Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010

OR

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

FOR THE TRANSITION PERIOD FROM                    TO                  

COMMISSION FILE NO. 333-167913

GLOBAL AVIATION HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

(770) 632-8000

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

Securities registered pursuant to Section 12(g) of the Act: Warrants to acquire shares of Common Stock, par value $0.0001 per share. Form 15 filed March 4, 2011 to deregister the Warrants.

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

The aggregate market value of the common equity held by non-affiliates as of June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $0.2 million computed by reference to the price at which the common equity was last issued prior to such date.

As of March 15, 2011 the number of shares of Common Stock, $.0001 par value, outstanding was 26,802,900.

Documents Incorporated By Reference

None

Table of Contents

GLOBAL AVIATION HOLDINGS INC.

TABLE OF CONTENTS

Table of Contents

Forward Looking and Cautionary Statements

This annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. The statements contained in this annual report that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will” and similar terms and phrases, including references to assumptions, in this annual report to identify forward-looking statements. These forward-looking statements are made based on our management’s expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

A number of important factors could cause actual results to differ materially from those indicated by our forward-looking statements, including but not limited to the factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” These factors include without limitation:

·                  levels of military spending for the transportation of military personnel and cargo;

·                  our level of entitlement to the military’s spending;

·                  our fixed obligations;

·                  our competitive environment;

·                  our ability to secure and maintain any necessary financing for aircraft acquisitions and other purposes;

·                  economic and other conditions in regions in which we operate;

·                  governmental regulation of our operations;

·                  the outcome of various legal proceedings;

·                  relations with unionized employees generally and the effect and outcome of future labor negotiations;

·                  problems with our aircraft;

·                  increases in maintenance, security costs and insurance premiums;

·                  cyclical and seasonal fluctuations in our operating results;

·                  our ability to establish and maintain effective internal control over financial reporting;

·                  risks related to our divestiture and acquisition strategies, including the risks related to the integration of acquired businesses;

·                  terrorist attacks, political instability, and acts of war;

·                  significant disruptions in the supply of aircraft fuel;

·                  risks inherent in our industry, such as demand for military and commercial cargo air services; and

·                  other risks that we have described in “Risk Factors.”

These factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. You should review carefully the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of

Table of Contents

Financial Condition and Results of Operations” and “Business” in this annual report for a more complete discussion of these and other factors that may affect our business, financial condition and results of operations.

The forward-looking statements contained in this annual report reflect our views and assumptions only as of the date of this annual report. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Part I

Item 1. BUSINESS

Overview

We are a provider of customized, non-scheduled passenger and cargo air transport services, offering our customers a wide range of aircraft types, configurations, payloads and capabilities. We operated in approximately 124 countries worldwide in 2010 and are the largest provider of contracted air transportation services to the U.S. military. We provide our services through our two operating air carriers, World Airways and North American. As of March 15, 2011, our combined operating fleet consisted of 28 wide-body and narrow-body leased aircraft, which support our two primary business lines: (1) military, which includes both passenger and cargo services and (2) commercial cargo air transport services. We also offer passenger charter services to customers in specialty markets.

Our two primary lines of business combine the recurring revenue base of our established military business with the growth opportunities provided by our commercial cargo service. This coupling reduces our business model’s vulnerability to economic downturns while positioning us to take advantage of opportunities as the global economy strengthens. Nearly all of our military and commercial cargo customer contracts provide for fuel expense pass-throughs or reimbursements, significantly reducing our exposure to fuel price volatility.

We have been flying for the military since 1952 and are the largest provider of military transport services in the AMC international program. The U.S. military, through the Air Mobility Command (AMC), relies on commercial air carriers for more than 90% of its passenger and 40% of its international air cargo needs. For the year ended December 31, 2010, our share of total AMC passenger spending was 50%, and our share of total AMC cargo spending was 12%, which on a combined basis represent 34% of total spending in the AMC international program. We are the only provider of both passenger and cargo air transport services to the AMC.

Our Strengths

Our business, contractual arrangements and aircraft provide us with a competitive advantage.

Our cost-plus type contracts with the military are not bid based on price but rather are awarded based on team entitlement and priced using the average costs of all participating air carriers, weighted by flights flown in the AMC international program, plus a fixed operating margin. We are compensated on a per mission basis based on the mission’s route and the aircraft type employed, at a fixed rate, regardless of the number of passengers or tons of freight actually flown. This operating and payment mechanism promotes a recurring revenue base with predictable margins. Our military business also benefits from attractive payment terms and certainty of collections.

