SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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


                  For the fiscal year ended: December 31, 1999
                         Commission File Number 0-26582

                               World Airways, Inc.
             (Exact name of registrant as specified in its charter)

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

              13873 Park Center Road, Suite 490, Herndon, VA 20171
                    (Address of Principal Executive Offices)

                                 (703) 834-9200
                         (Registrant's telephone number)

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

          Title of Each Class Name of Each Exchange on Which Registered

                                      NONE

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

                     Common Stock, par value $.001 per share

               Convertible Senior Subordinated Debentures due 2004

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

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

The aggregate market value of the Common Stock held by non-affiliates of the
registrant on March 15, 2000, was approximately $3,244,000.

The number of shares of the registrant's Common Stock outstanding on March 15,
2000 was 6,446,416.

DOCUMENTS INCORPORATED BY REFERENCE

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

<PAGE>



                               WORLD AIRWAYS, INC.
                         1999 ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS



PART I
------
Item 1.  Business

Item 2.  Properties

Item 3.  Legal Proceedings

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


PART II
-------
Item 5.  Market for Registrant's Common Equity and Related Stockholders Matters

Item 6.  Selected Financial Data

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

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Item 8.  Financial Statements and Supplemental Data

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

PART III
--------
Item 10  Directors and Executive Officers of the Registrant

Item 11  Executive Compensation

Item 12  Security Ownership of Certain Beneficial Owners and Management

Item 13  Certain Relationships and Related Transactions


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

<PAGE>



                                     PART I


Item 1.   Business

World Airways, Inc. ("World Airways" or the "Company") was organized in 1948 and
is a U.S. certificated air carrier. Airline operations account for 100% of the
Company's operating revenue. World Airways provides long-range passenger and
cargo charter air transportation, serving the U.S. Government, international
passenger and cargo air carriers, tour operators, major international freight
forwarders and cruise ship companies. The principal executive offices of World
Airways are located near Washington Dulles International Airport in The Hallmark
Building, 13873 Park Center Road, Herndon, Virginia 20171 and the Company's
telephone number is (703) 834- 9200. See Ownership.

In August 1997 the Company issued $50.0 million of 8% Convertible Senior
Subordinated Debentures (the "Debentures") due in 2004. Net proceeds of the
Debentures were used to purchase 4 million shares of Common Stock for $30.6
million, repay certain indebtedness aggregating approximately $3.8 million,
increase working capital and for general corporate purposes. During 1999 $1.2
million of the Debentures were converted into Common Stock and the Company
purchased $8.2 million principal amount of Debentures at a discount of
approximately 75% for a combination of cash and treasury stock. Also during
1999, the Company hired CIBC World Markets Corp. ("CIBC") as financial advisor
to assist the Company with a restructuring and recapitalization of the Company's
balance sheet. As part of those efforts CIBC initiated contact with Debenture
holders and other parties on strengthening the Company financially. Although in
February 2000 CIBC suspended further talks with the holders of the Debentures,
they will continue to explore other alternatives for strengthening the Company
financially.

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

Ownership

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

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

On February 12, 1999 WorldCorp filed a petition for protection from its
creditors under Chapter 11 of the U. S. Bankruptcy laws in the United States
Bankruptcy Court for the District of Delaware. In August 1999 the Company
concluded an agreement with WorldCorp to settle a secured loan and other amounts
totaling approximately $1.8 million that WorldCorp owed the Company when
WorldCorp filed for bankruptcy protection. In connection with the agreement,
that was approved by the Bankruptcy Court overseeing WorldCorp's bankruptcy
proceedings, WorldCorp returned 1,069,000 shares of the Company's Common Stock
(based on market value at date of settlement) it owned in exchange for the $1.8
million owed.

Under an agreement among World Airways, WorldCorp and Naluri, if at any time
after October 30, 1996 World Airways registers additional Common Stock under the
Securities Act of 1933, Naluri has the right to demand the registration of its
shares of the Company's Common Stock. Under a shareholders agreement, Naluri has
the right to nominate two members to the Company's Board of Directors and
WorldCorp has agreed to vote its shares of Common Stock to elect such nominees.
Also, if without the prior written consent of Naluri: (1) World Airways sells
all or substantially all of its business; or (2) World Airways fundamentally
changes its line of business, then Naluri has the option to require WorldCorp to
purchase all or part of Naluri's shares at fair market value. Fair market value
is defined to be not less than the aggregate of the costs borne by Naluri in
acquiring and holding its World Airways shares. Management has indicated that it
does not have any current intent to take any such actions without the prior
consent of Naluri or the directors nominated by Naluri.

The shareholders agreement also provides that if WorldCorp's ownership interest
in the Company falls below 51% of the outstanding shares of Common Stock, then
Naluri may either sell its shares to a third party or require WorldCorp to sell
a pro rata number of shares held by Naluri to the party purchasing WorldCorp's
shares. Naluri has not taken any action to exercise its rights as a result of
WorldCorp's ownership falling below 51% in 1999. Naluri also has a right of
first refusal to purchase shares of Common Stock issued by the Company or sold
by WorldCorp and to purchase additional shares of Common Stock to maintain its
ownership percentage in the Company.

At February 29, 2000, WorldCorp and Naluri own 38.5% and 18.9%, respectively, of
the outstanding Common Stock of World Airways, with the balance publicly traded.
Except as limited by contractual arrangements with Naluri, the beneficial owner
of WorldCorp's interest in the Company is in a position to have significant
influence over the outcome of many issues effecting World Airways' stockholders,
including the election of members of World Airways' Board of Directors, adoption
of amendments to World Airways' Certificate of Incorporation, and approval of
mergers.

On March 16, 2000, WorldCorp, and its wholly-owned subsidiary WorldCorp
Acquisition Corp., filed a proposed plan of liquidation in the bankruptcy court
that calls for all of their shares of World Airways Common Stock to be sold or
distributed to creditors.  In order to facilitate such a sale or distribution,
the Company intends to register those shares under the Securities Act of 1933.
In addition, a group of investors that includes members of the Company's
management and Board of Directors are negotiating to purchase some or all of the
shares.  Any such sale will be subject to approval by the bankruptcy court and
to higher and better offers from competing bidders.

WorldCorp's proposed plan of liquidation also calls for the shareholders
agreement with Naluri to be rejected, meaning that WorldCorp will not perform
its obligations under the agreement and the agreement will not be binding on the
purchasers of the shares of Common Stock. The WorldCorp plan of liquidation is
currently being considered by creditors and is scheduled to be presented to the
bankruptcy court for approval on April 26, 2000.  WorldCorp's rejection of the
shareholders agreement could have the effect of reducing or eliminating any
continuing obligations of the Company under that agreement.

Overview & Operating Environment

For more than 51 years World Airways has been a global provider of long-range
passenger and cargo air transportation services to the U.S. Air Force ("USAF"),
major international airlines, major international freight forwarders,
international leisure tour operators and, more recently, cruise ship companies.
As of February 29, 2000 the Company's operations employ ten wide-body long-range
aircraft that are operated under two types of fixed-rate contracts - ACMI or
Full Service.

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

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

World Airways focuses its marketing efforts on the U.S. Air Force Air Mobility
Command ("AMC"), cruise ship companies, international leisure tour operators,
freight operators and international airlines operating in countries where rapid
economic development drives demand for the Company's services. The Company
believes that its modern fleet of aircraft is well suited to the needs of its
customers and provides superior economics as compared to other popular aircraft.
The Company increases its potential customer base by being able to serve both
passenger and cargo customers. The Company flies passenger, cargo and
passenger/cargo convertible aircraft that permits it to target more
opportunities.

The Company generally charges customers on a block hour basis rather than on a
per seat, per pound or seat mile basis. "Block hours" are defined as the elapsed
time from the moment the aircraft first moves under its own power at the point
of origin to the time it comes to rest at its final destination. "Seat miles"
are defined as the number of miles an aircraft flies times the number of seats
on the aircraft. The Company generally charges a lower rate per block hour for
ACMI contracts than full service contracts, although it does not necessarily
earn a lower profit.

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

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

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

Prior to 1999 the Company derived a significant percentage of its revenues and
block hours from its operations in the Pacific Rim region. In 1997 through 1999
these operations were adversely effected by economic conditions in Malaysia,
Indonesia and other countries in the Asia Pacific Region. Those conditions
included national liquidity crises, significant depreciation in the value of the
ringgit and rupiah, higher domestic interest rates, reduced opportunity for
refinancing or refunding of maturing debts, and a general reduction in spending
throughout the region. However, management now believes these conditions have
started to improve and will provide new opportunities to wet lease aircraft to
airline customers, particularly those who have deferred or canceled new aircraft
orders but are still in need of providing additional airlift.

Similarly to other airlines, the Company's business is affected by seasonal
factors. During the early part of the first quarter, the Company typically
experiences lower levels of utilization and revenue per block hour ("yield"),
due to lower demand relative to other times of the year. The Company experiences
higher levels of utilization and yields in the later part of the first quarter
continuing into the second quarter, principally due to higher demand for
commercial passenger services associated with the annual Hadj pilgrimage.
Because the Islamic calendar is a lunar-based calendar, the Hadj pilgrimage
occurs approximately 10 to 12 days earlier each year relative to the Western
(Gregorian) calendar. In 2000, the Company's flight operations associated with
the Hadj pilgrimage will occur from February 14 to April 14.

Due to the high fixed costs of leasing and maintaining aircraft and costs for
cockpit crewmembers and flight attendants, the Company's aircraft must have high
utilization at attractive rates in order for the Company to operate profitably.
Although World Airways' preferred strategy is to enter into long-term contracts
with customers, the terms of existing customer contracts are shorter than the
terms of the Company's lease obligations with respect to its aircraft. There is
no assurance that the Company will be able to enter into additional contracts
with new or existing customers or that it will be able to obtain enough
additional business to fully utilize each aircraft. World Airways' financial
position and results of operations could be materially adversely affected even
by relatively brief periods of low aircraft utilization and yields.

World Airways' current operating philosophy is to build on its existing
relationships to achieve a strong platform for future growth while at the same
time grow its full service and cargo business. The Company's strategy is based,
first and foremost, upon providing the highest level of service to its
customers, thereby maintaining and expanding the amount of business being done
with existing customers. The Company perceives a number of opportunities for its
charter business created by a growing global economy, particularly long-term
growth in second and third world economies where the demand for airlift exceeds
capacity, notwithstanding economic problems faced by some developing countries
in recent years. World Airways attempts to maximize profitability by combining
ACMI contracts with full service agreements that meet the peak seasonal
requirements of its customers. The Company can respond to rapidly changing
market conditions and requirements because its fleet of aircraft can be deployed
in a variety of configurations.

Consistent with prior years, the Company has unsold capacity in the third and
fourth quarters of 2000 and beyond, however, historically it has been successful
in obtaining new business to utilize such capacity. Although there can be no
assurance that it will be able to secure additional business to utilize this
unsold capacity, the Company is actively seeking additional business for 2000
and beyond. The Company's financial results and financial condition would be
affected adversely if the Company is unable to secure business to utilize its
unsold capacity.

Customers

Over the years, the Company has had long-term business relationships with
several major international airlines and with the AMC of the USAF.

In 1999, the Company's principal customers were the USAF and Malaysian Airline
System Berhad ("Malaysia Airlines" or "MAS"). For the year ended December 31,
1999, these customers provided approximately 51.0%, and 9.0%, respectively, of
the Company's revenues and 35.1%, and 11.1%, respectively, of total block hours
flown. In 1998, the Company's principal customers were the USAF, MAS, and P.T.
Garuda Indonesia ("Garuda"). For 1998, these customers provided approximately
40.9%, 18.6%, and 11.7%, respectively, of revenues and 27.1%, 18.2%, and 12.8%,
respectively, of total block hours flown. In 1997, the USAF, MAS and Garuda
provided approximately 25.4%, 21.0%, and 9.9%, respectively, of the Company's
revenues and 15.8%, 22.6%, and 10.8%, respectively, of total block hours flown.
A contract with Philippine Airlines, which expired in February 1998, provided
31% of revenues and 34% of block hours flown in 1997.

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

The USAF awards points to air carriers acting alone or through teaming
arrangements in proportion to the number and type of aircraft made available to
CRAF. The Company utilizes teaming arrangements to maximize the value of
potential awards. Until 1999 the Company lead a contractor teaming arrangement
that enjoyed a large market share of the USAF's overall commercial airlift
requirement. During a period in which the U.S. military downsized substantially,
the Company's portion of the fixed USAF award increased from $15.6 million for
the government's 1992-93 fiscal year, to $86 million for the government's
1998-99 fiscal year. The Company's teaming agreement negotiations for fiscal
year October 1999 to September 2000 resulted in a substantially reduced share of
the USAF's fixed commercial airlift requirement - $27 million compared to the
$86 million for 1998-1999. However, the Company believes it will be in a
position to obtain an increased share of expansion flying which is customarily
awarded by the USAF over and above the fixed contract flying. In calendar year
1999, the Company's revenue from the fixed award was $94 million and its AMC
expansion revenue was $40.5 million. In December 1999, the Company was requested
by AMC to operate passenger charter flights from January 28, 2000 through April
2000 to replace another carrier that had previously been awarded a contract for
the flying. The value of the additional flying is approximately $13.5 million.
The Company cannot determine how future military spending budgets, airlift
requirements, and national security considerations for a continued strong and
balanced CRAF and the instability of other countries will combine to affect
future business with the USAF.

