year-end                                                              |  | $    | 1,603,582  |   |      | $ | 1,161,543  |      |  | $ | 904,792    |      |  | $    | 809,418    |      |  | $ | 473,450   |  
|Long-term debt and capital lease obligations including current maturities at year-end |  | $    | 811,110    |   |      | $ | 472,599    |      |  | $ | 313,970    |      |  | $    | 246,836    |      |  | $ | 210,173   |  
|                                                                                      |  |      |            |   |     
|Operating Data:                                                                       |  |      |            |   |      |   |            |      |  |   |            |      |  |      |            |      |  |   |           |  
|Revenue passengers                                                                    |  |      | 20,051,219 |   |      |   | 16,638,214 |      |  |   | 13,170,230 |      |  |      | 11,651,340 |      |  |   | 9,653,777 |  
|Revenue passenger miles (RPM) (000s)(1)                                               |  |      | 13,836,378 |   |      |   | 11,301,534 |      |  |   | 8,479,262  |      |  |      | 7,143,125  |      |  |   | 5,581,263 |  
|Available seat miles (ASM) (000s)(2)                                                  |  |      | 19,007,416 |   |      |   | 15,369,505 |      |  |   | 11,977,443 |      |  |      | 10,046,385 |      |  |   | 8,255,809 |  
|Passenger load factor(3)                                                              |  |      | 72.8       | % |      |   | 73.5       | %    |  |   | 70.8       | %    |  |      | 71.1       | %    |  |   | 67.6      | %
|Break-even load factor(4)                                                             |  |      | 71.8       | % |      |   | 72.9       | %    |  |   | 69.7       | %    |  |      | 64.2       | %    |  |   | 66.7      | %
|Average fare(5)                                                                       |  | $    | 90.51      |   |      | $ | 83.93      |      |  | $ | 76.30      |      |  | $    | 76.33      |      |  | $ | 73.86     |  
|Average yield per RPM(6)                                                              |  |      | 13.12      | ¢ |      |   | 12.36      | ¢    |  |   | 11.85      | ¢    |  |      | 12.45      | ¢    |  |   | 12.78     | ¢
|Passenger revenue per ASM(7)                                                          |  |      | 9.55       | ¢ |      |   | 9.09       | ¢    |  |   | 8.39       | ¢    |  |      | 8.85       | ¢    |  |   | 8.64      | ¢
|Operating cost per ASM (CASM)(8)                                                      |  |      | 9.74       | ¢ |      |   | 9.28       | ¢    |  |   | 8.45       | ¢    |  |      | 8.28       | ¢    |  |   | 8.51      | ¢
|Average stage length (miles)                                                          |  |      | 652        |   |      |   | 651        |      |  |   | 628        |      |  |      | 599        |      |  |   | 567       |  
|Average cost of aircraft fuel per gallon, including fuel taxes and into-plane fees    |  | $    | 2.17       |   |      | $ | 1.81       |      |  | $ | 1.22       |      |  | $    | 0.98       |      |  | $ | 0.90      |  
|Average daily utilization (hours: minutes)(9)                                         |  |      | 11:06      |   |      |   | 11:00      |      |  |   | 10:54      |      |  |      | 10:56      |      |  |   | 10:36     |  
|Number of operating aircraft in fleet at end of year                                  |  |      | 127        |   |      |   | 105        |      |  |   | 87         |      |  |      | 74         |      |  |   | 65        |  

---

Note: All special items listed below are pre-tax.

|(1) | The number of scheduled revenue miles flown by passengers
|--- | ---------------------------------------------------------

|(2) | The number of seats available for passengers multiplied by the number of miles the
seats are flown
|--- | --------------------------------------------------------------------------------------------------

|(3) | The percentage of aircraft seating capacity that is actually utilized (RPMs
divided by ASMs)
|--- | --------------------------------------------------------------------------------------------

|(4) | The percentage of seats that must be occupied by revenue passengers in order for
us to break even on a pre-tax income basis
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(5) | Passenger revenue divided by total passengers
|--- | ---------------------------------------------

|(6) | The average amount one passenger pays to fly one mile
|--- | -----------------------------------------------------

|(7) | Passenger revenue divided by ASMs
|--- | ---------------------------------

|(8) | Operating expenses, divided by ASMs
|--- | -----------------------------------

|(9) | The average amount of time per day that an aircraft flown is operated in revenue
service
|--- | ----------------------------------------------------------------------------------------

|(10) | Includes a $1.3 million benefit related to our unsuccessful bid for certain leased
gates and other assets of another airline at Chicagos Midway airport and $1.5 million of additional fuel expense related to prior periods
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes a $38.1 million payment received under the Wartime Act, deferred debt
discount/issuance cost write-off of $12.3 million and reversal of a tax valuation allowance of $15.9 million
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21



---

##### Table of Contents

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (RESTATED)

FORWARD-LOOKING STATEMENTS

The information contained in this section has been derived from our historical financial statements and
should be read together with our historical financial statements and related notes included elsewhere in this document. The discussion below contains forward-looking statements including, except in connection with AirTrans offer to exchange
with respect to Midwest, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties
including, but not limited to: consumer demand and acceptance of services offered by us, our ability to achieve and maintain acceptable cost levels, fare levels and actions by competitors, regulatory matters, general economic conditions, commodity
prices, and changing business strategies. Forward-looking statements are subject to a number of factors that could cause actual results to differ materially from our expressed or implied expectations, including, but not limited to: our performance
in future periods, our ability to generate working capital from operations, our ability to take delivery of and to finance aircraft, the adequacy of our insurance coverage, and the results of litigation or investigation. Our forward-looking
statements can be identified by the use of terminology such as anticipates, expects, intends, believes, will or the negative thereof, or variations thereon or comparable terminology. Except
as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

OVERVIEW

All of the operations of AirTran Holdings, Inc. (the Company, AirTran, we or us) are conducted by our
wholly owned subsidiary, AirTran Airways, Inc. (AirTran Airways or Airways). Airways is one of the largest low cost scheduled airlines in the United States in terms of departures and seats offered. We operate scheduled airline service primarily in
short-haul markets principally in the eastern United States, with a majority of our flights originating and terminating at our hub in Atlanta, Georgia. As of February 1, 2007, we operated 87 Boeing 717-200 (B717) and 41 Boeing 737-700 (B737)
aircraft offering approximately 700 scheduled flights per day to 51 locations in the United States, as well as to Freeport, Grand Bahamas.

Our plans for
2007 focus on continuing the growth of our operations. We intend to do this by:



| |  |  | adding 12 new B737 aircraft to our fleet (two of which were acquired as of February 12, 2007 and two of which may be sold to a non-U.S. airline);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | improving productivity;
| | - |  | -----------------------



| |  |  | keeping our unit costs at levels that rank among the best in the industry;
| | - |  | --------------------------------------------------------------------------



| |  |  | looking for new market opportunities that will satisfy the transportation needs of our customers; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | providing our customers with a travel experience worth repeating.
| | - |  | -----------------------------------------------------------------

We expect our mix of low fares, excellent customer service, an affordable Business Class product, and one of the youngest all-Boeing aircraft fleets will provide product value that customers will continue to find
attractive.

We anticipate that our capacity, as measured by available seat miles, will increase by approximately 19% on a year over year basis. As we
grow, we intend to remain focused on providing quality air service at low cost.

We experienced several challenges in 2006 including record fuel prices,
changes to airline security rules, and increased competition. Nevertheless, we earned a record net income in the second quarter, took delivery of 22 new aircraft, and commenced new service to White Plains, NY, and Seattle, WA.

During 2006, we continued our track record of operating profitably. We reported operating income of $40.9 million, net income of $14.7 million and diluted earnings per
common share of $0.16. We were able to operate profitably despite dramatically increased fuel costs. On a cost per available seat mile basis, our 2006 unit fuel cost increased 17.9 percent over unit fuel cost for 2005 which was 43.3 percent greater
than unit fuel cost for 2004. We were able to partially mitigate the impact of the increase in unit fuel cost by increasing unit revenue and reducing non-fuel unit operating costs. Unit revenue for 2006, as measured by passenger revenues per
available seat mile, increased by 5.1 percent compared to 2005.

During 2006, we also continued our rapid growth by taking delivery of two B717 aircraft
and 20 B737 aircraft bringing our total fleet to 127 aircraft at year end. As a result, our capacity, as measured by available seat miles, increased 23.7 percent. Our traffic, as measured by revenue passenger miles, increased 22.4 percent, resulting
in a 0.7 percentage point decrease in passenger load factor to 72.8 percent.



22



---

##### Table of Contents

Highlights from 2006 include the following:



| |  |  | Carried in excess of 20 million revenue passengers.
| | - |  | ---------------------------------------------------



| |  |  | Took delivery of 20 new Boeing 737-700 aircraft and two new 717-200 aircraft.
| | - |  | -----------------------------------------------------------------------------



| |  |  | Secured financing for all 2007 aircraft deliveries.
| | - |  | ---------------------------------------------------



| |  |  | Closed on new financing for aircraft pre-delivery deposits for 2008 aircraft deliveries.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Initiated new service to White Plains, N.Y., and Seattle, Wa.
| | - |  | -------------------------------------------------------------



| |  |  | Launched over 20 new non-stop routes.
| | - |  | -------------------------------------



| |  |  | Created over 700 new jobs throughout our network.
| | - |  | -------------------------------------------------



| |  |  | Announced that we will begin service to Newburgh, N.Y., Daytona Beach, Fla., Phoenix, Ariz., San Diego, Calif., and St. Louis, Mo. in 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Announced over 15 new non-stop routes in 2007.
| | - |  | ----------------------------------------------

The
Atlanta hub operation remains the core of our business. As important as Atlanta is in our long-term strategic plan we have also focused on developing new geographic sources of revenue. This has led to our proposal to acquire Midwest Air Group with
the aim of developing a stronger presence in the Midwestern United States. While there can be no assurance that our offer will be accepted, we remain convinced that a combination of AirTran and Midwest Airlines would bring substantial benefits that
would accrue to the shareholders, customers, employees and other stakeholders of both companies.

We will continue to face several challenges during 2007.
Managing costs and increasing revenues in the face of high fuel levels will continue to be a primary focus. Two of our largest competitors are operating in bankruptcy, which creates uncertainty in a number of competitive markets in both the near and
long term. Additionally, if our fuel costs rise, we cannot guarantee that we will be able to raise revenues to match the increased fuel costs. Our financial and operating results for any prior interim or annual period are not necessarily indicative
of those for the entire year. Air travel in our markets tends to be seasonal, with the highest level of travel occurring during the winter months to Florida and the summer months to the northeastern and western United States. Generally, the second
quarter tends to be our strongest revenue quarter.

RESULTS OF OPERATIONS

2006 Compared to 2005

Summary

We reported operating income of $40.9 million, net income of $14.7 million and diluted earnings per common share of $0.16 for the year ended December 31, 2006. For 2005 we reported operating income of $22.6
million, net income of $7.5 million, and diluted earnings per common share of $0.08.

Operating Revenues

Our operating revenues for year ended December 31, 2006 increased $442.4 million (30.5 percent), primarily due to a 30.0 percent increase in passenger revenues. The
increase in passenger revenues was largely due to a 22.4 percent increase in passenger traffic as measured by revenue passenger miles (RPMs), and an increase in our average yield per RPM of 6.1 percent to 13.12 cents. The increase in yield resulted
primarily from a 7.8 percent increase in our average fare to $90.51. This increase in yield, when combined with our 0.7 percentage point decrease in passenger load factor, resulted in a 5.1 percent increase in passenger unit revenues as measured by
passenger revenue per available seat mile (RASM) to 9.55 cents.

During the year ended December 31, 2006, we took delivery of two B717 aircraft and 20
B737 aircraft. As a result, our capacity, as measured by available seat miles (ASMs), increased 23.7 percent. Our traffic, as measured by RPMs, increased 22.4 percent, resulting in a 0.7 percentage point decrease in passenger load factor to 72.8
percent.



23



---

##### Table of Contents

Operating Expenses

Our operating expenses for the year ended December 31, 2006 increased $424.2 million (29.7 percent) or 5.0 percent on a cost per ASM basis. Our financial results were significantly affected by changes in the price of fuel.

In general, our operating expenses are significantly affected by changes in our capacity, as measured by ASMs. The following table presents our unit costs, defined as
operating expense per ASM, for the indicated periods:



|                                         |  |                         |   |  |                             |   |  |       |  
|---------------------------------------- |  | ----------------------- | - |  | --------------------------- | - |  | ----- | -
|                                         |  | Year ended December 31, |   |  | Percent Increase (Decrease) |  
|                                         |  | 2006                    |   |  | 2005                        |   | 
|Aircraft fuel                            |  | 3.55                    | ¢ |  | 3.01                        | ¢ |  | 17.9  | %
|Salaries, wages and benefits             |  | 2.05                    |   |  | 2.14                        |   |  | (4.2  | )
|Aircraft rent                            |  | 1.21                    |   |  | 1.25                        |   |  | (3.2  | )
|Maintenance, materials and repairs       |  | 0.79                    |   |  | 0.66                        |   |  | 19.7  |  
|Landing fees and other rents             |  | 0.53                    |   |  | 0.53                        |   |  |      |  
|Distribution                             |  | 0.37                    |   |  | 0.44                        |   |  | (15.9 | )
|Marketing and advertising                |  | 0.24                    |   |  | 0.24                        |   |  |      |  
|Aircraft insurance and security services |  | 0.14                    |   |  | 0.15                        |   |  | (6.7  | )
|Depreciation                             |  | 0.16                    |   |  | 0.13                        |   |  | 23.1  |  
|Other operating                          |  | 0.70                    |   |  | 0.73                        |   |  | (4.1  | )
|                                         |  |                         |   |  |                             |   |  |       |  
|Total CASM                               |  | 9.74                    | ¢ |  | 9.28                        | ¢ |  | 5.0   | %
|                                         |  |                         |   |  |                             |   |  |       |  

Aircraft fuel increased 17.9 percent on a cost per ASM basis, primarily due to escalating fuel prices. Our
fuel price per gallon, including all fees and taxes, increased 20.0 percent from $1.81 for the year ended December 31, 2005 to $2.17 for the year ended December 31, 2006. The level of our flight operations, as measured by block hours
flown, increased 21.0 percent while our fuel consumption per block hour increased slightly by 0.4 percent to 670 gallons. In a continued effort to reduce our fuel costs, we have added winglets to 23 of our B737 aircraft. These enhancements extend
the aircraft range, improve performance, and reduce fuel costs.

Salaries, wages and benefits decreased 4.2 percent on a cost per ASM basis,
primarily due to gains in productivity driven by the increased number of aircraft and higher daily utilization. We employed approximately 7,400 full-time equivalent employees as of December 31, 2006, representing a 10.6% percent increase over
the comparable period in 2005.

Maintenance, materials and repairs increased 19.7 percent on a cost per ASM basis. On a cost per block hour basis,
maintenance materials and repairs expense increased 21.1 percent to $322 per block hour primarily due to the expiration of warranties on the B717 aircraft and an increase in B717 engine maintenance contract rates. As the original manufacturer
warranties expire on our B717 and B737 aircraft, the maintenance, repair and overhaul of aircraft engines and a significant number of aircraft systems become covered by maintenance agreements with FAA-approved maintenance, repair, and overhaul
providers. Under certain of our maintenance agreements, we pay monthly charges based on either the number of flight hours flown or the number of landings.

Distribution costs decreased 15.9 percent on a cost per ASM basis reflecting the new rates in our GDS agreements that were renegotiated during the fourth quarter 2005. For the year ended December 31, 2006, approximately
60 percent of our sales were made via our internal website. We recognize significant cost savings when our sales are booked directly through our website compared with more traditional methods, such as travel agent systems (GDS).

Marketing and advertising costs were unchanged on a cost per ASM basis. The year ended December 31, 2006 included expense of $4.1 million related to a fourth
quarter 2005 barter transaction. The 2006 expense was due to changes in the estimated volume of travel exchanged in connection with the 2005 promotion. The year ended December 31, 2005 included $4.6 million expense related to this barter
transaction.

Aircraft insurance and security services decreased 6.7 percent on a cost per ASM basis. While the addition of 22 new Boeing aircraft
to our fleet during the year ended December 31, 2006 increased our total insured hull value and related insurance premiums, the decrease on a cost per ASM basis is primarily due to a reduction in hull and liability insurance rates and security
costs for our 2006 fleet coverage.

Depreciation increased 23.1 percent on a cost per ASM basis, primarily due to the addition of 13 owned B737 for
the year ended December 31, 2006 as well as the purchase of spare aircraft parts for the new B737 fleet. Additionally, during the year ended December 31, 2006 we charged depreciation expense $1.6 million for property and equipment no
longer in use.



24



---

##### Table of Contents

Other operating expense decreased 4.1 percent on a cost per ASM basis. The decrease is attributable in large part
to the favorable $3.2 million impact of claim settlements with vendors recognized during the year ended December 31, 2006.

Nonoperating (Income)
Expense

Other (income) expense, net increased by $5.7 million. Higher invested cash balances along with higher interest rates increased interest
income by $9.9 million. Interest expense, including amortization of debt issuance costs, increased by $20.1 million primarily due to the effect of aircraft debt financings entered into during 2005 and 2006. Capitalized interest increased by $4.4
million due to increased deposits on future aircraft deliveries. Capitalized interest represents the interest cost to finance purchase deposits for future aircraft. These amounts are classified as part of the cost of the aircraft upon delivery.

Income Tax Expense

Our effective income tax rate was
40.3 percent and 38.1 percent for the years ended December 31, 2006 and 2005, respectively. Our tax expense for 2005 includes a one-time benefit of $1.7 million resulting from an adjustment to our deferred tax liabilities due to a decrease in
our state effective rate. The overall rate increase resulted primarily from a combination of the $1.7 million 2005 benefit and 2006 permanent differences related to stock based compensation.

2005 Compared to 2004

Summary

We reported operating income of $22.6 million, net income of $7.5 million and diluted earnings per common share of $0.08 for the year ended December 31, 2005. For
the comparative period in 2004, we reported operating income of $29.1 million, net income of $9.8 million, and diluted earnings per common share of $0.11. The 2004 results included $1.3 million in other income (expense), primarily related to payment
of a break-up fee paid to us in connection with our unsuccessful bid for certain leased gates and other assets of another airline at Chicagos Midway airport and $1.5 million of additional operating expense relating to correction of fuel
expense for prior periods. The fuel adjustment was deemed to not be material to the previously issued financial statements and the cumulative adjustment was not material to our 2004 operating results.

Operating Revenues

Our operating revenues for the year ended
December 31, 2005 increased $408.7 million (39.3 percent), primarily due to a 39.0 percent increase in passenger revenues. The increase in passenger revenues was largely due to a 33.3 percent increase in passenger traffic, as measured by RPMs,
and an increase in our average yield per RPM of 4.3 percent to 12.36 cents. The increase in yield resulted primarily from a 10.0 percent increase in our average fare to $83.93. This increase in yield, when combined with our 2.7 percentage point
increase in passenger load factor, resulted in an 8.3 percent increase in passenger unit revenues or RASM to 9.09 cents.

During the year ended
December 31, 2005, we took delivery of six B717 aircraft and 12 B737 aircraft. As a result, our capacity, as measured by ASMs, increased 28.3 percent. Our traffic, as measured by RPMs, increased 33.3 percent, resulting in a 2.7 percentage point
increase in passenger load factor to 73.5 percent.

Operating Expenses

Our operating expenses for the year ended December 31, 2005 increased $415.1 million (41.0 percent) or 9.8 percent on a cost per ASM basis. Our financial results were significantly affected by changes in the
price of fuel. During 2005 we experienced high aircraft fuel prices driven by sharp increases in the cost of crude oil and disruptions to the Gulf Coast refineries as a result of hurricanes.

In general, our operating expenses are significantly affected by changes in our capacity, as measured by ASMs. The following table presents our unit costs, defined as
operating expenses per ASM, for the indicated periods:



|                                         |  |                         |   |  |                             |   |  |       |  
|---------------------------------------- |  | ----------------------- | - |  | --------------------------- | - |  | ----- | -
|                                         |  | Year ended December 31, |   |  | Percent Increase (Decrease) |  
|                                         |  | 2005                    |   |  | 2004                        |   | 
|Aircraft fuel                            |  | 3.01                    | ¢ |  | 2.10                        | ¢ |  | 43.3  | %
|Salaries, wages and benefits             |  | 2.14                    |   |  | 2.28                        |   |  | (6.1  | )
|Aircraft rent                            |  | 1.25                    |   |  | 1.26                        |   |  | (0.8  | )
|Maintenance, materials and repairs       |  | 0.66                    |   |  | 0.58                        |   |  | 13.8  |  
|Landing fees and other rents             |  | 0.53                    |   |  | 0.52                        |   |  | 1.9   |  
|Distribution                             |  | 0.44                    |   |  | 0.42                        |   |  | 4.8   |  
|Marketing and advertising                |  | 0.24                    |   |  | 0.23                        |   |  | 4.3   |  
|Aircraft insurance and security services |  | 0.15                    |   |  | 0.19                        |   |  | (21.1 | )
|Depreciation                             |  | 0.13                    |   |  | 0.12                        |   |  | 8.3   |  
|Other operating                          |  | 0.73                    |   |  | 0.75                        |   |  | (2.7  | )
|                                         |  |                         |   |  |                             |   |  |       |  
|Total CASM                               |  | 9.28                    | ¢ |  | 8.45                        | ¢ |  | 9.8   | %
|                                         |  |                         |   |  |                             |   |  |       |  



25



---

##### Table of Contents

Aircraft fuel increased 43.3 percent on a cost per ASM basis, primarily due to escalating fuel prices. Our fuel
price per gallon, including all fees and taxes, increased 48.3 percent from $1.22 for the year ended December 31, 2004 to $1.81 for year ended December 31, 2005. The level of our flight operations, as measured by block hours flown,
increased 23.3 percent while our fuel consumption per block hour increased slightly 0.6 percent to 667 gallons.

Salaries, wages and benefits
decreased 6.1 percent on a cost per ASM basis, primarily due to gains in productivity driven by the increased number of aircraft and higher daily utilization. We employed approximately 6,700 full-time equivalent employees, as of December 31,
2005, representing a 13.5 percent increase over the comparative period in 2004.

Maintenance, materials and repairs increased 13.8 percent on a cost
per ASM basis. On a cost per block hour basis, maintenance materials and repairs expense increased 18.8 percent to $266 per block hour due to the expiration of warranties on the B717 aircraft and an increase in airframe checks. As the original
manufacturer warranties expire on our B717 and B737 aircraft, the maintenance, repair and overhaul of aircraft engines and a significant number of aircraft systems become covered by maintenance agreements with FAA-approved contractors.

