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United States Securitie and Exchange Commission
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Period Ended June 30, 2004 or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition Period From ____________ to ____________

Commission file number 000-21642

ATA HOLDINGS CORP.
- --------------------------------------------------------------------------------

(Exact name of registrant as specified in its charter)

Indiana 35-1617970
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)


7337 West Washington Street
Indianapolis, Indiana 46231
(Address of principal executive offices) (Zip Code)

(317) 247-4000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)

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 periods 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 ______

Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

Common Stock, Without Par Value - 11,823,864 shares outstanding as of July 31,
2004

Part I - Financial Information
Item I - Financial Statements


ATA HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

June 30, December 31,
2004 2003
----------- ------------
ASSETS (Unaudited)

Current assets:
Cash and cash equivalents $ 150,046 $ 160,644
Receivables, net of allowance for doubtful accounts
(2004 - $1,077; 2003 - $1,388) 114,303 118,745
Inventories, net 46,803 47,604
Prepaid expenses and other current assets 30,568 21,406
----------- ------------
Total current assets 341,720 348,399

Property and equipment:
Flight equipment 330,993 324,697
Facilities and ground equipment 147,250 142,032
----------- ------------
478,243 466,729
Accumulated depreciation (236,329) (213,247)
----------- ------------
241,914 253,482

Restricted cash 31,682 48,301
Goodwill 14,887 14,887
Prepaid aircraft rent 146,175 144,088
Investment in BATA 13,679 14,672
Deposits and other assets 51,549 46,158
----------- ------------

Total assets $ 841,606 $ 869,987
=========== ============

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Current maturities of long-term debt $ 59,597 $ 51,645
Accounts payable 31,687 25,327
Air traffic liabilities 125,677 102,831
Accrued expenses 171,398 154,689
----------- ------------
Total current liabilities 388,359 334,492


Long-term debt, less current maturities 433,531 443,051
Deferred gains from sale and leaseback of aircraft 53,484 55,392
Other deferred items . 80,695 51,822
Mandatorily redeemable preferred stock; authorized and issued 500 shares 50,000 56,330
----------- ------------
Total liabilities 1,006,069 941,087

Commitments and contingencies

Convertible redeemable preferred stock; authorized and issued 300 shares 30,000 32,907

Shareholders' deficit:
Preferred stock; authorized 9,999,200 shares; none issued - -
Common stock, without par value; authorized 30,000,000 shares;
issued 13,535,304 - 2004; 13,476,193 - 2003 66,236 65,711
Treasury stock; 1,711,440 shares - 2004; 1,711,440 shares - 2003 (24,778) (24,778)
Additional paid-in capital 17,938 18,163
Accumulated deficit (253,859) (163,103)
----------- ------------
Total shareholders' deficit (194,463) (104,007)
----------- ------------

Total liabilities and shareholders' deficit $ 841,606 $ 869,987
=========== ============

See accompanying notes.


2



ATA HOLDINGS CORP.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
----------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)


Operating revenues:
Scheduled service $ 300,750 $ 278,009 $ 577,917 $ 522,777
Charter 72,676 94,550 164,366 206,857
Ground package 2,978 3,265 7,873 8,476
Other 14,370 12,298 27,951 23,641
------------ ----------- ----------- -----------
Total operating revenues 390,774 388,122 778,107 761,751
------------ ----------- ----------- -----------
Operating expenses:
Salaries, wages and benefits 107,394 98,875 215,062 193,153
Fuel and oil 85,838 68,081 168,128 143,173
Aircraft rentals 59,835 56,065 119,380 111,334
Handling, landing and navigation fees 30,097 31,399 63,452 61,456
Aircraft maintenance, materials and repairs 19,512 10,751 39,414 24,230
Other selling expenses 14,015 13,085 26,559 24,842
Crew and other employee travel 12,967 16,856 29,984 31,843
Depreciation and amortization 12,819 13,796 26,450 28,989
Advertising 10,399 10,030 20,226 20,305
Passenger service 10,096 10,756 21,432 21,005
Facilities and other rentals 6,729 5,797 13,113 11,621
Insurance 5,978 7,526 11,476 14,861
Commissions 5,676 4,214 12,496 10,240
Ground package cost 2,508 2,786 6,571 6,990
U.S. Government Funds - (37,156) - (37,156)
Other 17,434 19,316 37,238 37,400
----------- ----------- ----------- -----------
Total operating expenses 401,297 332,177 10,981 704,286
----------- ----------- ----------- -----------

Operating income (loss) (10,523) 55,945 (32,874) 57,465

Other income (expense):
Interest income 532 705 1,075 1,511
Interest expense (15,442) (12,959) (30,431) (25,641)
Loss on extinguishment of debt - - (27,314) -
Other (229) (376) (462) (1,012)
----------- ----------- ----------- -----------
Other expense (15,139) (12,630) (57,132) (25,142)
----------- ----------- ----------- -----------

Income (loss) before income taxes (25,662) 43,315 (90,006) 32,323
Income taxes - - - -
----------- ----------- ----------- -----------
Net income (loss) (25,662) 43,315 (90,006) 32,323

Preferred stock dividends (375) (2,485) (750) (2,860)
----------- ----------- ----------- -----------
Income (loss) available to common shareholders $ (26,037) $ 40,830 $ (90,756) $ 29,463
=========== =========== =========== ===========

Basic earnings per common share:
Average shares outstanding 11,823,864 11,764,753 11,823,317 11,764,753
Net income (loss) per share $ (2.20) $ 3.47 $ (7.68) $ 2.50
=========== =========== =========== ===========

Diluted earnings per common share:
Average shares outstanding 11,823,864 14,077,005 11,823,317 14,053,238
Net income (loss) per share $ (2.20) $ 2.93 $ (7.68) $ 2.15
=========== =========== =========== ===========

See accompanying notes.


3



ATA HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' DEFICIT
(Dollars in thousands)

Convertible
Redeemable Additional Total
Preferred Common Treasury Paid-in Retained Shareholders'
Stock Stock Stock Capital Deficit Deficit
------- ------- --------- ------- --------- ---------

Balance as of December 31, 2003 $32,907 $65,711 $ (24,778) $18,163 $(163,103) $(104,007)

Net loss - - - - (64,344) (64,344)

Stock options exercised - 525 - (225) - 300

Preferred stock dividends (2,907) - - - (375) (375)
------- ------- --------- ------- --------- ---------
Balance as of March 31, 2004 $30,000 $66,236 $ (24,778) $17,938 $(227,822) $(168,426)
======= ======= ========= ======= ========= =========

Net loss - - - - (25,662) (25,662)

Preferred stock dividends - - - - (375) (375)
------- ------- --------- ------- --------- ---------
Balance as of June 30, 2004 $30,000 $66,236 $ (24,778) $17,938 $(253,859) $(194,463)
======= ======= ========= ======= ========= =========


See accompanying notes.


4



ATA HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Six Months EndedJune 30,
2004 2003
(Unaudited) (Unaudited)
----------- -----------

Operating activities:

Net income (loss) $ (90,006) $ 32,323
Adjustments to reconcilenet income(loss)
to net cash provided byoperatingactivities:
Depreciation andamortization 26,450 28,989
Loss on extinguishment of debt 27,314 -
Other non-cash items 5,472 4,969
Changes in operating assets and liabilities:
U.S.Government grant receivable - 6,158
Other receivables 4,442 (14,394)
Inventories (736) (151)
Prepaid expenses (4,760) 2,719
Accounts payable 6,360 (1,275)
Air traffic liabilities 22,846 14,835
Accrued expenses 21,934 2,551
Other deferred items 20,000 -
--------- ---------
Net cash provided by operating activities 39,316 76,724
--------- ---------
Investing activities:

Aircraft pre-delivery deposits - 8,374
Capital expenditures (13,515) (29,523)
Noncurrent prepaid aircraft rent (2,087) (63,882)
(Additions) reductions to other assets (8,468) 4,909
Proceeds from sales of property and equipment 108 171
--------- ---------
Net cash used in investing activities (23,962) (79,951)
--------- ---------
Financing activities:

Proceeds from long-term debt 1,500 5,729
Payments of preferred dividends (9,987) -
Payments on short-term debt - (4,187)
Payments on long-term debt and exchange offers (29,982) (4,283)
Decrease (increase) in restricted cash 12,217 (8,210)
Proceeds from stock options exercises 300 -
--------- ---------
Net cash used in financing activities (25,952) (10,951)
--------- ---------
Decrease in cash and cash equivalents (10,598) (14,178)
Cash and cash equivalents, beginning of period 160,644 200,160
--------- ---------
Cash and cash equivalents, end of period $ 150,046 $ 185,982
========= =========

Supplemental disclosures:

Cash payments (receipts) for:
Interest $ 26,047 $ 22,999
Income tax refunds (4,142) (16,711)

Financing and investing activities not affecting cash:
Accrued capitalized interest 479 752
Accrued preferred stock dividends - 2,860
Additional new notes $ 12,991 $ -

See accompany notes.


5

ATA HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Stock Based Compensation

The accompanying consolidated financial statements of ATA Holdings Corp.
and subsidiaries ("the Company") have been prepared in accordance with
instructions for reporting interim financial information on Form 10-Q and,
therefore, do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash
flows in conformity with accounting principles generally accepted in the
United States ("GAAP"). For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003.

The consolidated financial statements for the periods ended June 30, 2004
and 2003 reflect, in the opinion of management, all adjustments necessary
to present fairly the financial position, results of operations and cash
flows for such periods. Results for the periods ended June 30, 2004 are not
necessarily indicative of results to be expected for the full fiscal year
ending December 31, 2004.

During 1996, the Company adopted the disclosure provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("FAS 123") with
respect to its stock options. As permitted by FAS 123, the Company has
elected to continue to account for employee stock options following the
intrinsic value method of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related
interpretations. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized.

The Company has not granted options since the year ended December 31, 2001.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period (1 to 3
years). The Company's total pro forma stock-based employee compensation
expense determined under fair value based method, net of related tax
effects, is less than $10,000 for the quarter and six months periods ended
June 30, 2004 and 2003, and has no effect on basic or diluted earnings per
share for these periods.

2. State of the Industry and the Company

The geopolitical impact of the conflict in the Middle East and generally
weak economic conditions of the past several years have adversely affected
the Company and the airline industry. The industry as a whole, and the
Company, have suffered significant financial losses since 2001. These
trends continued in the first six months of 2004, as the industry and the
Company experienced a weak revenue environment and increased fuel costs.
These conditions caused several network carriers including United Airlines,
American Airlines, Delta Airlines and US Airways to either seek bankruptcy
protection or threaten bankruptcy. The Company faced a competitive pricing
environment that included extraordinary fare discounting by several
airlines in many of the scheduled service markets the Company serves. In
addition, the Company faced increased capacity by its competitors in
several of the east-west markets it serves. These economic conditions
contributed to liquidity concerns for the Company.

In early 2004, the Company continued its efforts to address the liquidity
problems created by the economic conditions the Company has faced since
2001. On January 30, 2004, the Company successfully completed exchange
offers and issued Senior Notes due 2009 ("2009 Notes") and cash
consideration for certain of its $175 million 10 1/2% Senior Notes due in

6

August 2004 ("2004 Notes") and issued Senior Notes due 2010 ("2010 Notes"
and, together with the 2009 Notes, "New Notes") and cash consideration for
certain of its $125 million 9 5/8% Senior Notes due in December 2005 ("2005
Notes", and together with the 2004 Notes, "Existing Notes"). In completing
the exchange offers, the Company accepted $260.3 million of Existing Notes
tendered for exchange, issuing $163.1 million in aggregate principal amount
of 2009 Notes and delivering $7.8 million in cash in exchange for $155.3
million in aggregate principal amount of 2004 Notes tendered, and issuing
$110.2 million in aggregate principal amount of 2010 Notes and delivering
$5.2 million in cash in exchange for $105.0 million in aggregate principal
amount of 2005 Notes. In addition to the New Notes issued, $19.7 million in
aggregate principal amount of the 2004 Notes and $20.0 million in aggregate
principal amount of the 2005 Notes remain outstanding after the completion
of the exchange offers. In connection with the exchange offers, the Company
also obtained the consent of the holders of the Existing Notes to amend or
eliminate certain of the restrictive operating covenants and certain
default provisions of the indentures governing the Existing Notes. In
accordance with the Emerging Issues Task Force of the FASB No. 96-19,
Debtor's Accounting for Modification or Exchange of Debt Terms ("EITF
96-19"), the Company recorded a non-operating loss on extinguishment of
debt of $27.3 million in the first quarter of 2004. The loss is primarily
related to the accounting for the $13 million cash consideration paid at
closing of the exchange offers and the $13 million of incremental notes
issued during the exchange offers. In accordance with EITF 96-19, the New
Notes are recorded in the Company's balance sheet at fair value at the date
of the exchange offers, which closely approximated their face value.