Malaysia Airlines. World Airways has provided wet lease services to Malaysia
Airlines since 1981 for MAS' scheduled passenger and cargo operations as well as
transporting passengers for annual Hadj pilgrimages. Naluri, which owns 18.9% of
World Airways' Common Stock, also owns 28% of MAS. In 1999 and 1998, the Company
received approximately $7.3 million and $19.5 million, respectively, in revenue
associated with minimum guarantee payments from MAS. Effective October 1999 the
Company ceased operating for MAS as a result of the cessation of monthly
payments by MAS for the remaining aircraft being operated for them. MAS has
taken the position that its obligations to make payments for the aircraft ceased
on September 30, 1999. The Company deployed the aircraft elsewhere following
MAS's cessation of payments.

Renaissance Cruises. The Company began flying one aircraft for Renaissance
Cruises ("Renaissance") in August 1999, providing exclusive air service to
Athens, Greece, and Istanbul, Turkey, from New York. Subsequently in 1999 the
Company and Renaissance agreed to a three-year extension of the original
agreement. The Company expects to dedicate a second aircraft to serving
Renaissance later in 2000 and a third aircraft in 2001. The additional aircraft
will expand the current service and provide additional service to Lisbon,
Portugal, and Barcelona, Spain. Although Renaissance only accounted for 4.2% of
revenues and 3.5% or block hours in 1999, the Company expects that Renaissance
will become one of the Company's more significant customers in future years.

Garuda. The Company has flown for Garuda periodically since 1973. In 1997,
approximately 40,000 of the 200,000 Indonesians who traveled to Jeddah for the
Hadj pilgrimage flew on the Company's aircraft and the Company operated six
aircraft for Garuda during the 1998 pilgrimage. The Company did not operate any
aircraft for Garuda for the 1999 Hadj; however, the Company will be operating
four aircraft for Garuda for the 2000 Hadj.

STAF. In April 1998, the Company entered into an agreement with Servicios De
Transportes Aereos Fueguinos ("STAF") to provide one cargo aircraft for a
three-year term that began in May 1998.

The Company had an overall contract backlog at December 31, 1999 of $370
million, compared to $237 million at December 31, 1998. Approximately $148
million of the backlog relates to operations during 2000. The Company's backlog
for each contract is determined by multiplying the minimum number of block hours
guaranteed under the applicable contract by the specified hourly rate under such
contract. Approximately 70.1% and 7.6% of the backlog relates to its contracts
with Renaissance and the USAF, respectively.

See Note 13 of the Company's "Notes to Financial Statements" in Item 8 for
additional information regarding major customers and foreign source revenue.

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

                             Year Ended December 31,
                                 1999 1998 1997

     Passenger Charter Operations      $   195.6       $   221.9      $   267.3
     Cargo Charter Operations               67.6            47.7           39.5

Aircraft Fleet

As of February 29, 2000 the Company's operating fleet consisted of eight MD-11
and two DC-10-30 aircraft, all of which are leased under operating leases. The
MD-11 aircraft include five passenger aircraft (two of which are long-range
versions), one freighter aircraft and two convertible aircraft. The DC10-30
aircraft include one passenger aircraft and one convertible aircraft.

Maintenance

Airframe and engine maintenance costs that account for most of the Company's
maintenance expenses typically increase as the aircraft fleet ages. The Company
outsources major airframe maintenance and engine work to several suppliers. The
Company has a contract expiring in April 2003 with United Technologies
Corporation's Pratt & Whitney Group for all off-wing maintenance on the PW 4462
engines that power its MD-11 aircraft. Under this contract, the manufacturer
agreed to provide such maintenance services at a cost not to exceed specified
rates per flight hour during the term of the contract. The Company presently
does not expect its maintenance costs per flight hour to exceed the rates
specified in the contract.

Aviation Fuel

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

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

Regulatory Matters

Since it was founded in 1948, the Company has been authorized to engage in
commercial air transportation by the U.S. Department of Transportation ("DOT")
or its predecessor agencies. The Company is currently authorized to engage in
scheduled and charter air transportation to provide combination (persons,
property and mail) and all-cargo services between all points in the U.S., its
territories and possessions. It also holds worldwide charter authority for both
combination and all-cargo operations. In addition, the Company is authorized to
conduct scheduled combination services to the foreign points listed in its DOT
certificate. The Company also holds certificates of authority to engage in
scheduled all-cargo services to a limited number of foreign destinations.

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

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

In 1999 the FAA issued a notice of proposed rulemaking concerning an
Airworthiness Directive ("AD") that will require the replacement of insulation
blankets on the Company's MD-11aircraft. It is expected the FAA will issue a
final AD in 2000 that will require the replacement of the blankets to be
accomplished within four years. The Company presently estimates that the cost of
the replacement, including labor, material and out-of-service costs will total
approximately $4.9 million per aircraft. The Company has not yet determined how
the cost of replacing the blankets will be financed. The ultimate resolution of
this matter could have a material adverse effect on the Company's financial
condition and results of operations.

As of December 31, 1999, the FAA has also issued two modification requirements
and proposed one that will require the Company to make future modifications to
its aircraft. The first requirement provides that lower cargo compartments of
aircraft have fire suppression systems installed by March 2001. All of the
Company's aircraft except one currently comply with this requirement. The
estimated cost of modifying the one aircraft is approximately $0.4 million. The
second requirement provides that all aircraft have expanded recording
capabilities by August 2001 through the installation of Digital Flight Data
Recorders. The Company estimates the cost of installing such recorders in its
fleet will be approximately $0.5 million. It is also expected that the FAA will
issue a rule prior to December 21, 2000 that will require the Company to install
Enhanced Ground Proximity Warning Systems in its aircraft. The Company currently
estimates the cost of such installation will be approximately $65,000 per
aircraft.

In March 2000, the FAA issued an AD that will require the Company to make
modifications to the control system for the automatic cargo loading system on
five of the Company's MD-11 aircraft. The Company expects it will be able to
comply with the AD at minimal cost and with no disruption to flight operations.

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

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

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

Certain airports served by the Company are subject to slot allocations
administered by the governments of the countries in which such airports are
located or by coordinating committees comprising airline representatives. A
"slot" is an authorization to take off or land at the designated airport within
a specified time window. In the past, the Company has generally been successful
in obtaining the slots it needs in order to conduct its operations. There can be
no assurance, however, that it will be able to do so in the future because,
among other factors, government policies regulating the distribution of slots,
both in the U.S., and in foreign countries, are subject to change.

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

Due to its participation in the CRAF program of the USAF, the Company is subject
to inspections approximately every two years by the military as a condition of
retaining its eligibility to perform military charter flights. The last such
inspection was undertaken in 1998 and the next is anticipated to occur in April
2000. As a result of such inspections, the Company has been required to
implement measures, such as the establishment of a crew resource management
course, beyond those required by the DOT, FAA and other government agencies. The
USAF may terminate its contract with the Company if the Company fails to pass
such inspection or otherwise fails to maintain satisfactory performance levels,
if the Company loses its airworthiness certificate or if the aircraft pledged to
the contracts lose their U.S. registry or are leased to unapproved carriers.

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

Employees

As of February 29, 2000, the Company had 849 full time equivalent employees
classified as follows:

                                                   Number of
                                                   Full-Time
     Classification                                Employees
     --------------                                ---------
     Management                                         15
     Administrative and Operations                     270
     Cockpit Crew                                      232
     Flight Attendants                                 332
                                                    ------
     Total Employees                                   849
                                                    ======

The Company's cockpit crewmembers, approximately 27% of the Company's employees,
who are represented by the International Brotherhood of Teamsters (the
"Teamsters"), are subject to a collective bargaining agreement that will be
amendable June 30, 2003.

The Company's flight attendants, approximately 39% of the Company's employees,
who are also represented by the Teamsters, are subject to a four-year collective
bargaining agreement that will be amendable June 30, 2000. The Company's flight
attendants have argued the "scope clause" of the collective bargaining agreement
has been violated by the Company and have challenged the use of foreign flight
attendant crews on the Company's flights for Garuda Indonesia which has
historically been the Company's operating procedure. In certain instances the
Company is contractually obligated to permit its customers to deploy their own
flight attendants. While the arbitrator in this matter denied in 1997 the
Union's request for back pay to affected flight attendants for flying relating
to the 1994 Hadj, the arbitrator concluded that the Company's contract with its
flight attendants requires the Company to first actively seek profitable
business opportunities that require using the Company's flight attendants,
before the Company may accept wet lease business opportunities that use the
flight attendants of the Company's customers. In 1997, the flight attendants
filed "scope clause" grievances with respect to four separate wet-lease
contracts and in January 2000 they filed another "scope clause" grievance with
respect to the 2000 Garuda Hadj agreement. An adverse decision on one or more of
the grievances could have a material adverse impact on the financial condition
or results of operations of World Airways.

The Company's aircraft dispatchers, who are represented by the Transport Workers
Union (the "TWU") are subject to a collective bargaining agreement that will be
amendable December 31, 2003. Fewer than 12 Company employees are covered by this
collective bargaining agreement.

The Company is unable to predict whether any of its employees not currently
represented by a labor union will elect to be represented by a labor union or
collective bargaining unit. The Company is not aware of any parties or group of
employees who have indicated any intent of petitioning for such an election. The
election by such employees of representation in such an organization could
result in employee compensation and working condition demands that could have a
material adverse effect on the financial results of the Company.

Item 2.   Properties

Flight Equipment

At December 31, 1999, the Company's operating fleet consisted of 10 leased
aircraft as follows:

                                         Capacity
                                    ---------------------
                                    Passenger      Cargo
    Aircraft(a)                     (Seats)(b)     (Tons)        Total
    -----------------------------   ----------     ------        -----
    McDonnell Douglas MD-11            409           --            3
    McDonnell Douglas MD-11F            --           95            1
    McDonnell Douglas MD-11CF          410           90            2
    McDonnell Douglas MD-11ER          409           --            2
    McDonnell Douglas DC10-30          355           --            1
    McDonnell Douglas DC-10-30CF       380           65            1
                                                               -----
        Total                                                     10

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

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

The lease terms for the MD-11 aircraft expire between 2005 and 2020 (assuming
the exercise of a 12-year lease extension for the two MD-11ER aircraft). In
1999, in conjunction with amending the leases, the lessors obtained the right,
based on a failure of the Company to meet certain financial performance
requirements, that allow them to cancel the lease of any aircraft with 12 months
notice. To date, the Company has not been notified of any intent of the lessors
to cancel lease. If the Company fails to achieve a certain annual net income
level in 2000 and subsequent years, the lessors have similar termination rights.
The termination rights for the two MD-11ER aircraft extend into 2006 and the
termination rights for the other six MD-11 aircraft extend through 2001.

The lease term on the DC-10-30CF aircraft expires in January 2003. The lease
term for the other DC-10-30 aircraft is cancelable by the Company with 90 days
notice. The Company presently intends to operate the aircraft through the
balance of 2000.

Ground Facilities

The Company leases office space located near Washington Dulles International
Airport, which houses its corporate headquarters and substantially all of the
administrative employees of the Company. In addition, the Company leases
additional office and warehouse space in New York, New York; Wilmington,
Delaware; Los Angeles, California; Yokota, Japan; and Frankfurt, Germany.
Additional small office and maintenance material storage space is leased at
often frequented airports to provide administrative and maintenance support for
commercial and military contracts.

Item 3.   Legal Proceedings

In connection with the discontinuance of World Airways' scheduled service
operations in 1996, the Company has been subject to claims by various third
parties and may be subject to further claims in the future. A claim has been
filed in Germany against the Company by a tour operator seeking approximately
$3.5 million in compensation related to the cancellation of a summer program in
1996. The Company believes it has substantial defenses to this action, although
no assurance can be given of the eventual outcome of this litigation.

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

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

No matters were submitted to a vote of security holders during the fourth
quarter of 1999.

                                     PART II

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

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

                                                        Common Stock
                                                 --------------------------
                                                   High                Low
                                                 --------            ------

     1999
     Fourth Quarter                               1 3/16               3/4
     Third Quarter                                1 5/8                 1
     Second Quarter                               2 1/4                 1
     First Quarter                                1 1/2                 1

     1998
     Fourth Quarter                               2 1/4                7/8
     Third Quarter                                3 15/16               1
     Second Quarter                               5 7/8              3 7/8
     First Quarter                                6 13/16            5 1/8

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

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

WorldCorp is subject to the provisions of an indenture, expiring in 2004, which
causes the Company not to pay dividends upon the occurrence of any events of
default by WorldCorp under the indenture. In WorldCorp's February 1999
bankruptcy filing it disclosed that interest payments due on debentures issued
pursuant to the indenture were not made in 1998 which would constitute an event
of default. However, the indenture is not applicable to World Airways if
WorldCorp's ownership percentage is below 50% of the issued and outstanding
shares of Common Stock. WorldCorp now owns less than 50% of the Company's
outstanding Common Stock and is not expected to increase its ownership above 50%
in the future.