Aircraft insurance and security services decreased 21.1 percent on a cost per ASM basis. While the addition of 18 new Boeing aircraft to our fleet during the
year ended December 31, 2005 increased our total insured hull value and related insurance premiums, the decrease on a cost per ASM basis is primarily due to a reduction in hull and liability insurance rates and security costs for our 2005 fleet
coverage.

Depreciation increased 8.3 percent on a cost per ASM basis, primarily due to the addition of three owned B737 for the year ended
December 31, 2005 as well as, the purchase of spare aircraft parts for the new B737 fleet. With the exception of these three B737s, all aircraft additions during the year were lease financed rather than purchased.

Nonoperating (Income) Expense

Other (income) expense, net
decreased by $2.4 million (18.4 percent). Increases in rates earned on cash and higher investment balances increased interest income by $6.5 million. Interest expense, including amortization of debt issuance costs, increased by $6.4 million
primarily due to the issuance of new debt relating to new aircraft financing during the year ended December 31, 2005. Capitalized interest represents the interest cost associated with financing deposits for future aircraft deliveries.
Capitalized interest increased $3.6 million due to an increase in outstanding deposits for future aircraft deliveries in 2005 compared to 2004. Additionally $1.3 million of other income is included in our 2004 results relating a break-up fee paid to
us in connections with our unsuccessful bid for certain leased gates and other assets of another airline at Chicagos Midway airport.

Income Tax
Expense

Our effective income tax rate was 38.1 percent and 39.5 percent for the years ended December 31, 2005 and 2004, respectively. Our tax
expense for the year ended December 31, 2005 includes a one-time benefit of $1.7 million resulting from an adjustment to our deferred tax liabilities for a decrease in our state effective rate.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2006 we had
total cash, cash equivalents and short term investments of $310.2 million, which is a decrease of $60.4 million compared to December 31, 2005. Short-term investments represent auction rate securities with reset periods less than 12 months. As
of December 31, 2006 we also had $24.8 million of restricted cash. Our primary sources of cash are from operating activities and primary uses of cash are for investing and financing activities.



26



---

##### Table of Contents

Operating activities in 2006 provided $75.1 million of cash flow compared to $64.6 million in 2005. Cash flow from
operating activities is related to both the level of our profitability and to changes in working capital and other assets and liabilities. Operating cash inflows are largely attributable to revenues derived from the transportation of passengers.
Operating cash outflows are largely attributable to recurring expenditures for fuel, labor, aircraft rent, aircraft maintenance, marketing and other activities. For the year ended December 31, 2006, we reported net income of $14.7 million,
which was $7.2 million greater than net income for the year ended December 31, 2005. The increased net income favorably impacted cash provided by operating activities.

Changes in the components of our working capital also impact cash flow from operating activities. Changes in the air traffic liability balance and the related accounts receivable balance have had a significant impact
on our net cash flow from operating activities. We have a liability to provide future air travel because travelers tend to purchase air transportation in advance of their intended travel date. Advanced ticket sales, which are recorded in air traffic
liability, provide cash as the Company grows and consequently receives additional cash for future travel. During 2006, our air traffic liability balance increased $29 million more than the related accounts receivable balance increased contributing
to net cash provided by operating activities. During 2005, our air traffic liability balance increased $24 million more than the related accounts receivable balance increased, contributing to net cash flow from operating activities. Changes in
accounts payable, accrued and other current and non-current liabilities also have had a significant impact on our cash flow from operating activities. During 2006, the $31.6 million increase in accounts payable and accrued and other liabilities
contributed favorably to net cash provided by operating activities. Accounts payable and accrued and other liabilities increased in 2006 due to increases in accrued employee wages and benefits, accrued B737 aircraft rent, accrued interest,
liabilities to governmental authorities for taxes and fees that we collected on their behalf and various other liabilities. During 2005, the $50.5 million increase in accounts payable and accrued and other liabilities contributed favorably to net
cash provided by operating activities.

We used cash to increase other assets. Other assets include aircraft maintenance and other deposits, prepaid
insurance and prepaid distribution costs. Our B737 aircraft leases require us to remit aircraft maintenance deposits monthly to the lessor based on actual flight hours and landings. The balances of such aircraft maintenance deposits are available to
reimburse us for certain costs of maintaining airframes, engines and certain other component parts. These payments are accounted for as deposits and the aggregate amount of such deposits is included in other assets. During 2006 and 2005, the balance
of all aircraft maintenance deposits increased by $21.0 million and $11.1 million, respectively, reducing our cash flow provided by operating activities in each of those years.

Investing activities in 2006 used $251.5 million in cash compared to the $80.2 million used in 2005. Purchases and sales of available for sales securities are classified as investing activities. During 2006
purchases of available for sale securities exceeded sales of available for sale securities by $151.0 million. During 2005 sales of available for sale securities exceeded purchases of available for sale securities by $26.9 million. Investing
activities also include expenditures for aircraft deposits and the purchase of aircraft and other property and equipment.

Aircraft purchase contracts
typically require that the purchaser make pre-delivery deposits to the manufacturer. These deposits are refunded at the time of aircraft delivery. We may invest a portion or all of this deposit in the aircraft. During 2006, we received $102.8
million in previously paid aircraft deposits while paying $89.2 million in new aircraft deposits. During 2005, we received $29.8 million in previously paid aircraft deposits while paying $93.5 million in new aircraft deposits. During 2006, we
purchased 13 B737 aircraft. We expended $68.6 million in cash and incurred $380.6 million of debt related to acquiring aircraft. During 2005, we purchased three B737 aircraft. We expended in cash $11.7 million in cash and incurred $86.5 million of
debt related to the acquisition of these aircraft.

During 2006, we expended $50.6 million in cash for the acquisition of other property and equipment.
Acquisitions of other property and equipment included purchases of rotable spare parts, additions to leasehold improvements and the purchase of ground and computer equipment. During 2005 we expended $23.7 million in cash for the acquisition of other
property and equipment.

Financing activities used $35.1 million of cash during 2006 compared to providing cash of $78.6 million in 2005. During
2006, we received cash from the issuance of debt financing for aircraft pre-delivery deposits of $71.0 million and repaid $87.8 million of pre-delivery deposit debt financing. During 2006, we repaid $24.5 million of aircraft purchase debt financing.
Also, during 2006, we borrowed $380.6 million in non-cash transactions to finance the purchase of 13 B737 aircraft. During 2005, we received cash from the issuance of debt financing for aircraft pre-delivery deposits of $96.7 million and repaid $9.7
million of pre-delivery deposit debt financing. During 2005, we received $86.5 million aircraft purchase debt financing while repaying $14.1 million of aircraft purchase debt financing. See Note 5 to Consolidated Financial Statements for additional
information regarding our outstanding debt.

During 2006 and 2005 we received $7.5 million and $11.1 million, respectively, from the exercise of employee
options for the



27



---

##### Table of Contents

purchase of common stock. On April 6, 2006, 55,468 warrants were exercised for the purchase of our common stock.
Each warrant entitled the purchaser to 18.0289 shares of common stock for a total of 1,000,024 shares at $4.51 per share. Total cash proceeds from aforementioned transaction amounted to approximately $4.5 million.

Proposed Acquisition of Midwest Air Group

On January 11, 2007,
we commenced an exchange offer for all of the outstanding shares of Midwest Air Group (Midwest), for $13.25 per Midwest share, based on the closing price of our common stock on January 8, 2007. The offer consists of $6.625 in cash and 0.5884
share of AirTran common stock for each Midwest share. Accordingly, total equity value of the exchange offer is approximately $345 million. The offer, which is being made through a wholly-owned subsidiary of the Company, has been extended and is
scheduled to expire on March 8, 2007. The exchange offer is subject to specified and customary conditions. On January 25, 2007, the board of directors of Midwest announced that it had recommended that Midwests shareholders reject our
offer to acquire all outstanding shares of Midwest and not tender their shares to us. Because we believe a combination of the two airlines would strengthen both airlines we are continuing to pursue the acquisition of Midwest. We have filed a
registration statement (Form S-4 No. 333-139917) with the Securities and Exchange Commission which contains additional information regarding the exchange offer and the benefits and risks related to the proposed acquisition.

We anticipate funding the cash portion of the purchase price with the proceeds from $150 million in senior secured financing under a proposed credit facility. It is
expected that this floating rate term loan facility would be payable in equal quarterly installments, aggregating 1% of the original principal balance in each of years one through four and the remainder of the principal balance paid at the end of
year five. Certain of the terms of the proposed credit facility have not been finalized.

Aircraft Acquisitions and Aircraft Purchase Commitments

During 2006, we took delivery of two B717 and 20 B737 aircraft of which the two B717 and seven B737 were held under operating leases. The additional 13
B737 aircraft deliveries in 2006 were purchased and financed with debt. During 2005, we took delivery of six B717 and 12 B737 aircraft of which six B717 and nine B737 aircraft were held under operating leases. The additional three B737 aircraft
deliveries in 2005 were financed with debt.

As of December 31, 2006, we had 60 Boeing 737 aircraft on order scheduled to be delivered in the year
indicated below:



|      |  |                              
|----- |  | -----------------------------
|      |  | Firm Aircraft Deliveries B737
|2007  |  | 12                           
|2008  |  | 15                           
|2009  |  | 18                           
|2010  |  | 14                           
|2011  |  | 1                            
|      |  |                              
|Total |  | 60                           
|      |  |                              

The above table includes two B737 aircraft scheduled for delivery in the second quarter 2007 which we have agreed
to sell to an airline which operates outside of the United States.

Aircraft purchase contracts typically require the purchaser to make pre-delivery
deposits to the manufacturer. We have arranged pre-delivery deposit financing for all of our pre-delivery deposit requirements for aircraft scheduled to be delivered in 2007 and 2008. The pre-delivery deposit financing typically funds between 75
percent and 100 percent of our pre-delivery deposit obligation for any given aircraft. We expect to arrange pre-delivery deposit financing for the remainder of our scheduled aircraft deliveries.

Of the 60 B737 aircraft we have on order, we have secured debt financing for ten B737 aircraft scheduled for delivery in 2007 and for five of the aircraft which are
scheduled to be delivered in 2008. Such debt financing funds approximately 85 percent of the total cost of the aircraft. While our intention is to finance the remainder of the aircraft on order via a combination of debt and lease financings, we have
not yet arranged for such financing. Additionally, we have sale/leaseback commitments from an aircraft leasing company with respect to six spare engines to be delivered through 2010. During 2006, we entered into a sales/leaseback agreement related
to one of these spare engines.



28



---

##### Table of Contents

Letters of Credit

As
of December 31, 2006, $13.5 million of restricted cash on the accompanying consolidated balance sheet relates to outstanding letters of credit, primarily for airport facilities.

Other Year 2007 Cash Requirements

During 2007, in addition to funding the committed aircraft acquisitions discussed
above, we will need cash for non-aircraft capital expenditures and debt maturities. Non-aircraft capital expenditures are projected to be approximately $35 million. Scheduled 2007 debt and capital lease maturities aggregate $86.8 million. It is
anticipated that non-aircraft capital expenditures and 2007 debt and capital lease maturities will be funded with cash flow from operations, other financings, and the use of existing cash resources.

Other Sources of Liquidity

We have various options available to meet
our debt repayments, capital expenditures and operating commitments including internally generated funds and various borrowing or leasing options. Additionally, we have an outstanding shelf registration which it may utilize to raise funds for
aircraft financings or other purposes in the future. However, we have no unused lines of credit available and our owned aircraft and our pre-delivery deposits are pledged as collateral for outstanding debt. There can be no assurance that financing
will be available for all B737 aircraft deliveries or for other capital expenditures not covered by firm financing commitments. Should fuel prices remain high and if we are unable to generate revenues to cover our costs, we may slow our growth,
including through the rescheduling of aircraft deliveries or through the sale, lease or sublease of some of our aircraft.

Income Taxes

We have not been required to pay significant federal or state income taxes during the prior three years because we have had a loss for federal income tax purposes in
each of those years, largely because tax basis depreciation has exceeded depreciation expense calculated for financial accounting purposes.

Our
December 31, 2006 consolidated balance sheet includes gross deferred tax assets of $165.8 million and gross deferred tax liabilities of $149.2 million. The deferred tax assets include $107.1 million pertaining to the tax effect of $318.8
million of federal net operating losses (NOLs) previously recognized as a tax benefit for financial reporting purposes. In addition, deferred tax assets include $5.3 million attributable to state NOLs of approximately $134.6 million. Such NOLs,
which expire in the years 2017 to 2026, are available to be carried forward to offset future taxable income and thereby reduce future income tax payments. Included in the NOLs for the year ending December 31, 2006 is $11.4
million related to deductions from equity based compensation.

Section 382 of the Internal Revenue Code (Section 382) imposes
limitations on a corporations ability to utilize NOLs if it experiences an ownership change. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a
corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of our NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of our stock at
the time of the ownership change by the applicable long-term tax exempt rate. Any unused NOLs in excess of the annual limitation may be carried over to later years. As of December 31, 2006, we were not subject to the limitations under
Section 382. Under current conditions, if an ownership change were to occur, our annual NOL utilization would be limited to approximately $48 million per year.

Our deferred income tax liability is in large part due to the excess of the financial statement carrying value of owned flight equipment and other assets over the tax bases of such assets. Consequently, future tax
basis depreciation will tend to be lower than financial accounting depreciation for these assets. Accordingly, management has determined that it is more likely than not that the deferred tax assets will be realized through the reversal of existing
deferred tax liabilities and future taxable income.

Contractual Obligations

Our contractual obligations of December 31, 2006 are estimated to be due as follows (in millions):

Nature of
commitment



|                                  |  |       |         |      |   |           |  |           |         |            |   |         |  |   |        
|--------------------------------- |  | ----- | ------- | ---- | - | --------- |  | --------- | ------- | ---------- | - | ------- |  | - | -------
|                                  |  | Total |         | 2007 |   | 2008-2009 |  | 2010-2011 |         | Thereafter
|Long-term debt (1)                |  | $     | 1,269.3 |      | $ | 143.8     |  | $         | 203.4   |            | $ | 167.7   |  | $ | 754.4  
|Operating lease obligations (2)   |  |       | 3,547.1 |      |   | 285.6     |  |           | 538.1   |            |   | 499.4   |  |   | 2,224.0
|Capital lease obligations         |  |       | 23.1    |      |   | 2.7       |  |           | 5.7     |            |   | 6.3     |  |   | 8.4    
|Aircraft purchase commitments (3) |  |       | 2,072.9 |      |   | 457.7     |  |           | 1,143.9 |            |   | 471.3   |  |   |       
|Other (4)                         |  |       | 131.7   |      |   | 128.7     |  |           | 3.0     |            |   |        |  |   |       
|                                  |  |       |         |      |   |           |  |           |         |            |   |         |  |   |        
|Total contractual obligations     |  | $     | 7,044.1 |      | $ | 1,018.5   |  | $         | 1,894.1 |            | $ | 1,144.7 |  | $ | 2,986.8
|                                  |  |       |         |      |   |           |  |           |         |            |   |         |  |   |        

---

|(1) | Includes related interest payments, forecasted at the current interest rates, on the aforementioned debt of approximately $472.0 million. Debt agreements generally carry terms of
twelve years and are repaid either quarterly or semiannually.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts include minimum operating leases obligations for aircraft, airport facilities and other leased property. Amounts exclude contingent rentals and aircraft maintenance deposit
payments based on flight hours or landings. Lease agreements are generally for fifteen years on aircraft obligations.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Amounts include payment commitments, including payment of pre-delivery deposits, for aircraft on firm order. Payment commitments include the forecasted impact of contractual price
escalations. As noted under Aircraft Acquisitions and Aircraft Purchase Commitments, we have arranged pre-delivery deposit financing for 2007 and 2008 deliveries and have also arranged debt financing for ten aircraft to be delivered in 2007 and for
five aircraft to be delivered in 2008. The above table does not reflect the effects of such financings.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Amounts include fuel purchase commitments, our sponsorship of the Georgia Aquarium and other contractual commitments. The table does not include payments to be made to third party
aircraft maintenance contractors pursuant to agreements whereby we pay such contractors based on aircraft flight hours or landings. The table does not include liabilities to vendors, employees and others classified as current liabilities on our
December 31, 2006 consolidated balance sheet.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



29



---

##### Table of Contents

A variety of assumptions are necessary in order to derive the information with respect to contractual commitments
described in the above table, including, but not limited to, the timing of the aircraft delivery dates. Our actual obligations may differ from these estimates under different assumptions or conditions.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is
any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under
derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in
leasing, hedging or research and development arrangements with the company.

We have no arrangements of the types described in the first three categories
that we believe may have a material current or future affect on our financial condition, liquidity or results of operations. Certain guarantees that we do not expect to have a material current or future effect on our financial condition, liquidity
or resulted operations are disclosed in Note 2 to our consolidated financial statements.

We have variable interests in many of our aircraft leases. The
lessors are trusts established specifically to purchase, finance and lease aircraft to us. These leasing entities meet the criteria of variable interest entities, as defined by Financial Accounting Standards Board (FASB) Interpretation 46,Consolidation of Variable Interest Entities. We are generally not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, a
fixed-price purchase option or similar feature that obligates us to absorb decreases in value or entitles us to participate in increases in the value of the aircraft. This is the case in the majority of our aircraft leases; however, we have two
aircraft leases that contain fixed-price purchase options that allow us to purchase the aircraft at predetermined prices on specified dates during the lease term. We have not consolidated the related trusts because even taking into consideration
these purchase options, we are not the primary beneficiary based on our cash flow analysis.

Critical Accounting Policies and Estimates

General. The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and



30



---

##### Table of Contents

liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our
financial statements. Our actual results may differ from these estimates under different assumptions or conditions. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and are
sufficiently sensitive to result in materially different results under different assumptions and conditions. The following is a description of what we believe to be our most critical accounting policies and estimates. See Notes to the Consolidated
Financial Statements for a description of our financial accounting policies.

Revenue Recognition. Passenger revenue is recognized when
transportation is provided. Ticket sales for transportation which has not yet been provided are recorded as air traffic liability. Air traffic liability represents tickets sold for future travel dates. The balance of the air traffic liability
fluctuates throughout the year based on seasonal travel patterns and fare sale activity. Passenger revenue accounting is inherently complex and the measurement of the air traffic liability is subject to some uncertainty.

A nonrefundable ticket expires at the date of scheduled travel unless the customer exchanges the ticket in advance of such date for a credit to be used by the customer
as a form of payment for another ticket. We recognize as revenue the value of a non-refundable ticket at the date of scheduled travel unless the customer exchanges his or her ticket for credit. A percent of credits expire unused. We recognize as
revenue over time the value of credits that we expect to go unused. We estimate the amount of credits that we expect to go unused based on historical experience. Estimating the amount of credits that will go unused involves some level of
subjectivity and judgment. Changes in our estimate of the amount of unused credits could have an effect on our revenues. Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic
commissions and related fees not yet recognized are included as a prepaid expense.

Frequent Flyer Program. We accrue a liability for the estimated
incremental cost of providing free travel for awards earned under our A+ Rewards Program based on awards we expect to be redeemed. We adjust this liability based on points earned and redeemed as well as for changes in the estimated incremental
costs.

We also sell points in our A+ Rewards Program to third parties, such as credit card companies, internet service providers and car rental agencies.
A portion of these point sales is deferred and recognized as passenger revenue when transportation is provided. The remaining portion, which is the excess of the total sales proceeds over the estimated fair value of the transportation to be
provided, is recognized in other revenue at the time of sale.

Accounting for Long-Lived Assets. When appropriate, we evaluate our long-lived assets
in accordance with Statement of Financial Accounting Standards 144,Accounting for the Impairment or Disposal of Long-Lived Assets. We record impairment losses on long-lived assets used in operations when events or circumstances indicate that
the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the net book value of those assets. In making these determinations, we utilize certain assumptions, including, but not limited to:
(i) estimated fair market value of the assets; and (ii) estimated future cash flows expected to be generated by such assets, which are based on additional assumptions such as asset utilization, length of time the asset will be used in our
operations, and estimated salvage values.

In accounting for long-lived assets we must estimate the useful lives and salvage values of the assets. The
actual useful lives and salvage values could be different from the estimates. Generally changes in estimated lives and salvage values are accounted for by adjusting depreciation and amortization expense prospectively.



31



---

##### Table of Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk-Sensitive Instruments and Positions

We are subject to certain market risks, including interest rates and commodity prices (i.e., aircraft fuel). The adverse effects of changes in these
markets pose a potential loss as discussed below. The sensitivity analyses do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to
such changes. Actual results may differ. See the Notes to the Consolidated Financial Statements for a description of our financial accounting policies and additional information.

Interest Rates

We had approximately $498.9 million and $225.9 million of variable-rate debt as of December 31,
2006 and December 31, 2005, respectively. We have mitigated our exposure on certain variable-rate debt by entering into interest rate swap agreements. These swaps expire in May 2018, June 2018, and July 2018. The notional amount of the
outstanding interest rate swaps at December 31, 2006 was $85.2 million. The interest rate swaps effectively resulted in us paying a fixed rate of interest on a portion of our floating rate debt securities through the expiration of the swaps. If
average interest rates increased by 100 basis points during 2007 as compared to 2006, our projected 2007 interest expense would increase by approximately $4.4 million.

As of December 31, 2006 and 2005, the fair value of our long-term debt was estimated to be $857.9 million and $536.6 million, respectively, based upon discounted future cash flows using current incremental
borrowing rates for similar types of instruments or market prices. Market risk on our fixed rate debt, estimated as the potential increase in fair value resulting from a hypothetical 100 basis point decrease in interest rates, was approximately
$13.4 million as of December 31, 2006, and approximately $9.4 million as of December 31, 2005.

Aviation Fuel

Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel expense, including related taxes and
fees, for the years ended 2006 and 2005 represented approximately 36.5 percent and 32.4 percent of our operating expenses, respectively. Increases in fuel prices or a shortage of supply could have a material effect on our operations and operating
results. For 2007, if jet fuel increased $1 per barrel, AirTrans fuel expense, net of fuel contract arrangements, would increase approximately $9.3 million based on current and projected operations. As of December 31, 2006, utilizing
forward fuel purchase contracts, we had committed to purchase 62.1 million gallons of aviation fuel at a weighted average price per gallon, excluding taxes and related fees, of $1.77 for 2007. This represents 16.2 percent of our anticipated
fuel needs for 2007, including delivery to our operations hub in Atlanta and other locations. As of February 14, 2007, the Company entered into additional advanced fuel purchase contracts for 23.0 million gallons of aviation fuel.
Combined, these contracts represent 23.2 percent of our anticipated fuel needs for 2007, including delivery into our operations hub in Atlanta and other locations at a weighted average price per gallon, excluding fees and taxes, of $1.75.
Additionally, through February 14, 2007, we entered into jet fuel swap contracts to hedge an additional 36.1 million gallons, or 9.8 percent of our 2007 projected fuel usage.