Our business model generally insulates our profitability from fluctuations in jet fuel prices, which are typically the largest and most volatile expense for an air carrier. Under our military contracts and most of our commercial passenger and cargo charter arrangements, our customers are responsible for the cost of jet fuel. In 2010, approximately 96% of our block hours were flown under either military or ACMI (aircraft, crew, maintenance and insurance) arrangements, in which the customer assumed the risk of fuel price volatility.

We have a range of aircraft types in our fleet, which allows us the flexibility to cross-utilize the same aircraft in our military and commercial businesses, thereby maximizing aircraft usage and revenue while reducing unit costs. For example, we use the same fleet of freighter aircraft in the military business to transport military cargo to the Middle East and then to transport commercial cargo on return trips via Asia to the United States. In addition, our combined fleet provides the military and our commercial customers a complete range of aircraft with long-range capability that can meet most of their operational requirements.

Our freighter aircraft fleet is younger on average than that of a majority of our principal competitors in the ACMI market, resulting in relatively lower maintenance costs and higher fuel efficiency. All of our freighter aircraft are modern and are equipped

2

Table of Contents

with contemporary, digital, two crewmember cockpits. These cockpits provide us with a cost advantage over older wide-body freighter aircraft, such as the B747-200 and DC-10, which require a third pilot or flight engineer to operate all flights.

Our Strategy

Our strategy is to continue to be the leader in providing air transport services to the military while growing our commercial business.

We plan to maintain our leadership in the AMC international program by maximizing our team’s aircraft commitments to the Civil Reserve Air Fleet (CRAF), engaging the military on program improvements and continuing to match our aircraft offerings and capacity with the military’s needs. We also plan to grow our military and commercial cargo businesses by using our MD-11 and B747-400 freighter fleets to meet the military’s desire to use more modern, fuel-efficient aircraft and to address a similar desire we expect to exist in the commercial sector.

Our commercial cargo strategy seeks to capitalize upon the continued recovery of the air cargo transportation market. Given the current and anticipated increased demand for commercial air cargo transportation in improving economic conditions, coupled with a reduction in airlift capacity caused by the retirement of older freighter aircraft, such as DC-10 freighters and B747-200 freighters, we believe our fleet has the right mix of freighters to service our customers’ needs. Across our industry, approximately 52% of B747-200 freighters have been retired between January 2008 and January 2011. As the global economy and international trade continue to recover, we intend to explore opportunities to grow our freighter fleet to meet increased demand. We have recently taken delivery of one leased B747-400 freighter and are scheduled to take delivery of the second before the end of March 2011, and entered into an arrangement to lease a MD-11 passenger aircraft, which was delivered in the fourth quarter of 2010.

We plan to grow our passenger charter business in certain specialty markets by leveraging our worldwide operating experience, our authority from the U.S. government and the long-range capabilities of our fleets. The U.S. carrier operating rights held by World and North American secure our access to the largest aviation market in the world. The traffic rights permitted under aviation bilateral agreements between the U.S. and a foreign country confer operating privileges that are limited to U.S. carriers and the airlines of the foreign contracting state. For example, while World and North American might have to compete with U.S. and Chinese carriers in respect of air traffic between the U.S. and China, they do not have to compete with third-country carriers in that market. Due to the size of the U.S. market, we believe this to be a significant advantage that World and North American hold over carriers licensed by countries with a small traffic base.

We use our aircraft and crew to service scheduled operators’ seasonal peak businesses. Our wide range of passenger aircraft offerings enable us to operate for a variety of customers, including servicing supplemental peak capacity flights and flights to new markets for other air carriers, political campaigns, professional sports teams, tour operators and concert tours. We believe the experience developed from our military business gives us a competitive advantage in servicing customers that require the ability to change flight schedules on short notice or to operate in locations where most air carriers have limited experience and limited contacts with local vendors.

We plan to continue delivering safe, high quality service to our customers. In order to meet our customers’ needs, we prepare and train to operate in a variety of destinations, many of which are often remote. For example, North American is certified for extended twin-engine operations, referred to as ETOPS, in order to operate over-water up to 180 minutes from a landing field. World has received certification from the FAA to fly polar routings to reduce block hours on certain intercontinental flights.

Both World and North American maintain modern, computerized operations control centers, which, via satellite communications, enable real-time tracking of our aircraft, so that we can quickly troubleshoot issues and communicate with our customers. We carry a fly-away kit of spare parts on our aircraft and also frequently operate our flights with mechanics and operations personnel onboard.

As an integral part of our contract airlift business model, we maintain a competitive cost structure. We continuously seek opportunities to streamline our operations and reduce our unit costs. The following initiatives are currently underway:

·                  Streamline Operational Support Services—We are consolidating certain duplicate functions, including strategic sourcing for parts and services, travel arrangements for positioning crew, and engineering at World and North American into a single corporate organization charged with developing a more focused sourcing strategy and implementing operational process improvements, which we expect will ultimately drive additional cost savings.