In addition, on January 30, 2004, the Company also completed the amendments
of certain aircraft operating leases with its three major lessors, Boeing
Capital Services Corporation ("BCSC"), General Electric Capital Aviation
Services ("GECAS") and International Lease Finance Corporation ("ILFC").
The original terms of many of these aircraft operating leases were
determined before September 11, 2001, and many were structured to require
significant cash payments in the first few years of each lease in order to
reduce the total rental cost over the entire lease terms. The effect of the
lease amendments was to delay the payment of portions of the amounts due
under those operating leases, primarily between June 30, 2003 and March 31,
2005, and to extend the leases generally for two years. Most of the
payments delayed during this time period are to be subsequently paid at
various times throughout the remaining life of the leases. The Company
received a refund of $29.8 million on January 30, 2004 related to payments
made in 2003 under the original terms of certain retroactively amended
leases. The amendments will also result in approximately $69.6 million in
lower cash payments during 2004 under these operating leases, as compared
to payments that would have been due under the original lease terms.

Even after these steps, the Company faces substantial additional liquidity
concerns due to the continuing impact of the weak pricing environment,
increased fuel costs, a declining demand for military/government charter
service and increasing aircraft operating lease payments in 2005, which are
heavily concentrated in the first quarter of 2005. The Company has
announced that it expects to realize a net loss for the full year of 2004.
The Company is attempting to minimize these losses, including amending the
collective bargaining agreement with its cockpit crewmembers to forego
scheduled pay increases, implementing pay reductions for certain of its
non-crewmember employees, and eliminating jobs where appropriate.
Additionally, on March 30, 2004, the Company signed a letter agreement with
Boeing and ILFC (together "Issuer") that provides a financing commitment
from the Issuer to ATA for up to $30 million under certain specific
conditions. As consideration for the financing commitment, ATA must pay the
Issuer $1.2 million upon execution of the definitive documentation of the
financing agreement. If the Company obtains financing under the financing
commitment, the Company expects that the amount available under the
commitment will be reduced by $10 million per year on the anniversary of
the funding, for up to three years. Although based on current operating
assumptions and market conditions the Company presently projects that the
impact of these actions, together with cash on hand as of June 30, 2004,
will allow the Company to meet its cash obligations in 2004, the sustained
losses have negatively impacted the Company's financial covenant outlooks.
Specifically, the Company expects the percentage of its holdback with its
Visa and MasterCard processing bank to increase to 100% in August 2004,
from 75% as of June 30, 2004. This increase in holdback percentage will
decrease the Company's unrestricted cash balance by approximately $20.0

7

million. Under current operating assumptions and absent any changes to
existing aircraft lease obligations, the Company does not expect to have
sufficient cash to meet its cash obligations in the first quarter of 2005.

As of September 30, 2004, the Company is required to meet an earnings
before interest, taxes, depreciation, amortization and aircraft rent
("EBITDAR") to fixed charges ratio covenant under its secured term loan,
which is partially guaranteed by the Air Transportation Stabilization Board
("ATSB"), and its mortgage note payable agreements. In addition, certain of
the Company's other loan agreements have cross-default provisions that may
be triggered if the Company fails to meet this ratio. These covenants were
negotiated based on future projections that did not anticipate an on-going
weak revenue environment and increasing fuel costs. Based on current
financial projections, the Company is uncertain of its ability to satisfy
this covenant. If the Company is unable to meet this financial covenant, it
would be in default under these agreements, and the lenders would have the
right to accelerate the maturity date of the loan and exercise other
remedies against the Company. The Company intends to discuss its financial
position with the ATSB and other lenders to seek to obtain any necessary
waivers of these covenants. However, the Company can provide no assurances
as to its success in obtaining a waiver or revision of these covenants. In
addition, the Company cannot provide assurance that it will not be required
to make pre-payments under the loans in order to revise the covenants,
which could negatively impact the Company's cash outlook. The Company has
not identified alternate sources of funding to meet cash requirements
should an acceleration of the maturity date occur due to the current
economic and capital environment.

The Company's ability to obtain financing to assist with liquidity issues
will be extremely limited. Therefore, together with cost-cutting
initiatives, the Company is currently exploring opportunities to improve
its revenue generation and return the Company to profitability. Beginning
in August 2004, the Company will launch business class seating. This
service will be available system-wide by the end of 2004. The Company is
also looking at opportunities for expansion in the transatlantic markets.
The Company could begin European service in 2005, although no specific
destinations have been announced. The Company is undertaking other actions
to reduce cash obligations, improve liquidity and improve profitability,
including further restructuring of leases, further amendments to collective
bargaining agreements and restructuring of operations, with a concurrent
disposition of assets and reduction of workforce associated with the
discontinued operations. Even with these potential initiatives, the Company
faces significant risks beyond its control that could affect its long-term
viability including further declines in demand for air travel, further
increases in fuel price, competitive pricing and capacity increases, other
airlines seeking bankruptcy protection and the ongoing geopolitical impacts
of the conflicts in the Middle East.

8

3. Earnings per Share

The following tables set forth the computation of basic and diluted
earnings per share:


Three Months Ended June 30 ,
2004 2003
------------ ------------

Numerator:
Net income (loss) $ (25,662,000) $ 43,315,000
Preferred stock dividends (375,000) (2,485,000)
------------- ------------
Income (loss) available to common
shareholders - numerator for basic
earnings per share $ (26,037,000) $ 40,830,000
------------- ------------
Effect of dilutive securities:
Convertible redeemable preferred stock $ - $ 375,000
------------- ------------
Numerator for diluted earnings per share $ (26,037,000) $ 41,205,000
============= ============


Denominator:
Denominator for basic earnings per share
- weighted average shares 11,823,864 11,764,753
Effect of potential delutive securities:
Employee stock options - -
Convertible redeemable preferred stock - 1,914,486
Warrants issued under secured term loan - 397,766
------------- ------------
Denominator for diluted earnings per share
- adjusted weighted average shares 11,823,864 14,077,005
============= ============
Basic income (loss) per share $ (2.20) $ 3.47
============= ============
Diluted income (loss) per share $ (2.20) $ 2.93
============= ============


9



Six Months Ended June 30 ,
2004 2003
------------- ------------

Numerator:
Net income (loss) $ (90,006,000) $ 32,323,000
Preferred stock dividends (750,000) (2,860,000)
------------- ------------
Income (loss) available to common
shareholders - numerator for basic
earnings per share $ (90,756,000) $ 29,463,000
------------- ------------
Effect of dilutive securities:
Convertible redeemable preferred stock - $ 750,000
------------- ------------
Numerator for diluted earnings per share $ (90,756,000) $ 30,213,000
============= ============


Denominator:
Denominator for basic earnings per share
- weighted average shares 11,823,317 11,764,753
Effect of potential delutive securities:
Employee stock options - -
Convertible redeemable preferred stock - 1,914,486
Warrants issued under secured term loan - 373,999
------------- ------------
Denominator for diluted earnings per share
- adjusted weighted average shares 11,823,317 14,053,238
============= ============
Basic income (loss) per share $ (7.68) $ 2.50
============= ============
Diluted income (loss) per share $ (7.68) $ 2.15
============= ============


In accordance with FASB Statement of Financial Accounting Standards No.
128, Earnings per Share ("FAS 128"), the impact of 1,914,486 shares of
convertible redeemable preferred stock in the three and six months ended
June 30, 2004 has been excluded from the computation of diluted earnings
per share because their effect would be antidilutive. Also, the impact of
834,995 and 969,573 incremental shares from the assumed exercise of
warrants issued in conjunction with the secured term loan the Company
obtained in November 2002 were not included in the computation of diluted
earnings per share for the three and six months ended June 30, 2004,
respectively, because their effect would be antidilutive. In addition, the
impact of 257 and 9,327 employee stock options, respectively, has been
excluded from the computation of diluted earnings per share for the three
and six months ended June 30, 2004, respectively, because their effect
would be antidilutive.

10

4. Commitments and Contingencies

The Company has a purchase agreement with the Boeing Company ("Boeing") to
purchase seven new Boeing 737-800s, which are currently scheduled for
delivery between July 2007 and December 2007. These aircraft are powered by
General Electric CFM56-7B27 engines. The manufacturer's list price is $52.4
million for each 737-800, subject to escalation. The Company's purchase
price for each aircraft is subject to various discounts. According to a
2004 amendment to the purchase agreement with Boeing, if the Company does
not have permanent financing for these aircraft suitable to the Company and
does not have suitable pre-delivery deposit financing, and if Boeing does
not elect to provide such financing acceptable to the Company, these
deliveries can be delayed for one year periods annually through December
31, 2010. Aircraft pre-delivery deposits are required for these aircraft,
and the Company has historically funded these deposits for past aircraft
deliveries using operating cash and pre-delivery deposit financing
facilities. The Company can provide no assurance that it will be able to
secure pre-delivery deposit financing facilities or permanent financing for
any future aircraft purchases. As of June 30, 2004, the Company had $4.9
million in long-term pre-delivery deposits outstanding for the seven future
aircraft deliveries, which were funded with operating cash. Upon delivery
and financing of the aircraft, pre-delivery deposits funded with operating
cash are expected to be returned to the Company. As of June 30, 2004, the
Company also has purchase rights with Boeing for 40 Boeing 737-800
aircraft.

The Company also has commitments to take delivery of one additional Boeing
737-800 and four spare engines, all of which are currently scheduled for
delivery between the remainder of 2004 and 2008. The Company intends to
finance all future aircraft and engine deliveries with leases accounted for
as operating leases.

In the Company's aircraft financing agreements, the Company typically
indemnifies the financing parties, trustees acting on their behalf and
other related parties against liabilities that arise from the manufacture,
design, ownership, financing, use, operation and maintenance of the
aircraft and for tort liability, whether or not these liabilities arise out
of or relate to the negligence of these indemnified parties, except for
their gross negligence or willful misconduct. The Company expects that it
would be covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities under these aircraft leases.

In January 2002, the Company entered into an agreement (the "Lease") to
lease land from the City of Chicago (the "City"), which had been purchased
by the City with Chicago Midway Airport Revenue Bonds ("MARB's"). The
Company also entered into a redevelopment agreement (the "Agreement") with
the City in January 2002 to develop real estate on the property. As part of
the Agreement, the City agreed to pay for the debt service on the MARB's
from the incremental tax revenue expected to be generated from the real
estate developments. Under the Agreement, if the incremental tax revenue is
insufficient to fund the MARB's debt service, the City has the right to
require the Company to provide those funds as additional rent under the
lease. The total amount of the debt service, including interest, from 2006
through 2021 is approximately $27.2 million.

The Company is considering constructing a training center, primarily for
pilot training, on the land leased from the City (the "Project"). The
Company has received $5.1 million in grants from the State of Illinois to
assist with costs related to site development and construction of the
training center. As of June 30, 2004, $1.7 million of the grant funds have
been spent on costs related to the Project. In addition to requiring
completion of the Project, the grants require the Company to achieve
certain employment levels in the State of Illinois by December 31, 2005. In
the event that the Project is not completed or the employment levels are
not achieved as stipulated in the grant, the State of Illinois has the
right to seek recovery of all the funds received by the Company under the
grant. The Company is uncertain whether it can achieve the required
employment levels by December 31, 2005.

Various claims, contractual disputes and lawsuits against the Company arise
periodically involving complaints, which are normal and reasonably

11

foreseeable in light of the nature of the Company's business. The majority
of these suits are covered by insurance. In the opinion of management, the
resolution of these claims will not have a material adverse effect on the
business, operating results or financial condition of the Company.

5. Income Taxes

As of December 31, 2003, the Company had incurred a three-year cumulative
loss. Because of this cumulative loss and the presumption under GAAP that
net deferred tax assets should be fully reserved if it is more likely than
not that they will not be realized through carrybacks or other strategies,
the Company recorded a full valuation allowance against its net deferred
tax asset. In the first six months of 2004, the Company continued to record
a full valuation allowance against its net deferred tax asset under the
same presumption. This valuation allowance resulted in no tax benefit being
recognized in the Company's first six months of 2004 and 2003.