32



---

##### Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Supplementary Data



|                                                                                               |  |     
|---------------------------------------------------------------------------------------------- |  | ----
|                                                                                               |  | Page
|AirTran Holdings, Inc.                                                                         |  |     
|Report of Independent Registered Public Accounting Firm                                        |  | 34  
|Consolidated Statements of Operations- Years ended December 31, 2006, 2005, and 2004           |  | 35  
|Consolidated Balance Sheets- December 31, 2006 and 2005                                        |  | 36  
|Consolidated Statements of Cash Flows- Years ended December 31, 2006, 2005, and 2004           |  | 38  
|Consolidated Statements of Stockholders Equity- Years ended December 31, 2006, 2005, and 2004 |  | 39  
|Notes to Consolidated Financial Statements                                                     |  | 40  

The following consolidated financial statement schedule is included in Item 15(d):

Schedule II(a) - Valuation and Qualifying Accounts - AirTran Holdings, Inc.

All other schedules, for which provision is made in
the applicable accounting regulations of the Securities and Exchange Commission, are not required under the related instructions or are inapplicable and therefore have been omitted.



33



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of AirTran Holdings, Inc.

We have audited the accompanying consolidated balance sheets of AirTran Holdings, Inc. (the Company) as of December 31, 2006 and 2005,
and the related consolidated statements of operations, cash flows, and stockholders equity for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at
December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1, the consolidated financial statements have been restated to correct the accounting for passenger revenue.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Companys internal
control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 27, 2007, except for the effects of the material weakness described in the sixth paragraph of that report, as to which the date is August 9, 2007, expressed an unqualified opinion on managements assessment of the
effectiveness of internal control over financial reporting and an adverse opinion on the effectiveness of internal control over financial reporting.

/s/ Ernst & Young LLP



|                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------
|Atlanta, Georgia                                                                                                      
|February 27, 2007, except for the effects ofthe restatement described in Note 1,as to which the date is August 9,
2007



34



---

##### Table of Contents

AirTran Holdings, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Restated)



|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|---------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                         |  | Year ended December 31, |          
|                                         |  | 2006                    |           |   | 2005 |   |           | 2004 | 
|Operating Revenues:                      |  |                         |           |   |      |   |           |      |  |   |           |  
|Passenger                                |  | $                       | 1,814,907 |   |      | $ | 1,396,451 |      |  | $ | 1,004,835 |  
|Other                                    |  |                         | 73,315    |   |      |   | 48,886    |      |  |   | 36,086    |  
|Cargo                                    |  |                         | 3,861     |   |      |   | 4,363     |      |  |   | 73        |  
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Total operating revenues                 |  | $                       | 1,892,083 |   |      |   | 1,449,700 |      |  |   | 1,040,994 |  
|Operating Expenses:                      |  |                         |           |   |      |   |           |      |  |   |           |  
|Aircraft fuel                            |  |                         | 675,336   |   |      |   | 462,672   |      |  |   | 251,323   |  
|Salaries, wages and benefits             |  |                         | 390,348   |   |      |   | 329,299   |      |  |   | 273,514   |  
|Aircraft rent                            |  |                         | 230,699   |   |      |   | 192,394   |      |  |   | 150,959   |  
|Maintenance, materials and repairs       |  |                         | 149,448   |   |      |   | 101,964   |      |  |   | 69,514    |  
|Landing fees and other rents             |  |                         | 100,761   |   |      |   | 80,774    |      |  |   | 62,322    |  
|Distribution                             |  |                         | 69,888    |   |      |   | 67,395    |      |  |   | 50,890    |  
|Marketing and advertising                |  |                         | 44,792    |   |      |   | 36,400    |      |  |   | 27,569    |  
|Aircraft insurance and security services |  |                         | 25,678    |   |      |   | 23,100    |      |  |   | 22,888    |  
|Depreciation and amortization            |  |                         | 30,078    |   |      |   | 20,224    |      |  |   | 14,628    |  
|Other operating                          |  |                         | 134,194   |   |      |   | 112,832   |      |  |   | 88,314    |  
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Total operating expenses                 |  |                         | 1,851,222 |   |      |   | 1,427,054 |      |  |   | 1,011,921 |  
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Operating Income                         |  |                         | 40,861    |   |      |   | 22,646    |      |  |   | 29,073    |  
|Other (Income) Expense:                  |  |                         |           |   |      |   |           |      |  |   |           |  
|Interest income                          |  |                         | (21,714   | ) |      |   | (11,771   | )    |  |   | (5,275    | )
|Interest expense                         |  |                         | 50,861    |   |      |   | 30,787    |      |  |   | 24,350    |  
|Capitalized interest                     |  |                         | (12,943   | ) |      |   | (8,550    | )    |  |   | (4,922    | )
|Other                                    |  |                         |          |   |      |   |          |      |  |   | (1,332    | )
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Other (income) expense, net              |  |                         | 16,204    |   |      |   | 10,466    |      |  |   | 12,821    |  
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Income Before Income Taxes               |  |                         | 24,657    |   |      |   | 12,180    |      |  |   | 16,252    |  
|Income tax expense                       |  |                         | 9,943     |   |      |   | 4,635     |      |  |   | 6,418     |  
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Net Income                               |  | $                       | 14,714    |   |      | $ | 7,545     |      |  | $ | 9,834     |  
|                                         |  |                         |           |   |      |   |           |      |  |   |           |  
|Earnings Per Common Share:               |  |                         |           |   |      |   |           |      |  |   |           |  
|Basic                                    |  | $                       | 0.16      |   |      | $ | 0.09      |      |  | $ | 0.12      |  
|Diluted                                  |  | $                       | 0.16      |   |      | $ | 0.08      |      |  | $ | 0.11      |  
|Weighted-Average Shares Outstanding:     |  |                         |           |   |      |   |           |      |  |   |           |  
|Basic                                    |  |                         | 90,504    |   |      |   | 87,337    |      |  |   | 85,261    |  
|Diluted                                  |  |                         | 92,436    |   |      |   | 90,185    |      |  |   | 89,523    |  

See accompanying notes to consolidated financial statements.



35



---

##### Table of Contents

AirTran Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

(Restated)



|                                                                                                                           |  |              |           |   |      |   |           |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                                                                                                           |  | December 31, |          
|                                                                                                                           |  | 2006         |           |   | 2005 |  
|ASSETS                                                                                                                     |  |              |           |   |      |   |           |  
|Current Assets:                                                                                                            |  |              |           |   |      |   |           |  
|Cash and cash equivalents                                                                                                  |  | $            | 159,100   |   |      | $ | 370,572   |  
|Restricted cash                                                                                                            |  |              | 24,815    |   |      |   | 19,443    |  
|Short-term investments                                                                                                     |  |              | 151,100   |   |      |   | 75        |  
|Accounts receivable, less allowance of $1,180 and $494 at December 31, 2006 and 2005, respectively                         |  |              | 38,613    |   |      |   | 29,795    |  
|Spare parts and supplies, less allowance for obsolescence of $1,749 and $1,292 at December 31, 2006 and 2005,
respectively |  |              | 17,236    |   |      |   | 14,610    |  
|Deferred income taxes                                                                                                      |  |              | 8,854     |   |      |   | 7,204     |  
|Prepaid expenses and other current assets                                                                                  |  |              | 17,239    |   |      |   | 18,150    |  
|                                                                                                                           |  |              |           |   |      |   |           |  
|Total current assets                                                                                                       |  |              | 416,957   |   |      |   | 459,849   |  
|Property and Equipment:                                                                                                    |  |              |           |   |      |   |           |  
|Flight equipment                                                                                                           |  |              | 896,204   |   |      |   | 418,319   |  
|Less: Accumulated depreciation                                                                                             |  |              | (60,921   | ) |      |   | (43,676   | )
|                                                                                                                           |  |              |           |   |      |   |           |  
|                                                                                                                           |  |              | 835,283   |   |      |   | 374,643   |  
|Purchase deposits for flight equipment                                                                                     |  |              | 119,895   |   |      |   | 133,530   |  
|Other property and equipment                                                                                               |  |              | 102,748   |   |      |   | 92,269    |  
|Less: Accumulated depreciation                                                                                             |  |              | (42,697   | ) |      |   | (39,158   | )
|                                                                                                                           |  |              |           |   |      |   |           |  
|                                                                                                                           |  |              | 60,051    |   |      |   | 53,111    |  
|                                                                                                                           |  |              |           |   |      |   |           |  
|Total property and equipment                                                                                               |  |              | 1,015,229 |   |      |   | 561,284   |  
|Other Assets:                                                                                                              |  |              |           |   |      |   |           |  
|Goodwill                                                                                                                   |  |              | 8,350     |   |      |   | 8,350     |  
|Trademarks and trade names                                                                                                 |  |              | 21,567    |   |      |   | 21,567    |  
|Debt issuance costs                                                                                                        |  |              | 11,929    |   |      |   | 10,285    |  
|Deferred income taxes                                                                                                      |  |              | 7,772     |   |      |   | 16,268    |  
|Prepaid aircraft rent                                                                                                      |  |              | 70,802    |   |      |   | 57,850    |  
|Other assets                                                                                                               |  |              | 50,976    |   |      |   | 26,090    |  
|                                                                                                                           |  |              |           |   |      |   |           |  
|Total assets                                                                                                               |  | $            | 1,603,582 |   |      | $ | 1,161,543 |  
|                                                                                                                           |  |              |           |   |      |   |           |  

See accompanying notes to consolidated financial statements.



36



---

##### Table of Contents

AirTran Holdings, Inc.

Consolidated Balance Sheets (Continued)

(In thousands, except per share data)

(Restated)



|                                                                                                                                                                      |  |              |           |   |      |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                      |  | December 31, |          
|                                                                                                                                                                      |  | 2006         |           |   | 2005 |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                  |  |              |           |   |      |   |           |  
|Current Liabilities:                                                                                                                                                  |  |              |           |   |      |   |           |  
|Accounts payable                                                                                                                                                      |  | $            | 35,050    |   |      | $ | 38,082    |  
|Accrued and other liabilities                                                                                                                                         |  |              | 127,254   |   |      |   | 99,180    |  
|Air traffic liability                                                                                                                                                 |  |              | 148,938   |   |      |   | 115,157   |  
|Current portion of capital lease obligations                                                                                                                          |  |              | 876       |   |      |   | 717       |  
|Current portion of long-term debt                                                                                                                                     |  |              | 85,969    |   |      |   | 70,515    |  
|                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total current liabilities                                                                                                                                             |  |              | 398,087   |   |      |   | 323,651   |  
|Long-term capital lease obligations                                                                                                                                   |  |              | 12,979    |   |      |   | 13,971    |  
|Long-term debt                                                                                                                                                        |  |              | 711,286   |   |      |   | 387,396   |  
|Other liabilities                                                                                                                                                     |  |              | 101,947   |   |      |   | 83,150    |  
|Commitments and Contingencies                                                                                                                                         |  |              |           |   |      |   |           |  
|Stockholders Equity:                                                                                                                                                 |  |              |           |   |      |   |           |  
|Preferred stock, $.01 par value per share, 5,000 shares authorized, no shares issued or outstanding                                                                   |  |              |          |   |      |   |          |  
|Common stock, $.001 par value per share, 1,000,000 shares authorized, and 91,160 and 88,791 shares issued and outstanding at December 31,
2006 and 2005, respectively |  |              | 91        |   |      |   | 89        |  
|Additional paid-in capital                                                                                                                                            |  |              | 389,043   |   |      |   | 376,627   |  
|Accumulated deficit                                                                                                                                                   |  |              | (4,599    | ) |      |   | (19,313   | )
|Unearned compensation                                                                                                                                                 |  |              |          |   |      |   | (4,028    | )
|Other comprehensive income (loss)                                                                                                                                     |  |              | (5,252    | ) |      |   |          |  
|                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total stockholders equity                                                                                                                                            |  |              | 379,283   |   |      |   | 353,375   |  
|                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total liabilities and stockholders equity                                                                                                                            |  | $            | 1,603,582 |   |      | $ | 1,161,543 |  
|                                                                                                                                                                      |  |              |           |   |      |   |           |  

See accompanying notes to consolidated financial statements.



37



---

##### Table of Contents

AirTran Holdings, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Restated)



|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                  |  | Year ended December 31, |           
|                                                                                  |  | 2006                    |            |   | 2005 |   |          | 2004 | 
|Operating activities:                                                             |  |                         |            |   |      |   |          |      |  |   |         |  
|Net income                                                                        |  | $                       | 14,714     |   |      | $ | 7,545    |      |  | $ | 9,834   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |            |   |      |   |          |      |  |   |         |  
|Depreciation and amortization                                                     |  |                         | 31,700     |   |      |   | 22,160   |      |  |   | 15,982  |  
|Amortization of deferred gains from sales/leaseback of aircraft                   |  |                         | (4,407     | ) |      |   | (4,385   | )    |  |   | (4,385  | )
|Provisions for uncollectible accounts                                             |  |                         | 1,619      |   |      |   | 516      |      |  |   | 709     |  
|Loss on asset disposal                                                            |  |                         | 4,387      |   |      |   | 2,307    |      |  |   | 256     |  
|Deferred income taxes                                                             |  |                         | 9,943      |   |      |   | 4,633    |      |  |   | 6,269   |  
|Stock based compensation                                                          |  |                         | 4,443      |   |      |   | 3,513    |      |  |   | 2,460   |  
|Other                                                                             |  |                         | 133        |   |      |   | 80       |      |  |   | 113     |  
|Changes in certain operating assets and liabilities:                              |  |                         |            |   |      |   |          |      |  |   |         |  
|Restricted cash                                                                   |  |                         | (5,372     | ) |      |   | (11,589  | )    |  |   | 1,944   |  
|Accounts receivable                                                               |  |                         | (10,437    | ) |      |   | (10,935  | )    |  |   | (2,631  | )
|Spare parts, materials and supplies                                               |  |                         | (3,083     | ) |      |   | 10,054   |      |  |   | (6,104  | )
|Prepaid aircraft rent                                                             |  |                         | (12,986    | ) |      |   | (14,433  | )    |  |   | (13,690 | )
|Other assets                                                                      |  |                         | (20,934    | ) |      |   | (22,969  | )    |  |   | (4,741  | )
|Accounts payable, accrued and other liabilities                                   |  |                         | 31,625     |   |      |   | 50,532   |      |  |   | 23,278  |  
|Air traffic liability                                                             |  |                         | 33,781     |   |      |   | 27,586   |      |  |   | 8,825   |  
|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  
|Net cash provided by operating activities                                         |  |                         | 75,126     |   |      |   | 64,615   |      |  |   | 38,119  |  
|Investing activities:                                                             |  |                         |            |   |      |   |          |      |  |   |         |  
|Purchases of property and equipment                                               |  |                         | (119,113   | ) |      |   | (35,359  | )    |  |   | (26,449 | )
|Aircraft purchase deposits payments, net of refunds                               |  |                         | 13,635     |   |      |   | (71,692  | )    |  |   | (19,842 | )
|Deposit on aircraft sale                                                          |  |                         | 5,000      |   |      |   |         |      |  |   |        |  
|Purchases of available-for-sale securities                                        |  |                         | (2,540,215 | ) |      |   | (829,100 | )    |  |   | (26,975 | )
|Sales of available-for-sale-securities                                            |  |                         | 2,389,190  |   |      |   | 856,000  |      |  |   |        |  
|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  
|Net cash used by investing activities                                             |  |                         | (251,503   | ) |      |   | (80,151  | )    |  |   | (73,266 | )
|Financing activities:                                                             |  |                         |            |   |      |   |          |      |  |   |         |  
|Issuance of long-term debt                                                        |  |                         | 71,045     |   |      |   | 96,690   |      |  |   |        |  
|Debt issuance costs                                                               |  |                         | (5,011     | ) |      |   | (4,610   | )    |  |   | (1,163  | )
|Payments on long-term debt                                                        |  |                         | (113,132   | ) |      |   | (24,561  | )    |  |   | (5,879  | )
|Proceeds from exercise of employee stock-options and warrants                     |  |                         | 12,003     |   |      |   | 11,096   |      |  |   | 10,975  |  
|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  
|Net cash provided by (used by) financing activities                               |  |                         | (35,095    | ) |      |   | 78,615   |      |  |   | 3,933   |  
|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                         | (211,472   | ) |      |   | 63,079   |      |  |   | (31,214 | )
|Cash and cash equivalents at beginning of year                                    |  |                         | 370,572    |   |      |   | 307,493  |      |  |   | 338,707 |  
|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  
|Cash and cash equivalents at end of year                                          |  | $                       | 159,100    |   |      | $ | 370,572  |      |  | $ | 307,493 |  
|                                                                                  |  |                         |            |   |      |   |          |      |  |   |         |  

See accompanying notes to consolidated financial statements.



38



---

##### Table of Contents

AirTran Holdings, Inc.

Consolidated Statements of Stockholders Equity

(In thousands)

(Restated)



|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------- |  | ------------ |  | -------------------------- | -- |  | --------------------- | ------- | - | ------------------------------------ | - | ------ | ------------------- |  | - | -------------------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                   |  | Common Stock |  | Additional Paid-in Capital |    |  | Unearned Compensation |         |   | Accumulated Other Comprehensive Loss |   |        | Accumulated Deficit |  |   | Total Stockholders Equity |  
|                                                                                   |  | Shares       |  | Amount                     |    |  |                       |         |  
|Balance at January 1, 2004                                                         |  | 84,209       |  |                            | 84 |  |                       | 337,145 |   |                                      |   |       |                     |  |   | (271                       | ) |  |   | (36,692 | ) |  |   | 300,266 |  
|Net income                                                                         |  |             |  |                            |   |  |                       |        |   |                                      |   |       |                     |  |   |                           |   |  |   | 9,834   |   |  |   | 9.834   |  
|Unrealized gain on derivative instruments                                          |  |             |  |                            |   |  |                       |        |   |                                      |   |       |                     |  |   | 271                        |   |  |   |        |   |  |   | 271     |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|Total comprehensive income                                                         |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   | 10,105  |  
|Issuance of common stock for exercise of options                                   |  | 2,292        |  |                            | 2  |  |                       | 9,717   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 9,719   |  
|Issuance of common stock under stock purchase plan                                 |  | 116          |  |                            | 1  |  |                       | 1,255   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 1,256   |  
|Unearned compensation on common stock issues                                       |  |             |  |                            |   |  |                       | 7,084   |   |                                      |   | (7,084 | )                   |  |   |                           |   |  |   |        |   |  |   |        |  
|Amortization of unearned compensation                                              |  |             |  |                            |   |  |                       |        |   |                                      |   | 2,460  |                     |  |   |                            |   |  |   |        |   |  |   | 2,460   |  
|Tax benefit related to exercise of nonqualified stock options                      |  |             |  |                            |   |  |                       | 5,862   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 5,862   |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2004                                                       |  | 86,617       |  |                            | 87 |  |                       | 361,063 |   |                                      |   | (4,624 | )                   |  |   |                           |   |  |   | (26,858 | ) |  |   | 329,668 |  
|Net income                                                                         |  |             |  |                            |   |  |                       |        |   |                                      |   |       |                     |  |   |                           |   |  |   | 7,545   |   |  |   | 7,545   |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|Total comprehensive income                                                         |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   | 7,545   |  
|Issuance of common stock for exercise of options                                   |  | 1,783        |  |                            | 2  |  |                       | 9,775   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 9,777   |  
|Issuance of common stock under stock purchase plan                                 |  | 145          |  |                            |   |  |                       | 1,320   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 1,320   |  
|Unearned compensation on common stock issues                                       |  | 246          |  |                            |   |  |                       | 2,917   |   |                                      |   | (2,917 | )                   |  |   |                           |   |  |   |        |   |  |   |        |  
|Tax benefit related to exercise of nonqualified stock options and restricted stock |  |             |  |                            |   |  |                       | 1,552   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 1,552   |  
|Amortization of unearned compensation                                              |  |             |  |                            |   |  |                       |        |   |                                      |   | 3,513  |                     |  |   |                           |   |  |   |        |   |  |   | 3,513   |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2005                                                       |  | 88,791       |  | $                          | 89 |  | $                     | 376,627 |   |                                      | $ | (4,028 | )                   |  | $ |                           |   |  | $ | (19,313 | ) |  | $ | 353,375 |  
|Net income                                                                         |  |             |  |                            |   |  |                       |        |   |                                      |   |       |                     |  |   |                           |   |  |   | 14,714  |   |  |   | 14,714  |  
|Unrealized gain on derivative instruments, net of $0 million deferred taxes        |  |             |  |                            |   |  |                       |        |   |                                      |   |       |                     |  |   | 84                         |   |  |   |        |   |  |   | 84      |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|Total comprehensive income                                                         |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   | 14,798  |  
|Adjustment to initially apply SFAS 158, net of $3.1 million deferred taxes         |  |             |  |                            |   |  |                       |        |   |                                      |   |       |                     |  |   | (5,336                     | ) |  |   |        |   |  |   | (5,336  | )
|Issuance of common stock for exercise of options                                   |  | 951          |  |                            | 1  |  |                       | 5,952   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 5,953   |  
|Share-based compensation                                                           |  | 305          |  |                            |   |  |                       | 4,443   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 4,443   |  
|Adjustment upon adoption of SFAS 123(R)                                            |  |             |  |                            |   |  |                       | (4,028  | ) |                                      |   | 4,028  |                     |  |   |                           |   |  |   |        |   |  |   |        |  
|Issuance of common stock for detachable stock warrants                             |  | 1,000        |  |                            | 1  |  |                       | 4,509   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 4,510   |  
|Issuance of common stock under employee stock purchase plan                        |  | 113          |  |                            |   |  |                       | 1,540   |   |                                      |   |       |                     |  |   |                           |   |  |   |        |   |  |   | 1,540   |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2006                                                       |  | 91,160       |  | $                          | 91 |  | $                     | 389,043 |   |                                      | $ |       |                     |  | $ | (5,252                     | ) |  | $ | (4,599  | ) |  | $ | 379,283 |  
|                                                                                   |  |              |  |                            |    |  |                       |         |   |                                      |   |        |                     |  |   |                            |   |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial statements.