The approximate number of shareholders of record at February 29, 2000 is 95, and
does not include those shareholders who hold shares in street name accounts.

Item 6.   Selected Financial Data

WORLD AIRWAYS, INC.
Selected Financial Data
<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                                     --------------------------------------------------------------
                                                        1999         1998         1997         1996         1995
                                                        ----         ----         ----         ----         ----
                                                                   (in thousands except per share data)
<S>                                                 <C>          <C>           <C>         <C>           <C>
Results of operations:
Operating revenues                                   $ 263,998    $ 271,149     $ 309,412   $ 309,587     $ 242,386
Operating expenses                                     274,247      274,317       292,555     287,942       226,488
Operating income (loss)                               (10,249)      (3,168)        16,857      21,645        15,898
Earnings (loss) from continuing
     operations before income taxes
     and extraordinary item                           (13,653)     (10,905)        12,230      19,032        14,748
Earnings (loss) from continuing operations,
      before extraordinary item                       (13,653)     (11,032)        11,967      18,353        14,146
Discontinued operations                                     --           --         (515)    (32,375)       (5,250)
Extraordinary item                                       6,030           --            --          --            --
Net earnings (loss)                                    (7,623)     (11,032)        11,452    (14,022)         8,896
Cash dividends                                              --          --             --          --            --
Basic earnings (loss) per common share:
     Continuing operations                              (2.04)       (1.54)          1.16        1.55          1.35
     Discontinued operations                                --           --        (0.05)      (2.74)        (0.50)
       Extraordinary item                                 0.90           --            --          --            --
     Net earnings (loss)                                (1.14)       (1.54)          1.11      (1.19)          0.85
     Weighted average Common Stock outstanding           6,692        7,161        10,302      11,806        10,477
Diluted earnings (loss) per common share:
     Continuing operations                              (2.04)       (1.54)          1.09        1.55          1.34
     Discontinued operations                                --           --        (0.05)      (2.74)        (0.50)
       Extraordinary item                                 0.90           --            --          --            --
     Net earnings (loss)                                (1.14)       (1.54)         1.04       (1.19)          0.84
     Weighted average Common Stock and common
         equivalent shares outstanding                   6,692        7,161       12,279       11,806        10,572

Financial Position:
Cash and short-term investments                      $  12,406    $  16,893     $  25,887   $   8,075     $  26,180
Total assets                                           109,736      116,437       149,148     127,524       130,695
Notes payable and long-term obligations including
     current maturities                                 63,287       80,492        88,966      50,538        37,112
Stockholders' equity (deficiency)                     (29,838)     (23,627)       (4,771)       8,362        30,340
</TABLE>

<PAGE>



Item 7. Management's Discussion And Analysis Of Financial Condition And Results
        Of Operations

Management's Discussion and Analysis of Financial Condition and Results of
Operations presented below relates to the operations of World Airways as
reflected in its financial statements.

Results Of Operations
---------------------
Operating Losses

While the Company generated operating income in 1995 through 1997, it sustained
operating losses in 1998 and 1999. For 1996, the Company had a net loss which
resulted from losses incurred in the Company's scheduled service operations that
were discontinued in 1996. For 1998 the Company had an operating loss of $3.2
million and a net loss of $11.0 million. For 1999 the Company had an operating
loss of $10.2 million and a loss before extraordinary item of $13.7 million. The
Company's net loss after extraordinary gains on the extinguishment of debt of
$6.0 million was $7.6 million. There can be no assurance that the Company will
be able to generate income in 2000 or future years.

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

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

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

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

Flight expenses include all expenses related directly to the operation of the
aircraft other than aircraft rent, fuel and maintenance. Also included are
expenses related to flight dispatch and flight operations administration. Flight
expenses increased $10.6 million, or 15.3%, in 1999 to $79.9 million from $69.3
million in 1998. This increase resulted primarily from increases in flight
attendant costs and passenger food due to the shift to more full service flying.

Maintenance expenses decreased $3.2 million, or 5.7%, in 1999 to $54.1 million
from $57.3 million in 1998. This decrease resulted primarily from a decrease in
the average number of aircraft from 12 to 10.9 and the reduction in hours flown.
This was partially offset by the normal increase in maintenance costs generally
experienced with aging aircraft. In addition, the Company experienced an
increase in costs associated with the MD-11 aircraft and related engines as a
result of certain manufacturer guarantees and warranties that were fully expired
in 1998 and maintenance costs that increased pursuant to contractual agreements.
The Company expects its maintenance expense to increase further in future years
as its aircraft fleet gets older.

Aircraft costs decreased $8.7 million, or 10.4%, in 1999 to $76 million from
$84.7 million in 1998. This decrease principally reflects reductions in the
lease rates for the fleet of MD-11 aircraft and the return of two DC 10-30
aircraft in 1999.

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

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

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

Sales, general and administrative expenses decreased $1.4 million, or 5.5%, in
1999 to $23.9 million from $25.3 million in 1998. This decrease principally
reflects a $1.3 million decrease in general insurance costs.

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

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

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

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

Total block hours decreased 8,247 hours, or 18.8%, to 35,533 hours in 1998 from
43,780 hours in 1997, with an average of 12 available aircraft per day in 1998
compared to 12.9 in 1997. Average daily utilization decreased to 8.1 hours in
1998 from 9.3 hours in 1997. In 1998, the Company continued to obtain a higher
percentage of its revenues under wet lease contracts as opposed to full service
contracts. In 1998, wet lease contracts accounted for 70.0% of total block hours
compared with 81.2% in 1997.

Operating Revenues. Operating revenues decreased $38.3 million, or 12.4%, to
$271 million in 1998 from $309 million in 1997. This decrease was primarily
attributable to the decrease in block hours flown, partially offset by a shift
in business from ACMI flying to full service flying. Also, in 1998 the Company
received approximately $19.5 million in revenue associated with minimum
guarantee payments from Malaysia Airlines versus approximately $14.2 million
from Malaysian Airlines and another customer in 1997.

Operating Expenses. Total operating expenses decreased $18.1 million, or 6.2%,
in 1998 to $274 million from $293 million in 1997.

Flight expenses include all expenses related directly to the operation of the
aircraft other than aircraft cost, fuel and maintenance. Also included are
expenses related to flight dispatch and flight operations administration. Flight
expenses decreased $2.5 million, or 3.6%, in 1998 to $69.3 million from $71.8
million in 1997. This decrease resulted primarily from a decrease in cockpit
headcount partially offset by an increase in flight attendant costs and
passenger food due to the shift to more full service flying. Also, in 1997 the
Company accrued profit sharing expenses as a result of earnings experienced
during that period. No such accrual was made in 1998.

Maintenance expenses decreased $8.7 million, or 13.1%, in 1998 to $57.3 million
from $66.0 million in 1997. This decrease resulted primarily from a decrease in
the average number of aircraft from 12.9 to 12 and the reduction in hours flown.
This was partially offset by an additional maintenance accrual of $1.4 million
relating to an engine overhaul in the first quarter of 1998 and the normal
increase in maintenance costs generally experienced with aircraft fleets as the
aircraft get older. In addition, the Company experienced an increase in costs
associated with the MD-11 aircraft and related engines as a result of certain
manufacturer guarantees and warranties that were fully expired in 1998.

Aircraft costs decreased $6.7 million, or 7.3%, in 1998 to $84.7 million from
$91.4 million in 1997. This decrease reflects the return of one MD-11 aircraft,
one DC 10-30 aircraft and two engines in 1997. It also reflects a reduction in
insurance policy rates.

Fuel expenses increased $1.4 million, or 7.9%, in 1998 to $19.0 million from
$17.6 million in 1997. This increase reflects the increase in full service block
hours flown partially offset by a decrease in average fuel prices.

Commissions decreased $0.7 million in 1998 to $8.9 million from $9.6 million in
1997. This decrease resulted primarily from the end of the Philippine Airlines
contract in February 1998 partially offset by expenses incurred in connection
with increased revenues relating to increased AMC flying.

Depreciation and amortization decreased $0.2 million, or 1.7%, in 1998 to $8.5
million from $8.7 million in 1997. This decrease resulted primarily from a
decrease in both the depreciation of DC-10 leasehold improvements and
amortization of other assets, offset by an increase in the depreciation of owned
engines.

Sales, general and administrative expenses increased $0.5 million, or 2.1%, in
1998 to $25.4 million from $24.9 million in 1997. This increase reflects
increases in general insurance costs and a $1.1 million allowance for bad debts
offset by reductions in wages and fringes, legal expenses, property taxes and
FAA fines.

Interest expense increased $2.0 million in 1998 to $7.4 million from $5.4 in
1997. This increase resulted primarily from the issuance of $50 million of 8%
Convertible Senior Subordinated Debentures (the "Debentures") in August 1997.

Liquidity And Capital Resources
-------------------------------
World Airways' cash and short-term and long-term marketable investments at
December 31, 1999 totaled $14.1 million. As is common in the airline industry,
the Company operates with a working capital deficit. At December 31, 1999, World
Airways' current assets were $30.3 million and current liabilities were $55.2
million.

World Airways is highly leveraged. The Company incurred substantial debt and
lease commitments in connection with its acquisition of MD-11 aircraft and
related spare parts. As of December 31, 1999, the Company had outstanding
long-term debt and capital leases of $52.1 million, and notes payable and
current maturities of long-term obligations of $11.2 million. In addition, the
Company has significant long-term obligations relating to operating leases for
aircraft.

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

During 1999, the Company hired CIBC World Markets Corp. ("CIBC") as financial
advisor to assist the Company with a restructuring and recapitalization of the
Company's balance sheet. As part of those efforts CIBC initiated contact with
debenture holders and other parties to pursue options for strengthening the
Company financially. Although in February 2000 CIBC suspended further talks with
the holders of the Debentures, they will continue to explore other alternatives
for strengthening the Company financially.

Although there can be no assurances, World Airways believes that the combination
of its existing contracts and additional business which it expects to obtain,
along with its existing cash, planned cost cutting efforts, unencumbered assets
that can be utilized to generate cash and other financing arrangements, will be
sufficient to allow the Company to meet its cash requirements related to
operating and capital requirements for 2000. In February 2000, the Company
received $6.1 million from the sale/leaseback of an aircraft engine.

Also, in February 2000, the Company implemented an 18-month salary exchange
program for most of its employees. Under the program, participating employees
will exchange 10% of wages, in excess of $25,000, as defined, for Common Stock
on the basis of one share of stock for each $1.19375 of wages. The exchange rate
was determined from average stock prices coinciding to when the Board of
Directors approved the program. It is expected the program will produce total
cash savings of approximately $5.0 million during the 18-month program and
result in the issuance of approximately 4.1 million shares of Common Stock.
Approximately 3.8 million shares will be issued as restricted shares following
the beginning of the program. The recipients will be able to vote the shares
received but will not be able to sell the shares until the end of the program.
Expense associated with the value of the shares will be recognized over the
18-month period. If an employee leaves the Company during the program, a
pro-rata portion of the shares will be returned to the Company.

Cash Flows from Operating Activities

Operating activities provided $7.8 million in cash for the year ended December
31, 1999 compared to $10.4 million in 1998. This decrease in cash in 1999
resulted primarily from the greater operating loss incurred in 1999 compared to
1998.

Cash Flows from Investing Activities

Investing activities used $3.1 million in cash for the year ended December 31,
1999, compared to $2.5 million in 1998. In 1999, $2.1 million of cash was used
for the acquisition of aircraft parts and $2.5 million was used to purchase
marketable securities. In 1998 cash was used primarily for the purchase of parts
to support the aircraft fleet and leasehold improvements on the corporate
headquarters.

Cash Flows from Financing Activities

Financing activities used $9.9 million in cash for the year ended December 31,
1999 compared to using $16.9 million in 1998. In 1999, cash was principally used
for the repayment of debt. In 1998 cash was used primarily for a net reduction
in debt of approximately $8.7 million, for the purchase of shares of the
Company's Common Stock aggregating approximately $6.6 million and for a loan to
WorldCorp of $1.4 million, net.

Capital Commitments/Financing Developments

World Airways' capital expenditures for 2000 are currently expected to be
approximately $1 million, principally for the purchase of aircraft related
assets which it expects to finance from working capital.

In 1999, the FAA issued a notice of proposed rulemaking concerning an
Airworthiness Directive ("AD") that will require the replacement of insulation
blankets on the Company's aircraft. It is expected the FAA will issue a final AD
in 2000 that will require the replacement of the blankets to be accomplished
within four years. The Company presently estimates that the cost of the
replacement, including labor, material and out-of-service costs will total
approximately $4.9 million per aircraft. The Company has not yet determined how
the cost of replacing the blankets will be financed.

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

In March 1996, in conjunction with the lease of two MD-11ER aircraft the Company
agreed to assume existing leases of up to two additional MD-11F freighter
aircraft for the remainder of their 24-year leases which commenced in November
and December 1995, in the event that the existing lessee terminates its lease
with the lessor. As of the date hereof, the Company does not know if the
existing lessee intends to terminate the existing lease or not. As part of the
agreement for the aircraft, the lessor provided spare parts financing of $9.0
million of which approximately $7.9 million has been received.