6. Prepaid and Accrued Aircraft Rent

The Company's operating leases require periodic cash payments that vary in
amount and frequency. The Company accounts for aircraft rentals expense in
equal monthly amounts over the life of each operating lease because
straight-line expense recognition is most representative of the time
pattern from which benefit from use of the aircraft is derived. Forty-nine
of the Company's aircraft operating leases were structured to require
significant cash in the early years of the lease in order to obtain more
overall favorable lease rates. The amount of the cash payments in excess of
the aircraft rent expense in these early years has created a significant
prepaid aircraft rent amount on the Company's balance sheet. The portion of
the prepaid aircraft rent that will be amortized in the next twelve months
is recorded as short-term prepaid expense while the remainder is recorded
as long-term prepaid aircraft rent. Twenty-four of the Company's aircraft
operating leases require more significant cash payments later in the lease
term resulting in an accrued liability for aircraft rents on the Company's
balance sheet. The portion of the accrued liability that will be paid in
the next twelve months is recorded as short-term accrued expenses while the
remainder is recorded as long-term deferred items. Two of the Company's
aircraft operating leases were structured whereby monthly cash rents and
monthly book rents are equal. The table below summarizes the prepaid and
accrued aircraft rents as of June 30, 2004 and December 31, 2003 that
result from this straight-line expense recognition as reported under the
following captions on the Company's balance sheet:

12



June 30, December 31,
2004 2003
-------- ------------
(In thousands)

Assets:

Prepaid expenses and other current assets (short-term) $ 2,282 $ 3,879
Prepaid aircraft rent (long-term) 146,175 144,088
-------- --------
Total prepaid aircraft rent $148,457 $147,967
======== ========

Liabilities:

Accrued expenses (short-term) $ 6,304 $ 11,529
Other deferred items (long-term) 39,524 27,976
-------- --------
Total accrued aircraft rent $ 45,828 $ 39,505
======== ========




7. Dividends

In 2000, the Company issued and sold 300 shares of Series B convertible
redeemable preferred stock, without par value ("Series B Preferred"), at a
price of $100,000 per share. The Company must redeem the Series B Preferred
no later than September 20, 2015. The purchaser of the Series B Preferred
is entitled to cumulative quarterly dividends at an annual rate of 5.0% on
the liquidation amount ($100,000 per share) of the Series B Preferred. The
annual rate is subject to an increase to 8.44% on the liquidation amount
($100,000 per share) if the Company fails to pay any quarterly dividend
within ten days of the due date. Once dividends in arrears have been paid
in full, the rate returns to the original annual rate of 5.0%. The
mandatorily redeemable Series B Preferred is classified between liabilities
and equity on the Company's accompanying balance sheets because it is
convertible to the Company's common stock. The dividends related to the
Series B Preferred are recorded below net income on the Company's statement
of operations.

Also, in 2000, the Company issued and sold 500 shares of Series A
redeemable preferred stock, without par value ("Series A Preferred"), at a
price of $100,000 per share. The purchaser of the Series A Preferred is
entitled to cumulative semiannual dividends at an annual rate of 8.44% on
the liquidation amount ($100,000 per share) of the Series A Preferred. As
of July 1, 2003, per the provisions of FASB Statement of Financial
Accounting Standards No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity ("FAS 150"), the Series
A Preferred is classified as a liability on the Company's accompanying
balance sheets because it is mandatorily redeemable and not convertible,
and the dividends related to the Series A Preferred are classified as
interest expense on the Company's statement of operations.

Prior to and as of December 31, 2003, the Company's unsecured senior notes
indentures contained certain restricted payment covenants, which limited
the Company's ability to pay preferred stock dividends. At the end of the
third quarter of 2002, that covenant no longer permitted payment of
preferred dividends. The Company accrued preferred dividends at the
appropriate rates plus interest for the payments due between December 15,
2002 and December 31, 2003. In January 2004, as a result of completion of
the exchange offers, the restricted payment covenants were removed. In
addition, the restricted payment covenants in the Senior Note indentures
for the 2009 Notes and 2010 Notes permits the Company to pay preferred

13


stock dividends. Concurrently with the completion of the exchange offers on
January 30, 2004, the Company paid all accrued preferred dividends in
arrears of $9.2 million.

8. Management Changes

On June 28, 2004, the Company announced the resignation of David M. Wing,
who had held the role of Executive Vice President and Chief Financial
Officer of the Company and was a member of the Company's Board of
Directors. In addition, the Company appointed Gilbert F. Viets, who had
held the role of Chairman of the Audit Committee of the Company's Board of
Directors, to the role of Executive Vice President and Chief Financial
Officer. On July 12, 2004, the Company announced the appointment of Byron
F. Johnson as Chairman of the Audit Committee of the Company's Board of
Directors to replace Mr. Viets. Mr. Viets remains on the Board.

14

Part I - Financial Information
Item II - Management's Discussion and Analysis of Financial Conditions and
Results of Operations

Quarter Ended June 30, 2004, Versus Quarter Ended June 30, 2003

Overview

The Company is a leading provider of scheduled airline services to leisure and
other value-oriented travelers, and a leading provider of charter services to
the U.S. military. The Company, through its principal subsidiary, ATA Airlines,
Inc. ("ATA"), has been operating for 31 years and is the tenth largest U.S.
airline in terms of 2003 capacity and traffic. ATA provides jet scheduled
service through nonstop and connecting flights from the gateways of
Chicago-Midway and Indianapolis to popular vacation destinations such as Hawaii,
Phoenix, Las Vegas, Florida, California, Mexico and the Caribbean, as well as to
New York's LaGuardia Airport, Philadelphia, Denver, Dallas-Ft. Worth,
Washington, D.C., Boston, Seattle, Minneapolis-St. Paul, Newark, Charlotte, and
Pittsburgh. The Company's commuter subsidiary Chicago Express Airlines, Inc.
("Chicago Express") provides commuter scheduled service between Chicago-Midway
and the cities of Indianapolis, Dayton, Des Moines, Flint, Fort Wayne, Grand
Rapids, Madison, Milwaukee, Moline, South Bend, Springfield and Toledo. ATA also
provides charter service to independent tour operators, specialty charter
customers and the U.S. military.

In the quarter and six months ended June 30, 2004, the Company recorded an
operating loss of $10.5 million and $32.9 million, respectively, as compared to
an operating income of $55.9 million and $57.5 million in the same periods of
2003. In the quarter and six months ended June 30, 2004, the Company had a loss
available to common shareholders of $26.0 million and $90.8 million,
respectively, as compared to a net income available to common shareholders of
$40.8 million and $29.5 million in the same periods of 2003. The loss available
to common shareholders for the first six months of 2004 includes a non-operating
charge of $27.3 million related to a loss on extinguishment of debt from the
exchange offers completed on January 30, 2004. The second quarter and first six
months of 2003 results include $37.2 million received from the U.S. Government
for a reimbursement of expenses incurred and revenue foregone related to
enhanced aviation security after September 11, 2001, which was recorded as a
reduction in operating expenses. See "Notes to Consolidated Financial Statements
- - Note 2 - State of the Industry and the Company" for additional information on
the exchange offers.

Consolidated revenue per available seat mile ("RASM") increased to 7.36 cents
and decreased to 7.14 cents, respectively, in the second quarter and first six
months of 2004, as compared to 7.23 cents and 7.15 cents, respectively, in the
comparable periods of 2003. In 2004, the Company's scheduled service revenues
were adversely affected by the industry's added capacity, especially in the
Company's transcontinental and other east-west markets. In addition, the Company
continued to be challenged by competitive pricing which included extraordinary
fare discounting by several airlines. As a result, the Company cancelled some of
its east-west routes beginning in March and April 2004 while continuing to
review its other scheduled service markets. The Company intends to enhance its
position as a leading provider of passenger airline services in those markets
where it can capitalize on its competitive strengths. Military/government
charter revenues decreased in the second quarter and first six months of 2004 as
a result of the deactivation of Civil Reserve Air Fleet ("CRAF") in the second
quarter of 2003. In addition, the extension of tours of duty for overseas
military personnel caused a decline in demand for the Company's
military/government charter product in the first six months of 2004.

The Company's unit costs remained among the lowest of major airlines in the
second quarter and first six months of 2004. Consolidated cost per available
seat mile ("CASM") increased to 7.56 cents and 7.44 cents, respectively, in the
quarter and six months ended June 30, 2004, as compared to 6.19 cents and 6.61
cents, respectively, in the comparable periods of 2003. The 2003 CASM amounts
reflect the impact of the receipt of $37.2 million, or 0.69 cents and 0.35 cents
in the quarter and six months ended June 30, 2003, in U.S. Government funds
received in the second quarter of 2003. The remainder of the increase in CASM
between periods is primarily due to a 27.8% and 14.6% increase in the average
cost per gallon of fuel in the second quarter and first six months of 2004 as
compared to the same periods of 2003. In addition, the Company experienced
higher maintenance costs in the first six months of 2004 as a result of a
contractual rate increase in the hourly engine maintenance agreement for the
Company's fleet of Boeing 757-200 aircraft, and these rate increases are
expected to continue. Salary costs also increased in 2004, due primarily to

15

contractual rate increases for cockpit crew received in July 2003.

Critical Accounting Policies

Please refer to the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.

Results of Operations

For the quarter and six months ended June 30, 2004, the Company had an operating
loss of $10.5 million and $32.9 million, respectively, as compared to operating
income of $55.9 million and $57.5 million in the same periods of 2003. The
Company had a net loss of $25.7 million and $90.0 million in the second quarter
and first six months of 2004, respectively, as compared to a net income of $43.3
million and $32.3 million in the same periods of 2003. The net loss for the six
months ended June 30, 2004 includes a non-operating charge of $27.3 million
related to a loss on extinguishment of debt from the exchange offers completed
on January 30, 2004.

Operating revenues increased 0.7% to $390.8 million in the second quarter of
2004, as compared to $388.1 million in the same period of 2003, and increased
2.1% to $778.1 million in the first six months of 2004, as compared to $761.8
million in the same period of 2003. Consolidated RASM increased 1.8 % to 7.36
cents and decreased 1.2% to 7.14 cents in the second quarter and first six
months of 2004, respectively, as compared to 7.23 cents and 7.15 cents in the
second quarter and first six months of 2003. Scheduled service revenues
increased $22.7 million between the second quarters of 2003 and 2004, or 8.2 %,
while charter revenues decreased $21.9 million between the same periods, or
23.1%. Scheduled service revenues increased $55.1 million between the first six
months of 2003 and 2004, or 10.5%, while charter revenues decreased $42.5
million between the same periods, or 20.5%. Scheduled service unit revenues
reflected weakness in both load factors and unit revenue, while yields were
virtually unchanged from 2003 levels in the second quarter and first six months
of 2004. Military/government charter operations decreased in the first six
months of 2004 as a result of the deactivation of CRAF in the second quarter of
2003.

Operating expenses increased 20.8% to $401.3 million in the second quarter of
2004, as compared to $332.2 million in the comparable period of 2003, and
increased 15.1% to $811.0 million in the first six months of 2004, as compared
to $704.3 million in the same period of 2003. Consolidated CASM increased 22.1%
to 7.56 cents in the second quarter of 2004, as compared to 6.19 cents in the
second quarter of 2003, and increased 12.6% to 7.44 cents in the first six
months of 2004, as compared to 6.61 cents in the same period of 2003. Operating
expenses for the second quarter and first six months of 2003 reflect the receipt
of $37.2 million in U.S. Government funds for the reimbursement of expenses
incurred and revenue foregone related to enhanced aviation security after
September 11, 2001, which was recorded as a reduction to operating expenses.

16

Results of Operations in Cents Per ASM

The following table sets forth, for the periods indicated, operating revenues
and expenses expressed as cents per available seat mile ("ASM").


Cents per ASM Cents per ASM
Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
---------------------------- -------------------------


Consolidated operating revenues: 7.36 7.23 7.14 7.15

Consolidated operating expenses:
Salaries, wages and benefits 2.02 1.84 1.97 1.81
Fuel and oil 1.62 1.27 1.54 1.34
Aircraft rentals 1.13 1.04 1.10 1.04
Handling, landing and navigation fees 0.57 0.58 0.58 0.58
Aircraft maintenance, materials and repairs 0.37 0.20 0.36 0.23
Other selling expenses 0.26 0.24 0.24 0.23
Crew and other employee travel 0.24 0.31 0.28 0.30
Depreciation and amortization 0.24 0.26 0.24 0.27
Advertising 0.20 0.19 0.19 0.19
Passenger service 0.19 0.20 0.20 0.20
Facilities and other rentals 0.13 0.11 0.12 0.11
Insurance 0.11 0.14 0.11 0.14
Commissions 0.11 0.08 0.11 0.10
Ground package cost 0.05 0.05 0.06 0.07
U.S. Government Funds - (0.69) - (0.35)
Other 0.32 0.37 0.34 0.35
----- ---- ----- ----
Total consolidated operating expenses 7.56 6.19 7.44 6.61
----- ---- ----- ----
Consolidated operating income (loss) (0.20) 1.04 (0.30) 0.54
===== ==== ===== ====


ASMs (in thousands) 5,310,459 5,370,153 10,893,281 10,654,863


Consolidated Flight Operating and Financial Data

The following tables set forth, for the periods indicated, certain key operating
and financial data for the consolidated flight operations of the Company. Data
shown for "Jet" operations include the consolidated operations of Lockheed
L-1011, Boeing 737-800, Boeing 757-200, and Boeing 757-300 aircraft in all of
the Company's business units. Data shown for "SAAB" operations include the
operations of SAAB 340B propeller aircraft by Chicago Express as the ATA
Connection. Data for subservice operations, which is insignificant, is not
included.