39



---

##### Table of Contents

AirTran Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2006

Note 1  Restatement
and Summary of Significant Accounting Policies

Restatement

We have restated our consolidated financial statements and other financial information contained in our Annual Report on Form 10-K for the year ended December 31, 2006 to correct our accounting for passenger revenues. The accompanying
consolidated financial statements were restated only to reflect the adjustments described below and do not reflect events occurring after March 1, 2007, the date of the filing of our original Form 10-K, nor modify or update those disclosures
that have been affected by subsequent events. Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the Securities and Exchange Commission, or the SEC.

In late July 2007, we identified possible errors in our accounting for a specific type of passenger revenue transaction. Upon completion of our investigation and
analysis of these items, on August 7, 2007, our management concluded that we would amend our previously filed Annual Report on Form 10-K for the year ended December 31, 2006 and our previously filed Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007 to correct our previously reported passenger revenues for the impact of these errors. The Audit Committee of our Board of Directors concurred with managements decision to amend our previously filed reports on
August 9, 2007. We do not believe the rollover impact of the errors is material to our results of operations for any individual interim or annual period. However, because the cumulative effect of the errors is material to our most recently
completed fiscal year, we are restating our previously issued financial statements in accordance with the guidance provided in SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.

The following table sets forth the effects of the restatement on certain line items within our
previously reported financial statements (in thousands, except per share data):



|                                     |  |                         |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|------------------------------------ |  | ----------------------- | --------- | - | ------------------- | - | --------- | ---------------- |  | - | ------------------- | - |  | - | --------- | -
|                                     |  | Year Ended December 31, |          
|                                     |  | 2006                    |           |   | 2006                |   |           | 2005             |  |   | 2005                |  
|(in 000s, except per share data)     |  | Restated                |           |   | Previously Reported |   |           | Restated         |  |   | Previously Reported |  
|Consolidated Statement of Operations |  |                         |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|Passenger revenues                   |  | $                       | 1,814,907 |   |                     | $ | 1,816,179 |                  |  | $ | 1,396,451           |   |  | $ | 1,397,295 |  
|Operating income                     |  | $                       | 40,861    |   |                     | $ | 42,133    |                  |  | $ | 22,646              |   |  | $ | 23,490    |  
|Income before income taxes           |  | $                       | 24,657    |   |                     | $ | 25,929    |                  |  | $ | 12,180              |   |  | $ | 13,024    |  
|Net income                           |  | $                       | 14,714    |   |                     | $ | 15,514    |                  |  | $ | 7,545               |   |  | $ | 8,076     |  
|Income per common share:             |  |                         |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|Basic                                |  | $                       | 0.16      |   |                     | $ | 0.17      |                  |  | $ | 0.09                |   |  | $ | 0.09      |  
|Diluted                              |  | $                       | 0.16      |   |                     | $ | 0.17      |                  |  | $ | 0.08                |   |  | $ | 0.09      |  
|                                     |  |                         |           |  
|                                     |  | 2004                    |           |   | 2004                |   |           |                  |  |   |                     |  
|(in 000s, except per share data)     |  | Restated                |           |   | PreviouslyReported  |   |           |                  |  |   |                     |  
|Consolidated Statement of Operations |  |                         |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|Passenger revenues                   |  | $                       | 1,004,835 |   |                     | $ | 1,005,263 |                  |  |   |                     |   |  |   |           |  
|Operating income                     |  | $                       | 29,073    |   |                     | $ | 29,501    |                  |  |   |                     |   |  |   |           |  
|Income before income taxes           |  | $                       | 16,252    |   |                     | $ | 16,680    |                  |  |   |                     |   |  |   |           |  
|Net income                           |  | $                       | 9,834     |   |                     | $ | 10,103    |                  |  |   |                     |   |  |   |           |  
|Income per common share:             |  |                         |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|Basic                                |  | $                       | 0.12      |   |                     | $ | 0.12      |                  |  |   |                     |   |  |   |           |  
|Diluted                              |  | $                       | 0.11      |   |                     | $ | 0.11      |                  |  |   |                     |   |  |   |           |  
|                                     |  |                         |           |  
|                                     |  | December 31,2006        |           |   | December 31,2006    |   |           | December 31,2005 |  |   | December 31,2005    |  
|(in 000s)                            |  | Restated                |           |   | PreviouslyReported  |   |           | Restated         |  |   | PreviouslyReported  |  
|Consolidated Balance Sheet           |  |                         |           |   |                     |   |           |                  |  |   |                     |   |  |   |           |  
|Deferred income taxes-current        |  | $                       | 8,854     |   |                     | $ | 6,856     |                  |  | $ | 7,204               |   |  | $ | 5,678     |  
|Total assets                         |  | $                       | 1,603,582 |   |                     | $ | 1,601,584 |                  |  | $ | 1,161,543           |   |  | $ | 1,160,017 |  
|Accrued and other liabilities        |  | $                       | 127,254   |   |                     | $ | 121,709   |                  |  | $ | 99,180              |   |  | $ | 94,907    |  
|Accumulated deficit                  |  | $                       | (4,599    | ) |                     | $ | (1,052    | )                |  | $ | (19,313             | ) |  | $ | (16,566   | )

The restatement also resulted in an increase in accumulated deficit of $1.9 million as of January 1, 2004, and
changes to the consolidated statements of cash flows and stockholders equity in addition to Notes 1, 4, 7, 9, and 14.



40



---

##### Table of Contents

Basis of Presentation

Our accompanying Consolidated Financial Statements include the accounts of AirTran Holdings, Inc. (Holdings) and our wholly-owned subsidiaries (the Company or AirTran), including our principal subsidiary, AirTran Airways, Inc. (AirTran
Airways or Airways). All significant intercompany accounts and transactions have been eliminated in consolidation.

Business

Airways offers scheduled airline services, using Boeing B717-200 (B717) and Boeing B737-700 (B737) aircraft, to 53 locations across the United States, primarily in
short-haul markets principally in the eastern United States.

The financial and operating results for any interim period are not indicative of those for
the entire year. Air travel tends to be seasonal with the highest level of travel during the winter months to Florida and the summer months to the northeastern and western United States.

The management of our operations is based on a system-wide approach due to the interdependence of our route structure in the various markets we serve. As we offer only one service (i.e., air transportation),
management has concluded that we only have one segment of business.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results inevitably will differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

All highly liquid investments with maturities of three months or less when purchased are considered to be cash equivalents. Restricted cash primarily
represents amounts escrowed related to aircraft leases, letters of credit for airports and insurance, and collateral to support credit card holdbacks for advance ticket sales.

Short-Term Investments

Short-term investments consist of auction rate securities with auction reset periods of less
than 12 months, classified as available-for-sale securities and stated at fair value.

Accounts Receivable

Accounts receivable are due primarily from major credit card processors, travel agents, the issuer of co-branded credit cards, and municipalities related to guaranteed
revenue agreements. We provide an allowance for doubtful accounts equal to the estimated losses expected to be incurred in the collection of accounts receivable based on historical credit card charge backs and miscellaneous receivables based on
specific analysis. Collateral is generally not required for accounts receivable.

Spare Parts and Supplies

Spare parts and supplies consist of expendable aircraft spare parts, supplies, and prepaid aircraft fuel. These items are stated at cost using the first-in, first-out
method. These items are charged to expense when used. Allowances for obsolescence are provided over the estimated useful life of the related aircraft and engines for spare parts expected to be on hand at the date aircraft are retired from service.

Property and Equipment

Property and equipment are
stated on the basis of cost. The estimated salvage values and depreciable lives are periodically reviewed for reasonableness, and revised if necessary. Flight equipment is depreciated to salvage value of 10%, using the straight-line method. The
estimated useful lives for airframes, engines and aircraft parts are 30 years. Other property and equipment is depreciated over three to 10 years. Leasehold improvements are amortized over the economic life of the asset or the lease term, whichever
is shorter. Gains and losses on the sale of property and equipment are classified in depreciation and amortization on the consolidated statements of operations.

The financial statement carrying value of computer software and equipment, which is included in other property and equipment on the consolidated balance sheets, was $10.1 million and $15.4 million at December 31, 2006 and 2005,
respectively. Depreciation expense related to computer equipment and software was $5.4 million, $5.2 million and $4.5 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Measurement of Impairment

In accordance with Statement of Financial
Accounting Standards No. 144 (SFAS 144),Accounting for the Impairment or Disposal of Long-Lived Assets, we record impairment losses on long-lived assets used in operations when events or circumstances indicate that the assets may be
impaired, the undiscounted cash flows estimated to be generated by those assets are less than the net book value of those assets and the fair value is less than the net book value.

Intangibles

Excess of cost over fair value of net assets acquired (goodwill) and indefinite-lived intangibles, such
as trade names, are not amortized but are subject to periodic impairment tests in accordance with Statement of Financial Accounting Standards No. 142 (SFAS 142),Goodwill and Other Intangible Assets. We perform annual impairment tests in
the fourth quarter of each year. Our tests indicated that we did not have any impairment of our trade name or of our goodwill. Accumulated amortization was $6.5 million at December 31, 2006 and 2005.

Capitalized Interest

Interest attributable to funds used to finance
the acquisition of new aircraft is capitalized as an additional cost of the related asset. Interest is capitalized at our weighted average interest rate on long term debt or, where applicable, the interest rate related to specific borrowings.
Capitalization of interest ceases when the asset is ready for service.



41



---

##### Table of Contents

Aircraft Maintenance

Aircraft maintenance costs are expensed as incurred. The personnel costs of AirTran employees performing aircraft maintenance activities are classified as salaries, wages and benefits expense. The costs of replacement parts and services
performed by third parties are classified as maintenance, materials and repairs expense.

Maintenance expense is recognized when the work is performed if
the work is performed by AirTran employees or by third party FAA approved contractors pursuant to arrangements whereby AirTrans contractual liability to a contractor is incurred at the time the work is performed. The costs of line maintenance
activities, overhauls of airframes, overhauls of engines for B737 aircraft and repairs of certain component parts are recognized as expense when the repair is performed.

Maintenance expense is recognized based on flight hours or landings if AirTran incurs a contractual liability to a third-party FAA approved contractor to repair or overhaul major component parts based on a
contractually specified rate per flight hour or landing, as applicable. Maintenance repair costs for certain major components, including engines for B717 aircraft, are expensed monthly based on flight hours flown or landings, as applicable.

Advertising and Promotion Costs

Advertising costs are
charged to expense in the period the costs are incurred. Advertising expense was approximately $34.3 million, $35.0 million and $27.0 million for the years ended December 31, 2006, 2005 and 2004, respectively.

From time to time we enter into barter transactions where by we acquire goods or services in exchange for future air travel to be provided by us. We recognize operating
expense based on the estimated fair value of travel to be provided by us. During 2005, we entered into a barter transaction in which we exchanged flight credits in our frequent flyer program for promotional consideration. The transaction was
recorded at the estimated fair value of the credits exchanged resulting in approximately $4.6 million of 43 advertising expense in 2005. During 2006, we recorded additional expense of $4.1 million related to this promotion due to changes in the
estimated volume of travel exchanged. The revenue relating to the flight credits are recognized as passenger revenue as the credits are utilized or expire. During 2006 and 2005, $5.0 million and $0.4 million, respectively, related to this program
was recognized as passenger revenues.

Revenue Recognition

Passenger revenue is recognized when transportation is provided. Ticket sales for transportation which has not yet been provided are recorded as air traffic liability. Air traffic liability represents tickets sold for future travel dates.
The balance of the air traffic liability fluctuates throughout the year based on seasonal travel patterns and fare sale activity. Passenger revenue accounting is inherently complex and the measurement of the air traffic liability is subject to some
uncertainty. A nonrefundable ticket expires at the date of scheduled travel unless the customer exchanges the ticket in advance of such date for a credit to be used by the customer as a form of payment for another ticket. We recognize as revenue the
value of a non-refundable ticket at the date of scheduled travel unless the customer exchanges his or her ticket for a credit. A percent of credits expire unused. We recognize as revenue over time the value of credits that we expect to go unused. We
estimate the amount of credits that we expect to go unused based on historical experience. Estimating the amount of credits that will go unused involves some level of subjectivity and judgment. Changes in our estimate of the amount of unused credits
could have an effect on our revenues. Passenger traffic commissions and related fees are expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are included as a prepaid expense.

We are required to collect certain taxes and fees on our passenger tickets. These taxes and fees include U.S. federal transportation taxes, federal
security charges, airport passenger facility charges and foreign arrival and departure taxes. These taxes and fees are legal assessments on the customer. We have a legal obligation to act as a collection agent. As we are not entitled to retain these
taxes and fees, we do not include such amounts in passenger revenue. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable government agency or operating carrier.

Frequent Flyer Program

We accrue a liability for the estimated
incremental cost of providing free travel for awards earned under our A+ Rewards Program based on awards we expect to be redeemed. We adjust this liability based on points earned and redeemed as well as for changes in the estimated incremental
costs.

We also sell points in our A+ Rewards Program to third parties, such as credit card companies, internet service providers and car rental agencies.
A portion of these point sales is deferred and recognized as passenger revenue when transportation is provided, based on estimates of fair value. The remaining portion, which is the excess of the total sales proceeds over the estimated fair value of
the transportation, is recognized as other revenue at the time of sale.

Derivative Financial Instruments

Statement of Financial Accounting Standards No. 133 (SFAS 133),Accounting for Derivative Instruments and Hedging Activities, requires companies to recognize
all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument,
based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.

For derivative
instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative
instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings
(for example, in interest expense when the hedged transactions are interest cash flows associated with floating-rate debt).

We have entered
into interest rate swap agreements to convert a portion of our floating-rate debt to fixed-rates. These interest rate swaps are accounted for as cash flow hedges, as defined by SFAS 133. These hedges qualify for the short-cut method
under SFAS 133 and as such are deemed to be 100 percent effective during the term of the agreements. See Note 3 to the Consolidated Financial Statements for additional information on SFAS 133 and financial derivative instruments.



42



---

##### Table of Contents

New Accounting Standards

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R),Share-Based Payment, using the modified prospective method to account for our stock-based compensation plans covering a
portion of our employees, including the Companys Board of Directors and the Companys officers. Among other things SFAS 123(R) eliminated the use of Accounting Principles Board Opinion No. 25 (APB 25),Accounting for Stock Issued
to Employees, and related interpretations, and the intrinsic value method of accounting, and required companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value
of those awards, in the financial statements. Under the modified prospective method, stock option awards granted prior to January 1, 2006, but for which the vesting period is not complete, must be accounted for on a prospective
basis with the related cost recognized in the financial statements beginning with the first quarter of 2006 using the grant date fair values previously calculated for our pro forma disclosures. We recognize the related compensation costs not
previously reflected in the pro forma disclosures over the remaining vesting period. Adoption of SFAS 123R did not have a material impact on our results of operations in 2006. See Note 9 to the Consolidated Financial Statements for additional
information.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48,Accounting for Uncertainty in Income
TaxesAn interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements. We have not determined the effects, if any,
that the adoption of FIN 48 will have on our financial position or statement of operations. We will adopt FIN 48 during the first quarter of 2007, as required.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We have not determined the effect, if any, that the adoption of SFAS 157 will have on our
financial position or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No., 158,Employers
Accounting for Defined Pensions and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106 and 123R, (SFAS 158). On December 31, 2006, we adopted the recognition provisions of SFAS 158. SFAS 158 requires plan
sponsors of defined benefit pensions and other post-retirement plans (collectively, post-retirement benefit plans) to recognize the funded status of their postretirement benefit plans in the statement of financial position. See Note 12
to the consolidated financial statements for more information.

Note 2 - Commitments and Contingencies

Aircraft Purchase Commitments

During the year ended December 31,
2006, we took delivery of 20 B737 aircraft and two B717 aircraft. Of the 20 B737 aircraft, seven were leased under operating leases while 13 were purchased using debt financing. The two B717 aircraft were leased under operating leases. During the
year ended December 31, 2006, we exercised options to acquire 24 additional B737 aircraft with delivery dates through 2010. In September 2006, we entered into an agreement with the aircraft manufacturer to reschedule five aircraft deliveries
from the second half of 2007 and three aircraft deliveries from the first quarter of 2008 to deliveries in 2009 through 2011. As of December 31, 2006 we had firm orders for 60 B737 aircraft with delivery dates between 2007 and 2011 representing
$2.2 billion in aircraft purchase commitments. The table below sets forth all aircraft scheduled for delivery:



|      |  |                              
|----- |  | -----------------------------
|Year  |  | Firm Aircraft Deliveries B737
|2007  |  | 12                           
|2008  |  | 15                           
|2009  |  | 18                           
|2010  |  | 14                           
|2011  |  | 1                            
|      |  |                              
|Total |  | 60                           
|      |  |                              

The above table includes two B737 aircraft scheduled for delivery in the second quarter 2007 which we have agreed
to sell to an airline which operates outside of the United States. We anticipate recognizing a gain if and when each sale occurs.

Aircraft Financing
Arrangements

Of the 60 B737 aircraft on order, we have secured debt financing for ten B737 aircraft scheduled for delivery in 2007 and for five of the
aircraft scheduled to be delivered in 2008 through arrangements with financial institutions. While our intention is to finance the remainder of the aircraft on order via a combination of debt and lease financing we have not yet arranged for such
financing.



43



---

##### Table of Contents

Additionally, we have sale/leaseback commitments from an aircraft leasing company with respect to six spare engines to be
delivered through 2010. During 2006, we entered into a sale/leaseback agreement related to one of these spare engines.

Credit Card Arrangements

We have agreements with organizations that process credit card transactions arising from purchases of air travel by customers of AirTran Airways. Our
agreement with the MasterCard/Visa processor expires March 31, 2008. Our other credit card processing agreements generally have no fixed term but are terminable without cause after 30 days. Each of our agreements with the organizations that
process American Express, Discover, and MasterCard/Visa transactions allows, under specified conditions, the credit card processor to retain cash that such processor otherwise would deliver to the Company (i.e., a holdback). A holdback
consisting of cash escrowed by the processor is classified as restricted cash whereas a holdback consisting of a delay of cash remittance to us is classified as accounts receivable. We were in compliance with its credit card arrangements and we had
holdbacks with only one processor. The holdback with this processor was in amounts that were not material to our cash balances. A majority of our revenues relate to credit card transactions processed by the MasterCard/Visa processor. Our agreement
the MasterCard/Visa credit card processor contains covenants which permit the processor to holdback cash remittances to us if: we do not maintain aggregate prescribed levels of unrestricted cash and short-term investments; the processor determines
that there has been a material adverse occurrence; or certain other events occur. The amount which the processor may be entitled to withhold varies over time and is equal to the estimated liability for future air travel purchased with Visa and
MasterCard cards. As of December 31, 2006 we were in compliance with the agreement, no remittances had been withheld and the processor was not entitled to withhold future remittances. As of December 31, 2006, had the processor been
entitled to withhold future remittances the amount of such withholding entitlement would have been up to $95 million. We have the right to reduce the amount withheld to the extent that we provide the processor with a letter of credit and/or a cash
deposit.

General Indemnifications

We are party to
many routine contracts under which we indemnify third parties for various risks. We have not accrued any liability for any of these indemnities, as the amount is not determinable or estimable. These indemnities consist of the following:

Certain of our debt agreements related to aircraft-secured notes payable through 2017 contain language, whereby, we have agreed to indemnify certain holders of
certificates evidencing the debt associated with such notes, as necessary, to compensate them for any costs incurred by or any reduction in receivables due to such certificate holders resulting from broadly defined regulatory changes that impose or
modify any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of or any deposits with or other liabilities of such certificate holders. Additionally, if it becomes unlawful for such certificate
holders to make or maintain the investment or credit evidenced by the certificates, we have agreed to pay such certificate holders an amount necessary to cause the interest rate with respect to the certificates to be a rate per annum equal to 4.88%
over the rate specified by such certificate holders as the cost to them of obtaining funds in dollars in the United States in an amount equal to the pool balance of the certificates. The maximum potential payment under these indemnities cannot be
determined.

Our aircraft lease transaction documents contain customary indemnities concerning withholding taxes in which we are responsible in some
circumstances should withholding taxes be imposed for paying such amounts of additional rent, as is necessary to ensure that the lessor still receives, after taxes, the rent stipulated in the lease agreements. These provisions apply on leases
expiring through 2022. The maximum potential payment under these indemnities cannot be determined.

In our aircraft financing agreements, we typically
indemnify the financing parties, the trustee acting on their behalf and, other related parties against liabilities that arise from the manufacture, design, ownership, financing, use, operation, and maintenance of the aircraft for tort liability,
whether or not these liabilities arise out of or relate to the negligence of these indemnified parties except for their gross negligence or willful misconduct. We believe that we are covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities, as described above with respect to the aircraft we operate. Additionally, if there is a change in the law which results in the imposition of any reserve, capital adequacy, special deposit, or similar requirement
which will increase the cost to the lender, we will pay the lender the additional amount necessary to compensate the lender for the actual cost increase.

We have various leases with respect to real property and various agreements among airlines relating to fuel consortia or fuel farms at airports in which we have agreed to standard language indemnifying the lessor against environmental
liabilities associated with the real property covered under the agreement, even if we are not the party responsible for the environmental damage. In the case of fuel consortia at the airports, these indemnities are generally joint and several among
the airlines. We cannot quantify the maximum potential exposure under these indemnities and we do not currently have liability insurance that protects us against environmental damages.

Under certain contracts with third parties, we indemnify the third party against legal liability arising out of an action by a third party. The terms of these contracts vary and the potential exposure under these
indemnities cannot be determined. Generally, we have liability insurance protecting us from obligations undertaken under these indemnities.



44



---

##### Table of Contents

Employees

As of
December 31, 2006, approximately 48.2 percent of our employees were represented by unions and of the employees represented by unions, none of those agreements become amendable in 2007. The pilots agreement became amendable in 2005 and is
currently in mediation. While there can be no assurance that our generally good labor relations with our employees will continue we have established as a significant component of our business strategy the preservation of good relations with our
employees.

Note 3 - Financial Instruments and Risk Management

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, short-term investments, and accounts receivable. We maintain cash and cash equivalents and
short-term investments with various high credit-quality financial institutions or in short-duration, high-quality debt securities. Investments are stated at fair value, which approximates cost. We periodically evaluate the relative credit standing
of those financial institutions that are considered in our investment strategy. There were no material realized or unrealized gains or losses on our available-for-sale securities for the years ended December 31, 2006, 2005 or 2004. We use
specific identification of securities for determining gains and losses. Contractual maturities of our available-for-sale securities at December 31, 2006 exceed 10 years while the auction re-set periods are 28 to 35 days. The balance of these
available-for-sale securities at December 31, 2006 and 2005 was approximately $151.1 million and $0.1 million, respectively.