Other Matters
-------------
Year 2000

Prior to 2000, the Company incurred approximately $200,000 of incremental costs
to address "year 2000" issues. The Company has not incurred any operational
problems in 2000.

Inflation

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

Item 7a.   Quantitative And Qualitative Disclosures About Market Risk

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

With respect to interest rate risks, at December 31, 1999 interest rates on all
of the Company's long-term debt and capitalized lease obligations aggregating
$58.2 million are fixed. Borrowings under the Company's Credit Agreement, $5.1
million at December 31, 1999, bear interest at prime plus 1%. Based on the
average outstanding month-end balances during 1999 each 1% change in the prime
rate would have increased or decreased the Company's interest cost by
approximately $69,000. Based on the balance outstanding at December 31, 1999
each 1% change in the prime rate will increase or decrease the Company's
interest cost by approximately $51,000 on an annual basis. See Notes 7 and 8 of
"Notes to Financial Statements" in Item 8. The Company has not entered into any
obligations for trading purposes.

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

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



Item 8.   Financial Statements And Supplementary Data

WORLD AIRWAYS, INC.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                       ----------------------------
                                                                                           1999              1998
                                                                                       ----------        ----------
<S>                                                                                   <C>               <C>
ASSETS
Current assets
     Cash and cash equivalents, including restricted cash of $2,387
         at December  31, 1999 and $22 at December 31, 1998                            $   11,725        $   16,893
     Short-term marketable investments                                                        681                --
     Accounts receivable, less allowance for doubtful accounts
         of $1,848 in 1999 and $1,560 in 1998                                              11,225             7,876
     Prepaid expenses and other current assets                                              6,647             3,580
                                                                                          -------           -------
         Total current assets                                                              30,278            28,349

Equipment and property
     Flight and other equipment                                                            90,150            89,878
     Equipment under capital leases                                                        10,262            12,266
                                                                                          -------           -------
                                                                                          100,412           102,144
     Less:  accumulated depreciation and amortization                                      38,306            33,433
                                                                                          -------           -------
         Net equipment and property                                                        62,106            68,711
                                                                                          -------           -------

Assets held for sale                                                                        1,315             1,609

Long-term operating deposits                                                               13,414            15,855

Marketable investments                                                                      1,688                --

Other assets and deferred charges, net of amortization of
         $624 in 1999 and $2,663 in 1998                                                      935             1,913
                                                                                          -------           -------
              Total assets                                                             $  109,736         $ 116,437
                                                                                          =======           =======
</TABLE>

<PAGE>



WORLD AIRWAYS, INC.
BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                        ---------------------------
                                                                                           1999            1998
                                                                                        ---------        ----------
<S>                                                                                    <C>              <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
     Notes payable                                                                      $   5,079        $    5,213
     Current maturities of long-term obligations                                            6,096             7,710
     Accounts payable                                                                      19,453            16,494
     Unearned revenue                                                                       4,152             2,329
     Accrued maintenance in excess of reserves paid                                         7,923             8,928
     Accrued salaries and wage                                                              8,510             6,972
     Accrued taxes                                                                          2,835             2,205
     Other accrued liabilities                                                              1,127             1,480
                                                                                          -------           -------
         Total current liabilities                                                         55,175            51,331
                                                                                          -------           -------

Long-term obligations, net of current maturities                                           52,112            67,569

Other liabilities
     Deferred gain from sale-leaseback transactions, net of accumulated
         amortization of $22,269 in 1999 and $21,212 in 1998                                3,083             4,140
     Accrued maintenance in excess of reserves paid                                        14,884             8,460
     Accrued post-retirement benefits                                                       2,907             2,794
     Deferred rent                                                                         11,413             5,770
                                                                                          -------           -------
              Total other liabilities                                                      32,287            21,164
                                                                                          -------           -------

Total liabilities                                                                         139,574           140,064
                                                                                          -------           -------

Stockholders' deficiency
     Preferred stock, $.001 par value (5,000,000 shares
          authorized and no shares issued or outstanding)                                      --                --
     Common Stock, $.001 par value (40,000,000 shares authorized;
         12,147,141 shares issued and 6,446,416 outstanding at December 31, 1999
         and 12,000,064 shares issued and 7,000,064
         outstanding at December 31, 1998)                                                     12                12
     Additional paid-in capital                                                            46,857            45,522
     Accumulated deficit                                                                 (35,972)          (28,434)
     Receivables--WorldCorp                                                                    --           (1,346)
     Treasury stock, at cost (Common Stock--5,700,725 shares at
         December 31, 1999 and 5,000,000 shares at December 31, 1998)                    (40,735)          (39,381)
                                                                                         --------          --------
              Total stockholders' deficiency                                             (29,838)          (23,627)
                                                                                         --------          --------

Commitments and contingencies

Total liabilities and stockholders' deficiency                                        $   109,736         $ 116,437
                                                                                         ========           =======
</TABLE>
                 See accompanying Notes to Financial Statements
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                             --------------------------------------
                                                                                 1999          1998         1997
                                                                             -----------    ---------    ----------
<S>                                                                         <C>            <C>          <C>
Operating revenues
     Flight operations                                                       $   263,156    $ 269,637    $  306,800
     Other                                                                           842        1,512         2,612
                                                                                --------      -------       -------
         Total operating revenue                                                 263,998      271,149       309,412
                                                                                --------      -------       -------
Operating expenses
     Flight                                                                       79,903       69,280        71,845
     Maintenance                                                                  54,080       57,333        65,972
     Aircraft costs                                                               75,951       84,738        91,422
     Fuel                                                                         22,986       19,012        17,615
     Flight operations subcontracted to other carriers                             2,650        1,295         2,603
     Commissions                                                                   6,629        8,884         9,569
     Depreciation and amortization                                                 8,165        8,503         8,651
     Sales, general, and administrative                                           23,883       25,272        24,878
                                                                                --------     --------       -------
         Total operating expenses                                                274,247      274,317       292,555
                                                                                --------     --------       -------
Operating income (loss)                                                         (10,249)      (3,168)        16,857
Other income (expense)
     Interest expense                                                            (6,299)      (7,363)       (5,379)
     Interest income                                                                 917          873         1,506
     Other, net                                                                    1,978      (1,247)         (754)
                                                                                --------     --------       -------
         Total other, net                                                        (3,404)      (7,737)       (4,627)
                                                                                --------     --------       -------
Earnings (loss) from continuing operations before
     income taxes and extraordinary item                                        (13,653)     (10,905)        12,230
Income tax expense                                                                    --        (127)         (263)
                                                                                --------     --------       -------
Earnings (loss) from continuing operations before
     extraordinary item                                                         (13,653)     (11,032)        11,967
Discontinued operations  - loss on disposal                                           --           --         (515)
Earnings (loss) before extraordinary item
Extraordinary item - gain on extinguishment of debt                                6,030           --            --
                                                                                --------     --------       -------
         Net earnings (loss)                                                 $   (7,623)    $(11,032)    $   11,452
                                                                                ========      =======       =======
Basic earnings (loss) per share:
     Continuing operations                                                   $    (2.04)    $  (1.54)    $     1.16
     Discontinued operations                                                          --           --        (0.05)
     Extraordinary item                                                             0.90           --            --
                                                                                --------      -------       -------
         Net earnings (loss)                                                 $    (1.14)    $  (1.54)   $      1.11
                                                                                ========      =======       =======
Weighted average shares outstanding                                                6,692        7,161        10,302
                                                                                ========      =======       =======
Diluted earnings (loss) per share:
     Continuing operations                                                   $    (2.04)    $  (1.54)    $     1.09
     Discontinued operations                                                          --           --        (0.05)
     Extraordinary item                                                             0.90           --            --
                                                                                --------      -------       -------
         Net earnings (loss)                                                 $    (1.14)    $  (1.54)    $     1.04
                                                                                ========      =======       =======
Weighted average shares outstanding                                                6,692        7,161        12,279
                                                                                ========      =======       =======
</TABLE>
                 See accompanying Notes to Financial Statements
<PAGE>



WORLD AIRWAYS, INC.
STATEMENTS OF CHANGES
IN STOCKHOLDERS' DEFICIENCY
Years ended December 31, 1999, 1998, and 1997
(in thousands except share amounts)
<TABLE>
<CAPTION>

                                         Additional                   ESSOP     Treasury                  Total
                               Common     Paid-In    Accumulated   Guaranteed    Stock,   Receivables  Stockholders'
                               Stock      Capital      Deficit      Bank Loan    at Cost   WorldCorp   Deficiency
                              --------   ----------   ---------     ---------    ---------  ---------   ---------
<S>                          <C>        <C>          <C>           <C>          <C>         <C>         <C>
Balance at
   December 31, 1996          $     12   $   45,522   $ (29,006)    $   (805)    $ (7,361)   $     --   $   8,362
Common Stock
   purchases (3,279,000
   shares)                          --           --           --           --     (25,163)         --    (25,163)
ESSOP Guaranteed
   Bank Loan Payments               --           --           --          578           --         --         578
Net earnings                        --           --       11,452           --           --         --      11,452
                               -------      -------     --------      -------     --------    -------     -------
Balance at
   December 31, 1997                12       45,522     (17,554)        (227)     (32,524)         --     (4,771)
Common Stock purchases
   (1,003,000 shares)               --           --           --           --      (6,857)         --     (6,857)
Issuance of note receivable-
   WorldCorp, net                   --           --          152           --           --    (1,346)     (1,194)
ESSOP Guaranteed Bank
   Loan Payments                    --           --           --          227           --         --         227
Net loss                           ---           --     (11,032)           --           --         --    (11,032)
                               -------      -------     --------      -------     --------    -------    --------
Balance at
   December 31, 1998                12       45,522     (28,434)           --     (39,381)    (1,346)    (23,627)
8% Debentures converted
   into 137,000 shares
   of Common Stock                  --        1,207           --           --           --         --       1,207
Reclassification of
   WorldCorp receivables            --           --           85           --           --      (399)       (314)
Settlement of receivables-
   WorldCorp, net
   (1,069,000 shares of
   Common Stock received)           --           --           --           --      (1,745)      1,745          --
Exercise of 10,000 stock
   options                          --           10           --           --           --         --          10
Amortization of warrants            --          118           --           --           --         --         118
Treasury stock (368,000
   shares) issued to acquire
   8% Debentures                    --           --           --           --          391         --         391
Net loss                            --           --      (7,623)           --           --         --     (7,623)
                               -------       ------     --------      -------     --------     ------    --------
Balance at
   December 31, 1999         $      12     $ 46,857   $ (35,972)     $     --   $ (40,735)   $     --  $ (29,838)
                               =======       ======     ========      =======     ========     ======    ========
</TABLE>
                 See Accompanying Notes to Financial Statements
<PAGE>



WORLD AIRWAYS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                               ------------------------------------
                                                                                  1999       1998           1997
                                                                               ---------   ----------    ----------
<S>                                                                           <C>         <C>           <C>
Cash and cash equivalents at beginning of year                                 $  16,893   $   25,887    $    7,028
Cash flows from operating activities
Net earnings (loss)                                                              (7,623)     (11,032)        11,452
Adjustments to reconcile net earnings (loss) to cash provided (used) by
     operating activities:
     Depreciation and amortization                                                 8,165        8,503         8,651
     Deferred gain recognition                                                   (1,057)      (1,055)       (1,057)
     Extraordinary gain                                                          (6,030)           --            --
     (Gain) loss on sale of property and equipment                                    --           --           108
     Writedown of assets held for sale                                                --        1,160           500
     Provision for doubtful accounts                                                 450        1,129           565
     Other                                                                           533          469            18
     Increase (decrease) in cash resulting from changes in operating assets and
         liabilities:
         Accounts receivable                                                     (3,799)       10,698         5,050
         Restricted short-term investments                                            --           --         1,047
         Deposits, prepaid expenses and other assets                               (626)        4,872         (298)
         Accounts payable, accrued expenses and other liabilities                 15,963      (4,168)       (3,385)
         Unearned revenue                                                          1,823        (157)         (560)
                                                                                --------     --------      --------
         Net cash provided  by operating activities                                7,799       10,419        22,091
                                                                                --------     --------      --------

Cash flows from investing activities
Additions to equipment and property                                              (2,103)      (3,234)       (5,467)
Proceeds from disposals of equipment and property                                  1,398          698         1,183
Purchase of marketable investments                                               (2,458)           --            --
Maturities of marketable investments                                                  85           --            --
                                                                                --------    ---------     ---------
         Net cash used by investing activities                                   (3,078)      (2,536)       (4,284)
                                                                                --------    ---------     ---------

Cash flows from financing activities
(Decrease) increase in line of credit, net                                         (134)        5,212       (9,354)
Issuance of debt                                                                      --           --        54,495
Repayment of debt                                                                (9,765)     (13,933)      (17,333)
Issuance of note receivable to WorldCorp, net                                         --      (1,416)            --
Acquisition of Common Stock, at cost                                                  --      (6,635)      (25,163)
Proceeds from exercise of stock options                                               10           --            --
Debt issuance costs                                                                   --        (105)       (1,593)
                                                                                --------    ---------     ---------
         Net cash provided (used) by financing activities                        (9,889)     (16,877)         1,052
                                                                                --------    ---------     ---------

Net increase (decrease) in cash and cash equivalents                             (5,168)      (8,994)        18,859
                                                                                ---------    --------      --------

Cash and cash equivalents at end of year                                     $    11,725   $   16,893   $    25,887
                                                                                ========     ========      ========
</TABLE>
                                  See accompanying Notes to Financial Statements
<PAGE>


WORLD AIRWAYS, INC.
NOTES TO FINANCIAL STATEMENTS

1.   Summary Of Significant Accounting Policies

Organization

World Airways, Inc. ("World Airways" or the "Company") was organized in 1948 and
is a U.S. certificated air carrier. Airline operations account for 100% of the
Company's operating revenue. World Airways provides long- range passenger and
cargo charter air transportation, serving the U.S. Government, international
passenger and cargo air carriers, tour operators and cruise ship companies (see
Note 13).