17




Three Months Ended June 30,
---------------------------------------------------------------
2004 2003 Inc (Dec) % Inc (Dec)
---------------------------------------------------------------

Departures Jet 21,439 19,786 1,653 8.35
Departures SAAB 13,314 13,084 230 1.76
---------------------------------------------------------------
Total Departures 34,753 32,870 1,883 5.73
---------------------------------------------------------------
Block Hours Jet 64,417 61,716 2,701 4.38
Block Hours SAAB 12,956 12,797 159 1.24
---------------------------------------------------------------
Total Block Hours 77,373 74,513 2,860 3.84
---------------------------------------------------------------
RPMs Jet (000s) 3,749,521 3,732,628 16,893 0.45
RPMs SAAB (000s) 49,369 51,922 (2,553) (4.92)
---------------------------------------------------------------
Total RPMs (000s) (a) 3,798,890 3,784,550 14,340 0.38
---------------------------------------------------------------
ASMs Jet (000s) 5,233,066 5,292,058 (58,992) (1.11)
ASMs SAAB (000s) 77,393 78,095 (702) (0.90)
---------------------------------------------------------------
Total ASMs (000s) (b) 5,310,459 5,370,153 (59,694) (1.11)
---------------------------------------------------------------

Load Factor Jet (%) 71.65 70.53 1.12 1.59
Load Factor SAAB (%) 63.79 66.49 (2.70) (4.06)
---------------------------------------------------------------
Total Load Factor (%) (c) 71.54 70.47 1.07 1.52
---------------------------------------------------------------
Passengers Enplaned Jet 2,815,650 2,658,408 157,242 5.91
Passengers Enplaned SAAB 284,551 295,799 (11,248) (3.80)
---------------------------------------------------------------
Total Passengers Enplaned (d) 3,100,201 2,954,207 145,994 4.94
---------------------------------------------------------------
Revenue $ (000s) 390,774 388,122 2,652 0.68
RASM in cents (e) 7.36 7.23 0.13 1.80
CASM in cents (f) 7.56 6.19 1.37 22.13
Yield in cents (g) 10.29 10.26 0.03 0.29

Average Aircraft in Service
Lockheed L-1011 6.00 8.42 (2.42) (28.74)
Boeing 737-800 32.50 30.20 2.30 7.62
Boeing 757-200 15.59 15.00 0.59 3.93
Boeing 757-300 12.00 10.11 1.89 18.69
SAAB 340B 16.00 16.00 - -

Average Block Hours Flown per day
Lockheed L-1011 6.77 7.34 (0.57) (7.77)
Boeing 737-800 10.71 10.71 - -
Boeing 757-200 12.22 12.04 0.18 1.50
Boeing 757-300 10.73 11.11 (0.38) (3.42)
SAAB 340B 8.99 8.88 0.11 1.24


See footnotes (a) through (g) on page 20.

18



Six Months Ended June 30,
-----------------------------------------------------------------
2004 2003 Inc (Dec) % Inc (Dec)
-----------------------------------------------------------------

Departures Jet 43,332 38,980 4,352 11.16
Departures SAAB 26,471 25,797 674 2.61
-----------------------------------------------------------------
Total Departures 69,803 64,777 5,026 7.76
-----------------------------------------------------------------
Block Hours Jet 132,426 122,532 9,894 8.07
Block Hours SAAB 25,914 25,220 694 2.75
-----------------------------------------------------------------
Total Block Hours 158,340 147,752 10,588 7.17
-----------------------------------------------------------------
RPMs Jet (000s) 7,273,958 7,057,275 216,683 3.07
RPMs SAAB (000s) 95,874 97,973 (2,099) (2.14)
-----------------------------------------------------------------
Total RPMs (000s) (a) 7,369,832 7,155,248 214,584 3.00
-----------------------------------------------------------------
ASMs Jet (000s) 10,737,873 10,500,361 237,512 2.26
ASMs SAAB (000s) 155,408 154,502 906 0.59
-----------------------------------------------------------------
Total ASMs (000s) (b) 10,893,281 10,654,863 238,418 2.24
-----------------------------------------------------------------
Load Factor Jet (%) 67.74 67.21 0.53 0.79
Load Factor SAAB (%) 61.69 63.41 (1.72) (2.71)
-----------------------------------------------------------------
Total Load Factor (%) (c) 67.65 67.15 0.50 0.74
-----------------------------------------------------------------
Passengers Enplaned Jet 5,378,751 5,036,086 342,665 6.80
Passengers Enplaned SAAB 546,413 557,933 (11,520) (2.06)
-----------------------------------------------------------------
Total Passengers Enplaned (d) 5,925,164 5,594,019 331,145 5.92
-----------------------------------------------------------------

Revenue $ (000s) 778,107 761,751 16,356 2.15
RASM in cents (e) 7.14 7.15 (0.01) (0.14)
CASM in cents (f) 7.44 6.61 0.83 12.56
Yield in cents (g) 10.56 10.65 (0.09) (0.85)

Average Aircraft in Service
Lockheed L-1011 6.00 9.21 (3.21) (34.85)
Boeing 737-800 32.25 30.10 2.15 7.14
Boeing 757-200 15.30 15.33 (0.03) (0.20)
Boeing 757-300 12.00 10.01 1.99 19.88
SAAB 340B 16.00 16.00 - -

Average Block Hours Flown per day
Lockheed L-1011 8.04 7.50 0.54 7.20
Boeing 737-800 11.05 10.55 0.50 4.74
Boeing 757-200 12.57 11.86 0.71 5.99
Boeing 757-300 10.93 10.80 0.13 1.20
SAAB 340B 9.00 8.76 0.24 2.74


See footnotes (a) through (g) on page 20.

19

(a) Revenue passenger miles (RPMs) represent the number of seats occupied by
revenue passengers multiplied by the number of miles those seats are flown.
RPMs are an industry measure of the total seat capacity actually sold by
the Company.

(b) Available seat miles (ASMs) represent the number of seats available for
sale to revenue passengers multiplied by the number of miles those seats
are flown. ASMs are an industry measure of the total seat capacity offered
for sale by the Company, whether sold or not.

(c) Passenger load factor is the percentage derived by dividing RPMs by ASMs.
Passenger load factor is relevant to the evaluation of scheduled service
because incremental passengers normally provide incremental revenue and
profitability when seats are sold individually. In the case of commercial
charter and military/government charter, load factor is less relevant
because the right to use an entire aircraft is sold by the Company instead
of individual seats. Since both costs and revenues are largely fixed for
these types of charter flights, changes in load factor have less impact on
business unit profitability. Consolidated load factors and scheduled
service load factors for the Company are shown in the appropriate tables
for industry comparability, but load factors for individual charter
businesses are omitted from applicable tables.

(d) Passengers enplaned are the number of revenue passengers who occupied seats
on the Company's flights. This measure is also referred to as "passengers
boarded." In the case of commercial charter and military/government
charter, passengers enplaned is less relevant because the right to use an
entire aircraft is sold by the Company instead of individual seats.

(e) Revenue per ASM (expressed in cents) is total operating revenue divided by
total ASMs. This measure is also referred to as "RASM." RASM measures the
Company's unit revenue using total available seat capacity. In the case of
scheduled service, RASM is a measure of the combined impact of load factor
and yield (see (g) below for the definition of yield).

(f) Cost per ASM (expressed in cents) is total operating expense divided by
total ASMs. This measure is also referred to as "CASM." CASM measures the
Company's unit cost using total available seat capacity.

(g) Revenue per RPM (expressed in cents) is total operating revenue divided by
total RPMs. This measure is also referred to as "yield." Yield is relevant
to the evaluation of scheduled service because yield is a measure of the
average price paid by customers purchasing individual seats. Yield is less
relevant to the commercial charter and military/government charter
businesses because the right to use an entire aircraft is sold at one time
for one price. Consolidated yields and scheduled service yields are shown
in the appropriate tables for industry comparability, but yields for
individual charter businesses are omitted from applicable tables.

Operating Revenues

Total operating revenues in the second quarter of 2004 increased 0.7% to $390.8
million, as compared to $388.1 million in the second quarter of 2003; and
operating revenues in the first six months of 2004 increased 2.1% to $778.1
million, as compared to $761.8 million in the same period of 2003.

These increases were due primarily to a $22.7 million and $55.1 million increase
in scheduled service revenues for the second quarter and first six months of
2004, partially offset by a $21.9 million and $42.5 million decrease in charter
revenues for the second quarter and first six months of 2004.

The following tables set forth, for the periods indicated, certain key operating
and financial data for the scheduled service, commercial charter and
military/government charter operations of the Company.

20



Three Months Ended June 30,
-------------------------------------------------------------
2004 2003 Inc (Dec) % Inc (Dec)
-------------------------------------------------------------

Scheduled Service
Departures 33,157 30,344 2,813 9.27
Block Hours 70,453 63,530 6,923 10.90
RPMs (000s) (a) 3,402,077 3,191,216 210,861 6.61
ASMs (000s) (b) 4,497,588 4,172,529 325,059 7.79
Load Factor (c) 75.64 76.48 (0.84) (1.10)
Passengers Enplaned (d) 3,004,028 2,753,353 250,675 9.10
Revenue $ (000s) 300,750 278,009 22,741 8.18
RASM in cents (e) 6.69 6.66 0.03 0.41
Yield in cents (g) 8.84 8.71 0.13 1.49
Revenue per segment (h) 100.12 100.97 (0.85) (0.85)

Military Charter
Departures 1,283 1,602 (319) (19.91)
Block Hours 5,771 7,707 (1,936) (25.12)
ASMs (000s) (b) 720,284 947,338 (227,054) (23.97)
Revenue $ (000s) 65,538 78,020 (12,482) (15.99)
RASM in cents (e) 9.10 8.24 0.86 10.43
RASM excluding fuel escalation (j) 8.71 8.21 0.50 6.09

Commercial Charter
Departures 302 915 (613) (66.99)
Block Hours 1,122 3,255 (2,133) (65.53)
ASMs (000s) (b) 91,123 248,534 (157,411) (63.34)
Revenue $ (000s) 7,138 16,530 (9,392) (56.82)
RASM in cents (e) 7.83 6.65 1.18 17.74
RASM excluding fuel escalation (i) 7.69 6.32 1.37 21.68

Percentage of Consolidated Revenues:
Scheduled Service 77.0% 71.6% 5.4% 7.54
Military Charter 16.8% 20.1% (3.3%) (16.42)
Commercial Charter 1.8% 4.3% (2.5%) (58.14)

See footnotes (a) through (j) on pages 20 and 22.

21



Six Months Ended June 30,
-------------------------------------------------------------
2004 2003 Inc (Dec) % Inc (Dec)
-------------------------------------------------------------

Scheduled Service
Departures 66,281 59,250 7,031 11.87
Block Hours 142,672 123,688 18,984 15.35
RPMs (000s) (a) 6,482,014 5,875,697 606,317 10.32
ASMs (000s) (b) 9,094,597 8,018,861 1,075,736 13.42
Load Factor (c) 71.27 73.27 (2.00) (2.73)
Passengers Enplaned (d) 5,708,277 5,137,816 570,461 11.10
Revenue $ (000s) 577,917 522,777 55,140 10.55
RASM in cents (e) 6.35 6.52 (0.17) (2.61)
Yield in cents (g) 8.92 8.90 0.02 0.22
Revenue per segment $ (h) 101.24 101.75 (0.51) (0.50)

Military Charter
Departures 2,721 3,320 (599) (18.04)
Block Hours 12,855 16,123 (3,268) (20.27)
ASMs (000s) (b) 1,576,233 2,030,427 (454,194) (22.37)
Revenue $ (000s) 146,260 164,215 (17,955) (10.93)
RASM in cents (e) 9.28 8.09 1.19 14.71
RASM excluding fuel escalation (j) 8.94 7.96 0.98 12.31

Commercial Charter
Departures 742 2,198 (1,456) (66.24)
Block Hours 2,658 7,920 (5,262) (66.44)
ASMs (000s) (b) 211,861 603,823 (391,962) (64.91)
Revenue $ (000s) 18,106 42,642 (24,536) (57.54)
RASM in cents (e) 8.55 7.06 1.49 21.10
RASM excluding fuel escalation (i) 8.39 6.66 1.73 25.97

Percentage of Consolidated Revenues:
Scheduled Service 74.3% 68.6% 5.7% 8.31
Military Charter 18.8% 21.6% (2.8%) (12.96)
Commercial Charter 2.3% 5.6% (3.3%) (58.93)


See footnotes (a) through (j) on pages 20 and 22.