The estimated fair value
of other financial instruments, excluding debt, approximates their carrying amount. The fair values of long-term debt are based on quoted market prices, if available, or are estimated using discounted cash flow analyses, based on current incremental
borrowing rates for similar types of borrowing arrangements. The carrying amounts and estimated fair values of long-term debt and capital leases were $811.1 million and $857.9 million, respectively, at December 31, 2006, and $473.0 million and
$536.6 million, respectively, at December 31, 2005.

The majority of our receivables result from the sale of tickets to individuals, mostly through
the use of major credit cards. These receivables are short-term, generally being settled shortly after sale.

Cash Flow Hedging

During 2006, we entered into interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis for the next 12 years, thus
reducing the impact of interest-rate changes on future interest expense. Approximately 11.0 percent ($85.2 million) of our outstanding debt had its interest payments designated as hedged forecasted transactions to interest rate swap agreements at
December 31, 2006. Under these agreements, we pay fixed rates of 5.085 percent and 4.9875 percent and receive the London InterBank Offered Rate (LIBOR) every three months, expiring in 2018. The primary objective for our use of interest rate
hedges is to reduce the volatility of interest rates. We account for the interest rate hedges as cash flow hedges, as defined by SFAS 133. The fair values of interest rate swap derivatives are included in other assets. As of December 31, 2006,
the fair value of the interest rate swaps included in other assets is $0.1 million. The effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the
same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in interest expense when the hedged transactions are interest cash flows
associated with floating-rate debt). During 2006 amounts reclassified into earnings were not material.

Fuel Risk Management

Efforts to reduce our exposure to increases in the price and availability of aviation fuel include the utilization of fuel purchase contracts involving both fixed-price
arrangements and cap arrangements. Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party at defined prices. Cap arrangements consist of an agreement to purchase defined quantities of
aviation fuel from a third party at a price not to exceed a defined price, limiting our exposure to upside market risk. Because agreements are accounted for under the normal sales and use exception included in SFAS 133, these agreements are not
considered derivative financial instruments. As of December 31, 2006, utilizing forward fuel purchase contracts, we had committed to purchase 62.1 million gallons of aviation fuel at a weighted average price per gallon, excluding taxes and
related fees, of $1.77 for 2007. This represents 16.2 percent of our anticipated fuel needs for 2007, including delivery to our operations hub in Atlanta and other locations. As of February 14, 2007, the Company entered into additional advanced
fuel purchase contracts for 23.0 million gallons of aviation fuel. Combined, these contracts represent 23.2 percent of our anticipated fuel needs for 2007, including delivery into our operations hub in Atlanta and other locations at a weighted
average price per gallon, excluding fees and taxes, of $1.75. Additionally, during the first quarter 2007, we entered into jet fuel swap contracts to hedge an additional 36.1 million gallons, or 9.8 percent of our 2007 projected fuel usage.
Such contracts will be accounted for as derivative financial instruments.



45



---

##### Table of Contents

Note 4 - Other Assets and Accrued and Other Liabilities

The components of other assets were (in thousands):



|                              |  |              |        |      |   |       
|----------------------------- |  | ------------ | ------ | ---- | - | ------
|                              |  | December 31,
|                              |  | 2006         |        | 2005
|Aircraft maintenance deposits |  | $            | 33,878 |      | $ | 12,873
|Deposits                      |  |              | 13,308 |      |   | 9,892 
|Other                         |  |              | 3,790  |      |   | 3,325 
|                              |  |              |        |      |   |       
|Other assets                  |  | $            | 50,976 |      | $ | 26,090
|                              |  |              |        |      |   |       

The components of accrued and other liabilities were (in thousands):



|                                                                |  |                 |         |   |                 |   |         |  
|--------------------------------------------------------------- |  | --------------- | ------- | - | --------------- | - | ------- | -
|                                                                |  | December 31,    |        
|                                                                |  | 2006 (Restated) |         |   | 2005 (Restated) |  
|Deferred gains from sale/leaseback of aircraft                  |  | $               | 59,682  |   |                 | $ | 62,366  |  
|Accrued salaries, wages and benefits                            |  |                 | 53,903  |   |                 |   | 32,383  |  
|Accrued interest                                                |  |                 | 25,386  |   |                 |   | 17,309  |  
|Deferred credits                                                |  |                 | 21,671  |   |                 |   | 15,503  |  
|Accrued federal excise taxes                                    |  |                 | 11,304  |   |                 |   | 9,120   |  
|Unremitted fees and taxes collected from passengers             |  |                 | 7,608   |   |                 |   | 7,624   |  
|Accrued maintenance                                             |  |                 | 1,650   |   |                 |   | 2,461   |  
|Accrued insurance                                               |  |                 | 1,192   |   |                 |   | 1,381   |  
|Other                                                           |  |                 | 46,805  |   |                 |   | 34,183  |  
|                                                                |  |                 |         |   |                 |   |         |  
|                                                                |  |                 | 229,201 |   |                 |   | 182,330 |  
|Less non-current deferred gains from sale/leaseback of aircraft |  |                 | (55,172 | ) |                 |   | (57,968 | )
|Less non-current other                                          |  |                 | (34,945 | ) |                 |   | (18,745 | )
|Less non-current accrued rent                                   |  |                 | (11,830 | ) |                 |   | (6,437  | )
|                                                                |  |                 |         |   |                 |   |         |  
|Accrued and other liabilities                                   |  | $               | 127,254 |   |                 | $ | 99,180  |  
|                                                                |  |                 |         |   |                 |   |         |  

Note 5 - Debt

The components of long-term debt were (in thousands):



|                                                                                                                  |  |              |         |   |      |   |         |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                                                                                  |  | December 31, |        
|                                                                                                                  |  | 2006         |         |   | 2005 |  
|B737 Aircraft Purchase Financing Facilities:                                                                      |  |              |         |   |      |   |         |  
|Floating rate aircraft notes payable due through 2018, 6.83% weighted-average interest rate                       |  | $            | 428,681 |   |      | $ | 138,906 |  
|Fixed rate aircraft notes payable due through 2017, 7.02% weighted-average interest rate                          |  |              | 76,069  |   |      |   |        |  
|Aircraft notes payable through 2017, 10.64% weighted-average interest rate                                        |  |              | 97,322  |   |      |   | 107,036 |  
|Floating rate aircraft pre-delivery deposit financings payable through 2008, 6.07% weighted-average interest rate |  |              | 70,183  |   |      |   | 86,969  |  
|7.00% Convertible notes due 2023                                                                                  |  |              | 125,000 |   |      |   | 125,000 |  
|                                                                                                                  |  |              |         |   |      |   |         |  
|Total long-term debt                                                                                              |  |              | 797,255 |   |      |   | 457,911 |  
|Less current maturities                                                                                           |  |              | (85,969 | ) |      |   | (70,515 | )
|                                                                                                                  |  |              |         |   |      |   |         |  
|                                                                                                                  |  | $            | 711,286 |   |      | $ | 387,396 |  
|                                                                                                                  |  |              |         |   |      |   |         |  



46



---

##### Table of Contents

Maturities of long-term debt for the next five years and thereafter, in aggregate, are (in thousands): 2007-$85,969;
2008-$69,096; 2009-$35,039; 2010-$38,495; 2011-$43,348; thereafter-$525,308.

As of December 31, 2006 the aggregate net book value of assets
(primarily flight equipment) which serves as collateral for outstanding debt was $730 million. Additionally we have pledged our pre-delivery deposits as collateral for outstanding debt.

B737 Aircraft Purchase Financing Facilities:

Through December 31, 2006, we have entered into six separate
aircraft purchase financing facilities for purposes of financing the acquisition of B737 aircraft on order with the aircraft manufacturer.

We entered into
the first permanent facility (included in floating rate aircraft notes above) in August 2004, pursuant to which we financed the acquisition of three B737 aircraft. We took delivery of the three B737 aircraft in August 2004, July 2005 and August
2005, respectively. In conjunction with the financing of these B737 aircraft, we issued equipment notes as aircraft were delivered for an aggregate amount of $87.0 million, which are scheduled to mature between August 2016 and August 2017. The
equipment notes bear interest at a floating rate per annum above the six-month US Dollar London Interbank Offering rate (LIBOR) in effect at the commencement of each semi-annual period, and payments of principal and interest under the notes are
payable semi-annually. At December 31, 2006 and 2005, $81 million and $85 million were outstanding, respectively. Each note is secured by a first mortgage on the aircraft to which it relates.

We entered into the second permanent facility (included in fixed rate aircraft notes above) in September 2004, pursuant to which we financed the acquisition of three
additional B737 aircraft. We took delivery of the aircraft in September 2004, June 2005 and January 2006, respectively. In conjunction with the financing of these B737 aircraft, we issued equipment notes as aircraft were delivered for an
aggregate amount of $85.5 million, which are scheduled to mature between September 2016 and January 2018. The notes bore interest at a floating rate per annum above the six-month US Dollar LIBOR in effect at the commencement of each semi-annual
period, and payments of principal and interest under the notes are payable semi-annually. During April 2006, we exercised the fixed rate option on these three floating rate aircraft notes. The notes bear interest at an average fixed rate of 7.02%.
At December 31, 2006 and 2005, $76 million and $53 million were outstanding, respectively. Each note is secured by a first mortgage on the aircraft to which it relates. As of December 31, 2005, amounts outstanding were including in the
floating rate aircraft notes payable above as the interest rates were not fixed until 2006.

We entered into the third permanent facility (included in
floating rate aircraft notes above) in September 2005, pursuant to which we are entitled to borrow up to $354 million for purposes of acquiring 12 B737 aircraft currently scheduled to be delivered to us in 2006 and 2007 and satisfying our repayment
obligations under a related pre-delivery payment financing facility, which is described in more detail below. We took delivery of 11 aircraft in May 2006, June 2006, July 2006, September 2006, October 2006, November
2006, December 2006 and February 2007, respectively. In conjunction with the financing of these aircraft, we issued equipment notes as aircraft were delivered for an aggregate amount of $324 million, which are scheduled to mature through 2019.
The notes bear interest at a floating rate pre annum above the three-month US Dollar LIBOR in effect at the commencement of each quarterly period, and payments of principle and interest under the notes are payable quarterly. At December 31,
2006, $291 million was outstanding thereunder. Each note is secured by a first mortgage on the aircraft to which it relates. As of December 31, 2006, we had $59 million available under the facility.

On February 14, 2006, we entered into a fourth permanent facility (included in floating rate aircraft notes above), pursuant to which we financed the acquisition of
two B737 aircraft. We took delivery of the two B737 aircraft in February 2006 and March 2006, respectively. In conjunction with the financing of these B737 aircraft, we issued equipment notes as aircraft were delivered for an aggregate amount
of $58.0 million, which are scheduled to mature between February 2018 and March 2018. The equipment notes bear interest at a floating rate per annum above the six-month LIBOR in effect at the commencement of each semi-annual period, and payments of
principal and interest under the notes are payable semi-annually. At December 31, 2006, $57 million was outstanding thereunder. Each note is secured by a first mortgage on the aircraft to which it relates.

On August 31, 2006, we entered into a fifth permanent facility (included in floating rate aircraft notes above), pursuant to which we intend to finance the
acquisition of five additional B737 aircraft. The five B737 aircraft are scheduled to be delivered in 2007 and 2008. In conjunction with the financing of these B737 aircraft, we will issue equipment notes as aircraft are delivered. The notes will
likely bear interest at a floating rate per annum above the three-month LIBOR; however, we have the ability to fix the rate on the date such notes are issued. Interest and principle payments will be payable quarterly.



47



---

##### Table of Contents

On December 8, 2006, we entered into a sixth permanent facility (included in floating rate aircraft notes above),
pursuant to which we intend to finance the acquisition of two additional B737 aircraft. The two B737 aircraft are scheduled to be delivered in 2007. In conjunction with the financing of these B737 aircraft, we will issue equipment notes as aircraft
are delivered. The notes will likely bear interest at a floating rate per annum above the three-month LIBOR. Interest and principle payments will be payable quarterly. Additionally we have an option to enter into financing with the lender for two
additional B737 aircraft with delivery dates in 2008. We have not exercised this option.

On February 12, 2007, we entered into a seventh permanent
facility, pursuant to which we intend to finance the acquisition of six additional B737 aircraft. Three of the B737 aircraft are scheduled to be delivered in 2007 with the remaining three to be delivered in 2008. In conjunction with the financing of
the aircraft, we will issue equipment notes as aircraft are delivered. The notes will likely bear interest at a floating rate per annum above the six-month LIBOR. Interest and principle will be payable semi-annually. We took delivery the first B737
aircraft in February 2007. In conjunction with the financing of these aircraft, we issued an equipment note as the aircraft was delivered for $29 million, which is scheduled to mature in 2019.

Aircraft Notes Payable:

We completed a private placement of $178.9
million enhanced equipment trust certificates (EETCs) in 1999. The EETC proceeds were used to replace loans for the purchase of the first 10 B717 aircraft delivered, and all 10 aircraft were pledged as collateral for the EETCs. In March 2000, we
sold and leased back two of the B717s in a leveraged lease transaction reducing the outstanding principal amount of the EETCs by $35.9 million. Principal and interest payments on the EETCs are due semiannually through April 2017.

Floating Rate Aircraft Pre-delivery Deposit Financing:

Through
December 31, 2006, we have entered into five separate facilities (each a PDP facility) for purposes of financing our obligations to make pre-delivery payments in respect of B737 aircraft on order with the aircraft manufacturer.

During May 2005, we closed the first PDP facility, (PDP-1), pursuant to which we were entitled to draw an amount equal to $19.6 million to
fund a portion of our obligations to make pre-delivery payments in respect of six B737 aircraft delivered through March 2006. Drawings made under PDP-1 bore interest at a floating rate per annum above the one-month US Dollar LIBOR. PDP-1 was secured
by certain rights under our purchase agreement with the aircraft manufacturer for the six B737 aircraft. As of December 31, 2005, PDP-1 was fully drawn and $9.9 million was outstanding thereunder. All outstanding amounts related to PDP-1 were
repaid in March 2006.

On September 1, 2005, we closed the second PDP facility, (PDP-2), pursuant to which we are entitled to draw amounts
sufficient to fund all of our obligations to make pre-delivery payments in respect of 12 B737 aircraft. Ten of such aircraft were delivered in 2006 and the remaining two are scheduled for delivery in the first quarter of 2007. PDP-2 was entered into
in conjunction with the September 2005 permanent facility for $354 million as described above. Drawings made under PDP-2 bear interest at a floating rate per annum above the one-month US Dollar LIBOR. PDP-2 is secured by certain rights under our
purchase agreement with the aircraft manufacturer for the twelve B737 aircraft. As of December 31, 2006 and 2005, $10.5 million and $57.2 million, respectively, is outstanding under PDP-2. We expect to repay all outstanding amounts under PDP-2
during the first quarter of 2007.

On December 7, 2005, we closed the third PDP facility, (PDP-3), pursuant to which we are entitled to
draw amounts up to $65 million to fund a portion of our obligations to make pre-delivery payments in respect of 19 B737 aircraft currently scheduled to be delivered in 2007 and 2008. Drawings made under PDP-3 bear interest at a floating rate per
annum above the one-month US Dollar LIBOR. PDP-3 is secured by certain rights under our purchase agreement with the aircraft manufacturer for the 19 B737 aircraft. As of December 31, 2006 and December 31, 2005, $38.8 million and $20.0
million, respectively, is outstanding under PDP-3.

On August 1, 2006, we entered into two separate facilities, (PDP-4 and PDP-5), for
purposes of financing our obligations to make pre-delivery payments on 14 B737 aircraft on order with an aircraft manufacturer. The PDP facilities entitle us to draw amounts up to approximately $30.3 million and $30.4 million, respectively, to fund
a portion of our obligations to make pre-delivery payments in respect of 14 B737 aircraft with delivery dates scheduled through 2008. Drawings made under the PDP facilities bear interest at a floating rate per annum above one-month US Dollar LIBOR.
As of December 31, 2006, $20.9 million was outstanding under these facilities. We intend to make additional drawings under PDP-4 and PDP-5 for approximately $36.6 million, through November 2007, at which time the deposit requirements for the 14
aircraft will have been met.

7% Convertible Notes:

In
May 2003, Holdings completed a private placement of $125 million in convertible notes due in 2023. The proceeds were used to improve Holdings and Airways overall liquidity by providing working capital and for general corporate purposes. The notes
bear interest at 7% payable semi-annually on January 1 and July 1. The notes are unsecured senior obligations ranking equally with



48



---

##### Table of Contents

Holdings existing unsecured senior indebtedness. The notes are unconditionally guaranteed by Airways and rank
equally with all unsecured obligations of Airways. The unsecured notes and the note guarantee are junior to any secured obligations of Holdings or Airways to the extent of the collateral pledged and are also effectively subordinated to all
liabilities of our subsidiaries (other than Airways).

The notes are convertible into shares of Holdings common stock at a conversion rate of 89.9281
shares per $1,000 in principal amount of the notes which equals an initial conversion price of approximately $11.12 per share. This conversion rate is subject to adjustment in certain circumstances. Holdings may redeem the notes, in whole or in
part, beginning on July 5, 2010 at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest.

The holders of
the notes may require Holdings to repurchase the notes on July 1, 2010, 2013 and 2018 at a repurchase price of 100 percent plus any accrued and unpaid interest. Holdings filed a shelf registration statement with the U.S. Securities and Exchange
Commission covering the resale of the notes and the underlying common stock which became effective in October 2003. We may, at our option, elect to pay the repurchase price in cash, in shares of Holdings common stock or in any combination of
the two. Upon any such repurchase, it is our present intention to pay the repurchase price in cash.

Letters of Credit

As of December 31, 2006, $13.5 million of restricted cash on the accompanying consolidated balance sheet relates to outstanding letters of credit, primarily for
airport facilities.

Note 6  Leases

Total rental
expense charged to operations for aircraft, facilities and office space for the years ended December 31, 2006, 2005 and 2004 was approximately $287.5 million, $238.0 million and $187.1 million, respectively.

We lease 79 B717 aircraft through various lessors, under leases with terms that expire through 2022. We have the option to renew the B717 leases for periods ranging from
one to four years. The B717 leases have purchase options at or near the end of the lease term at fair market value, and two have purchase options based on a stated percentage of the lessors defined cost of the aircraft at the end of the
thirteenth year of the lease term. Each of the leases contains return conditions that must be met prior to the termination of the leases. Forty-one of the B717 leases are the result of sale/leaseback transactions. Deferred gains from these
transactions are being amortized over the terms of the leases. At December 31, 2006 and 2005, unamortized deferred gains were $59.7 million and $62.4 million, respectively. We also lease facilities from local airport authorities or other
carriers, as well as office space under operating leases with terms ranging up to 12 years. In addition, we lease spare engines and certain rotables under capital leases.

We lease 22 B737-700 aircraft through a single lessor, under leases with terms that expire through 2021. We have the option to extend the lease term for 12 months up to 39 months. There are no purchase options. Each
of the leases contains return conditions that must be met prior to the termination of the leases. During 2006, the Company entered into a sales/leaseback with respect to one B737 spare engine that expires in 2022.

The B737 leases require us to remit monthly maintenance deposit payments to the lessor based on actual flight hours and landings. The balance of such payments, which is
capped at any point in time at $2.25 million for each aircraft, is available to reimburse us for the cost of airframe, engine and certain other component part maintenance. There will be an accounting at the end of each aircraft lease to ascertain if
there is any excess balance of the deposit payments; if so, such excess will be returned to Airways. These payments are accounted for as deposits and the aggregate amount of such deposits is included in other assets. As of December 31, 2006 and
2005, the balance of such maintenance payment deposits for all the B737 leased aircraft aggregated $33.9 million and $12.9 million, respectively.

The
amounts applicable to capital leases included in property and equipment were (in thousands):



|                               |  |              |        |   |      |   |        |  
|------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                               |  | December 31, |       
|                               |  | 2006         |        |   | 2005 |  
|Flight equipment               |  | $            | 21,560 |   |      | $ | 21,560 |  
|Less: Accumulated depreciation |  |              | (4,169 | ) |      |   | (3,322 | )
|                               |  |              |        |   |      |   |        |  
|Flight equipment-net           |  | $            | 17,391 |   |      | $ | 18,238 |  
|                               |  |              |        |   |      |   |        |  

The following schedule outlines the future minimum lease payments at December 31, 2006, under non-cancelable
operating leases and capital leases with initial terms in excess of one year (in thousands):



|                                   |  |                |        |   |                  |   |          
|---------------------------------- |  | -------------- | ------ | - | ---------------- | - | ---------
|                                   |  | Capital Leases |        |   | Operating Leases
|2007                               |  | $              | 2,655  |   |                  | $ | 285,561  
|2008                               |  |                | 2,787  |   |                  |   | 276,497  
|2009                               |  |                | 2,927  |   |                  |   | 261,578  
|2010                               |  |                | 3,073  |   |                  |   | 251,543  
|2011                               |  |                | 3,227  |   |                  |   | 247,994  
|Thereafter                         |  |                | 8,477  |   |                  |   | 2,223,959
|                                   |  |                |        |   |                  |   |          
|Total minimum lease payments       |  |                | 23,146 |   |                  | $ | 3,547,132
|                                   |  |                |        |   |                  |   |          
|Less: amount representing interest |  |                | (9,291 | ) |                  |   |          
|                                   |  |                |        |   |                  |   |          
|Present value of future payments   |  |                | 13,855 |   |                  |   |          
|Less: current obligations          |  |                | (876   | ) |                  |   |          
|                                   |  |                |        |   |                  |   |          
|Long-term obligations              |  | $              | 12,979 |   |                  |   |          
|                                   |  |                |        |   |                  |   |          



49



---

##### Table of Contents

Amortization of assets recorded under capital leases is included as depreciation and amortization in the
accompanying consolidated statements of operations.

We have variable interests in our aircraft leases. The lessors are trusts established specifically to
purchase, finance and lease aircraft to us. These leasing entities meet the criteria of variable interest entities, as defined by FASB Interpretation 46,Consolidation of Variable Interest Entities. We are generally not the primary
beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, a fixed-price purchase option or similar feature that obligates us to absorb
decreases in value or entitles us to participate in increases in the value of the aircraft. This is the case in the majority of our aircraft leases; however we have two aircraft leases that contain fixed-price purchase options that allow us to
purchase the aircraft at predetermined prices on specified dates during the lease term. We have not consolidated the related trusts because even taking into consideration these purchase options, we are not the primary beneficiary based on our cash
flow analysis. Our maximum exposure under the two leases is limited to the remaining lease payments, which are reflected in the future minimum lease payments in the table above.