Financial Statement Reclassifications

Certain items in prior year financial statements included herein have been
reclassified to conform to the 1999 financial statement presentation.

Segment Information

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

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid investments purchased with an original maturity of ninety days or less to
be cash equivalents.

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

Marketable Investment Securities

Investments generally consist of commercial paper and municipal debt that the
Company accounts for as "available for sale" in accordance with Statement of
Financial Accounting Standards No. 115 (SFAS 115). At December 31, 1999, the
investments' carrying value approximated market value. Investments that mature
within 12 months are classified as current assets. All investments mature within
three years.

Revenue Recognition

Contract flight revenues are recognized as the services are provided.

Income Taxes

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

Earnings (Loss) Per Common Share

Basic earnings (loss) per Common Share is computed by dividing net earnings
(loss) by the weighted average number of Common Shares outstanding during the
period. Diluted earnings (loss) per Common Share also includes the effect of
common equivalent shares outstanding during the period. The Company's common
equivalent shares consist of shares issuable for stock options, convertible
debentures and warrants (see Note 11).

Equipment and Property

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

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

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

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

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

Aircraft Maintenance

Airframe maintenance and engine overhauls are expensed using the accrual method
of accounting. The accrual method provides for estimating the cost of overhauls
and accruing the cost, based on an hourly rate, over the estimated life of the
overhaul. At that time, the actual cost of overhaul is charged to the accrual.
Accrual rates and accumulated balances are reviewed periodically for adequacy
and adjusted as appropriate. Certain of the Company's leases require the Company
to make monthly payments to the lessor for maintenance costs to be incurred.

Assets Held for Sale

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

Impairment of Long-Lived Assets

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

Other Assets and Deferred Charges

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

Post-retirement Benefits Other Than Pensions

World Airways' cockpit crewmembers and eligible dependents are covered under
post-retirement health care benefits to age 65. The Company accounts for the
benefit costs in accordance with Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions"
("FAS No. 106"). The Company funds the benefit costs on a pay-as-you-go (cash)
basis (see Note 10).

Accounting for Stock-Based Compensation

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

2.   Operating Environment

At December 31, 1999 cash and cash equivalents and short-term marketable
investments totaled $12.4 million, the working capital deficit was $24.9 million
and the Company had long-term obligations, net of current maturities of $52.1
million. The Company also has significant future long-term obligations under its
aircraft leases. The Company anticipates that its capital expenditures in 2000
will approximate $1 million.

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

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

Due to the large capital costs of leasing and maintaining aircraft and costs for
cockpit crewmembers and flight attendants, the Company's aircraft must have high
utilization at attractive rates in order for the Company to operate
profitably.Although World Airways' preferred strategy is to enter into long-term
contracts with customers, the terms of existing customer contracts are shorter
than the terms of the Company's lease obligations with respect to its aircraft.
There is no assurance that the Company will be able to enter into additional
contracts with new or existing customers or that it will be able to obtain
enough additional business to fully utilize each aircraft. World Airways'
financial position and results of operations could be materially adversely
affected even by relatively brief periods of low aircraft utilization and
yields.

World Airways' current operating philosophy is to build on its existing
relationships to achieve a strong platform for future growth while at the same
time grow its full service and cargo business. The Company's strategy is based,
first and foremost, upon providing the highest level of service to its
customers, thereby maintaining and expanding the amount of business being done
with existing customers. The Company perceives a number of opportunities for its
charter business created by a growing global economy, particularly long-term
growth in second and third world economies where the demand for airlift exceeds
capacity, notwithstanding economic problems faced by some developing countries
in recent years. World Airways attempts to maximize profitability by combining
ACMI contracts with full service agreements that meet the peak seasonal
requirements of its customers. The Company can respond to rapidly changing
market conditions and requirements because its fleet of aircraft can be deployed
in a variety of configurations.

Consistent with prior years, the Company has unsold capacity in the third and
fourth quarters of 2000 and beyond, however, historically it has been successful
in obtaining new business to utilize such capacity. Although there can be no
assurance that it will be able to secure additional business to utilize this
unsold capacity, the Company is actively seeking additional business for 2000
and beyond. The Company's financial results and financial condition would be
affected adversely if the Company is unable to secure business to utilize its
unsold capacity.

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

Prior to 1999 the Company derived a significant percentage of its revenues and
block hours from its operations in the Pacific Rim region. In 1997 through 1999
these operations were adversly effected by economic conditions in Malaysia,
Indonesia and other countries in the Asia Pacific Region. These conditions
included national liquidity crises, significant depreciation in the value of the
ringgit and rupiah, higher domestic interest rates, reduced opportunity for
refinancing or refunding of maturing debts, and a general reduction in spending
throughout the region. However, management now believes these conditions have
started to improve and will provide new opportunities to wet lease aircraft to
airline customers, particularly those who have deferred or canceled new aircraft
orders but are still in need of providing additional airlift.

Although there can be not assurances, the Company believes that the combination
of its existing contracts and additional business which it expects to obtain for
2000, along with its existing cash, planned cost cutting efforts, unencumbered
assets that can be utilized to generate cash and other financing arrangements,
will be sufficient to allow the Company to meet its cash requirements related to
operating and capital requirements for 2000. In January 2000, the Company
entered into a sale and six-year leaseback of an engine and received $6.1
million.

Also, in February 2000, the Company implemented an 18-month salary exchange
program for most of its employees. Under the program, participating employees
will exchange 10% of wages, in excess of $25,000, as defined, for Common Stock
on the basis of one share of stock for each $1.19375 of wages. The exchange rate
was determined from average stock prices coinciding to when the Board of
Directors approved the program. It is expected the program will produce total
cash savings of approximately $5.0 million during the 18-month program and
result in the issuance of approximately 4.1 million shares of Common Stock.
Approximately 3.8 million shares will be issued as restricted shares following
the beginning of the program. The recipients will be able to vote the shares
received but will not be able to sell the shares until the end of the program.
Expense associated with the value of the shares will be recognized over the
18-month period. If an employee leaves the Company during the program, a
pro-rata portion of the shares will be returned to the Company.

3.   WorldCorp and Naluri Ownership  & Transactions

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

In 1997 and 1998 the Company purchased 4 million shares of its Common Stock from
WorldCorp and Naluri from the proceeds of Debentures issued in 1997 (see Note 8)
in accordance with a shareholders agreement. In 1998 the Company also acquired
150,000 of its Common Stock from WorldCorp valued at $682,000 as payment towards
principal, interest and expenses of a loan to WorldCorp.

On February 12, 1999 WorldCorp filed a petition for protection from its
creditors under Chapter 11 of the U. S. Bankruptcy laws in the United States
Bankruptcy Court for the District of Delaware. In August 1999 the Company
concluded an agreement with WorldCorp to settle a secured loan and other amounts
totaling approximately $1.8 million that WorldCorp owed the Company when
WorldCorp filed for bankruptcy protection. In connection with the agreement,
that was approved by the Bankruptcy Court overseeing WorldCorp's bankruptcy
proceedings, WorldCorp returned 1,069,000 shares of the Company's Common Stock
(based on market value on the date of settlement) it owned in exchange for the
$1.8 million owed.

In April 1998 WorldCorp entered into a series of transactions that resulted in
the shares of World Airways it owned being transfered to what became an 80%
owned subsidiary. In November 1999, as the result of a settlement approved by
the Bankruptcy Court, the WorldCorp subsidiary that owned the World Airways
shares became a wholly-owned subsidiary of WorldCorp again.

Under an agreement among World Airways, WorldCorp and Naluri, if at any time
after October 30, 1996 World Airways registers additional Common Stock under the
Securities Act of 1933, Naluri has the right to demand the registration of its
shares of the Company's Common Stock. Under a shareholders agreement, Naluri has
the right to nominate two members to the Company's Board of Directors and
WorldCorp has agreed to vote its shares of Common Stock to elect such nominees.
Also, if without the prior written consent of Naluri: (1) World Airways sells
all or substantially all of its business; or (2) World Airways fundamentally
changes its line of business, then Naluri has the option to require WorldCorp to
purchase all or part of Naluri's shares at fair market value. Fair market value
is defined to be not less than the aggregate of the costs borne by Naluri in
acquiring and holding its World Airways shares. Management has indicated that it
does not have any current intent to take any such actions without the prior
consent of Naluri or the directors nominated by Naluri.

The shareholders agreement also provides that if WorldCorp's ownership interest
in the Company falls below 51% of the outstanding shares of Common Stock, then
Naluri may either sell its shares to a third party or require WorldCorp to sell
a pro rata number of shares held by Naluri to the party purchasing WorldCorp's
shares. Naluri has not taken any action to exercise its rights as a result of
WorldCorp's ownership falling below 51% in 1999. Naluri also has a right of
first refusal to purchase shares of Common Stock issued by the Company or sold
by WorldCorp and to purchase additional shares of Common Stock to maintain its
ownership percentage in the Company.

At February 29, 2000, WorldCorp and Naluri own 38.5% and 18.9%, respectively, of
the outstanding Common Stock of World Airways, with the balance publicly traded.
Except as limited by contractual arrangements with Naluri, the beneficial owner
of WorldCorp's interest in the Company is in a position to have significant
influence over the outcome of many issues effecting World Airways' stockholders,
including the election of members of World Airways' Board of Directors, adoption
of amendments to World Airways' Certificate of Incorporation, and approval of
mergers (see Note 19).

4.   Transactions with Malaysia Airlines

World Airways provided service to Malaysian Airline System Berhad ("Malaysia
Airlines" or "MAS") from 1981 to September 1999 for scheduled passenger, cargo
and charter operations. MAS has been one of the Company's largest customers (see
Note 13). Naluri owns approximately 28% of Malaysia Airlines at December 31,
1999.

In 1994, the Company entered into a series of multi-year contracts, with
expiration dates that ranged from 1997 to 2000, to provide aircraft to MAS. The
Company also entered into a 32-month agreement for year-round operations with
MAS whereby the Company was providing two passenger aircraft on an ACMI basis to
MAS's charter division through May 1999. The Company agreed to a five-month and
a three-month reduction in the utilization of one aircraft during 1997 and 1998,
respectively, and the aircraft was redeployed in other activity. The Company
provided three aircraft for 1997 Hadj operations. The Company provided two
aircraft to fly in the 1998 Indian Hadj on behalf of a contract entered into by
MAS.

The Company also has a long-term contract to operate three MD-11 cargo aircraft
for MAS. However, beginning in July 1996, as mutually agreed by the parties,
World Airways redeployed two cargo aircraft, which had been operating under
these contracts, into another contract that expired in February 1998. Effective
October 1999 the Company ceased operating any aircraft for MAS as a result of
the cessation of monthly payments by MAS for the remaining aircraft being
operated for them. MAS has taken the position that its obligations to make
payments for the aircraft ceased on September 30, 1999. The Company issued a
Notice of Default and deployed the aircraft elsewhere following MAS's cessation
of payments. As of December 31, 1999 the Company had a minimal net amount due
from MAS. In 1999 and 1998, the Company received approximately $7.3 million and
$19.5 million, respectively, in revenue associated with minimum guarantees for
aircraft not operated.

From 1995 to 1999, the Company leased four DC10-30 passenger aircraft from
Malaysia Airlines. Two aircraft were returned to MAS after World Airways
discontinued scheduled service, with the leases terminated effective December
31, 1996. In 1997, one of these aircraft was leased again for approximately
three months to support the 1997 Hadj program, and returned to MAS. The third
aircraft lease was terminated effective May 1999, and the fourth aircraft was
returned to MAS in July 1999. Rent and maintenance reserve payments related to
these aircraft amounted to $2.2 million, $5.8 million, and $6.6 million in 1999,
1998, and 1997, respectively.

5.   Supplemental Information -- Statements Of Cash Flows

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

                                          Year Ended December 31,
                                 ----------------------------------------
                                     1999           1998           1997
                                 ---------       ---------      ---------
     Cash paid for:
         Interest                $   5,755       $   6,819      $   3,641
         Income taxes                   --              --            462

In 1999 the Company acquired 1,069,000 shares of the Company's Common Stock
owned by WorldCorp as settlement of all amounts owed to the Company by WorldCorp
(see Note 3). Also in 1999, the Company issued 368,000 shares of Treasury Stock
with a fair market value of $391,000 as consideration given to acquire $1.5
million of the Company's outstanding 8% Debentures and $1.2 of the 8% Debentures
were converted by the holders into 137,000 shares of Common Stock.