(h) Revenue per segment flown is determined by dividing total scheduled service
revenues by the number of passengers boarded. Revenue per segment is a
broad measure of the average price obtained for all flight segments flown
by passengers in the Company's scheduled service route network.

(i) Commercial charter contracts generally provide that the tour operator will
reimburse the Company for certain fuel cost increases, which, when earned,
are accounted for as additional revenue. A separate RASM calculation,
excluding the impact of fuel reimbursements, is provided as a separate
measure of unit revenue changes.

(j) Military/government reimbursements to the Company are calculated based upon
a "cost plus" formula, including an assumed average fuel price for each
contract year. If actual fuel prices differ from the contract rate,
revenues are adjusted up or down to neutralize the impact of the change on
the Company. A separate RASM calculation is provided, excluding the impact
of the fuel price adjustments.

22

Scheduled Service Revenues. Scheduled service revenues in the second quarter of
2004 increased 8.2% to $300.8 million from $278.0 million in the second quarter
of 2003, and scheduled service revenues in the six months ended June 30, 2004
increased 10.5% to $577.9 million from $522.8 million in the same period of
2003. For the three months ended June 30, 2004 scheduled service capacity
increased 7.8%, while unit revenues and yield experienced only minor increases
and load factor experienced a minor decrease, as compared to the same period of
2003. For the six months ended June 30, 2004, scheduled service capacity
increased 13.4% and yield experienced a minor increase, while unit revenues and
load factor experienced decreases of 2.6% and 2.7%, respectively, as compared to
the same period of 2003. During 2004 the Company continued to experience
significant pressure from a competitive pricing environment including
extraordinary fare discounting by several airlines in many of the scheduled
service markets the Company serves. The primary reason for the competitive
pricing environment has been the industry's added capacity, especially in the
Company's transcontinental and other east-west markets. As a result, the Company
cancelled some of its east-west routes beginning in March and April 2004 while
continuing to review its other scheduled service markets. The Company intends to
combat the adverse effects of the foregoing competitive factors by enhancing its
position as a leading provider of passenger airline services in selected markets
where it can capitalize on its competitive strengths. However, the Company
expects that it will continue to be challenged by competitive pricing actions
and added industry capacity throughout 2004.

Approximately 66.3% of the Company's scheduled service capacity was generated by
flights either originating or terminating at Chicago-Midway in the second
quarter of 2004, as compared to 65.7% in the second quarter of 2003. The
Hawaiian market generated approximately 14.8% of total scheduled service
capacity in the second quarter of 2004, as compared to 13.4% in the second
quarter of 2003. Another 14.3% of total scheduled service capacity was generated
in the Indianapolis market in the second quarter of 2004, as compared to 13.5%
in the second quarter of 2003.

The Company anticipates that its Chicago-Midway operation will continue to
represent a substantial proportion of its scheduled service business in the
future. Construction at Chicago's Midway Airport was completed in the second
quarter of 2004 and the company occupies 14 jet gates as of June 30, 2004, as
compared to its ten jet gates as of June 30, 2003. The Company operated 167 peak
daily jet and commuter departures from Chicago-Midway and served 42 destinations
on a nonstop basis in the second quarter of 2004, as compared to 154 peak daily
jet and commuter departures and 39 nonstop destinations in the second quarter of
2003.

Military/Government Charter Revenues. Military/government charter revenue
decreased 16.0% to $65.5 million in the second quarter of 2004 from $78.0
million in the second quarter of 2003, and in the six months ended June 30,
2004, military/government charter revenue decreased 10.9% to $146.3 million from
$164.2 million in the same period of 2003.

The decrease in revenue for military/government charter revenues in the second
quarter and first six months of 2004 was mainly due to the deactivation of the
CRAF program in the second quarter of 2003. The CRAF program, which ran from
February 18, 2003 to June 18, 2003, required ATA to pledge up to 13 aircraft to
military/government charter use to support Operation Iraqi Freedom and allowed
the Company to increase its Lockheed L-1011 aircraft utilization (number of
productive hours of flying per day).

Although military/government charter revenues declined between periods,
military/government charter RASM, excluding the impact of fuel escalation
revenue, increased 6.1% to 8.71 cents and 12.3% to 8.94 in the second quarter
and first six months of 2004, respectively, from 8.21 cents and 7.96 cents in
the same periods of 2003. The primary reason for this increase was the Company
utilizing proportionately more L-1011-500 and narrow-body aircraft in 2004, as
compared to 2003, which generate a higher RASM compared to other types of
aircraft.

Commercial Charter Revenues. Commercial charter revenues decreased 57.0% to $7.1
million in the second quarter of 2004 from $16.5 million in the second quarter
of 2003, and in the six months ended June 30, 2004, commercial charter revenue
decreased 57.5% to $18.1 million from $42.6 million in the same period of 2003.

23

The majority of the decline in commercial charter revenues was due to the
retirement of certain Lockheed L-1011 aircraft that the Company has
traditionally used in commercial charter flying. Since aircraft utilization is
typically much lower for commercial charter, as compared to scheduled service
flying, the Company's replacement fleets of new Boeing 737-800 and Boeing
757-300 aircraft are economically disadvantaged when used in the charter
business, because of their higher fixed-ownership cost. Consequently, the
Company expects its commercial charter revenues to continue to decline as the
fleet supporting this business continues to shrink as a result of aircraft
retirements.

Although commercial charter revenues declined between periods, excluding the
impact of fuel escalation revenue, commercial charter RASM increased 21.7% to
7.69 cents in the second quarter of 2004 from 6.32 cents in the second quarter
of 2003 and increased 26.0% to 8.39 cents in the first six months of 2004 from
6.66 cents in the same period of 2003. The primary reason for the increases is
that the Company flew a higher percentage of specialty charter flights in 2004,
as compared to same period of 2003. The specialty charter flights, which are
designed to meet the customers' needs, historically yield higher revenue per ASM
than the track charter flights, which are repetitive flights to vacation
destinations marketed to tour operators.

Ground Package Revenues. The Company earns ground package revenues through the
sale of hotel, car rental and cruise accommodations in conjunction with the
Company's air transportation product. Currently the Company markets these ground
packages through its Ambassadair subsidiary. Ambassadair Travel Club offers
tour-guide-accompanied vacation packages to its approximately 32,000 individual
and family members. In the second quarter and six months ended June 30, 2004,
ground package revenues decreased 9.1% to $3.0 million and decreased 7.1% to
$7.9 million, as compared to $3.3 million and $8.5 million in the same periods
of 2003. These declines are primarily due to the Company closing a small
Canadian tour operator business as of July 1, 2003, and are partially offset by
increased ground revenue for Ambassadair due to a change in mix of packages
offered.

Other Revenues. Other revenues are comprised of the consolidated revenues of
certain affiliated companies, together with miscellaneous categories of revenue
associated with operations of the Company, such as cancellation and
administration service fees, Ambassadair Travel Club membership dues and cargo
revenue. Other revenues increased 17.1% to $14.4 million in the second quarter
of 2004 from $12.3 million in the second quarter of 2003, and in the six months
ended June 30, 2004, other revenues increased 18.6% to $28.0 million, as
compared to $23.6 million in the same period of 2003, primarily due to increases
in cargo revenue and service fees.

Operating Expenses

Salaries, Wages and Benefits. Salaries, wages and benefits include the cost of
salaries and wages paid to the Company's employees, together with the Company's
cost of employee benefits and payroll-related local, state and federal taxes.
Salaries, wages and benefits expense in the second quarter of 2004 increased
8.6% to $107.4 million from $98.9 million in the second quarter of 2003, and in
the six months ended June 30, 2004, salaries, wages and benefits expense
increased 11.3% to $215.1 million, as compared to $193.2 million in the same
period of 2003.

The increases in salaries, wages and benefits in the second quarter and first
six months of 2004, as compared to the same periods of 2003, are partially due
to the Company employing additional crewmembers and other operations employees
to handle its increased scheduled service capacity in 2004, as compared to 2003.
The Company also incurred increasing costs in 2004 for employee medical and
workers' compensation benefits. In addition, the Company's salary costs
increased between these periods due to contractual rate increases effective July
1, 2003 for the Company's cockpit crewmembers.

The Company is experiencing an erosion of its competitive labor cost advantage
relative to other carriers as other carriers reduce their costs through
negotiated concessions. The Company has reached an agreement on contract

24

amendments with the cockpit crewmembers represented by the Air Line Pilots
Association ("ALPA"). Under the amendments, the crewmembers will forego their
contractual rate increases that were to become effective July 1, 2004 and July
1, 2005, resulting in savings of approximately $32.5 million. The amendments
include new contractual increases effective July 1, 2006 and July 1, 2007. The
cabin crewmembers, represented by the Association of Flight Attendants, rejected
an amendment to their existing collective bargaining agreement. Under the
proposed amendment, the cabin crewmembers would have foregone two hours of pay
per month from August 1, 2004 through July 31, 2005, which would have resulted
in aggregate labor cost savings of approximately $1.0 million.

Fuel and Oil. Fuel and oil expense increased 26.0% to $85.8 million in the
second quarter of 2004, as compared to $68.1 million in the same period of 2003,
and increased 17.4% to $168.1 million in the six months ended June 30, 2004, as
compared to $143.2 million in the same period of 2003.

During the quarter and six months ended June 30, 2004, the average cost per
gallon of jet fuel consumed increased by 27.8% and 14.6%, respectively, compared
to the same periods of 2003, resulting in an increase in fuel and oil expense of
approximately $18.1 million and $21.0 million, respectively, between those
periods.

Periodically, the Company has entered into fuel price hedge contracts to reduce
the risk of fuel price fluctuations. The Company did not have any hedge
contracts in place in the first six months of 2004 or 2003. Although the Company
did not have any hedge contracts in place, the Company did benefit from fuel
reimbursement clauses and guarantees in its bulk scheduled service, commercial
charter and military/government contracts in the second quarter of 2004. The
benefit of these price guarantees was accounted for as revenue.

Aircraft Rentals. The Company's operating leases require periodic cash payments
that vary in amount and frequency. Many of the Company's aircraft operating
leases were originally structured to require very significant cash in the early
years of the lease in order to obtain more overall favorable lease rates. The
Company accounts for aircraft rentals expense in equal monthly amounts over the
life of each operating lease because straight-line expense recognition is most
representative of the time pattern from which benefit is derived from use of the
aircraft. Although the Company restructured many of its operating leases in
January 2004 resulting in significant cash deferrals, the amount of the cash
payments in excess of the aircraft rent expense in these early years has still
resulted in a significant prepaid aircraft rent amount on the Company's balance
sheet. This prepaid aircraft rent would have been substantially larger had the
leases not been restructured resulting in a $29.8 million refund received on
January 30, 2004 related to payments made in 2003 under the original terms of
certain retroactively amended leases. Aircraft rentals expense in the second
quarter of 2004 increased 6.6% to $59.8 million from $56.1 million in the second
quarter of 2003, and increased 7.3% to $119.4 million in the six months ended
June 30, 2004, as compared to $111.3 million in the same period of 2003. These
increases were mainly attributable to the delivery of three leased Boeing
737-800, one leased Boeing 757-300 aircraft, and one leased 757-200 aircraft
between June 2003 and June 2004.

Handling, Landing and Navigation Fees. Handling and landing fees include the
costs incurred by the Company at airports to land and service its aircraft and
to handle passenger check-in, security, cargo and baggage where the Company
elects to use third-party contract services in lieu of its own employees. Where
the Company uses its own employees to perform ground handling functions, the
resulting cost appears within salaries, wages and benefits. Air navigation fees
are incurred when the Company's aircraft fly over certain foreign airspace.

Handling, landing and navigation fees decreased by 4.1% to $30.1 million in the
second quarter of 2004, as compared to $31.4 million in the same period of 2003,
and increased by 3.3% to $63.5 million in the six months ended June 30, 2004, as
compared to $61.5 million in the same period of 2003.