Note 7 - Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per
common share (in thousands, except per share data):



|                                                      |  |                         |        |                 |   |                 |  |   |       
|----------------------------------------------------- |  | ----------------------- | ------ | --------------- | - | --------------- |  | - | ------
|                                                      |  | Year ended December 31,
|                                                      |  | 2006 (Restated)         |        | 2005 (Restated) |   | 2004 (Restated)
|Numerator:                                            |  |                         |        |                 |   |                 |  |   |       
|Net income                                            |  | $                       | 14,714 |                 | $ | 7,545           |  | $ | 9,834 
|                                                      |  |                         |        |                 |   |                 |  |   |       
|Denominator:                                          |  |                         |        |                 |   |                 |  |   |       
|Weighted-average shares outstanding, basic            |  |                         | 90,504 |                 |   | 87,337          |  |   | 85,261
|Effect of dilutive stock options                      |  |                         | 1,243  |                 |   | 2,187           |  |   | 3,639 
|Effect of dilutive restricted shares                  |  |                         | 494    |                 |   | 97              |  |   |      
|Effect of warrants to purchase common stock           |  |                         | 195    |                 |   | 564             |  |   | 623   
|                                                      |  |                         |        |                 |   |                 |  |   |       
|Adjusted weighted-average shares outstanding, diluted |  |                         | 92,436 |                 |   | 90,185          |  |   | 89,523
|                                                      |  |                         |        |                 |   |                 |  |   |       
|Basic earnings per common share                       |  | $                       | 0.16   |                 | $ | 0.09            |  | $ | 0.12  
|                                                      |  |                         |        |                 |   |                 |  |   |       
|Diluted earnings per common share                     |  | $                       | 0.16   |                 | $ | 0.08            |  | $ | 0.11  
|                                                      |  |                         |        |                 |   |                 |  |   |       

The assumed conversions of convertible debt in 2006, 2005 and 2004 were anti-dilutive and consequently
11.2 million shares were excluded from the computation of weighted-average shares outstanding used in computing diluted earnings per common share in each of those years.

Note 8  Common Stock

We have one class of common stock. Holders of shares of common stock are entitled to one
vote per share. At December 31, 2006, 4,504,754 shares of common stock are reserved for future issuance upon exercise of stock options.

On
April 6, 2006, 55,468 warrants were exercised for the purchase of our common stock. Each warrant entitled the purchaser to 18.0289 shares of common stock for a total of 1,000,024 shares at $4.51 per share. Total proceeds from the aforementioned
transaction amounted to approximately $4.5 million.



50



---

##### Table of Contents

Our debt agreements restrict the payment of cash dividends.

Note 9 - Stock Option Plans and Restricted Stock Awards

Our 1993
Incentive Stock Option Plan provides for the grant of options to officers, directors and key employees to purchase up to 4.8 million shares of common stock at prices not less than the fair value of the shares on the dates of grant. Our 2002
Long-term Incentive Plan, 1996 Stock Option Plan, and 1994 Stock Option Plan respectively authorize up to 5 million, 5 million, and 4 million incentive stock options or nonqualified options, respectively, to be granted to our
officers, directors, key employees and consultants.

In connection with the acquisition of Airways Corporation in 1997, we assumed the Airways Corporation
1995 Stock Option Plan (Airways Plan) and the Airways Corporation 1995 Director Stock Option Plan (Airways DSOP). Under the Airways Plan, up to 1.2 million incentive stock options or nonqualified options may be granted to our officers,
directors, key employees or consultants. Under the Airways DSOP, up to 150,000 nonqualified options may be granted to directors.

Vesting and term of all
options is determined by the Board of Directors and may vary by optionee; however, the term may be no longer than 10 years from the date of grant.

Effective January 1, 2006, we adopted the provisions of SFAS 123(R), which requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those
awards in the financial statements.

Prior to January 1, 2006, we accounted for our stock-based compensation plans in accordance with APB 25 and
related interpretations. Accordingly, we recognized compensation expense related to restricted stock grants based on the market value of the common stock at the date of grant and recognized compensation expense for a stock option grant only if the
exercise price was less than the market value of our common stock on the grant date. Prior to the adoption of SFAS 123(R), as required under the disclosure provisions of SFAS 123, we provided pro forma net income and earnings per share for each
period presented as if we had applied the fair value method to measure stock-based compensation expense.

The following table illustrates the effect on net
income and earnings per share for as if we had applied the fair value method to measure stock-based compensation, as required under the disclosure provision in SFAS 123 (in thousands, except for per share amounts):



|                                                                                                                           |  |                                       |        |   |                 |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | - | --------------- | - | ------ | -
|                                                                                                                           |  | Year ended December 31,               |       
|                                                                                                                           |  | 2005 (Restated)                       |        |   | 2004 (Restated) |  
|                                                                                                                           |  | (In thousands, except per share data) |       
|Net income, as reported                                                                                                    |  | $                                     | 7,545  |   |                 | $ | 9,834  |  
|Add: Stock-based employee compensation expense included in reported income, net of related tax effects                     |  |                                       | 2,059  |   |                 |   | 1,500  |  
|Deduct: Stock-based employee compensation expense determined under the fair value based method, net of related tax effects |  |                                       | (3,891 | ) |                 |   | (3,815 | )
|                                                                                                                           |  |                                       |        |   |                 |   |        |  
|Pro forma net income                                                                                                       |  | $                                     | 5,713  |   |                 | $ | 7,519  |  
|                                                                                                                           |  |                                       |        |   |                 |   |        |  
|Earnings Per Share:                                                                                                        |  |                                       |        |   |                 |   |        |  
|Basic, as reported                                                                                                         |  | $                                     | 0.09   |   |                 | $ | 0.12   |  
|Basic, pro forma                                                                                                           |  | $                                     | 0.07   |   |                 | $ | 0.09   |  
|Diluted, as reported                                                                                                       |  | $                                     | 0.08   |   |                 | $ | 0.11   |  
|Diluted, pro forma                                                                                                         |  | $                                     | 0.06   |   |                 | $ | 0.08   |  

The fair value for the stock options was estimated at the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions for 2004: risk-free interest rate of 3.74 percent; no dividend yields; volatility factors of the expected market price of our common stock of 0.625; and a weighted-average expected life of the
options of 5 years. There were no options granted during either 2006 or 2005.

The adoption of SFAS 123(R) also affected our accounting for our employee
stock purchase plan. See Note 12 to the Consolidated Financial Statements. The change in the accounting for the stock purchase plan does not have a material impact on our statement of operations. The adoption of SFAS 123(R) had no impact on our
accounting for restricted stock awards.



51



---

##### Table of Contents

Stock Options

SFAS
123(R) is effective for all stock options granted on or after January 1, 2006. For those stock options that were granted prior to January 1, 2006, but for which the vesting period is not complete, we used the modified prospective
method of accounting permitted under SFAS 123(R). Under this method, stock option awards granted prior to January 1, 2006, but for which the vesting period is not complete, must be accounted for on a prospective basis with the related
cost being recognized in the financial statements beginning with the first quarter of 2006 using the grant date fair values previously calculated for our pro forma disclosures. We recognize the related compensation costs not previously reflected in
the pro forma disclosures over the remaining vesting period.

During 2005, we accelerated the vesting for certain unvested stock options awarded that had
an exercise price greater than the market price on the date of the acceleration. The purpose of accelerating the vesting of these options was to avoid compensation expense in 2006 associated with the unvested options upon adoption of SFAS 123(R). We
have recognized $0.1 million in compensation expense related to the adoption of SFAS 123(R) during the year ended December 31, 2006.

A summary of
stock option activity under the aforementioned plans are as follows:



|                                 |  |            |   |  |                         |      
|-------------------------------- |  | ---------- | - |  | ----------------------- | -----
|                                 |  | Options    |   |  | Weighted- Average Price
|Balance at January 1, 2004       |  | 8,495,774  |   |  | $                       | 6.20 
|Granted                          |  | 514,405    |   |  | $                       | 12.40
|Exercised                        |  | (2,147,149 | ) |  | $                       | 12.66
|Expired                          |  | (40,773    | ) |  | $                       | 4.26 
|                                 |  |            |   |  |                         |      
|Balance at December 31, 2004     |  | 6,822,257  |   |  | $                       | 7.20 
|Granted                          |  |           |   |  |                         |     
|Exercised                        |  | (1,773,550 | ) |  | $                       | 5.56 
|Expired                          |  | (191,843   | ) |  | $                       | 8.81 
|                                 |  |            |   |  |                         |      
|Balance at December 31, 2005     |  | 4,856,864  |   |  | $                       | 7.77 
|Granted                          |  |           |   |  |                         |     
|Exercised                        |  | (952,058   | ) |  | $                       | 6.12 
|Expired                          |  | (608,881   | ) |  | $                       | 18.60
|Balance at December 31, 2006     |  | 3,295,925  |   |  | $                       | 6.31 
|                                 |  |            |   |  |                         |      
|Exercisable at December 31, 2006 |  | 3,295,925  |   |  | $                       | 6.31 
|                                 |  |            |   |  |                         |      

The following table summarizes information at December 31, 2006 concerning outstanding options at such date,
all of which were exercisable at such date:



|                         |  |                    |  |                                                      |  |                                 |       |                                   |   |       
|------------------------ |  | ------------------ |  | ---------------------------------------------------- |  | ------------------------------- | ----- | --------------------------------- | - | ------
|Range of Exercise Prices |  | Number Outstanding |  | Weighted- Average Remaining Contractual Life (Years) |  | Weighted Average Exercise Price |       | Aggregate Intrinsic Value (000s)
|$2.78 - 4.00             |  | 1,123,366          |  | 3.0                                                  |  | $                               | 3.26  |                                   | $ | 9,524 
|4.22 -5.97               |  | 704,971            |  | 4.8                                                  |  |                                 | 4.92  |                                   |   | 4,810 
|6.08 - 9.12              |  | 1,047,333          |  | 4.9                                                  |  |                                 | 8.04  |                                   |   | 3,871 
|10.00 -13.80             |  | 420,255            |  | 8.0                                                  |  |                                 | 12.52 |                                   |   |      
|                         |  |                    |  |                                                      |  |                                 |       |                                   |   |       
|$2.78-13.80              |  | 3,295,925          |  | 4.6                                                  |  | $                               | 6.31  |                                   | $ | 18,205
|                         |  |                    |  |                                                      |  |                                 |       |                                   |   |       



52



---

##### Table of Contents

The total intrinsic value of options exercised during the years ended December 31, 2006, 2005, and 2004, was $9.8
million, $13.4 million, and $17.6 million, respectively.

Cash received from options exercised under all share-based payment arrangements for the years
ended December 31, 2006, 2005, and 2004, was $6.0 million, $9.8 million, and $9.7 million, respectively. SFAS 123R requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a
financing cash flow rather than as a operating cash flow. For the year ended December 31, 2006, we did not record any excess tax benefit generated from option exercises.

Restricted Stock Awards

Restricted stock awards have been granted to certain of our officers, directors and key
employees pursuant to our 2002 Long-Term Incentive Plan. Stock awards are grants of shares of our common stock which typically vest over time and are valued for financial accounting purposes at the fair market value of our publicly traded stock on
the date of issuance. The value is being charged on a straight-line basis to compensation expense over the respective vesting period (generally three years). A summary of restricted stock activity under the aforementioned plan is as follows:



|                             |  |                         |  
|---------------------------- |  | ----------------------- | -
|                             |  | Restricted Stock Awards |  
|Balance at January 1, 2004   |  |                        |  
|Vested                       |  | (160,000                | )
|Issued                       |  | 657,750                 |  
|Surrendered                  |  |                        |  
|                             |  |                         |  
|Balance at December 31, 2004 |  | 497,750                 |  
|Vested                       |  | (209,603                | )
|Issued                       |  | 340,500                 |  
|Surrendered                  |  | (32,000                 | )
|                             |  |                         |  
|Balance at December 31, 2005 |  | 596,647                 |  
|Vested                       |  | (306,593                | )
|Issued                       |  | 472,500                 |  
|Surrendered                  |  | (7,633                  | )
|                             |  |                         |  
|Balance at December 31, 2006 |  | 754,921                 |  
|                             |  |                         |  

Restricted stock awards are not included in the number of outstanding common shares. As of December 31, 2006
there was $6.7 million of unearned compensation cost related to non-vested share-based compensation arrangements granted under the Long-term Incentive Plan. The total fair value of shares vested during the years ended December 31, 2006,
2005, and 2004, was $3.1 million, $2.8 million, and $0 million, respectively.

Approximately $4.4 million, $3.5 million, and $2.5 million of unearned
compensation was amortized as compensation expense during the twelve months ended December 31, 2006, 2005, and 2004, respectively.

Prior to our
adoption of SFAS 123R, we presented unearned compensation related to restricted stock awards as a separate component of stockholders equity. In accordance with SFAS 123R, on January 1, 2006, we reclassified unearned compensation as
additional paid-in capital on our consolidated balance sheets and consolidated statements of stockholders equity.

Note 10 - Comprehensive Income

Comprehensive income encompasses net income and other comprehensive income, which includes all other non-owner transactions and events that
change stockholders equity. Other comprehensive income is composed of changes in the fair value of our derivative financial instruments that qualified for hedge accounting and the funded status of our postretirement obligations. The
differences between net income and comprehensive income are as follows (in thousands):

The components of Accumulated other comprehensive income
(loss), are shown below (in thousands):



|                                      |  |                                                  |      |   |                           |   |        |                                               |  |   |        |  
|------------------------------------- |  | ------------------------------------------------ | ---- | - | ------------------------- | - | ------ | --------------------------------------------- |  | - | ------ | -
|                                      |  | Unrealized gain (loss) on derivative instruments |      |   | Postretirement obligation |   |        | Accumulated other comprehensive income
(loss) | 
|Balance at January 1, 2004            |  | $                                                | 271  |   |                           | $ |       |                                               |  | $ | 271    |  
|2004 changes in fair value            |  |                                                  |     |   |                           |   |       |                                               |  |   |       |  
|Reclassification to earnings          |  |                                                  | (271 | ) |                           |   |       |                                               |  |   | (271   | )
|                                      |  |                                                  |      |   |                           |   |        |                                               |  |   |        |  
|Balance at December 31, 2004          |  |                                                  |     |   |                           |   |       |                                               |  |   |       |  
|2005 changes in fair value            |  |                                                  |     |   |                           |   |       |                                               |  |   |       |  
|Reclassification to earnings          |  |                                                  |     |   |                           |   |       |                                               |  |   |       |  
|                                      |  |                                                  |      |   |                           |   |        |                                               |  |   |        |  
|Balance at December 31, 2005          |  |                                                  |     |   |                           |   |       |                                               |  |   |       |  
|2006 changes in fair value            |  |                                                  | 84   |   |                           |   |       |                                               |  |   | 84     |  
|Adjustment to initially adopt FAS 158 |  |                                                  |     |   |                           |   | (5,336 | )                                             |  |   | (5,336 | )
|Reclassification to earnings          |  |                                                  |     |   |                           |   |       |                                               |  |   |       |  
|                                      |  |                                                  |      |   |                           |   |        |                                               |  |   |        |  
|Balance at December 31, 2006          |  | $                                                | 84   |   |                           | $ | (5,336 | )                                             |  | $ | (5,252 | )
|                                      |  |                                                  |      |   |                           |   |        |                                               |  |   |        |  



53



---

##### Table of Contents

Note 11 - Income Taxes

The components of the provision for income taxes are as follows (in thousands):



|                           |  |                         |       |                 |   |       |                 |  |   |      
|-------------------------- |  | ----------------------- | ----- | --------------- | - | ----- | --------------- |  | - | -----
|                           |  | Year ended December 31,
|                           |  | 2006 (Restated)         |       | 2005 (Restated) |   |       | 2004 (Restated)
|Current provision:         |  |                         |       |                 |   |       |                 |  |   |      
|Federal                    |  | $                       |      |                 | $ |      |                 |  | $ |     
|State                      |  |                         |      |                 |   |      |                 |  |   | 282  
|                           |  |                         |       |                 |   |       |                 |  |   |      
|Total current provision    |  |                         |      |                 |   |      |                 |  |   | 282  
|Deferred provision:        |  |                         |       |                 |   |       |                 |  |   |      
|Federal                    |  |                         | 9,805 |                 |   | 5,119 |                 |  |   | 5,579
|State                      |  |                         | 138   |                 |   | (484  | )               |  |   | 557  
|                           |  |                         |       |                 |   |       |                 |  |   |      
|Total deferred provision   |  |                         | 9,943 |                 |   | 4,635 |                 |  |   | 6,136
|                           |  |                         |       |                 |   |       |                 |  |   |      
|Provision for income taxes |  | $                       | 9,943 |                 | $ | 4,635 |                 |  | $ | 6,418
|                           |  |                         |       |                 |   |       |                 |  |   |      

A reconciliation of taxes computed at the statutory federal tax rate on income before income taxes to the
provision for income taxes is as follows (in thousands):



|                                                                                                 |  |                         |       |   |                 |   |        |                 |  |   |        |  
|------------------------------------------------------------------------------------------------ |  | ----------------------- | ----- | - | --------------- | - | ------ | --------------- |  | - | ------ | -
|                                                                                                 |  | Year ended December 31, |      
|                                                                                                 |  | 2006 (Restated)         |       |   | 2005 (Restated) |   |        | 2004 (Restated) | 
|Tax computed at federal statutory rate                                                           |  | $                       | 8,629 |   |                 | $ | 4,263  |                 |  | $ | 5,688  |  
|State income taxes, net of federal tax benefit                                                   |  |                         | 516   |   |                 |   | 302    |                 |  |   | 811    |  
|Change in state effective tax rate                                                               |  |                         |      |   |                 |   | (1,695 | )               |  |   | 48     |  
|Reduction state net operating loss carryforwards                                                 |  |                         |      |   |                 |   | 910    |                 |  |   | 2,511  |  
|Stock grants, non-deductible compensation expense                                                |  |                         | 432   |   |                 |   | 627    |                 |  |   | 431    |  
|Expiration of non-qualified stock options                                                        |  |                         | 557   |   |                 |   |       |                 |  |   |       |  
|Other                                                                                            |  |                         | (191  | ) |                 |   | 228    |                 |  |   | 220    |  
|Change in valuation allowance, including the effect of changes to prior year deferred tax assets |  |                         |      |   |                 |   |       |                 |  |   | (3,291 | )
|                                                                                                 |  |                         |       |   |                 |   |        |                 |  |   |        |  
|Provision for income taxes                                                                       |  | $                       | 9,943 |   |                 | $ | 4,635  |                 |  | $ | 6,418  |  
|                                                                                                 |  |                         |       |   |                 |   |        |                 |  |   |        |  



54



---

##### Table of Contents

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax liabilities and assets are as follows (in thousands):



|                                                   |  |                 |         |                 |   |        
|-------------------------------------------------- |  | --------------- | ------- | --------------- | - | -------
|                                                   |  | December 31,   
|                                                   |  | 2006 (Restated) |         | 2005 (Restated)
|Deferred tax liabilities related to:               |  |                 |         |                 |   |        
|Depreciation                                       |  | $               | 120,957 |                 | $ | 89,375 
|Other                                              |  |                 | 28,244  |                 |   | 23,028 
|                                                   |  |                 |         |                 |   |        
|Gross deferred tax liabilities                     |  |                 | 149,201 |                 |   | 112,403
|Deferred tax assets related to:                    |  |                 |         |                 |   |        
|Deferred gains from sale and leaseback of aircraft |  |                 | 22,142  |                 |   | 23,138 
|Accrued liabilities                                |  |                 | 20,836  |                 |   | 14,207 
|Federal net operating loss carryforwards           |  |                 | 107,083 |                 |   | 89,399 
|State operating loss carryforwards                 |  |                 | 5,336   |                 |   | 3,877  
|AMT credit carryforwards                           |  |                 | 3,292   |                 |   | 3,292  
|Other                                              |  |                 | 7,138   |                 |   | 1,962  
|                                                   |  |                 |         |                 |   |        
|Gross deferred tax assets                          |  |                 | 165,827 |                 |   | 135,875
|                                                   |  |                 |         |                 |   |        
|Total net deferred taxes                           |  | $               | 16,626  |                 | $ | 23,472 
|                                                   |  |                 |         |                 |   |        

At December 31, 2006 and 2005, federal net operating loss carryforwards for income tax purposes were
approximately $318.8 million and $256.7 million, respectively, which expire between 2017 and 2026. State net operating loss carryforwards at December 31, 2006 and 2005, respectively, were $134.6 million and $153.6 million. Included in the net
operating loss carryforwards for the year ending December 31, 2006 is $11.4 million related to deductions from equity based compensation. In addition, our alternative minimum tax (AMT) credit carryforwards for income tax purposes
were $3.3 million at December 31, 2006 and 2005. Management has determined that it is more likely than not that the deferred tax assets will be realized through the reversal of existing deferred tax liabilities and future taxable income and,
therefore, no valuation allowance has been recorded at December 31, 2006 and 2005.

Note 12 - Employee Benefit Plans

Effective January 1, 1998, we consolidated our 401(k) plans (the Plan). All employees, except pilots, are eligible to participate in the consolidated Plan, a defined
contribution benefit plan that qualifies under Section 401(k) of the Internal Revenue Code. Participants may contribute up to 15 percent of their base salary to the Plan. Our contributions to the Plan are discretionary. The amount of our
contributions to the Plan expensed in 2006, 2005, and 2004 was approximately $1.0 million, $0.6 million and $0.3 million, respectively.

Effective in the
third quarter of 2000, we agreed to fund, on behalf of our mechanics and inspectors, a monthly fixed contribution per eligible employee to their unions pension plan. In May of 2001, a similar agreement was made on behalf of our maintenance
training instructors. During each of the fiscal years 2006, 2005 and 2004, we expensed approximately $0.4 million related to these agreements. Beginning in January 2002, additional agreements with our stores clerks and ground service equipment
employees took effect that call for a monthly fixed amount per eligible employee to be made to the unions pension plan. During 2006, 2005 and 2004, the contributions to this plan were less than $0.1 million. From the time these agreements took
effect, the applicable eligible employee were allowed to continue making contributions to the Plan, but without any company match.

Effective
August 1, 2001, the AirTran Airways Pilot Savings and Investment Plan (Pilot Savings Plan) was established. This plan is designed to qualify under Section 401(k) of the Internal Revenue Code. Eligible employees may contribute up to the IRS
maximum allowed. We will not match pilot contributions to this Pilot Savings Plan. Effective on August 1, 2001, we also established the Pilot-Only Defined Contribution Pension Plan (DC Plan) which qualifies under Section 403(b) of the
Internal Revenue Code. Company contributions were 10.5 percent of compensation, as defined, during 2006, 2005, and 2006, respectively. We expensed $11.1 million, $10.0 million and $8.2 million in contributions to the DC Plan during the years ended
2006, 2005 and 2004, respectively.