In 1998 the Company acquired 150,000 shares of the Company's Common Stock valued
at $682,000 owned by WorldCorp as payment towards principal and interest on a
loan to WorldCorp (see Note 3). Also in 1998 the Company financed the
acquisition of approximately $152,000 of office furniture.

In 1997 the Company financed 85% of the acquisition cost of an aircraft engine
by the issuance of a note payable for approximately $6.3 million. Also in 1997
the Company entered into a capital lease for equipment valued at $0.8 million.

6.   Prepaid Expenses And Other Current Assets

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

                                        December 31,
                                 -------------------------
                                     1999           1998
                                 ---------       ---------
     Prepaid rent                $   3,465       $   3,420
     Deposits                        2,465              37
     Other                             717             123
                                  --------         -------
         Total                   $   6,647       $   3,580
                                   =======          ======

7.   Notes Payable

The Company has a Credit Agreement with GMAC Financial Corporation ("GMAC")
expiring in March 2001. The Agreement has a borrowing capacity of up to $25.0
million, subject to borrowing base amounts related to receivables and spare
parts inventory, as defined, and borrowings are collateralized by certain
receivables, inventory, and equipment. The Agreement provides for an unused
facility fee of 1/4 of 1% and interest on borrowings outstanding at prime plus
1%. Prime was 8 1/2 % at December 31, 1999. Further, the receivables facility
allows for the issuing of Letters of Credit to a sub-limit of $4 million for an
issuance fee and interest of 1/8 of 1%. The Agreement as amended in March 1999
contains dividend and borrowing restrictions as well as covenants related to the
Company's financial condition and operating results. At December 31, 1999 the
outstanding balance under the Agreement was $5.1 million. At that date the
Company did not have any additional borrowing capacity under this Agreement,
other than outstanding Letters of Credit aggregating approximately $1.4 million,
principally for deposits for facility leases.

8.   Long-term Obligations

Long-Term Debt
<TABLE>
<CAPTION>
The Company's long-term obligations at December 31 are as follows (in thousands):                   1999          1998
<S>                                                                                              <C>           <C>
                                                                                                  --------      --------
     Convertible senior subordinated debentures due 2004 --with interest at 8% payable
          semi-annually                                                                           $ 40,545      $ 50,000
     Note payable due January 1999--with principal and interest at 7.25% payable monthly                --         3,300
     Note payable due 2003--with principal and interest at 9.98% payable monthly,
         collateralized by one Pratt and Whitney PW4462 engine                                       4,048         4,705
     Note payable due 2004--with interest at 8.18% payable monthly, with a final payment of
          $2.2 million due June 2004, collateralized by one Pratt & Whitney PW4462 engine            4,757         5,338
     Spare parts loan due 2003--with principal and interest at 10% payable monthly,
         collateralized by certain MD-11 spare parts                                                 3,848         5,061
     Spare parts loan due 2003--with principal and interest at 8.5% payable monthly,
         collateralized by certain MD-11 spare parts                                                 1,492         1,886
     Capital lease obligations                                                                       2,996         4,247
     Other                                                                                             522           811
     Less: debt discount                                                                                --          (69)
                                                                                                   -------       -------
         Total                                                                                      58,208        75,279
     Less: current maturities                                                                        6,096         7,710
                                                                                                   -------       -------
         Total long-term obligations, net of current maturities                                  $  52,112    $   67,569
                                                                                                   =======       ========
</TABLE>

The estimated fair value of the 8% Convertible Senior Subordinated Debentures
(the "Debentures") at December 31, 1999 approximated $7.1 million. The Company
believes that the carrying values of its other outstanding debt approximates
fair value.

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

The Debentures are unsecured obligations, convertible into shares of the
Company's Common Stock at $8.90 per share, subject to adjustment in certain
events, and subordinated to all present and future senior indebtedness of the
Company. In certain circumstances including the Company's Common Stock being
delisted from trading and a change in control of the Company, as defined, the
holders of the Debentures could require the Company to repurchase the
outstanding Debentures. The Debentures are not redeemable by the Company prior
to August 26, 2000.

The Company has $1.1 million available for additional borrowings at December 31,
1999 under the 10% spare parts loan due 2003.

The following table shows the aggregate annual amount of scheduled principal
maturities (in thousands) of debt outstanding at December 31, 1999, excluding
capital lease obligations.

         2000                             $     3,190
         2001                                   3,082
         2002                                   2,995
         2003                                   2,966
         2004                                  42,979
                                              -------
            Total                         $    55,212
                                              =======

Capital Leases

The present value of the obligations under capital leases at December 31, 1999
is calculated using rates ranging from 9.25% to 10.0%. The following are
remaining scheduled minimum capital lease payments (in thousands) due, together
with the present value of such obligations:

     2000                                 $     2,961
     2001                                          92
                                            ---------
     Total minimum lease payments               3,053
     Less: imputed interest                        57
                                            ---------
         Present value of obligations
              under capital lease         $     2,996

Property under capital leases consists of equipment leases and is amortized over
the lease terms or expected useful lives of the assets. Accumulated amortization
under capital leases was $4.8 million and $5.5 million at December 31, 1999 and
1998, respectively. Amortization expense of property under capital leases
totaled approximately $0.9 million for each 1999 and $0.6 million for 1998 and
1997.

Operating Leases

The Company's operating fleet consists of eight MD-11 and two DC10-30 aircraft,
all of which are leased under operating leases. The MD-11 aircraft included five
passenger aircraft (two of which are long-range versions), one freighter
aircraft and two convertible aircraft. The DC10-30 aircraft included one
passenger aircraft and one convertible aircraft.

The lease terms for the MD-11 aircraft expire between 2005 and 2020 (assuming
the exercise of a 12-year lease extension for the two MD-11ER aircraft). In
1999, in conjunction with amending the leases to reduce future costs, the
lessors obtained the right, in the event the Company is unable to meet certain
financial requirements, that allow them to cancel the lease of any aircraft with
12 months notice. While certain financial requirements were not achieved in
1999, the Company has not been notified of any intent of the lessors to cancel
the aircraft leases. If the Company fails to achieve a certain annual net income
level in 2000 and subsequent years, the lessors have similar termination rights.
The termination rights for the two MD-11ER aircraft extend into 2006 and the
termination rights for the other six MD-11 aircraft extend through 2001. In
addition, the Company granted warrants to each of the two lessors to purchase up
to one million shares of Common Stock (see Note 9). The value of the warrants
are being amortized to rent expense over the remaining terms of the related
aircraft lease agreements.

The lease term on the DC-10-30CF aircraft expires in January 2003. The lease
term for the other DC-10-30 aircraft is cancelable by the Company with 90 days
notice. The Company presently intends to operate the aircraft through the
balance of 2000.

Rental expense, primarily relating to aircraft leases, totaled approximately
$74.4 million, $81.5 million, and $87.7 million for the years ended December 31,
1999, 1998 and 1997, respectively.

As of December 31, 1999, future annual minimum lease payments required under
operating leases that have initial or remaining lease terms in excess of one
year were as follows (in thousands):

         2000                             $    66,133
         2001                                  66,176
         2002                                  66,214
         2003                                  60,481
         2004                                  61,574
         Thereafter                           311,539
                                              -------
              Total                       $   632,117
                                              =======

9.   Capital Stock

At December 31, 1999, 10,996,000 shares of Common Stock are reserved for
issuance pursuant to outstanding warrants, convertible debt and stock option
plans. The Company also announced the implementation of an Employee Salary
Exchange Program in 2000 pursuant to which it is expected that up to 5,000,000
shares of Common Stock may be issued.

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

At December 31, 1999 the Company's outstanding Debentures are convertible into
an aggregate of 4,556,000 shares of Common Stock at $8.90 per share, subject to
adjustment in certain events.

Stock Option Plans

An aggregate of 4,440,000 shares of Common Stock are reserved for stock option
plans.

Pursuant to a 1995 Stock Option Plan, as amended, (the "1995 Plan") adopted in
1995 members of the Company's Board of Directors, employees, and consultants to
the Company or its affiliates are eligible to receive stock options. The Company
has reserved 3,290,000 shares of Common Stock for issuance upon the exercise of
options granted to participants under the 1995 Plan. These options expire at the
earlier of the stated expiration, which shall not exceed ten years from the date
of grant, or one year after the termination of the participant's employment with
the Company. Stock options are granted with an exercise price that shall not be
less than 85% of the fair market value of the Common Stock on the date of grant.
The stock options have terms ranging from seven years and seven months to ten
years and become vested and fully exercisable at various times through August
2007.

Pursuant to a Non-Employee Directors' Stock Option Plan (the "Directors' Plan")
adopted in 1995, non-affiliate directors will be offered options to purchase
10,000 shares of Common Stock upon election or appointment to the Board of
Directors of the Company. Up to 250,000 shares of Common Stock may be issued
under the Directors' Plan, subject to certain adjustments. On the third
anniversary of the initial award, each such director will be offered an option
to purchase an additional 5,000 shares of Common Stock. Options granted under
the Directors' Plan are exercisable in equal monthly installments during the 36
months following the award, as long as the individual remains a director of the
Company. The exercise price of all such options is the average closing price of
the Common Stock during the 30 trading days immediately preceding the date of
grant.

Pursuant to a 1999 Chief Executive Stock Option Plan (the "CEO Plan") adopted in
1999, the Chief Executive Officer (the "CEO") of the Company was granted an
option to purchase up to 900,000 shares of Common Stock at an exercise price of
$1.00 per share in conjunction with the CEO's acceptance of an offer of
employment in 1999. The option was granted at fair market value and will expire
April 1, 2007. Options become exercisable on January 1, 2007 or prior to that
date in increments when the fair market value of the Company's Common Stock
exceeds certain pre-defined amounts ranging from $2.00 to $10.00.

The per share weighted-average fair value of stock options granted during 1999,
1998 and 1997 was $1.15, $2.13 and $4.67, respectively, on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions:

                                    1999              1998             1997
                                 -----------       -----------      ----------
Expected dividend yield              0%                0%               0%
Risk-free interest rate          6.6% - 6.7%       4.8% - 4.9%      5.7% - 5.8%
Expected life (in years)            7 - 8             6 - 8           3 - 10
Expected volatility                  61%               78%           53% - 61%

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

                                           1999          1998          1997
                                        ---------     ---------     ---------
Net earnings (loss)     As reported     $ (7,623)     $ (11,032)    $  11,452
                          Pro forma       (8,636)       (12,084)       10,502

Basic earnings (loss)   As reported     $  (1.14)     $   (1.54)    $    1.11
   per common share       Pro forma        (1.29)         (1.69)         1.02

Diluted earnings (loss) As reported     $  (1.14)     $   (1.54)    $    1.04
    per common share      Pro forma        (1.29)         (1.69)         0.97

Stock option activity during the last three years is as follows (in thousands):

                                                 Number of          Weighted
                                                  Options            Average
                                                Outstanding      Exercise Prices
                                                -----------      ---------------

     Balance at December 31, 1996                     811             11.00
         Granted                                      773              7.61
         Forfeited                                  (114)             11.00
                                                  -------
     Balance at December 31, 1997                   1,470              9.20
         Granted                                      255              2.75
         Forfeited                                  (302)             11.00
                                                  -------
     Balance at December 31, 1998                   1,423              7.66
         Granted                                    2,170              1.18
         Exercised                                   (10)              1.00
         Forfeited                                  (464)              6.69
                                                  -------
     Balance at December 31, 1999                   3,119              3.31
                                                  =======

At December 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $0.87--$12.50 and 5.3
years, respectively. The following table summarizes the stock options
outstanding and exercisable at December 31, 1999 (in thousands except per share
amounts)
<TABLE>
<CAPTION>

                                                  Outstanding                              Exercisable
                               -----------------------------------------------       ---------------------------
                                                   Weighted
                                                    Average          Weighted                           Weighted
         Range of                Number         Remaining Life        Average          Number            Average
      Exercise Price           of Options            Months            Price         of Options           Price
    ------------------         ----------       ---------------     -----------      ----------        ---------
<S> <C>                          <C>                 <C>            <C>              <C>               <C>
     $   0.00 - 0.99                 50               95             $  0.870               10          $  0.870
         1.00 - 1.99              2,175               77                1.174              512             1.133
         2.00 - 3.00                 35               79                2.130                7             2.130
         5.00 - 5.99                 20               77                5.160               10             5.160
         6.00 - 6.99                 68               73                6.529               47             6.556
         7.00 - 7.99                330               13                7.210              180             7.281
         8.00 - 9.00                 48               28               12.947               48             8.259
        10.00 - 10.99                10               41               10.250               10            10.250
        11.00 - 11.99               377               30               11.007              198            11.014
        12.00 - 13.00                 6               41               12.500                6            12.500
                                 ------                                                 ------
                                  3,119                                                  1,028
                                 ======                                                 ======
</TABLE>

At December 31, 1999, 1998 and 1997, the number of options exercisable was
1,028,000; 444,000; and 661,000, respectively, and the weighted-average exercise
price of those options was $4.89, $8.01 and $9.79, respectively.