The Company experienced a decrease in the cost of handling per departure due to
the negotiation of favorable terms in new contracts, resulting in $2.3 million
and $5.7 million, respectively, less expense in the second quarter and first six
moths of 2004, as compared to the same periods of 2003. The Company realized an
8.4% and 11.2% increase in system-wide jet departures between periods, which

25

resulted in an increase of handling, landing and navigation fees of $1.6 million
and $6.4 million more expense in the quarter and six month ended June 30, 2004,
respectively, as compared to the same periods of 2003.

Aircraft Maintenance, Materials and Repairs. This expense includes the cost of
expendable aircraft spare parts, repairs to repairable and rotable aircraft
components, contract labor for maintenance activities, and other non-capitalized
direct costs related to fleet maintenance, including spare engine leases, parts
loan and exchange fees, and related shipping costs. It also includes the costs
incurred under hourly engine maintenance agreements the Company has entered into
on its Boeing 737-800, Boeing 757-200/300 and SAAB 340B power plants. These
agreements provide for the Company to pay monthly fees based on a specified rate
per engine flight hour, in exchange for major engine overhauls and maintenance.
Aircraft maintenance, materials and repairs expense increased 80.6% to $19.5
million in the second quarter of 2004, as compared to $10.8 million in the
second quarter of 2003, and increased 62.8% to $39.4 million in the six months
ended June 30, 2004, as compared to $24.2 million in the same periods of 2003.

The increases in maintenance, materials and repairs were mainly due to a
contractual rate increases in the cost of the hourly engine maintenance
agreement for the Company's Boeing 757-200 and Boeing 757-300 fleets effective
January 1, 2004, which resulted in an increase in aircraft maintenance,
materials and repairs expense of $6.2 million and $12.7 million in the second
quarter and first six months of 2004, as compared to the same periods of 2003.
The Company expects the increase for the remainder of 2004, as compared to 2003,
to be similar to the increase experienced in the first six months of the year.
The Company also incurred higher maintenance, materials and repairs cost in both
periods of 2004 due to an increase in the number of airframe checks, as compared
to the same period of 2003.

Other Selling Expenses. Other selling expenses are comprised primarily of
booking fees paid to computer reservation systems ("CRS"), credit card discount
expenses incurred when selling to customers using credit cards for payment, and
toll-free telephone services provided to customers who contact the Company
directly to book reservations. Other selling expenses increased 6.9% to $14.0
million in the second quarter of 2004, as compared to $13.1 million in the
second quarter of 2003, and increased 7.3% to $26.6 million in the six months
ended June 30, 2004, as compared to $24.8 million in the same period in 2003.
The Company experienced increases in credit card and CRS fees due to the
increase in scheduled service passengers enplaned between the second quarter and
first six months of 2004, as compared to the same periods of 2003. These
increases were partially offset by a decrease in toll-free service costs in both
the quarter and six months ended June 30, 2004, compared to the same periods of
2003, due to contractual rate decreases offered by the Company's new provider.

Crew and Other Employee Travel. Crew and other employee travel is primarily the
cost of air transportation, hotels and per diem reimbursements to cockpit and
cabin crewmembers incurred to position crews away from their bases to operate
Company flights throughout the world. The cost of crew and other employee travel
decreased 23.1% to $13.0 million in the second quarter of 2004, as compared to
$16.9 million in the second quarter of 2003, and decreased 5.7% to $30.0 million
in the six months ended June 30, 2004, as compared to $31.8 million in the same
period of 2003. These decreases are primarily due to less military/government
flying in the second quarter and first six months of 2004, as compared to the
same periods of 2003, due to the CRAF program ending in June 2003. Since
military/government flights often operate to and from points remote from the
Company's crew bases, the Company incurs significant travel expenses on other
airlines for positioning of the crews and higher hotel costs.

As a result of the contract amendments with the cockpit crewmembers represented
by ALPA, the Company expects a reduction in per diem costs of approximately $4.2
million for the contract years effective July 1, 2004 and July 1, 2005. A
further reduction of approximately $3.2 million is expected from the flight
attendant group due to stipulations in their collective bargaining agreement
which link per diem rates to the cockpit crewmember contract.

26

Depreciation and Amortization. Depreciation reflects the periodic expensing of
the recorded cost of owned airframes and engines, leasehold improvements and
rotable parts for all fleet types, together with other property and equipment
owned by the Company. Depreciation and amortization expense decreased 7.2% to
$12.8 million in the second quarter of 2004, as compared to $13.8 million in the
second quarter of 2003, and decreased 8.6% to $26.5 million in the six months
ended June 30, 2004, as compared to $29.0 million in the same period of 2003.

The decrease in depreciation and amortization expense is mainly attributable to
the L-1011-50 and 100 fleet. The Company retired four L-1011-50 and 100 aircraft
from revenue service during the second and third quarters of 2003. Due to these
retirements, the Company recorded $1.3 million and $3.5 million less in
depreciation in the second quarter and first six months of 2004, respectively,
as compared to the same period of 2003.

Advertising. Advertising expense increased 4.0% to $10.4 million in the second
quarter of 2004, as compared to $10.0 million in the same period of 2003, and
decreased 0.5% to $20.2 million in the six months ended June 30, 2004, as
compared to $20.3 million in the same period of 2003. The Company incurs
advertising costs primarily to support single-seat scheduled service sales. In
the second quarter of 2004, the Company increased advertising due to initiatives
intended to respond to the current competitive pricing environment. In the first
six months of 2003, the Company increased advertising in an effort to increase
customer preference for the Company's enhanced product with an advertising
campaign identifying the Company as "An Honestly Different Airline." The brand
awareness campaign has enabled the Company to achieve efficiencies in the use of
advertising resources causing the expense to decrease in the first quarter of
2004, which offset increased spending for sales initiatives in the second
quarter of 2004.

Passenger Service. Passenger service expense includes the onboard costs of meal
and non-alcoholic beverage catering, the cost of alcoholic beverages and the
cost of onboard entertainment programs, together with certain costs incurred for
mishandled baggage and passengers inconvenienced due to flight delays or
cancellations. For the second quarters of 2004 and 2003, catering represented
82.6% and 83.0%, respectively, of total passenger service expense, while
catering represented 81.4% and 82.1%, respectively, of total passenger service
expense for the six month periods ended June 30, 2004 and 2003.

The total cost of passenger service decreased 6.5% to $10.1 million in the
second quarter of 2004, as compared to $10.8 million in the second quarter of
2003 and increased 1.9% to $21.4 million in the six months ended June 30, 2004,
as compared to $21.0 million in the same period of 2003. In the three and six
month periods ended June 30, 2004, the Company experienced an increase in
passenger service expense of $0.4 million and $1.1 million, respectively, due to
the increase in scheduled service passengers, as compared to the same periods of
2003. The Company realized a decrease in passenger service expense of $0.8
million and $0.5 million in the second quarter and first six months of 2004,
respectively, as compared to the same periods of 2003, related to the decrease
in military/government flying between periods, as military/government flying
requires a significantly more expensive catering product.

Facilities and Other Rentals. Facilities and other rentals include the cost of
all ground facilities that are leased by the Company such as airport space,
regional sales offices and general offices. The cost of facilities and other
rentals was $6.7 million in the second quarter of 2004, as compared to $5.8
million in the second quarter of 2003, and increased 12.9% to $13.1 million in
the six months ended June 30, 2004, as compared to $11.6 million in the same
period of 2003. The Company experienced rate increases at certain existing
locations due to increased frequency to those destinations.

Insurance. Insurance expense represents the Company's cost of hull and liability
insurance and the costs of general insurance policies held by the Company,
including workers' compensation insurance premiums and claims handling fees. The
total cost of insurance decreased 20.0% to $6.0 million in the second quarter of
2004, as compared to $7.5 million in the second quarter of 2003, and decreased
22.8% to $11.5 million in the six months ended June 30, 2004, as compared to
$14.9 million in the same period of 2003. The decreases are mainly attributable

27

to decreased contract rates for the Company's hull and liability insurance for
the policy year beginning in September 2003.

The federal government has provided the Company and other airlines excess war
risk insurance coverage above $50 million up to $3.0 billion per event. The
Company is covered under this policy through December 2004. If the Federal
government stops providing excess war risk insurance to the Company, it is
likely that the Company's insurance expense will increase as the premiums
charged by aviation insurers for this coverage will be higher than those charged
by the government.

Commissions. The Company incurs commissions expense in association with the sale
by travel agents of single seats on scheduled service. In addition, the Company
incurs commissions to secure some commercial and military/government charter
business. Commissions expense increased 35.7% to $5.7 million in the second
quarter of 2004, as compared to $4.2 million in the second quarter of 2003, and
increased 22.5% to $12.5 million in the six months ended June 30, 2004 as
compared to $10.2 million in the same period of 2003.

The Company experienced an increase in military/government charter commissions
of $1.9 million and $3.5 million in the second quarter and first six months of
2004 because certain CRAF flights in the second quarter and first six months of
2003 were exempt from commissions. As CRAF ended in June 2003, the military
flights flown in 2004 were commissionable. These increases were partially offset
by a decrease in scheduled service commissions of $0.4 million and $1.2 million
in the second quarter and first six months of 2004, as compared to the same
periods of 2003, due to the increasing share of non-commissionable ticket
purchases made on the Company's own website.

Ground Package Cost. Ground package cost is incurred by the Company through
hotels, car rental companies, cruise lines and similar vendors who provide
ground and cruise accommodations to Ambassadair customers. Ground package cost
decreased 10.7% to $2.5 million in the second quarter of 2004, as compared to
$2.8 million in the second quarter of 2003, and decreased 5.7% to $6.6 million
in the six months ended June 30, 2004, as compared to $7.0 million in the same
period of 2003. See the "Ground Package Revenues" section above for an
explanation of the ground package sales and related costs.

U.S. Government Funds. On April 16, 2003, President Bush signed into law the
Emergency Wartime Supplemental Appropriations Act, which made available $2.3
billion in reimbursement to U.S. air carriers for expenses incurred and revenue
foregone related to enhanced aviation security subsequent to September 11, 2001.
Pursuant to this legislation, the Company received $37.2 million in May 2003,
which was recorded as U.S. Government funds in the second quarter of 2003. The
Company does not expect to receive any further material compensatory funds from
the U.S. Government.

Other Operating Expenses. Other operating expenses decreased 9.8% to $17.4
million in the second quarter of 2004, as compared to $19.3 million in the
second quarter of 2003, and decreased 0.5% to $37.2 million in the six months
ended June 30, 2004, as compared to $37.4 million in the same period of 2003.
These decreases were attributable to various changes in other expenses
comprising this line item, none of which were individually significant.

Interest Expense. Interest expense in the quarter and the six months ended June
30, 2004 increased to $15.4 million and $30.4 million, respectively, as compared
to $13.0 million and $25.6 million in the same periods of 2003. The Company
recorded $2.1 million and $3.5 million more in interest expense in the quarter
and six months ended June 30, 2004 as compared to the same period of 2003,
related to its unsecured senior notes restructured in January 2004. The Company
also recorded interest expense of $1.1 million and $2.3 million, respectively,
in the second quarter and first six months of 2004 related to dividends on the
Series A Preferred. As of July 1, 2003, per the provisions of FAS 150, the
dividends related to the Series A Preferred are classified as interest expense
on the Company's statement of operations and the Series A Preferred is recorded
as a liability in the accompanying balance sheet. The Company recorded less
interest in both periods of 2004, as compared to the same periods of 2003, on

28

various debt instruments, including its secured term loan partially guaranteed
by the ATSB, due to declining principal balances.

Loss on Extinguishment of Debt. On January 30, 2004, the Company successfully
completed exchange offers and issued 2009 Notes and cash consideration for
certain of its 2004 Notes and issued 2010 Notes and cash consideration for
certain of its 2005 Notes. The Company accepted $260.3 million of Existing Notes
tendered for exchange, issuing $163.1 million in aggregate principal amount of
2009 Notes and delivering $7.8 million in cash in exchange for $155.3 million in
aggregate principal amount of 2004 Notes tendered, and issuing $110.2 million in
aggregate principal amount of 2010 Notes and delivering $5.2 million in cash in
exchange for $105.0 million in aggregate principal amount of 2005 Notes. As a
result of this transaction, the Company recorded a non-operating loss on
extinguishment of debt of $27.3 million in accordance with EITF 96-19. The loss
mainly relates to the accounting for the $13 million cash consideration paid at
closing of the exchange offers and the $13 million of incremental notes issued
during the exchange offers. In accordance with EITF 96-19, the New Notes are
recorded in the Company's balance sheet at fair value at the date of the
exchange offers, which equates to their face value.