Under our 1995 Employee Stock Purchase Plan, employees who complete 12 months of service are eligible to make periodic
purchases of our common stock at up to a 15 percent discount from the market value on the offering date. The Board of Directors determines the discount rate, which was increased to 10 percent from 5 percent effective November 1, 2001. We are
authorized to issue up to 4 million shares of common stock under this plan. During 2006, 2005, and 2004, the employees purchased a total of 113,765, 144,597 and 116,488 shares, respectively, at an average price of $12.32, $9.13 and $9.84 per
share, respectively.

We provide post retirement defined benefits to certain eligible employees. At December 31, 2006, the liability for the
accumulated postretirement benefit obligation under the plan was $11.6 million, and unrecognized prior service costs and net actuarial losses were $8.4 million. Benefit expense under the plan was $2.1 million in 2006. Benefit expense and benefit
payments in all periods presented are not material. On December 31, 2006, we adopted the recognition provisions of SFAS 158. SFAS 158 requires us to recognize the $11.6 million unfunded status of the plan as a liability in the December 31,
2006 statement of financial position, with a corresponding reduction of $5.3 million to accumulated other comprehensive income, net of income tax of $3.1 million. The adoption of SFAS 158 had no effect on our consolidated statement of operations for
the year ended December 31, 2006, or for any prior periods presented, and it will not impact our operating results in future periods.



55



---

##### Table of Contents

Note 13Supplemental Cash Flow Information

Supplemental cash flow information is summarized as follows, (in thousands):



|                                                               |  |                         |         |      |   |        |      |  |   |       
|-------------------------------------------------------------- |  | ----------------------- | ------- | ---- | - | ------ | ---- |  | - | ------
|                                                               |  | Year Ended December 31,
|                                                               |  | 2006                    |         | 2005 |   |        | 2004
|Supplemental disclosure of cash flow activities:               |  |                         |         |      |   |        |      |  |   |       
|Cash paid for interest, net of amounts capitalized             |  | $                       | 17,410  |      | $ | 11,038 |      |  | $ | 14,832
|Cash paid (received) for income taxes, net of amounts refunded |  |                         |        |      |   | (46    | )    |  |   | 107   
|Non-cash financing and investing activities:                   |  |                         |         |      |   |        |      |  |   |       
|Acquisition of equipment under capital leases                  |  |                         |        |      |   |       |      |  |   | 15,513
|Aircraft acquisition debt financing                            |  |                         | 380,600 |      |   | 86,500 |      |  |   | 57,500

Note 14Quarterly Financial Data (Unaudited) Restated

As discussed in Note 1, we have restated our financial statements and other financial information, including the unaudited quarterly information presented below, to
correct an error in our passenger revenues. Unaudited summarized financial data by quarter for 2006 and 2005 is as follows (in thousands, except per share data):



|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|-------------------------- |  | ------------------ | ------- | - | ------- | - | ------- | ------------ |  | - | ----------- | - |  | - | ------- | -
|                           |  | Three Months Ended |        
|                           |  | March 31           |         |   | June 30 |   |         | September 30 |  |   | December 31 |  
|2006                       |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Operating revenue          |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | 416,042 |   |         | $ | 528,163 |              |  | $ | 487,269     |   |  | $ | 461,881 |  
|Adjustment                 |  |                    | (206    | ) |         |   | (288    | )            |  |   | (412        | ) |  |   | (366    | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | 415,836 |   |         | $ | 527,875 |              |  | $ | 486,857     |   |  | $ | 461,515 |  
|Operating income (loss):   |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (11,256 | ) |         | $ | 54,501  |              |  | $ | (3,579      | ) |  | $ | 2,467   |  
|Adjustment                 |  |                    | (206    | ) |         |   | (288    | )            |  |   | (412        | ) |  |   | (366    | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (11,462 | ) |         | $ | 54,213  |              |  | $ | (3,991      | ) |  | $ | 2,101   |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Net Income (loss):         |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (8,810  | ) |         | $ | 31,958  |              |  | $ | (4,309      | ) |  | $ | (3,325  | )
|Adjustment                 |  |                    | (130    | ) |         |   | (181    | )            |  |   | (259        | ) |  |   | (230    | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (8,940  | ) |         | $ | 31,777  |              |  | $ | (4,568      | ) |  | $ | (3,555  | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Earnings (loss) per share: |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Basic:                     |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (0.10   | ) |         | $ | 0.35    |              |  | $ | (0.05       | ) |  | $ | (0.04   | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Adjustment                 |  |                    |        |   |         |   |        |              |  |   |            |   |  |   |        |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (0.10   | ) |         | $ | 0.35    |              |  | $ | (0.05       | ) |  | $ | (0.04   | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Diluted:                   |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (0.10   | ) |         | $ | 0.32    |              |  | $ | (0.05       | ) |  | $ | (0.04   | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Adjustment                 |  |                    |        |   |         |   |        |              |  |   |            |   |  |   |       |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (0.10   | ) |         | $ | 0.32    |              |  | $ | (0.05       | ) |  | $ | (0.04   | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|2005                       |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Operating revenue          |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | 299,707 |   |         | $ | 366,323 |              |  | $ | 374,644     |   |  | $ | 409,870 |  
|Adjustment                 |  |                    | (165    | ) |         |   | (220    | )            |  |   | (241        | ) |  |   | (218    | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | 299,542 |   |         | $ | 366,103 |              |  | $ | 374,403     |   |  | $ | 409,652 |  
|Operating income (loss):   |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (8,340  | ) |         | $ | 23,604  |              |  | $ | 3,420       |   |  | $ | 4,806   |  
|Adjustment                 |  |                    | (165    | ) |         |   | (220    | )            |  |   | (241        | ) |  |   | (218    | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (8,505  | ) |         | $ | 23,384  |              |  | $ | 3,179       |   |  | $ | 4,588   |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Net income (loss):         |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (7,295  | ) |         | $ | 14,038  |              |  | $ | 964         |   |  | $ | 369     |  
|Adjustment                 |  |                    | (104    | ) |         |   | (138    | )            |  |   | (152        | ) |  |   | (137    | )
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (7,399  | ) |         | $ | 13,900  |              |  | $ | 812         |   |  | $ | 232     |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Earnings (loss) per share: |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Basic:                     |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (0.08   | ) |         | $ | 0.16    |              |  | $ | 0.01        |   |  | $ |        |  
|Adjustment                 |  |                    | (0.01   | ) |         |   |        |              |  |   |            |   |  |   |        |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (0.09   | ) |         | $ | 0.16    |              |  | $ | 0.01        |   |  | $ |        |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Diluted:                   |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|As originally reported     |  | $                  | (0.08   | ) |         | $ | 0.15    |              |  | $ | 0.01        |   |  | $ |        |  
|Adjustment                 |  |                    | (0.01   | ) |         |   |        |              |  |   |            |   |  |   |        |  
|                           |  |                    |         |   |         |   |         |              |  |   |             |   |  |   |         |  
|Restated                   |  | $                  | (0.09   | ) |         | $ | 0.15    |              |  | $ | 0.01        |   |  | $ |        |  



56



---

##### Table of Contents

The results of the fourth quarter of 2005 include expense of $2.7 million, net of tax, related to an advertising barter
transaction in which we exchanged flight credits in our frequent flyer program for promotional consideration.

The results of the third quarter of 2006
include expense of $1.4 million, net of tax, related to a change in estimated volume of travel exchanged in connection with the 2005 advertising barter transaction.

The results of the fourth quarter of 2006 include expense of $1.0 million, net of tax, related to a change in estimated volume of travel exchanged in connection with the 2005 advertising barter transaction and a
benefit of $1.9 million, net of tax, related to claim settlements.

Note 15 -Subsequent EventProposed Acquisition of Midwest Air Group

On January 11, 2007, we commenced an exchange offer for all of the outstanding shares of Midwest Air Group (Midwest), for $13.25 per Midwest
share, based on the closing price of our common stock on January 8, 2007. The offer consists of $6.625 in cash and 0.5884 share of AirTran common stock for each Midwest share. The total equity value of the exchange offer was approximately $345
million at such date. The offer, which is being made through a wholly-owned subsidiary of the Company, has been extended and is scheduled to expire on March 8, 2007. The exchange offer is subject to customary conditions. On January 25,
2007, the board of directors of Midwest announced that it had unanimously recommended that Midwests shareholders reject our offer to acquire all outstanding shares of Midwest and not tender their shares to us. Because we believe a combination
of the two airlines would strengthen both airlines we are continuing to pursue the acquisition of Midwest. We anticipate funding the cash portion of the purchase price with the proceeds from $150 million in senior secured financing under a proposed
credit facility.



57



---

##### Table of Contents

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A CONTROLS AND PROCEDURES

Restatement.In late July 2007, we identified possible errors in our accounting
for a specific type of passenger revenue transaction. Upon completion of our investigation and analysis of these items, on August 7, 2007, our management concluded that we would amend our previously filed Annual Report on Form 10-K for the year
ended December 31, 2006 and our previously filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 to correct our previously reported passenger revenues for the impact of these errors. The Audit Committee of our Board of
Directors concurred with managements decision to amend our previously filed reports on August 9, 2007. We do not believe the rollover impact of the errors is material to our results of operations for any individual interim or annual period.
However, because the cumulative effect of the errors is material to our most recently completed fiscal year, we are restating our previously issued financial statements in accordance with the guidance provided in SEC Staff Accounting Bulletin
No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.

Disclosure Controls and Procedures.We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to process, summarize and
disclose this information within the time periods specified in the rules of the SEC. In connection with the restatement, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has reevaluated our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 as amended (the Exchange Act)). Based on this reevaluation our Chief Executive Officer and Chief
Financial Officer have concluded that, as a result of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of the end of the period covered by this
annual report.

Managements Report on Internal Control over Financial Reporting.Management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the preparation and fair
presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.In
our Form 10-K filed on March 1, 2007, management concluded that our internal control over financial reporting was effective as of December 31, 2006. Subsequently, management concluded that our failure to identify the errors in our
accounting for a specific type of passenger revenue transaction constituted a material weakness in our internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, that results in
more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Solely as a result of this material weakness, our management has revised its earlier assessment and concluded
that our internal control over financial reporting was not effective as of December 31, 2006, based on the criteria in the Internal Control  Integrated Framework. This material weakness caused us to amend our 2006 Form 10-K for the
year ended December 31, 2006 and Form 10-Q for the quarter ended March 31, 2007, in order to restate our consolidated financial statements as of December 31, 2005 and 2006 and for each of the three years in the period ended
December 31, 2006 and for the quarter ended March 31, 2007.

Managements revised assessment of the effectiveness of internal control over
financial reporting as of December 31, 2006, has been audited by Ernst & Young LLP, the independent registered public accounting firm who also has audited the Companys restated consolidated financial statements included in this
Form 10-K/A. Ernst & Youngs attestation report on managements assessment of the Companys internal control over financial reporting appears below.

Remediation of Material Weakness in Internal Control. We have performed an extensive review of the transactions impacted by the material weakness described above in an effort to ensure that this amendment
reflects all necessary adjustments. We believe that this review, the investigation and analysis of the errors described above, and the changes in the related revenue accounting processes we have implemented as a result of this restatement will
remediate the material weakness and are designed so that similar transactions will be accounted for in accordance with generally accepted accounting principles in our future filings.

Changes in Internal Control. There were no changes to our internal control over financial reporting during the quarter ended December 31, 2006 that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.



58



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of AirTran Holdings, Inc.

We
have audited managements assessment, included in the accompanying Managements Annual Report on Internal Control over Financial Reporting, that AirTran Holdings, Inc. (the Company) did not maintain effective internal control
over financial reporting as of December 31, 2006, because of the effect of the Companys material weakness relating to the accounting for a specific type of passenger revenue transaction, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our report dated February 27, 2007, we expressed an unqualified opinion on managements
previous assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006 and an unqualified opinion that the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2006, based on the COSO criteria. Management has subsequently determined that a deficiency in controls relating to the accounting for a specific type of passenger revenue transaction existed as of the
previous assessment date, and has further concluded that such deficiency represented a material weakness as of December 31, 2006. As a result, management has revised its assessment, as presented in the accompanying Managements Report on
Internal Control over Financial Reporting, to conclude that the Companys internal control over financial reporting was not effective as of December 31, 2006. Accordingly, our present opinion on the effectiveness of the Companys
internal control over financial reporting as of December 31, 2006, as expressed herein, is different from that expressed in our previous report.

A
material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The
following material weakness has been identified and included in managements assessment. In its assessment as of December 31, 2006, management identified a material weakness in the Companys accounting for certain passenger revenues
and, as a result, concluded the Companys previously reported passenger revenues had been overstated. The insufficient controls over the recording of a specific type of passenger revenue transaction resulted in the restatement of the
Companys consolidated financial statements as of December 31, 2005 and 2006 and for each of the three years in the period ended December 31, 2006. This material weakness was considered in determining the nature, timing, and extent of
audit tests applied in our audit of the 2006 consolidated financial statements, and this report does not affect our report dated February 27, 2007, except for Note 1, as to which the date is August 9, 2007, on those consolidated financial
statements (as restated).

In our opinion, managements assessment that the Company did not maintain effective internal control over financial
reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control
criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

/s/ Ernst & Young LLP

Atlanta, Georgia

February 27, 2007, except for

the effects of the material weakness described in the

sixth paragraph above, as to which the date is August 9, 2007



59



---

##### Table of Contents

ITEM 9B OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Code of Ethics

The information required by this Item is incorporated herein by reference to our 2007 Proxy Statement.

Audit Committee Financial Expert

The information required by this Item is incorporated herein by reference to our
2007 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to our 2007
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain
information required by this Item is incorporated herein by reference to our 2007 Proxy Statement.

62Securities Authorized for Issuance Under Equity
Compensation Plans



|                                                           |  |                                                                                             |  |                                                                             |      |                                                                                                                                             |        
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                           |  | (a)                                                                                         |  | (b)                                                                         |      | (c)                                                                                                                                        
|Plan Category                                              |  | Number of securities to be issued upon exercise of
outstanding options, warrants and rights |  | Weighted-average exercise price of outstanding options, warrants and rights |      | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|Equity compensation plans approved by security holders (1) |  | 4,050,846                                                                                   |  | $                                                                           | 6.31 |                                                                                                                                             | 453,908
|Equity compensation plans not approved by security holders |  |                                                                                            |  |                                                                             | n/a  |                                                                                                                                             |       
|Total                                                      |  | 4,050,846                                                                                   |  | $                                                                           | 6.31 |                                                                                                                                             | 453,908

---

|(1) | Includes our 1993, 1994 and 1996 Stock Option Plans and our 2002 Long-Term Incentive Plan.
|--- | ------------------------------------------------------------------------------------------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item
is incorporated herein by reference to our 2007 Proxy Statement.

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference
to our 2007 Proxy Statement.



60



---

##### Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE



|                                                                                       |  |     
|-------------------------------------------------------------------------------------- |  | ----
|                                                                                       |  | Page
|                                                                                       | 
|(a)(1) Financial Statements (included in Item 8 of this Report) AirTran Holdings, Inc. |  |     
|Report of Independent Registered Public Accounting Firm                                |  | 34  
|Consolidated Statements of Operations                                                  |  | 35  
|                                                                                       | 
|Years ended December 31, 2006, 2005, and 2004                                         |  |     
|Consolidated Balance Sheets                                                            |  | 36  
|                                                                                       | 
|December 31, 2006 and 2005                                                            |  |     
|Consolidated Statements of Cash Flows                                                  |  | 38  
|                                                                                       | 
|Years ended December 31, 2006, 2005, and 2004                                         |  |     
|Consolidated Statements of Stockholders Equity                                        |  | 39  
|                                                                                       | 
|Years ended December 31, 2006, 2005 and 2004                                          |  |     
|Notes to Consolidated Financial Statements                                             |  | 40  
|                                                                                       | 
|(a)(2) Financial Statement Schedules (included in Item 15(d) below)                    |  |     
|Schedule II (a)Valuation and Qualifying AccountsAirTran Holdings, Inc.               |  | 67  



61



---

##### Table of Contents

(a)(3) The following exhibits are filed herewith or incorporated by reference as indicated. Exhibit numbers refer to
Item 601 of Regulation S-K.



|            |  |                                                                                                                                                                                     
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                         
|3.1         |  | Articles of Incorporation (1)                                                                                                                                                       
|            | 
|3.2         |  | By-Laws (As Amended and Restated on July 28, 2005) (13)                                                                                                                             
|            | 
|4.1         |  | See the Articles of Incorporation filed as Exhibit 3.1 and Bylaws filed as Exhibit 3.2                                                                                              
|            | 
|10.1        |  | Incentive Stock Option Agreement dated June 1, 1993, between ValuJet Airlines, Inc. and Lewis H. Jordan (2)(3)                                                                      
|            | 
|10.2        |  | 1993 Incentive Stock Option Plan (2)(3)                                                                                                                                             
|            | 
|10.3        |  | 1994 Stock Option Plan (2)(3)                                                                                                                                                       
|            | 
|10.4        |  | 1995 Employee Stock Purchase Plan (4)                                                                                                                                               
|            | 
|10.5*       |  | Purchase Agreement between McDonnell Douglas Corporation and ValuJet Airlines, Inc. dated December 6, 1995 (5)                                                                      
|            | 
|10.6        |  | Agreement and Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (5)                                                                     
|            | 
|10.7        |  | 1996 Stock Option Plan (3)(6)                                                                                                                                                       
|            | 
|10.8        |  | Airways Corporation 1995 Stock Option Plan (3)(8)                                                                                                                                   
|            | 
|10.9        |  | Airways Corporation 1995 Directors Stock Option Plan (3)(8)                                                                                                                         
|            | 
|10.10       |  | Lease of headquarters in Orlando, Florida, dated November 14, 1995 (9)                                                                                                              
|            | 
|10.11       |  | Orlando International Lease and Use Agreement (10)                                                                                                                                  
|            | 
|10.12       |  | Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation Authority and Page AvJet Corporation dated December 11, 1989 (11)                      
|            | 
|10.13       |  | Amendment No. 1 to Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation Authority and Page AvJet Corporation dated June 22, 1990 (11)       
|            | 
|10.14       |  | Agreement and Second Amendment to Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation Authority and the Company dated January 25, 1996
(11)



62



---

##### Table of Contents

|       |  |                                                                                                                                                                                                                                                                                                                                                            
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15  |  | Note Purchase Agreement dated as of November 3, 1999, among the Company, AirTran Airways, Inc., State Street Bank and Trust Company of Connecticut National Association and First Security
Bank, National Association (12)                                                                                                                                 
|       | 
|10.16  |  | Note Agreement, dated April 12, 2001, between AirTran Holdings, Inc. and Boeing Capital Loan Corporation, including as an exhibit thereto the form of notes (15)                                                                                                                                                                                           
|       | 
|10.17  |  | Warrant Agreement, dated April 12, 2001, between AirTran Holdings, Inc. and Wilmington Trust Company (14)                                                                                                                                                                                                                                                  
|       | 
|10.18  |  | Purchase Agreement, dated April 12, 2001, among AirTran Holdings, Inc., AirTran Airways, Inc. and Boeing Capital Loan Corporation (15)                                                                                                                                                                                                                     
|       | 
|10.19  |  | Indenture, dated as of April 12, 2001, between AirTran Airways, Inc. and Wilmington Trust Company, as trustee, including as an exhibit thereto the form of note (15)                                                                                                                                                                                       
|       | 
|10.20  |  | Employment Agreement dated as of October 6, 2001, between the Company and Joseph B. Leonard (16)                                                                                                                                                                                                                                                           
|       | 
|10.21  |  | Employment Agreement dated as of October 28, 2004, between the Company and Joseph B. Leonard (3) (17)                                                                                                                                                                                                                                                      
|       | 
|10.22* |  | Aircraft General Terms Agreement Number AGTA-CQT, dated July 3, 2003, by and between The Boeing Company (Boeing), and AirTran Airways, Inc. (AirTran)
(18)                                                                                                                                                                                             
|       | 
|10.23* |  | Purchase Agreement Number 2444, dated July 3, 2003 (Purchase Agreement 2444), between Boeing and AirTran, as supplemented by Purchase Agreement 2444 Supplement No. 1, by and between
Boeing and AirTran (18)                                                                                                                                            
|       | 
|10.24* |  | Letter Agreements to Purchase Agreement 2444, each dated July 3, 2003, by and between Boeing and AirTran (18)                                                                                                                                                                                                                                              
|       | 
|10.25* |  | General Terms Agreement No. CFM-03-0017 (GTA CFM-03-0017), dated June 30, 2003, by and between CFM International Inc. (CFM) and AirTran, as supplemented by Letter
Agreement No. 1 to GTA CFM-03-0017, dated June 30, 2003, by and between CFM and AirTran, and Letter Agreement No. 1-A, dated September 10, 2003, by and between CFM and AirTran (18)
|       | 
|10.26* |  | Maintenance Cost Per Hour Engine Service Agreement, dated August 13, 2003, by and between GE Engine Services, Inc. and AirTran (18)                                                                                                                                                                                                                        
|       | 
|10.27  |  | Aircraft Lease Common Terms Agreement, dated August 15, 2003, by and between Aviation Financial Services, Inc. and AirTran (18)                                                                                                                                                                                                                            
|       | 
|10.28* |  | Form of Aircraft Lease Agreement entered into with respect to twenty-two (23) Boeing model 737-700 aircraft, together with the cover page from each of the twenty-two (23) individual Aircraft
Lease Agreements (18)                                                                                                                                       
|       | 
|10.29  |  | Engine Lease Common Terms Agreement, dated August 15, 2003, by and between Aviation Financial Services, Inc. and AirTran (18)                                                                                                                                                                                                                              
|       | 
|10.30* |  | Form of Engine Lease Agreement entered into with respect to six (6) CFM International model CFM56-7B20 engines, together with the cover pages from each of the six (6) individual Engine Lease
Agreements (18)                                                                                                                                             
|       | 
|10.31* |  | Letter Agreement 5-1005-JSW-737, dated July 3, 2003, by and between Boeing and AirTran (18)                                                                                                                                                                                                                                                                
|       | 
|10.32* |  | Amendment No. 11 to Purchase Agreement No. DAC95-40-D, dated July 3, 2003, by and between McDonnell Douglas Corporation, a wholly owned subsidiary of Boeing (MDC), and AirTran (18)                                                                                                                                                                     
|       | 
|10.33* |  | Amendment No. 6 to Letter Agreement No. 1 to Purchase Agreement No. DAC95-40-D, dated July 3, 2003, by and between MDC and AirTran (18)                                                                                                                                                                                                                    
|       | 
|10.34* |  | B717 Lease Financing Letter Agreement, dated July 3, 2003, by and between Boeing and AirTran (18)                                                                                                                                                                                                                                                          
|       | 
|10.35* |  | AirTran Holdings, Inc. Amended and Restated 2002 Long Term Incentive Plan (17)                                                                                                                                                                                                                                                                             
|       | 
|10.36* |  | Loan Agreement, dated as of August 31, 2005, by and among AirTran Airways, Inc. (AirTran), as Borrower, The Parties Identified in Schedule 1 thereto as Lenders, as Lenders, and The
Royal Bank of Scotland plc, New York Brach (RBS), as Security Agent (20)                                                                                          
|       | 
|10.37* |  | Credit Agreement, dated as of August 31, 2005, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lenders, and RBS, as Security Agent (20)                                                                                                                                                                                