10.   Employee Benefit Plans

The World Airways' Crewmembers Target Benefit Plan is a defined contribution
plan covering cockpit crewmembers with contributions based upon wages, as
defined. It is a tax-qualified retirement plan under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Pension expense for the
Target Benefit plan totaled $1.5 million, $1.7 million, and $1.9 million for the
years ended December 31, 1999, 1998, and 1997, respectively.

The Company's flight attendants participate in a pension plan maintained by the
International Brotherhood of Teamsters ("Teamsters"). Pension contributions made
to the Teamsters on behalf of the flight attendants totaled $0.5 million in 1999
and $0.3 million in 1998 and 1997.

In 1996 the Company implemented an Employee Savings and Stock Ownership Plan
(the "ESSOP"). It is a tax-qualified retirement plan under the Code. The ESSOP
was intended to allow employees not covered by collective bargaining agreements,
as well as employees of certain affiliated companies, to acquire ownership in
the Company on a tax-favored basis. The ESSOP was an amendment and continuation
of a similar plan previously maintained by WorldCorp. A loan guaranteed by the
ESSOP and World Airways was paid off in 1998. The ESSOP was amended and changed
to The Employee 401(k) Savings Plan (the "401(k) Plan") in 1998 and the Company
stock purchase feature of the former plan was eliminated. The 401(k) Plan
continues to hold the shares of WorldCorp and World Airways Common Stock that
were allocated to the participants' accounts prior to termination of the stock
purchase feature.

Under the 401(k) Plan, employees may elect to invest salary deferrals in
selected investment funds. The Company contributes matching funds to the 401(k)
Plan equal to 33% of a participants voluntary deferrals up to $10,000. The
Company expensed approximately $0.2 million for its contributions to the 401(k)
Plan during 1999, 1998 and 1997.

In 1994 the Company adopted the World Airways, Inc. Retroactivity and Profit
Sharing Bonus Plan (the "1994 Profit Sharing Plan"). It is not a tax-qualified
plan under the Code. Distributions under the 1994 Profit Sharing Plan are equal
to 20% of earnings, as defined, subject to an annual limitation of 10% of the
total annual aggregate compensation of World Airways employees participating in
the 1994 Profit Sharing Plan in that year. The Company distributed approximately
$2.6 million in 1998 pertaining to 1997 results.

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

A summary of the net periodic post-retirement benefit costs for the years ended
December 31, 1999, 1998, and 1997 is as follows (in thousands):

                                                  1999        1998      1997
                                                 ------     -------    -------
     Service cost                                $   162    $   144    $   157
     Interest cost on accumulated
       post-retirement benefit obligation            105         98        103
     Net amortized gain                             (54)       (64)       (53)
                                                    ----       ----       ----
     Net periodic post-retirement benefit cost   $   213    $   178    $   207
                                                    ====       ====       ====

The reconciliation of the Company's accumulated post-retirement benefit
obligation for 1999 and 1998 was as follows (in thousands):

                                               1999             1998
                                            -----------      -----------
     Accumulated post-retirement benefit
         obligation, beginning of year      $     1,758      $     1,520
         Service cost                               162              144
         Interest cost                              105               98
         Benefits paid                            (150)            (100)
         Actuarial (gain) loss                       14               96
                                                 ------          -------
     Accumulated post-retirement benefit
         obligation, end of year            $     1,889      $     1,758
                                                 ======          =======

The reconciliation of the Company's accrued post-retirement benefits of December
31, 1999 and 1998 was as follows (in thousands):

                                               1999              1998
                                            -----------      -----------
     Unfunded status                        $     1,889      $     1,758
     Unrecognized net gain                        1,018            1,036
                                                  -----            -----
     Accrued post-retirement benefits       $     2,907      $     2,794

The assumed discount rate used to measure the accumulated post-retirement
benefit obligation for 1999 and 1998 was 7.75% and 6.25%, respectively. The
medical cost trend rate in 2000 was 8.0% trending down to an ultimate rate in
2027 of 4.0%. A one percentage point increase in the assumed health care cost
trend rates for each future year would have increased the aggregate of the
service and interest cost components of 1999 net periodic post-retirement
benefit cost by $28,000 and would have increased the accumulated post-retirement
benefit obligation as of December 31, 1999 by $144,000. A one percentage point
decrease in the assumed health care cost trend rates for each future year would
have decreased the aggregate of the service and interest cost components of 1999
net periodic post-retirement benefit cost by $25,000 and would have decreased
the accumulated post-retirement benefit obligation as of December 31, 1999 by
$128,000.

In order to ensure the performance of certain key functions, in December 1998
the Company adopted a plan which provides for the payment of retention
incentives to encourage certain members of management to remain in the
employment of the Company through the year 2000. If all participants remain with
the Company the obligation for retention payments is estimated to be
approximately $1.8 million, which the Company is accruing on a current basis.
The plan also provides for the payment of certain severance benefits in the
event there is a change in control of the Company, as defined, and employment of
a participant in the plan is terminated within 24 months of the occurrence of a
change in control.


11.   Earnings Per Share

Earnings per common equivalent share for the year ended December 31, 1997 is
computed as follows (amounts in thousands except per share data):

                                                                1997
Net earings (loss) from continuing operations             $    11,967
     Effect of Dilutive Securities
         8% convertible debentures                              1,375
         Stock options                                             --
Net earnings (loss) from continuing
     operations - diluted                                 $    13,342
                                                               ======

Weighted average common shares
     outstanding                                               10,302
     Incremental shares related to:
         8% convertible debentures                              1,970
         Stock options                                              7
Weighted average common shares
     outstanding - diluted                                     12,279
                                                               ======

Earnings (loss) per share from continuing
     operations
     Basic                                                $      1.16
     Diluted                                              $      1.09

12.   Federal And State Income Taxes

Income tax expense consists of (in thousands):

                                          Years ended December 31,
                              ---------------------------------------------
                                 1999              1998             1997
                              ----------       -----------      -----------
     U.S. Federal             $       --       $        --      $       203
     State                            --               127               60
                                 -------           -------           ------
     Income tax expense       $       --       $       127      $       263
                                 =======           =======           ======

There is no deferred tax expense or benefit for the years ended December 31,
1999, 1998, and 1997.

Income tax expense attributable to earnings (loss) from continuing operations
before extraordinary item differed from the statutory income tax rate as a
result of the following (in thousands):
<TABLE>
<CAPTION>
                                                                           Years ended December 31,
                                                          ---------------------------------------------------------
                                                               1999                  1998                 1997
                                                          -------------         -------------        --------------
<S>                                                      <C>                   <C>                   <C>
Expected Federal income tax expense (benefit)
     at the statutory rate                                $     (4,779)         $     (3,861)        $        4,188
Generation (Utilization) of the net operating
     loss carryforward                                            3,791                2,828                (5,304)
Alternative minimum and environmental taxes                          --                    --                   203
State income tax expense, net of Federal benefit                     --                    83                    39
Other:
     Meals and entertainment                                        773                   850                   911
     Other                                                          215                   227                   226
                                                               --------               -------               -------
Income tax expense                                        $          --         $         127        $          263
                                                               ========              ========               =======
</TABLE>

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at December 31, are as follows (in
thousands):
<TABLE>
<CAPTION>
                                                                                     1999                  1998
                                                                                -------------        --------------
<S>                                                                            <C>                  <C>
Deferred tax assets:
     Net operating loss carryforwards                                           $      24,951        $       29,581
     Recognition of sales/leaseback gains                                               1,048                 1,449
     Accrued maintenance in excess of reserves paid, primarily
         due to accrual for financial statement purposes                                7,963                 9,201
     Accrued post-retirement benefit obligation, due to accrual
         or financial statement purposes                                                  988                   978
     Compensated absences, primarily due to accrual for
         financial statement purposes                                                   1,220                   887
     Accrued rent                                                                       3,880                 2,019
     Alternative minimum tax credit carryforward                                        2,790                 2,790
     Investment tax credit carryforward                                                    --                   187
     Other                                                                                182                   215
                                                                                      -------              --------
     Gross deferred tax assets                                                         43,022                47,307
         Less:   valuation allowance                                                   30,419                35,362
                                                                                      -------              --------
     Net deferred tax assets                                                           12,603                11,945
     Deferred tax liabilities:
         Property and equipment                                                        12,603                11,945
         Other                                                                             --                    --
                                                                                      -------              --------
         Gross deferred tax liabilities                                                12,603                11,945
                                                                                      -------              --------
     Net deferred income taxes                                                  $          --        $           --
                                                                                      =======              ========
</TABLE>

The net changes in the total valuation allowance for the years ended December
31, 1999 and 1998 were due to the generation or expiration of net operating loss
("NOL") carryforwards, tax credit carryforwards and the realization of other
deferred tax assets. In assessing the realizability of the deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
(including reversals of deferred tax liabilities) during the periods in which
those temporary differences will become deductible. Management believes it is
not likely that the deferred tax assets will be realized.

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

As of December 31, 1999, the Company had NOL carryforwards for federal income
tax purposes of $73.4 million. Of this amount, approximately $8.1 million is
subject to a $6.9 million annual limitation resulting from a 1991 Ownership
Change. The Company's NOL's expire as follows (in millions):

     2000                      $    10.2
     2004                            4.0
     2007                           20.4
     2008                            5.9
     2009                           17.9
     2011                            2.8
     2018                            7.7
     2019                            4.5
                                 -------
                               $    73.4

Use of the Company's NOL carryforwards in future years could be further limited
if another Ownership Change were to occur. While the Company believes that as of
December 31, 1999, no Ownership Change has occurred since the 1991 Ownership
Change, the application of the Code in this area is subject to interpretation by
the Internal Revenue Service. The NOLs are subject to examination by the IRS
and, thus, are subject to adjustment or disallowance resulting from any such IRS
examination. In addition, conversion of the Debentures (see Note 8) or future
transactions in the Company's Common Stock or the Common Stock of the Company's
stockholders, including conversions of a portion of outstanding WorldCorp
debentures into Common Stock or other changes that may result from the WorldCorp
bankruptcy may cause an Ownership Change, which could result in a substantial
reduction in the annual availability of the NOLs and the subsequent loss of a
substantial portion of the NOLs available to the Company.

13.   Major Customers

The Company operates in one business segment, the air transportation industry.
Information concerning customers for years in which their revenues comprised 10%
or more of the Company's operating revenues is presented in the following table
(in thousands):
                                                 Years ended December 31,
                                       ---------------------------------------
                                           1999          1998          1997
                                       -----------   -----------   -----------
     U.S. Department of Defense
        (including U.S. Air Force)     $   134,601   $   110,912   $    78,896
     Malaysia Airlines (see Note 4)         23,824        50,319        64,995
     P.T. Garuda Indonesia                      --        31,790        30,627
     Philippine Airlines                        --         7,264        95,427

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

The USAF awards points to air carriers acting alone or through teaming
arrangements in proportion to the number and type of aircraft made available to
CRAF. The Company utilizes teaming arrangements to maximize the value of
potential awards. Until 1999 the Company lead a contractor teaming arrangement
that enjoyed a large market share of the USAF's overall commercial airlift
requirement. During a period in which the U.S. military downsized substantially,
the Company's portion of the fixed USAF award increased from $15.6 million for
the government's 1992-93 fiscal year, to $86 million for the government's
1998-99 fiscal year. The Company's teaming agreement negotiations for fiscal
year October 1999 to September 2000 resulted in a substantially reduced share of
the USAF's fixed commercial airlift requirement - $27 million compared to the
$86 million for 1998-1999. However, the Company believes it will be in a
position to obtain an increased share of expansion flying which is customarily
awarded by the USAF over and above the fixed contract flying. In calendar year
1999, the Company's revenue from the fixed award was $94 million and its AMC
expansion revenue was $40.5 million. In December 1999, the Company was requested
by AMC to operate passenger charter flights from January 28, 2000 through April
2000 to replace another carrier that had previously been awarded a contract for
the flying. The value of the additional flying is approximately $13.5 million.
The Company cannot determine how future military spending budgets, airlift
requirements, and national security considerations for a continued strong and
balanced CRAF and the instability of other countries will combine to affect
future business with the USAF.

Garuda. The Company has flown for Garuda periodically since 1973. In 1997,
approximately 40,000 of the 200,000 Indonesians who traveled to Jeddah for the
Hadj pilgrimage flew on the Company's aircraft and the Company operated six
aircraft for Garuda during the 1998 pilgrimage. The Company did not operate any
aircraft for Garuda for the 1999 Hadj; however, the Company will be operating
four aircraft for Garuda for the 2000 Hadj.

Philippine Airlines. The Company had agreements with Philippine Airlines to
operate four passenger aircraft until November 1997. As a result of the economic
distress experienced in the Philippines, the agreements for two of the aircraft
were terminated in August 1997, and the Company received monthly termination
payments totaling $3.0 million through the original end of the agreements in
November 1997. The contracts on the remaining two aircraft were extended until
February 1998 when the contract expired.

