FORM 10-Q

(Mark One)
[Ö ]

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

For the quarterly 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 ______________

AirTran Holdings, Inc.
(Exact name of registrant as specified in its charter)
State of Incorporation: Nevada





9955 AirTran Boulevard, Orlando, Florida  32827
(Address of principal executive offices)  (Zip Code)

(407) 251-5600
(Registrant's telephone number, including area code)

Commission file number: 1-15991     I.R.S. Employer Identification No: 58-2189551

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes    Ö       No        

As of July 30, 2004 there were approximately 85,558,000 shares of the registrant's common stock outstanding.

AIRTRAN HOLDINGS, INC.

Form 10-Q

For the Quarter Ended June 30, 2004

INDEX

Page

PART I.

FINANCIAL INFORMATION

   Item 1.

   Financial Statements

      Condensed Consolidated Statements of Income
         - Three months and six months ended June 30, 2004 and 2003 (unaudited)

3

      Condensed Consolidated Balance Sheets
         - June 30, 2004 (unaudited) and December 31, 2003

4

      Condensed Consolidated Statements of Cash Flows
         - Six months ended June 30, 2004 and 2003 (unaudited)

6

      Notes to Condensed Consolidated Financial Statements (unaudited)

7

   Item 2.

   Management's Discussion and Analysis of Financial Condition
      and Results of Operations

13

   Item 3.

   Quantitative and Qualitative Disclosures About Market Risk

22

   Item 4.

   Controls and Procedures

22

PART II.

OTHER INFORMATION

   Item 1.

   Legal Proceedings

23

   Item 4.

   Submission of Matters to a Vote of Security Holders

23

   Item 6.

   Exhibits and Reports on Form 8-K

23

   Signatures

24

AirTran Holdings, Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

   2004  

   2003   

   2004  

   2003  

Operating Revenues:

Passenger

$

265,944

$

226,872

$

499,447

$

428,772

Cargo

--

332

--

715

Other

      9,060

       6,697

     16,963

     12,416

Total operating revenues

275,004

233,901

516,410

441,903

Operating Expenses:

Salaries, wages and benefits

66,312

57,584

129,154

112,175

Aircraft fuel

54,914

41,034

106,454

88,178

Aircraft rent

36,099

29,857

72,035

56,276

Maintenance, materials and repairs

18,215

15,556

37,225

30,635

Distribution

13,401

11,996

25,349

22,768

Landing fees and other rents

16,201

13,274

30,074

24,758

Aircraft insurance and security services

5,818

3,692

11,132

9,242

Marketing and advertising

6,633

5,911

14,235

12,988

Depreciation

3,303

3,301

6,187

6,623

Other operating

     23,090

    20,993

    43,271

     39,179

Total operating expenses

   243,986

  203,198

  475,116

   402,822

Operating Income

31,018

30,703

41,294

39,081

Other (Income) Expense:

Interest income

(1,134)

(748

)

(2,138

)

(1,275

)

Interest expense

5,077

8,922

9,724

15,791

Payment received under the Emergency
  Wartime Supplemental Appropriations Act,
  2003

- --

(38,061

)

- --

(38,061

)

Convertible debt discount amortization

            --

      1,812

           --

      1,812

Other (income) expense, net

      3,943

   (28,075

)

     7,586

   (21,733

)

Income Before Income Taxes

27,075

58,778

33,708

60,814

Income tax expense

    10,289

      1,587

    12,809

       1,587

Net Income

$

16,786

$

57,191

$

20,899

$

59,227

=======

=======

=======

=======

Earnings per Common Share

     Basic

$

0.20

$

0.79

$

0.25

$

0.82

     Diluted

$

0.18

$

0.74

$

0.23

$

0.78

Weighted-average Shares Outstanding

     Basic

84,930

72,202

84,607

71,864

     Diluted

101,137

77,682

89,214

76,589

AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

June 30,

December 31,

     2004    

     2003    

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

378,620

$

338,707

Restricted cash

8,693

9,798

Accounts receivable, less allowance of $694 and $603 at

June 30, 2004 and December 31, 2003, respectively

24,934

17,454

Spare parts, materials and supplies, less allowance for

obsolescence of $844 and $733 at June 30, 2004

and December 31, 2003, respectively

18,553

19,345

Deferred income taxes

52,054

52,054

Prepaid expenses and other current assets

      20,074

      15,209

Total current assets

502,928

452,567

Property and Equipment:

Flight equipment

253,355

229,927

Less: Accumulated depreciation

     (30,366

)

    (26,610

)

222,989

203,317

Purchase deposits for flight equipment

67,476

49,991

Other property and equipment

54,166

45,425

Less: Accumulated depreciation

    (24,916

)

     (22,272

)

      29,250

      23,153

Total property and equipment

319,715

276,461

Other Assets:

Intangibles resulting from business acquisition

8,350

8,350

Trade names

21,567

21,567

Debt issuance costs

6,916

7,293

Other assets

     46,641

     42,126

Total other assets

     83,474

     79,336

Total assets

$

906,117

$

808,364

=======

=======

AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets (Continued)
(In thousands)

June 30,

December 31,

     2004     

     2003     

(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

24,648

$

18,498

Accrued liabilities

92,953

69,233

Air traffic liability

109,501

78,746

Current portion of long-term debt

         4,971

        5,015

Total current liabilities

232,073

171,492

Long-term debt, less current portion

253,914

241,821

Deferred income taxes

26,100

26,100

Other liabilities

64,546

66,738

Commitments and Contingencies

Stockholders' Equity:

Preferred stock

--

--

Common stock

85

84

Additional paid-in-capital

343,342

337,145

Accumulated other comprehensive loss

(97

)

(271

)

Accumulated deficit

     (13,846

)

      (34,745

)

Total stockholders' equity

     329,484

     302,213

Total liabilities and stockholders' equity

$

906,117

$

808,364

========

========

AirTran Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Six months ended June 30,

     2004     

     2003     

Operating activities:

     Net income

$

20,899

$

59,227

       Adjustments to reconcile net income to net cash provided by

         operating activities:

      Depreciation and amortization

6,932

8,314

      Amortization of deferred gains from sale/leaseback of aircraft

(2,192

)

(2,336

)

      Provisions for uncollectible accounts

(316

)

142

      Amortization of debt discount upon conversion of debt to equity

--

1,812

      Deferred income taxes

--

1,587

      Other

593

317

      Changes in current operating assets and liabilities:

          Restricted cash

1,105

(24,811

)

          Accounts receivable

(7,164

)

(3,929

)

          Fuel

1,053

(224

)

          Spare parts, materials and supplies

(382

)

(3,081

)

          Other assets

(11,557

)

(12,928

)

          Accounts payable, accrued and other liabilities

29,870

14,940

          Air traffic liability

        30,755

       36,342

Net cash provided by operating activities

69,596

75,372

Investing activities:

Purchases of property and equipment

(14,491

)

(12,687

)

(Payment) refund of aircraft purchase deposits

       (17,485

)

         2,244

Net cash used for investing activities

(31,976

)

(10,443

)

Financing activities:

Issuance of long-term debt

--

125,000

Debt issuance costs

--

(3,750

)

Payments of long-term debt

(3,495

)

(8,506

)

Proceeds from sale of common stock

         5,788

         2,699

Net cash provided by financing activities

2,293

115,443

Net increase in cash and cash equivalents

39,913

180,372

Cash and cash equivalents at beginning of period

     338,707

     104,151

Cash and cash equivalents at end of period

$

378,620

$

284,523

========

========

Supplemental Disclosure of Cash Flow Activities:

Non-cash investing and financing activities

Purchase and sale-leaseback of equipment

$

--

$

22,359

Gain on sale-leaseback of aircraft and payment of debt

$

--

$

3,000

Acquisition of equipment under capital lease

$

15,513

$

--

Conversion of debt to equity

$

--

$

5,500

Three months ended

Six months ended

June 30,

June 30,

(in thousands, except per share amounts)        

   2004   

   2003   

   2004   

   2003   

Net income, as reported

$

16,786

$

57,191

$

20,899

$

59,227

Add: Stock-based employee compensation

    expense included in reported income,

    net of related tax effects

152

--

254

--

Deduct: Stock-based employee compensation

    expense determined under the fair value

    based method, net of related tax effects

     (1,014

)

     (1,378

)

     (1,917

)

     (2,746

)

Pro forma net income

$

15,924

$

55,813

$

19,236

$

56,481

=======

=======

=======

=======

EARNINGS PER SHARE:

    Basic, as reported

$

0.20

$

0.79

$

0.25

$

0.82

    Basic, pro forma

$

0.19

$

0.77

$

0.23

$

0.78

    Diluted, as reported

$

0.18

$

0.74

$

0.23

$

0.78

    Diluted, pro forma

$

0.16

$

0.72