63



---

##### Table of Contents

|       |  |                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.38* |  | Security Agreement, dated as of August 31, 2005, by and between AirTran, as Borrower, and RBS, as Security Agent (20)                                                                                                      
|       | 
|10.39* |  | Credit Agreement, dated as of December 7, 2005, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lenders, and HSH Nordbank AG, New York Branch, as Security
Agent (23)                  
|       | 
|10.40* |  | Security Agreement, dated as of December 7, 2005, by and between AirTran, as Borrower, and HSH Nordbank AG, New York Branch, as Security Agent (23)                                                                        
|       | 
|10.41* |  | Association of Flight Attendants  CWA, AFL-CIO, Flight Attendant Labor Contract with AirTran Airways, Effective June 1, 2005, Amendable December 1, 2008 (7)                                                              
|       | 
|10.42  |  | Notice to executive officers of AirTran Holdings, Inc. regarding the acceleration of incentive options and acceleration of non-qualified options (22)                                                                      
|       | 
|10.43* |  | Credit Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and BNP Paribas S.A. (acting through its Paris Branch),
as Security Agent (24)   
|       | 
|10.44* |  | Security Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, and the BNP Paribas S.A. (acting through its Paris Branch), as Security Agent (24)                                                      
|       | 
|10.45* |  | Credit Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York Branch, as
Security Agent (24)       
|       | 
|10.46* |  | Security Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, and the The Royal Bank of Scotland Plc New York Branch, as Security Agent (24)                                                          
|       | 
|10.47* |  | Loan Agreement [N320AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.48* |  | Loan Agreement [N330AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.49* |  | Loan Agreement [N336AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.50* |  | Loan Agreement [N337AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.51* |  | Loan Agreement [N344AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|21.1   |  | Subsidiaries of AirTran Holdings, Inc. (19)                                                                                                                                                                                
|       | 
|21.2   |  | Subsidiaries of AirTran Airways, Inc. (19)                                                                                                                                                                                 
|       | 
|23     |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                   
|       | 
|31.1   |  | CEO certification pursuant to Rule 13(a)-14 or 15(d)-14                                                                                                                                                                    
|       | 
|31.2   |  | CFO certification pursuant to Rule 13(a)-14 or 15(d)-14                                                                                                                                                                    
|       | 
|32     |  | CEO and CFO certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                          
|       | 
|99.1   |  | Instructions on requesting copies of AirTran Holdings, Inc.s Corporate Governance Guidelines, Code of Ethics and the charters for the Audit, Compensation and Corporate Governance
Committees                             
|       | 
|99.2   |  | Letter of Resignation from Robert L. Priddy (22)                                                                                                                                                                           

---

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

|(1) | Incorporated by reference to the Companys Registration Statement on Form S-4, registration number 33-95232, filed with the Commission on August 1, 1995 and amendments
thereto.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to the Companys Registration Statement on Form S-1, registration number 33-78856, filed with the Commission on May 12, 1994 and amendments
thereto.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Management contract or compensation plan or arrangement required to be filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c) of Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, (Commission File No. 0-24164), filed with the Commission on
August 11, 1995.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 1995, (Commission File No. 0-24164), filed with the Commission on
March 29, 1996 and amendment thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 1996, (Commission File No. 0-24164), filed with the Commission on
March 31, 1997.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on May 26, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Airways Corporations Registration Statement on Form S-4, registration number 33-93104, filed with the Commission.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to the Quarterly Report on Form 10-Q of Airways Corporation (Commission File No. 0-26432) for the quarter ended December 31, 1995.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference to the Quarterly Report on Form 10-Q of Airways Corporation (Commission File No. 0-26432) for the quarter ended December 31, 1996.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



64



---

##### Table of Contents

|(11) | Incorporated by reference to the Annual Report on Form 10-K of Airways Corporation (Commission File No. 0-26432) for the year ended March 31, 1997.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 1999, (Commission File No. 0-26914), filed with the Commission on
March 30, 2000.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on August 1, 2005.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated by reference to the Companys Current Report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on June 18, 2001.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q, (Commission File No. 1-15991), for the quarter ended June 30, 2001.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2001, (Commission File No. 1-15991), filed with the Commission
on March 28, 2002.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(17) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on May 19, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------

|(18) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, (Commission File No. 1-15991), filed with the
Commission on November 14, 2003.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(19) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2003, (Commission File No. 1-15991), filed with the Commission
on March 26, 2003.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, (Commission File No. 1-15991), filed with the
Commission on November 9, 2005.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(21) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on May 6, 2005.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------

|(22) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on September 16, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(23) | Incorporated by reference to the Companys Annual Report on Form 10-K, (Commission File No. 1-15991), filed with the Commission on March 9, 2006.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(24) | Incorporated by reference to the Companys Annual Report on Form 10-Q for the quarter ending September 30, 2006, (Commission File No. 1-15991), filed with the
Commission on November 1, 2006.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



65



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



AIRTRAN HOLDINGS, INC. (Registrant)By:

/s/ Joseph B. LeonardJoseph B. Leonard Chairman and Chief Executive Officer Date: February 28, 2007


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



|                                                                                                                                               |  |               
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|                                                                                                                                               | 
|/s/ Joseph B. Leonard Joseph B. Leonard Chairman of the Board and Chief
Executive Officer                                                      |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Robert L. Fornaro Robert L. Fornaro President and Chief Operating Officer                                                                  |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Stanley J. Gadek Stanley J. Gadek Senior Vice President, Finance, and
Chief Financial Officer (Principal Accounting and Financial Officer) |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ J. Veronica Biggins J.
Veronica Biggins Director                                                                                           |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Don L. Chapman Don L.
Chapman Director                                                                                                     |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Jere A. Drummond Jere
A. Drummond Director                                                                                                 |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ John F. Fiedler John F.
Fiedler Director                                                                                                   |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Lewis H. Jordan Lewis
H. Jordan Director                                                                                                   |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Robert L. Priddy Robert
L. Priddy Director                                                                                                 |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ William J. Usery William J. Usery Director                                                                                                 |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Peter DAloia Peter DAloia Director                                                                                                       |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              
|                                                                                                                                               | 
|/s/ Alexis P. Michas Alexis
P. Michas Director                                                                                                 |  | August 9, 2007
|                                                                                                                                              
|                                                                                                                                              



66



---

##### Table of Contents

AirTran Holdings, Inc.

Schedule II (a)Valuation and Qualifying Accounts

(In thousands)



|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|------------------------------------------- |  | ------------------------------ | ----- | ----------------------------- | - | ------ | ------------------------------------ |  | - | --------------------- | ---- |  | ------------------------ | ----- | --- |  | - | -----
|                                            |  | BALANCE AT BEGINNING OF
PERIOD |       | CHARGED TO COSTS AND EXPENSES |   |        | CHARGED TO OTHER ACCOUNTS - DESCRIBE |  |   | DEDUCTIONS - DESCRIBE |      |  | BALANCE AT END OF
PERIOD
|Year ended December 31, 2006                |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Allowance for Doubtful Accounts             |  | $                              | 494   |                               | $ | 1,619  |                                      |  | $ |                      |      |  | $                        | 933   | (1) |  | $ | 1,180
|Allowance for Obsolescence                  |  |                                | 1,292 |                               |   | 457    |                                      |  |   |                      |      |  |                          |      |     |  |   | 1,749
|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Total                                       |  | $                              | 1,786 |                               | $ | 2,076  |                                      |  | $ |                      |      |  | $                        | 933   |     |  | $ | 2,929
|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Year ended December 31, 2005                |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Allowance for Doubtful Accounts             |  | $                              | 627   |                               | $ | 516    |                                      |  | $ |                      |      |  | $                        | 649   | (1) |  | $ | 494  
|Allowance for Obsolescence                  |  |                                | 987   |                               |   | 305    |                                      |  |   |                      |      |  |                          |      |     |  |   | 1,292
|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Total                                       |  | $                              | 1,614 |                               | $ | 821    |                                      |  | $ |                      |      |  | $                        | 649   |     |  | $ | 1,786
|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Year ended December 31, 2004                |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Allowance for Doubtful Accounts             |  | $                              | 603   |                               | $ | 709    |                                      |  | $ |                      |      |  | $                        | 685   | (1) |  | $ | 627  
|Allowance for Obsolescence                  |  |                                | 733   |                               |   | 301    |                                      |  |   |                      |      |  |                          | 47    | (2) |  |   | 987  
|Reserve for Lease Termination               |  |                                | 4,021 |                               |   |       |                                      |  |   |                      |      |  |                          | 4,021 | (3) |  |   |     
|Valuation Allowance for Deferred Tax Assets |  |                                | 4,053 |                               |   | (1,326 | )                                    |  |   | (2,727                | )(4) |  |                          |      |     |  |   |     
|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      
|Total                                       |  | $                              | 9,410 |                               | $ | (316   | )                                    |  | $ | (2,727                | )    |  | $                        | 4,753 |     |  | $ | 1,614
|                                            |  |                                |       |                               |   |        |                                      |  |   |                       |      |  |                          |       |     |  |   |      

---

|(1) | Uncollectible amounts charged to allowance for doubtful accounts
|--- | ----------------------------------------------------------------

|(2) | Obsolete items charged to allowance for obsolescence
|--- | ----------------------------------------------------

|(3) | Lease payments for B737 aircraft charged against the reserve
|--- | ------------------------------------------------------------

|(4) | Write-off of state net operating loss carryforwards against valuation allowance
|--- | -------------------------------------------------------------------------------



67



---

##### Table of Contents

INDEX TO EXHIBITS



|            |  |                                                                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                               
|3.1         |  | Articles of Incorporation (1)                                                                                                                                                                                             
|            | 
|3.2         |  | By-Laws (As Amended and Restated on July 28, 2005) (13)                                                                                                                                                                   
|            | 
|4.1         |  | See the Articles of Incorporation filed as Exhibit 3.1 and Bylaws filed as Exhibit 3.2                                                                                                                                    
|            | 
|10.1        |  | Incentive Stock Option Agreement dated June 1, 1993, between ValuJet Airlines, Inc. and Lewis H. Jordan (2)(3)                                                                                                            
|            | 
|10.2        |  | 1993 Incentive Stock Option Plan (2)(3)                                                                                                                                                                                   
|            | 
|10.3        |  | 1994 Stock Option Plan (2)(3)                                                                                                                                                                                             
|            | 
|10.4        |  | 1995 Employee Stock Purchase Plan (4)                                                                                                                                                                                     
|            | 
|10.5*       |  | Purchase Agreement between McDonnell Douglas Corporation and ValuJet Airlines, Inc. dated December 6, 1995 (5)                                                                                                            
|            | 
|10.6        |  | Agreement and Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (5)                                                                                                           
|            | 
|10.7        |  | 1996 Stock Option Plan (3)(6)                                                                                                                                                                                             
|            | 
|10.8        |  | Airways Corporation 1995 Stock Option Plan (3)(8)                                                                                                                                                                         
|            | 
|10.9        |  | Airways Corporation 1995 Directors Stock Option Plan (3)(8)                                                                                                                                                               
|            | 
|10.10       |  | Lease of headquarters in Orlando, Florida, dated November 14, 1995 (9)                                                                                                                                                    
|            | 
|10.11       |  | Orlando International Lease and Use Agreement (10)                                                                                                                                                                        
|            | 
|10.12       |  | Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation Authority and Page AvJet Corporation dated December 11, 1989 (11)                                                            
|            | 
|10.13       |  | Amendment No. 1 to Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation Authority and Page AvJet Corporation dated June 22, 1990 (11)                                             
|            | 
|10.14       |  | Agreement and Second Amendment to Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation Authority and the Company dated January 25, 1996
(11)                                      
|            | 
|10.15       |  | Note Purchase Agreement dated as of November 3, 1999, among the Company, AirTran Airways, Inc., State Street Bank and Trust Company of Connecticut National Association and First Security
Bank, National Association (12)
|            | 
|10.16       |  | Note Agreement, dated April 12, 2001, between AirTran Holdings, Inc. and Boeing Capital Loan Corporation, including as an exhibit thereto the form of notes (15)                                                          
|            | 
|10.17       |  | Warrant Agreement, dated April 12, 2001, between AirTran Holdings, Inc. and Wilmington Trust Company (14)                                                                                                                 
|            | 
|10.18       |  | Purchase Agreement, dated April 12, 2001, among AirTran Holdings, Inc., AirTran Airways, Inc. and Boeing Capital Loan Corporation (15)                                                                                    
|            | 
|10.19       |  | Indenture, dated as of April 12, 2001, between AirTran Airways, Inc. and Wilmington Trust Company, as trustee, including as an exhibit thereto the form of note (15)                                                      
|            | 
|10.20       |  | Employment Agreement dated as of October 6, 2001, between the Company and Joseph B. Leonard (16)                                                                                                                          
|            | 
|10.21       |  | Employment Agreement dated as of October 28, 2004, between the Company and Joseph B. Leonard (3) (17)                                                                                                                     
|            | 
|10.22*      |  | Aircraft General Terms Agreement Number AGTA-CQT, dated July 3, 2003, by and between The Boeing Company (Boeing), and AirTran Airways, Inc. (AirTran)
(18)                                                            



68



---

##### Table of Contents

|       |  |                                                                                                                                                                                                                                                                                                                                                            
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23* |  | Purchase Agreement Number 2444, dated July 3, 2003 (Purchase Agreement 2444), between Boeing and AirTran, as supplemented by Purchase Agreement 2444 Supplement No. 1, by and
between Boeing and AirTran (18)                                                                                                                                            
|       | 
|10.24* |  | Letter Agreements to Purchase Agreement 2444, each dated July 3, 2003, by and between Boeing and AirTran (18)                                                                                                                                                                                                                                              
|       | 
|10.25* |  | General Terms Agreement No. CFM-03-0017 (GTA CFM-03-0017), dated June 30, 2003, by and between CFM International Inc. (CFM) and AirTran, as supplemented by Letter
Agreement No. 1 to GTA CFM-03-0017, dated June 30, 2003, by and between CFM and AirTran, and Letter Agreement No. 1-A, dated September 10, 2003, by and between CFM and AirTran (18)
|       | 
|10.26* |  | Maintenance Cost Per Hour Engine Service Agreement, dated August 13, 2003, by and between GE Engine Services, Inc. and AirTran (18)                                                                                                                                                                                                                        
|       | 
|10.27  |  | Aircraft Lease Common Terms Agreement, dated August 15, 2003, by and between Aviation Financial Services, Inc. and AirTran (18)                                                                                                                                                                                                                            
|       | 
|10.28* |  | Form of Aircraft Lease Agreement entered into with respect to twenty-two (23) Boeing model 737-700 aircraft, together with the cover page from each of the twenty-two (23) individual Aircraft
Lease Agreements (18)                                                                                                                                       
|       | 
|10.29  |  | Engine Lease Common Terms Agreement, dated August 15, 2003, by and between Aviation Financial Services, Inc. and AirTran (18)                                                                                                                                                                                                                              
|       | 
|10.30* |  | Form of Engine Lease Agreement entered into with respect to six (6) CFM International model CFM56-7B20 engines, together with the cover pages from each of the six (6) individual Engine Lease
Agreements (18)                                                                                                                                             
|       | 
|10.31* |  | Letter Agreement 5-1005-JSW-737, dated July 3, 2003, by and between Boeing and AirTran (18)                                                                                                                                                                                                                                                                
|       | 
|10.32* |  | Amendment No. 11 to Purchase Agreement No. DAC95-40-D, dated July 3, 2003, by and between McDonnell Douglas Corporation, a wholly owned subsidiary of Boeing (MDC), and AirTran (18)                                                                                                                                                                     
|       | 
|10.33* |  | Amendment No. 6 to Letter Agreement No. 1 to Purchase Agreement No. DAC95-40-D, dated July 3, 2003, by and between MDC and AirTran (18)                                                                                                                                                                                                                    
|       | 
|10.34* |  | B717 Lease Financing Letter Agreement, dated July 3, 2003, by and between Boeing and AirTran (18)                                                                                                                                                                                                                                                          
|       | 
|10.35* |  | AirTran Holdings, Inc. Amended and Restated 2002 Long Term Incentive Plan (17)                                                                                                                                                                                                                                                                             
|       | 
|10.36* |  | Loan Agreement, dated as of August 31, 2005, by and among AirTran Airways, Inc. (AirTran), as Borrower, The Parties Identified in Schedule 1 thereto as Lenders, as Lenders, and The
Royal Bank of Scotland plc, New York Brach (RBS), as Security Agent (20)                                                                                          
|       | 
|10.37* |  | Credit Agreement, dated as of August 31, 2005, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lenders, and RBS, as Security Agent (20)                                                                                                                                                                                



69



---

##### Table of Contents

|       |  |                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.38* |  | Security Agreement, dated as of August 31, 2005, by and between AirTran, as Borrower, and RBS, as Security Agent (20)                                                                                                      
|       | 
|10.39* |  | Credit Agreement, dated as of December 7, 2005, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lenders, and HSH Nordbank AG, New York Branch, as Security
Agent (23)                  
|       | 
|10.40* |  | Security Agreement, dated as of December 7, 2005, by and between AirTran, as Borrower, and HSH Nordbank AG, New York Branch, as Security Agent (23)                                                                        
|       | 
|10.41* |  | Association of Flight Attendants  CWA, AFL-CIO, Flight Attendant Labor Contract with AirTran Airways, Effective June 1, 2005, Amendable December 1, 2008 (7)                                                              
|       | 
|10.42  |  | Notice to executive officers of AirTran Holdings, Inc. regarding the acceleration of incentive options and acceleration of non-qualified options (22)                                                                      
|       | 
|10.43* |  | Credit Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and BNP Paribas S.A. (acting through its Paris Branch),
as Security Agent (24)   
|       | 
|10.44* |  | Security Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, and the BNP Paribas S.A. (acting through its Paris Branch), as Security Agent (24)                                                      
|       | 
|10.45* |  | Credit Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York Branch, as
Security Agent (24)       
|       | 
|10.46* |  | Security Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, and The Royal Bank of Scotland Plc New York Branch, as Security Agent (24)                                                              
|       | 
|10.47* |  | Loan Agreement [N320AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.48* |  | Loan Agreement [N330AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.49* |  | Loan Agreement [N336AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.50* |  | Loan Agreement [N337AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|10.51* |  | Loan Agreement [N344AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York
Branch, as Security Agent (24)
|       | 
|21.1   |  | Subsidiaries of AirTran Holdings, Inc. (19)                                                                                                                                                                                
|       | 
|21.2   |  | Subsidiaries of AirTran Airways, Inc. (19)                                                                                                                                                                                 
|       | 
|23     |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                   
|       | 
|31.1   |  | CEO certification pursuant to Rule 13(a)-14 or 15(d)-14                                                                                                                                                                    
|       | 
|31.2   |  | CFO certification pursuant to Rule 13(a)-14 or 15(d)-14                                                                                                                                                                    
|       | 
|32     |  | CEO and CFO certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                          
|       | 
|99.1   |  | Instructions on requesting copies of AirTran Holdings, Inc.s Corporate Governance Guidelines, Code of Ethics and the charters for the Audit, Compensation and Corporate Governance
Committees                             
|       | 
|99.2   |  | Letter of Resignation from Robert L. Priddy (22)                                                                                                                                                                           

---

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

|(1) | Incorporated by reference to the Companys Registration Statement on Form S-4, registration number 33-95232, filed with the Commission on August 1, 1995 and amendments
thereto.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to the Companys Registration Statement on Form S-1, registration number 33-78856, filed with the Commission on May 12, 1994 and amendments
thereto.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Management contract or compensation plan or arrangement required to be filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c) of Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, (Commission File No. 0-24164), filed with the Commission on
August 11, 1995.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 1995, (Commission File No. 0-24164), filed with the Commission on
March 29, 1996 and amendment thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 1996, (Commission File No. 0-24164), filed with the Commission on
March 31, 1997.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on May 26, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Airways Corporations Registration Statement on Form S-4, registration number 33-93104, filed with the Commission.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to the Quarterly Report on Form 10-Q of Airways Corporation (Commission File No. 0-26432) for the quarter ended December 31, 1995.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



70



---

##### Table of Contents

|(10) | Incorporated by reference to the Quarterly Report on Form 10-Q of Airways Corporation (Commission File No. 0-26432) for the quarter ended December 31, 1996.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated by reference to the Annual Report on Form 10-K of Airways Corporation (Commission File No. 0-26432) for the year ended March 31, 1997.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 1999, (Commission File No. 0-26914), filed with the Commission on
March 30, 2000.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on August 1, 2005.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated by reference to the Companys Current Report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on June 18, 2001.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q, (Commission File No. 1-15991), for the quarter ended June 30, 2001.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2001, (Commission File No. 1-15991), filed with the Commission
on March 28, 2002.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(17) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on May 19, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------

|(18) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, (Commission File No. 1-15991), filed with the
Commission on November 14, 2003.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(19) | Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2003, (Commission File No. 1-15991), filed with the Commission
on March 26, 2003.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(20) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, (Commission File No. 1-15991), filed with the
Commission on November 9, 2005.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(21) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on May 6, 2005.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------

|(22) | Incorporated by reference to the Companys report on Form 8-K, (Commission File No. 1-15991), filed with the Commission on September 16, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(23) | Incorporated by reference to the Companys Annual Report on Form 10-K, (Commission File No. 1-15991), filed with the Commission on March 9, 2006.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(24) | Incorporated by reference to the Companys Annual Report on Form 10-Q for the quarter ending September 30, 2006, (Commission File No. 1-15991), filed with the
Commission on November 1, 2006.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



71