The Company derives a significant percentage of its revenues and block hours
from its operations in the Pacific Rim region. Any further economic decline or
any military or political disturbance in this area may interfere with the
Company's ability to provide service in this area and could have a material
adverse effect on the financial condition or results of operations of the
Company. See Note 2 for further discussion. All contracts are denominated in
U.S. dollars as are substantially all of the related expenses. The
classification between domestic and export revenues is based on entity
definitions prescribed in the economic regulations of the Department of
Transportation. Information concerning the Company's export revenues from
continuing operations is presented in the following table (in thousands):

                                             Years Ended December 31,
                                  ----------------------------------------------
                                      1999             1998              1997
                                  -----------      -----------        ----------
Operating Revenues:
     Domestic                     $   201,779      $   142,948        $   97,469
     Export  - Malaysia                33,749           50,319            64,995
             - Philippines                 --            7,264            95,427
             - Indonesia                   --           31,790            30,627
             - Belgium                     --            3,597            15,407
             - United Kingdom           1,659           24,032                --
             - Other                   26,811           11,199             5,487
                                      -------          -------           -------
         Total                    $   263,998      $   271,149        $  309,412
                                      =======          =======           =======

14.  Related Party Transactions

At December 31, 1999, WorldCorp owned approximately 38.5% of the outstanding
Common Stock of World Airways. Transactions between World Airways and WorldCorp
are described in Note 3.

At December 31, 1999, Naluri owned approximately 18.9% of the outstanding Common
Stock of World Airways and approximately 28% of the outstanding Common Stock of
Malaysian Airlines. See Notes 4 and 13 for further information about the
Company's transactions with Naluri and Malaysian Airlines.

In 1997, the Company paid T. Coleman Andrews, the then Chairman of WorldCorp and
World Airways, $175,000 in salary for his services as Chairman of the Board of
Directors of World Airways.

15.  Discontinued Operations

In 1996 the Company discontinued scheduled service operations and accrued
substantially all of the costs it expected to incur in connections with the
discontinued operations in the year ended December 31, 1996. However, the
Company recognized an additional $0.5 million of expense in the fourth quarter
of 1997 in connection with the discontinued operations. The Company is also
subject to certain claims arising as a result of the discontinuance of the
scheduled service operations (see Note 16).

16.  Commitments and Contingencies

The Company's flight attendants, approximately 35% of the Company's employees,
who are also represented by the Teamsters, are subject to a four-year collective
bargaining agreement that will be amendable June 30, 2000. The Company's flight
attendants have argued the "scope clause" of the collective bargaining agreement
has been violated by the Company and have challenged the use of foreign flight
attendant crews on the Company's flights for Garuda Indonesia which has
historically been the Company's operating procedure. In certain instances the
Company is contractually obligated to permit its customers to deploy their own
flight attendants. While the arbitrator in this matter denied in 1997 the
Union's request for back pay to affected flight attendants for flying relating
to the 1994 Hadj, the arbitrator concluded that the Company's contract with its
flight attendants requires the Company to first actively seek profitable
business opportunities that require using the Company's flight attendants,
before the Company may accept wet lease business opportunities that use the
flight attendants of the Company's customers. In 1997, the flight attendants
filed "scope clause" grievances with respect to four separate wet-lease
contracts and in January 2000 they filed another "scope clause" grievance with
respect to the 2000 Garuda Hadj agreement. An adverse decision on one or more of
the grievances could have a material adverse impact on the financial condition
or results of operations of World Airways.

In connection with the discontinuance of World Airways' scheduled service
operations in 1996, World Airways is subject to claims by various third parties
and may be subject to further claims in the future. One claim has been filed in
Germany against the Company by a tour operator seeking approximately $3.5
million in compensation related to the cancellation of a summer program in 1996.
The Company believes it has substantial defenses to this action, although no
assurance can be given of the eventual outcome of this litigation.

The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial condition.

In 1993 the Company returned certain DC10-30 aircraft to the lessor. As a result
of this early lease termination, the Company is responsible, until 2004 for one
aircraft and 2005 for the second aircraft, for one-third of any deficit in rent
incurred in future leases of the aircraft, up to $100,000 monthly per plane,
with an overall combined cap of $1,850,000. The Company incurred $984,000 for
rent shortfalls through December 1996. The Company's remaining contingent
liability related to this matter approximates $866,000.

17.  Valuation and Qualifying Accounts (in thousands)

                                                   Allowances
                                                  for Doubtful        Deferred
                                                    Accounts         Tax Assets
                                                  -----------        -----------
     Balance at December 31, 1996                 $       413        $    43,258
         Additions charged to expense                     565                 --
         Amounts charged to allowance                     (5)            (5,002)
                                                      -------            -------
     Balance at December 31, 1997                         973             38,256
         Additions charged to expense                   1,129                 --
         Amounts charged to allowance                   (542)            (2,894)
                                                      -------            -------
     Balance at December 31, 1998                       1,560             35,362
         Additions charged to expense                     450                 --
         Amounts charged to allowance                   (162)            (4,943)
                                                       ------            -------
     Balance at December 31, 1999                 $     1,848        $    30,419
                                                       ======            =======

18.  Unaudited Quarterly Results

The results of the Company's quarterly operations (unaudited) for 1999 and 1998
are as follows (in thousands except share data):
<TABLE>
<CAPTION>

                                                                               Quarter Ended
                                                          ---------------------------------------------------------
1999                                                         Mar 31         Jun 30        Sep 30          Dec 31
                                                          -----------    -----------    -----------     -----------
<S>                                                       <C>            <C>            <C>             <C>
Operating revenues                                        $    65,326    $    67,492    $    67,517     $    63,663
Operating income (loss)                                       (2,189)        (1,724)        (1,904)         (4,432)
Earnings (loss) before extraordinary item                     (2,706)        (3,093)        (3,125)         (4,729)
Extraordinary item                                                 --          4,176             --           1,854
Net earnings (loss)                                           (2,706)          1,083        (3,125)         (2,875)

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

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

1998
Operating revenues                                        $    69,222    $    71,629    $    67,456     $    62,842
Operating income (loss)                                       (1,592)        (1,185)            832         (1,223)
Net loss                                                      (2,987)        (3,163)        (1,497)         (3,385)
                                                            =========       ========       ========       =========

Basic loss per common share                                    (0.40)         (0.44)         (0.21)          (0.49)
Diluted loss per common equivalent share                       (0.40)         (0.44)         (0.21)          (0.49)

</TABLE>
19.  Subsequent Events

On March 16, 2000, WorldCorp, and its wholly-owned subsidiary WorldCorp
Acquisition Corp., filed a proposed plan of liquidation in the bankruptcy court
that calls for all of their shares of World Airways Common Stock to be sold or
distributed to creditors.  In order to facilitate such a sale or distribution,
the Company intends to register those shares under the Securities Act of 1933.
In addition, a group of investors that includes members of the Company's
management and Board of Directors are negotiating to purchase some or all of the
shares.  Any such sale will be subject to approval by the bankruptcy court and
to higher and better offers from competing bidders.

WorldCorp's proposed plan of liquidation also calls for the shareholders
agreement with Naluri to be rejected, meaning that WorldCorp will not perform
its obligations under the agreement and the agreement will not be binding on the
purchasers of the shares of Common Stock. The WorldCorp plan of liquidation is
currently being considered by creditors and is scheduled to be presented to the
bankruptcy court for approval on April 26, 2000.  WorldCorp's rejection of the
shareholders agreement could have the effect of reducing or eliminating any
continuing obligations of the Company under that agreement.

<PAGE>



INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of World Airways, Inc. ("World
Airways") as of December 31, 1999 and 1998, and the related statements of
operations, changes in stockholders' deficiency and cash flows for each of the
years in the three-year period ended December 31, 1999. These financial
statements are the responsibility of World Airways' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of World Airways as of December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1999, in conformity
with generally accepted accounting principles.



KPMG LLP
McLean, Virginia
February 11, 2000, except as to Note 19, which is as of March 16, 2000

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

Not applicable.

<PAGE>



                                    PART III

Item 10.   Directors and Executive Officers of the Registrant

Directors

The Company incorporates herein by reference the information concerning
directors contained in its Notice of Annual Stockholder's Meeting and Proxy
Statement to be filed within 120 days after the end of the Company's fiscal year
(the "2000 Proxy Statement").

Executive Officers

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

Hollis L. Harris          68   Chairman of the Board and Chief Executive Officer
Andrew G. Morgan, Jr.     43   President and Chief Operating Officer
Gilberto M. Duarte, Jr.   55   Chief Financial Officer
John E. Ellington         65   Deputy Chief Operating Officer
Randy J. Martinez         44   Chief Information Officer
Cathy Sigalas             47   General Counsel and Secretary

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

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

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

John E. Ellington, currently serving as Deputy Chief Operating Officer, joined
the Company in June 1999 as Vice President and Director of Flight Operations.
From September 1997 through March 1999 Mr. Ellington served as Executive
Director, Smyrna-Rutherford County Airport Authority. Prior to that he served as
Vice President and Director of Flight Operations of American Trans Air from
December 1995 to June 1997. Before 1995 Mr. Ellington served as a line pilot and
held numerous managerial positions within flight operations for Delta Airlines
for 32 years.

Randy J. Martinez joined the Company in October 1998 and was named Chief
Information Officer in 1999. Prior to joining the Company Mr. Martinez served
with the United States Air Force for 21 years and retired as a Colonel.

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

Beneficial Ownership Reporting

The Company incorporates herein by reference the information required by Item
405 of Regulation S-K contained in its 2000 Proxy Statement.

Item 11.   Executive Compensation

The Company incorporates herein by reference the information concerning
executive compensation contained in the 2000 Proxy Statement.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

The Company incorporates herein by reference the information concerning security
ownership of certain beneficial owners and management contained in the 1999
Proxy Statement.

Item 13.   Certain Relationships and Related Transactions

The Company incorporates herein by reference the information concerning certain
relationships and related transactions contained in the 2000 Proxy Statement.

<PAGE>


                                     PART IV

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

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

(1)Financial Statements

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

     -   Balance Sheets, December 31, 1999 and 1998
     -   Statements of Operations, Years Ended December 31, 1999, 1998 and 1997
     -   Statements of Changes in Stockholders' Deficiency, Years Ended
         December 31, 1999, 1998 and 1997
     -   Statements of Cash Flows, Years Ended December 31, 1999, 1998 and 1997
     -   Notes to Financial Statements
     -   Independent Auditors' Report

(2)  Financial Statement Schedules

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

(3)   Index to Exhibits

  No.    Description

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

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

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

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

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

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

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

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

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

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

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

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

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

10.4     Amendement (No. 3) dated as of September 3, 1999 to
         Restated and Amended Accounts Receivable Management
         and Security Agreement between the Company and BNY
         Financial Coporation                                     Filed Herewith

10.5     Amended and Restated Employment Agreement dated July 8,
         1999 between Hollis L. Harris and the Company (Exhibit
         10.14 to the Company's Quarterly Report on Form 10-Q
         filed August 16, 1999)                                                *

10.6     Employment Agreement dated June 1, 1999 between Andrew
         Gilbert Morgan, Jr. and the Company (Exhibit 10.20 to the
         Company's Quarterly Report on Form 10-Q filed August 16, 1999)        *

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

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

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

23.1     Consent of Independent Auditors

27.1     Financial Data Schedule for the Year Ended December 31, 1999
-----------------------

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

(b)   Reports on Form 8-K
      None

Status of Prior Documents

World Airways' Annual Report on Form 10-K for the year ended December 31, 1999,
at the time of filing with the Securities and Exchange Commission, shall modify
and supersede all prior documents filed pursuant to Sections 13, 14, and 15(d)
of the Securities Exchange Act of 1934 for purposes of any offers or sales of
any securities after the date of such filing pursuant to any Registration
Statement or Prospectus filed pursuant to the Securities Act of 1933, as
amended, which incorporates by reference such Annual Report on Form 10-K.


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

<PAGE>



SIGNATURES

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

                                                   World Airways, Inc.


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

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

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

/s/ Hollis L. Harris.          Chairman and Chief
Hollis L. Harris               Executive Officer              March 29, 2000

/s/ Andrew G. Morgan, Jr.      President and Chief
Andrew G. Morgan, Jr.          Operating Officer              March 29, 2000

/s/ Gilberto M. Duarte, Jr.    Chief Financial Officer        March 29, 2000
Gilberto M. Duarte, Jr.

/s/ Daniel J. Altobello        Director                       March 29, 2000
Daniel J. Altobello

/s/ A. Scott Andrews           Director                       March 29, 2000
A. Scott Andrews

/s/ Mark M. Feldman            Director                       March 29, 2000
Mark M. Feldman

/s/ Ronald R. Fogleman         Director                       March 29, 2000
Ronald R. Fogleman

/s/ Wan Malek Ibrahim          Director                       March 29, 2000
Wan Malek Ibrahim

/s/ Gordon C. McCormick        Director                       March 29, 2000
Gordon C. McCormick

/s/ Russell L. Ray, Jr.        Director                       March 29, 2000
Russell L. Ray, Jr.

____________________           Director
Wilbur L. Ross, Jr.

/s/ Peter M. Sontag            Director                       March 29, 2000
Peter M. Sontag

/s/ Lim Kheng Yew              Director                       March 29, 2000
Lim Kheng Yew