Income Taxes. The Company did not record any income tax expense or benefit in
the quarter and the six months ended June 30, 2004 applicable to $25.7 million
and $90.0 million, respectively in pre-tax loss for those periods, nor did it
record any income tax expense or benefit in the second quarter or six months
ended June 30, 2003, applicable to $ 43.3 million and $32.3 million,
respectively, in pre-tax income for those periods.

As of December 31, 2003, the Company had incurred a three-year cumulative loss.
Because of this cumulative loss and the presumption under GAAP that net deferred
tax assets should be fully reserved if it is more likely than not that they will
not be realized through carrybacks or other strategies, the Company had recorded
a full valuation allowance against its net deferred tax asset. In the second
quarter of and first six months of 2004, the Company continued to record a full
valuation allowance against its net deferred tax asset under the same
presumption.

Liquidity and Capital Resources

Statement of Cash Flow Overview

In the six months ended June 30, 2004, net cash provided by operating activities
was $39.3 million, as compared to $76.7 million for the same period of 2003. The
decrease in cash provided by operating activities between periods primarily
resulted from the significant net loss in the first six months of 2004, as
compared to the net income in the first six months of 2003, partially offset by
favorable changes in operating assets and liabilities.

Net cash used in investing activities was $24.0 million in the first six months
of 2004, as compared to $80.0 million in the same period of 2003. Such amounts
included capital expenditures totaling $13.5 million in the first six months of
2004, as compared to $29.5 million in the period of 2003. Cash used for
non-current prepaid aircraft rent payments of $2.1 million, net of the $29.8
million refund received on January 30, 2004 related to payments made in 2003
under the original terms of certain retroactively amended leases, in the first
six months of 2004 was much less significant as compared to $63.9 million in the
same period of 2003, mainly due to the completion of the lease amendments on
January 30, 2004. See "Liquidity Outlook" section below.

Net cash used in financing activities was $26.0 million in the six months ended
June 30, 2004, as compared to $11.0 million in the same period of 2003. Upon
completion of the exchange offers on January 30, 2004, the Company paid all
accrued preferred dividends in arrears totaling $9.2 million in the first
quarter of 2004. In addition, in the first six months of 2004, the Company also
paid $13.0 million as cash consideration for the completion of the exchange
offers and made other scheduled debt payments of $17.0 million. In the first six
months of 2003, the Company made scheduled debt payments of $8.5 million. Also
in the first six months of 2004, the Company reduced restricted cash $12.2
million primarily due to the cancellation of a surety bond relating to the
Department of Transportation ("DOT") charter obligations. In contrast, in the

29

first six months of 2003, the Company's restricted cash increased by $8.2
million to collateralize additional letters of credit.

Liquidity Outlook

The geopolitical impact of the conflict in the Middle East and generally weak
economic conditions of the past several years have adversely affected the
Company and the airline industry. The industry as a whole, and the Company, have
suffered significant financial losses since 2001. These trends continued in the
first six months of 2004, as the industry and the Company experienced a weak
revenue environment and increased fuel costs. These conditions caused several
network carriers including United Airlines, American Airlines, Delta Airlines
and US Airways to either seek bankruptcy protection or threaten bankruptcy. The
Company faced a competitive pricing environment that included extraordinary fare
discounting by several airlines in many of the scheduled service markets the
Company serves. In addition, the Company faced increased capacity by its
competitors in several of the east-west markets it serves. These economic
conditions contributed to liquidity concerns for the Company.

In early 2004, the Company continued its efforts to address the liquidity
problems created by the economic conditions the Company has faced since 2001. On
January 30, 2004, the Company successfully completed exchange offers and issued
2009 Notes and cash consideration for certain of its 2004 Notes and issued 2010
Notes and cash consideration for certain of its 2005 Notes. In completing the
exchange offers, the Company accepted $260.3 million of Existing Notes tendered
for exchange, issuing $163.1 million in aggregate principal amount of 2009 Notes
and delivering $7.8 million in cash in exchange for $155.3 million in aggregate
principal amount of 2004 Notes tendered, and issuing $110.2 million in aggregate
principal amount of 2010 Notes and delivering $5.2 million in cash in exchange
for $105.0 million in aggregate principal amount of 2005 Notes. In addition to
the New Notes issued, $19.7 million in aggregate principal amount of the 2004
Notes and $20.0 million in aggregate principal amount of the 2005 Notes remain
outstanding after the completion of the exchange offers. In connection with the
exchange offers, the Company also obtained the consent of the holders of the
Existing Notes to amend or eliminate certain of the restrictive operating
covenants and certain default provisions of the indentures governing the
Existing Notes. In accordance with EITF 96-19, the Company recorded a
non-operating loss on extinguishment of debt of $27.3 million in the first
quarter of 2004. The loss is primarily related to the accounting for the $13
million cash consideration paid at closing of the exchange offers and the $13
million of incremental notes issued during the exchange offers. In accordance
with EITF 96-19, the New Notes are recorded in the Company's balance sheet at
fair value at the date of the exchange offers, which closely approximated their
face value.

In addition, on January 30, 2004, the Company also completed the amendments of
certain aircraft operating leases with its three major lessors, BCSC, GECAS and
ILFC. The original terms of many of these aircraft operating leases were
determined before September 11, 2001, and many were structured to require
significant cash payments in the first few years of each lease in order to
reduce the total rental cost over the entire lease terms. The effect of the
lease amendments was to delay the payment of portions of the amounts due under
those operating leases, primarily between June 30, 2003 and March 31, 2005, and
to extend the leases generally for two years. Most of the payments delayed
during this time period are to be subsequently paid at various times throughout
the remaining life of the leases. The Company received a refund of $29.8 million
on January 30, 2004 related to payments made in 2003 under the original terms of
certain retroactively amended leases. The amendments will also result in
approximately $69.6 million in lower cash payments during 2004 under these
operating leases, as compared to payments that would have been due under the
original lease terms.

Even after these steps, the Company faces substantial additional liquidity
concerns due to the continuing impact of the weak pricing environment, increased
fuel costs, a declining demand for military/government charter service and
increasing aircraft operating lease payments in 2005, which are heavily
concentrated in the first quarter of 2005. The Company has announced that it
expects to realize a net loss for the full year of 2004. The Company is
attempting to minimize these losses, including amending the collective
bargaining agreement with its cockpit crewmembers to forego scheduled pay
increases, implementing pay reductions for certain of its non-crewmember
employees, and eliminating jobs where appropriate. Additionally, on March 30,
2004, the Company signed a letter agreement with the Issuer that provides a
financing commitment from the Issuer to ATA for up to $30 million under certain

30

specific conditions. As consideration for the financing commitment, ATA must pay
the Issuer $1.2 million upon execution of the definitive documentation of the
financing agreement. If the Company obtains financing under the financing
commitment, the Company expects that the amount available under the commitment
will be reduced by $10 million per year on the anniversary of the funding, for
up to three years. Although based on current operating assumptions and market
conditions the Company presently projects that the impact of these actions,
together with cash on hand as of June 30, 2004, will allow the Company to meet
its cash obligations in 2004, the sustained losses have negatively impacted the
Company's financial covenant outlooks. Specifically, the Company expects the
percentage of its holdback with its Visa and MasterCard processing bank to
increase to 100% in August 2004, from 75% as of June 30, 2004. This increase in
holdback percentage will decrease the Company's unrestricted cash balance by
approximately $20.0 million. Under current operating assumptions and absent any
changes to existing aircraft lease obligations, the Company does not expect to
have sufficient cash to meet its cash obligations in the first quarter of 2005.

As of September 30, 2004, the Company is required to meet an EBITDAR to fixed
charges ratio covenant under its secured term loan, which is partially
guaranteed by the ATSB, and its mortgage note payable agreements. In addition,
certain of the Company's other loan agreements have cross-default provisions
that may be triggered if the Company fails to meet this ratio. These covenants
were negotiated based on future projections that did not anticipate an on-going
weak revenue environment and increasing fuel costs. Based on current financial
projections, the Company is uncertain of its ability to satisfy this covenant.
If the Company is unable to meet this financial covenant, it would be in default
under these agreements, and the lenders would have the right to accelerate the
maturity date of the loan and exercise other remedies against the Company. The
Company intends to discuss its financial position with the ATSB and other
lenders to seek to obtain any necessary waivers of these covenants. However, the
Company can provide no assurances as to its success in obtaining a waiver or
revision of these covenants. In addition, the Company cannot provide assurance
that it will not be required to make pre-payments under the loans in order to
revise the covenants, which could negatively impact the Company's cash outlook.
The Company has not identified alternate sources of funding to meet cash
requirements should an acceleration of the maturity date occur due to the
current economic and capital environment.

The Company's ability to obtain financing to assist with liquidity issues will
be extremely limited. Therefore, together with cost-cutting initiatives, the
Company is currently exploring opportunities to improve its revenue generation
and return the Company to profitability. Beginning in August 2004, the Company
will launch business class seating. This service will be available system-wide
by the end of 2004. The Company is also looking at opportunities for expansion
in the transatlantic markets. The Company could begin European service in 2005,
although no specific destinations have been announced. The Company is
undertaking other actions to reduce cash obligations, improve liquidity and
improve profitability, including further restructuring of leases, further
amendments to collective bargaining agreements and restructuring of operations,
with a concurrent disposition of assets and reduction of workforce associated
with the discontinued operations. Even with these potential initiatives, the
Company faces significant risks beyond its control that could affect its
long-term viability including further declines in demand for air travel, further
increases in fuel price, competitive pricing and capacity increases, other
airlines seeking bankruptcy protection and the ongoing geopolitical impacts of
the conflicts in the Middle East.

Debt and Operating Lease Cash Payment Obligations. The Company is required to
make cash payments in the future on debt obligations and operating leases.
Although the Company is obligated on a number of long-term operating leases,
which are not recorded on the balance sheet under GAAP, the Company has no
off-balance sheet debt and does not guarantee the debt of any other party. The
following table summarizes the Company's contractual debt and operating lease
obligations as of June 30, 2004, and the effect such obligations are expected to
have on its liquidity and cash flows in future periods.

31



Cash Payments Currently Scheduled
-------------------------------------------------------------------------------------
Total 3 Qtr- 4 Qtr 2005 2007 After
As of 6/30/04 2004 -2006 -2008 2008
----------- ----------- ----------- ----------- ------------
(in thousands)

Current and long-term debt $ 497,595 $ 36,631 $ 101,354 $ 81,335 $ 278,275

Lease obligations 3,810,669 79,546 589,401 635,785 2,505,937

Expected future lease obligations (1) 581,121 654 10,668 59,373 510,426

Redeemable Preferred Stock (2) 50,000 - - - 50,000
----------- ----------- ----------- ----------- ------------
Total contractual cash obligations $ 4,939,385 $ 116,831 $ 701,423 $ 776,493 $ 3,344,638
=========== =========== =========== =========== ============



(1) Represents estimated payments on eight new Boeing 737-800 aircraft the
Company is committed to taking delivery of in 2004 through 2007, as well as
four spare engines the Company is committed to taking delivery of in 2005
through 2008. The Company intends to finance these aircraft and engines
with operating leases. However, no such leases are in place as of June 30,
2004, as the Company has not received the aircraft. Payments for expected
future lease obligations were derived using terms of leases for comparable
aircraft currently in place.

(2) Represents the mandatory redemption of the 500 shares of Series A Preferred
in equal semiannual installments between 2010 and 2015. Amount excludes the
mandatory redemption of the 300 shares of Series B convertible preferred
stock in 2015, as these shares can be converted into common stock at any
time up to the mandatory redemption date.

Aircraft and Fleet Transactions. The Company has a purchase agreement with
Boeing to purchase directly from Boeing seven new Boeing 737-800s, which are
currently scheduled for delivery between July 2007 and December 2007. These
aircraft are powered by General Electric CFM56-7B27 engines. The manufacturer's
list price is $52.4 million for each 737-800, subject to escalation. The
Company's purchase price for each aircraft is subject to various discounts.
According to a 2004 amendment to the purchase agreement with Boeing, if the
Company does not have permanent financing for these aircraft suitable to the
Company, and does not have suitable pre-delivery deposit financing, and if
Boeing does not elect to provide such financing suitable to the Company, these
deliveries can be delayed for one year periods annually through December 31,
2010. Aircraft pre-delivery deposits are required for these aircraft, and the
Company has historically funded these deposits for past aircraft deliveries
using operating cash and pre-delivery deposit finance facilities. The Company
can provide no assurance that it will be able to secure pre-delivery deposit
finance facilities or permanent financing for any future aircraft purchases. As
of June 30, 2004, the Company had $4.9 million in long-term pre-delivery
deposits outstanding for the seven future aircraft deliveries, which were funded
with operating cash. Upon delivery and financing of the aircraft, pre-delivery
deposits funded with operating cash are expected to be returned to the Company.
As of June 30, 2004, the Company also has purchase rights with Boeing for 40
Boeing 737-800 aircraft.

The Company also has commitments to take delivery of one additional Boeing
737-800 and four spare engines, all of which are currently scheduled for
delivery between the remainder of 2004 and 2008.

In March 2001, the Company entered a limited liability agreement with Boeing
Capital Corporation - Equipment Leasing Corporation forming BATA, a 50/50 joint
venture. BATA is remarketing the Company's fleet of Boeing 727-200 aircraft in
cargo configurations. As of June 30, 2004, the Company had transferred 23 of its
fleet of Boeing 727-200 aircraft to BATA.

Significant Financings. In November 2002, the Company obtained a $168.0 million
secured term loan, of which $148.5 million was guaranteed by the ATSB. The net

32

proceeds of the secured term loan were approximately $164.8 million, after
deducting issuance costs. The Company used a portion of the net proceeds to
repay borrowings on its existing bank credit facility and to collateralize new
letters of credit, previously secured under the bank facility. The remaining
funds were used for general corporate purposes. Interest is payable monthly at
LIBOR plus a margin. Guarantee fees of 5.5% of the outstanding guaranteed
principal balance in 2003, with escalation to 9.5% on the outstanding guaranteed
principal balance in 2004 through 2008, are payable quarterly.

The secured term loan is subject to certain restrictive covenants and is
collateralized primarily by certain receivables, certain aircraft, spare
engines, and rotable parts. The aircraft, spare engines and parts consist of two
Lockheed L-1011-500 aircraft, one Lockheed L-1011-50 and 100 aircraft, two SAAB
340B aircraft, 24 Rolls Royce RB211 spare engines and Boeing 757-200, Boeing
757-300 and Boeing 737-800 rotables. As of September 30, 2004, the Company is
required to meet a EBITDAR to fixed charges ratio covenant. Based on current
financial projections, the Company is uncertain of its ability to satisfy this
covenant. If the Company is unable to meet this financial covenant, it would be
in default under this agreement as well as certain cross default provisions, and
the lenders would have the right to accelerate the maturity date of the loan and
exercise other remedies against the Company. The Company intends to discuss its
financial position with the ATSB and other lenders to seek to obtain any
necessary waivers of these covenants. However, the Company can provide no
assurances as to its success in obtaining a waiver or revision of these
covenants. In addition, the Company cannot provide assurance that it will not be
required to make pre-payments under the loans in order to revise the covenants,
which could negatively impact the Company's cash outlook. The Company has not
identified alternate sources of funding to meet cash requirements should an
acceleration of the maturity date occur due to the current economic and capital
environment.

In conjunction with obtaining the secured term loan, the Company issued a
warrant to the Federal Government to purchase up to 1.5 million shares of its
common stock, and additional warrants to other loan participants to purchase up
to 0.2 million shares of its common stock, in each case at an exercise price of
$3.53 per share for a term of ten years. The Company recorded $7.4 million as
the total fair value of warrants issued, which was recorded as unamortized
discount on the secured loan at the date of the loan.

On March 30, 2004, the Company signed a letter agreement with the Issuer that
provides a financing commitment from the Issuer to ATA for up to $30 million
under certain specific conditions. As consideration for the financing
commitment, ATA must pay the Issuer $1.2 million upon execution of the
definitive documentation of the financing agreement. If the Company obtains
financing under the financing commitment, the Company expects that the amount
available under the commitment will be reduced by $10 million per year on the
anniversary of the funding, for up to three years.

Card Agreement. The Company accepts charges to most major credit and debit cards
("cards") as payment from its customers. Approximately 90% of scheduled service
and vacation package sales are purchased using these cards. More than half of
these card sales are made using MasterCard or Visa cards. The Company maintains
an agreement with a bank for the processing and collection of charges to these
cards. Under this agreement, a sale is normally charged to the purchaser's card
account and is paid to the Company in cash within a few days of the date of
purchase, although the Company may provide the purchased services days, weeks or
months later. In 2003, the Company processed approximately $753.8 million in
MasterCard and Visa charges under its merchant processing agreement.

According to the bank processing agreement, the bank can retain cash collected
by it on processed card charges as a deposit, up to 100% of the full dollar
amount of purchased services to be provided at a future date. If the Company
fails to perform pre-paid services which are purchased by a charge to a card,
the purchaser may be entitled to obtain a refund which, if not paid by the
Company, is the obligation of the bank. The deposit secures this potential
obligation of the bank to make such refunds. The bank exercised its right to
withhold distributions shortly after September 11, 2001. The retention
percentage employed by the bank has ranged from 60% to 100% from late 2001
through March 1, 2004 and was at 100% on March 1, 2004.

33

On March 1, 2004, the Company amended its agreement with its credit card
processing bank to reflect an extension for the processing of sales charges on
MasterCard and Visa cards until June 30, 2005. The credit card processing bank
agreed to reduce the holdback percentage for sales for future travel to 75%
effective with the execution of the amendment. The effect of decreasing the
holdback percentage from 100% to 75% increased the Company's cash balance by
approximately $21.0 million based on the holdback balance at March 1, 2004,
which is reflected on the June 30, 2004 balance sheet. The amended agreement
provides quarterly financial covenants under which the Company may maintain a
holdback at 75% or 50% of sales for future travel, but at no time during the
life of the amendment will the holdback be lower than 50% of sales for future
travel. However, the Company can provide no assurances that it will be able to
maintain the percentage of holdback below 100% in future periods under this
amendment. As of June 30, 2004 and June 30, 2003, the bank had withheld $59.6
million and $39.7 million, respectively. The Company expects the percentage of
its holdback with it Visa and MasterCard processing bank to increase to 100% in
August 2004, from 75% as of June 30, 2004. This increase in holdback percentage
will decrease the Company's unrestricted cash balance by approximately $20.0
million.

The Company has the right to terminate its agreement with the bank upon
providing 90 days notice, as does the bank. In the event of such termination,
the bank may retain a deposit equal to the amount of purchased services not yet
performed, for up to 24 months from the date of termination. The Company can
give no assurance that it could obtain a replacement credit card processor. Lack
of a credit card processor would have a significant adverse impact on the
Company's ability to continue operations.

Although the Company continues to process significant dollar amounts of ticket
sales using credit cards other than MasterCard and Visa, as of June 30, 2004, no
cash deposit requirements had been implemented by the issuers or processors of
those cards. However, these processors have the right to require deposits if
certain material adverse events occur. As of June 30, 2004, assuming a holdback
percentage of 100% and using criteria similar to the Visa and Mastercard
holdback, those deposits would have been approximately $20.0 million.

ATA Credit Card. On March 31, 2004, the Company entered into agreements with a
credit card issuer and Visa to introduce a consumer credit card ("the Card")
bearing redemption benefits on ATA Airlines, Inc. Holders of the Card will
accumulate points through purchases on the Card, which will allow them to earn
free travel on the airline once certain point thresholds are attained. The
Company will earn revenue from the credit card issuer as consideration for
issuing the Card with the Company's logo, and certain cooperative advertising
activities. Upon signing the agreement, the Company received a prepayment for
future revenue to be earned from the issuer, all of which is recorded as a
deferred item as of June 30, 2004. The Company expects to launch the Card in the
third quarter of 2004.

Surety Bonds. The Company has historically provided surety bonds to airport
authorities and selected other parties, to secure the Company's obligation to
these parties. As of June 30, 2004, the Company's restricted cash pledged to
secure its letters of credit for all surety bonds totaled $31.7 million and is
shown as non-current restricted cash on the Company's balance sheet.

The DOT requires the Company to provide a surety bond or an escrow to secure
potential refund claims of charter customers who have made prepayments to the
Company for future transportation. On December 15, 2003, upon cancellation of
the DOT charter obligation surety bond by the issuer, the Company entered into
an escrow arrangement which requires the Company to place advance receipts for
certain charter flights into escrow until the flight operates. Once the flight
occurs the Company is paid from the escrow account those advance deposits
specific to that completed flight. As of June 30, 2004, the Company has $4.4
million in advance charter receipts deposited in escrow, which was included in
prepaid expenses and other current assets on the Company's balance sheet as of
that date. The surety bond of $12.9 million relating to the DOT charter
obligations was released in the first quarter of 2004, and the restricted cash
securing the letter of credit was returned to the Company.

34

Forward-Looking Information

Information contained within "Management's Discussion and Analysis of Financial
Condition and Results of Operations" includes forward-looking information which
can be identified by forward-looking terminology such as "believes," "expects,"
"may," "will," "should," "anticipates," or the negative thereof, or other
variations in comparable terminology. Such forward-looking information is based
upon management's current knowledge of factors affecting the Company's business.
The differences between expected outcomes and actual results can be material,
depending upon the circumstances. Where the Company expresses an expectation or
belief as to future results in any forward-looking information, such expectation
or belief is expressed in good faith and is believed to have a reasonable basis.
The Company can provide no assurance that the statement of expectation or belief
will result or will be achieved or accomplished.


Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results to be materially different. Such
factors include, but are not limited to, the following:

o economic conditions;
o threat of future terrorist attacks;
o labor costs;
o aviation fuel costs;
o competitive pressures on schedules and pricing;
o weather conditions;
o governmental legislation and regulation;
o consumer perceptions of the Company's products;
o demand for air transportation overall and specifically in markets in which
the Company operates;
o higher costs associated with new security
directives;
o higher costs for insurance and the continued availability of such
insurance;
o the Company's ability to raise additional financing and to refinance
existing borrowings upon maturity;
o declines in the value of the Company's aircraft, as these may result in
lower collateral value and additional impairment charges; and
o other risks and uncertainties listed from time to time in reports the
Company periodically files with the Securities and Exchange Commission.

The Company is under no obligation to update, and will not undertake to update,
its forward-looking statements to reflect future events or changes in
circumstances.

35

PART I - Financial Information
Item III - Quantitative and Qualitative Disclosures About Market Risk

The Company's results of operations are significantly impacted by changes in the
price of aircraft fuel. The price of fuel is subject to political, economic and
market factors that are generally outside of the Company's control. Continued
significant increases in fuel costs could materially and adversely affect the
Company's liquidity, results of operations and financial condition. There have
been no material changes in market risk from the information provided in Item
7A, Quantitative and Qualitative Disclosures About Market Risk, of ATA Holdings
Corp.'s Annual Report on Form 10-K for the year 2003.

36

PART I - Financial Information
Item IV - Controls and Procedures

The Company conducted an evaluation (under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer), pursuant to Rule 13a-15 promulgated under the
Securities Exchange Act of 1934 ("Exchange Act"), as amended, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of June 30, 2004. Based on this evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that, as of June
30, 2004, the controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by the Company in reports it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission.

There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls, subsequent to the
date of the evaluation.

37

Item I - Legal Proceedings

None

Item II - Changes in Securities

None

Item III - Defaults Upon Senior Securities

None

Item IV - Submission of Matters to a Vote of Security Holders

None

Item V - Other information

None

Item VI - Exhibits and Reports on Form 8-K

(a) Exhibits are filed as a separate section of this report as set forth
in the Index to Exhibits attached to this report.

(b) Report filed on May 21, 2004, furnishing items under Item 5. Other
Events and Item 7. Financial Statements and Exhibits.

Report filed on June 15, 2004, furnishing items under Item 5. Other
Events, Item 7. Financial Statements and Exhibits.

Report filed on June 29, 2004, furnishing items under Item 5. Other
Events and Item 7. Financial Statements and Exhibits.

Report filed on July 2, 2004, furnishing items under Item 9.
Regulation FD Disclosure.

Report filed on July 12, 2004, furnishing items under Item 5. Other
Events and Item 7. Financial Statements and Exhibits.

Report filed on July 15, 2004, furnishing items under Item 5. Other
Events.

Report filed on August 2, 2004, furnishing items under Item 5. Other
Events and Item 7. Financial Statements and Exhibits.

38

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


ATA Holdings Corp.
(Registrant)

Date August 16, 2004 by /s/ Gilbert F. Viets
-----------------------
Gilbert F. Viets
Executive Vice President and
Chief Financial Officer
On behalf of the Registrant

Index to Exhibits

Exhibit No.

31.1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002