·                  Simplify Fleet—We currently operate five wide-body and narrow-body passenger and cargo aircraft types. We have an on-going initiative to simplify our fleet and, in 2009, we began to replace and retire DC-10 passenger and freighter aircraft, and retired the remaining DC-10 fleet in early 2011. This fleet simplification will allow World to further

3

Table of Contents

streamline maintenance, support functions and flight crew training, as well as improving crew utilization across its two remaining cockpit types.

·                  Reduce Aircraft Lease Costs—We will continue to manage fleet capacity through near-term lease expirations and renewals. More than 85% of our aircraft lease contracts will expire over the next four years. Based on prevailing market conditions, we expect to be able to achieve significant reductions in aircraft rental or equivalent costs when we replace or renegotiate the operating lease terms of these aircraft. Current market lease rates are generally lower than the lease rates under our operating leases that we entered into in past years, reflecting changes in general economic conditions, the used aircraft market, and interest rates. For example, we signed operating leases for two B747-400 freighter aircraft in July 2010 that provide for significantly lower monthly lease rates than our prior leases for B747-400 freighter aircraft.

·                  Reduce Commissions—Outside studies sponsored by the military have indicated that the level of commissions paid by the charter carriers operating AMC flights to their non-flying carrier teammates should be reduced. In 2011, AMC program changes have been implemented that will have the effect of reducing our commission expense as a percentage of Military Charter revenue.

Military Passenger and Cargo

AMC/CRAF Arrangements.  The Department of Defense (DOD), through the AMC, relies on commercial air carriers for more than 90% of its passenger and 40% of its international cargo air transport needs. The AMC awards flights to teams of air carriers through annual contracts. The teams are comprised of U.S. passenger and cargo air carriers that pledge aircraft to the CRAF to be available for activation by the U.S. government in times of need. Since its inception in 1951, the CRAF has only been activated twice: during Operation Desert Shield/Storm in 1990-1991 and during Operation Iraqi Freedom in 2003. In times of normal operating demand, the substantial majority of AMC missions are flown by a handful of charter carriers, including World and North American.

Eligibility to participate in the AMC international program is limited to U.S. certificated air carriers that commit aircraft to the CRAF and can demonstrate a history of flight experience comparable to AMC missions, primarily international long range flights, with appropriate equipment, e.g., long range, overwater, heavy payload flights, access to flight crews and union rules that permit extended international missions with relatively short notice as to specific routes, and that otherwise meet rigid inspection, audit and qualification criteria.

The AMC allocates flights, or missions, to air carrier teams proportionally based on the number of entitlement points of each team. Each participating air transport carrier earns entitlement points under a formula devised by the AMC, based on the number, size and capability of its aircraft pledged to the program. The members of each team enter into arrangements to determine the allocation of flights among the team members. Team agreements often set out priority rights to operate certain flights and the commissions paid to team members contributing entitlement points in excess of their share of team flights. Air carriers that contribute entitlement points to a team in excess of missions flown are generally large commercial airlines. These legacy carriers do not generally operate AMC flights except during a CRAF activation because of the disruption it causes to their core businesses, the remoteness of the destinations and their crew work rule restrictions. It is typical within the AMC international program for charter carriers to align themselves with the larger legacy carriers to maximize their team’s entitlement. In return for the contribution of entitlement points, the legacy carriers are paid a commission out of the revenue a team receives for flying AMC missions. The AMC international program contracts are awarded annually and team arrangements and award allocations can change from year to year.

There are more than 20 air transport carriers participating in the AMC international program, the majority of which are organized into and participate in one of three teams: the Alliance Team, the FedEx Team and the UPS Team. World and North American are co-leaders of the Alliance Team and have been awarded the largest share of AMC passenger revenue in each of the last six fiscal years. Within the Alliance team, we currently have the right of first refusal to fly all long-range military passenger flights and MD-11 freighter flights, and a second priority position on all B747 freighter flights.

The AMC fiscal year 2011 contract provides that the AMC will begin awarding carriers entitlement points based on their past flying instead of solely based on the number of aircraft they pledge to the CRAF. This change will benefit charter carriers with smaller fleets, such as World and North American, that fly day-to-day military missions. In addition, for government fiscal year 2010 and government fiscal year 2011, the AMC suspended a rule that reduced the number of entitlement points awarded to air carriers, such as World and North American, that derive more than 40% of their revenue from the AMC international program.

The AMC is also seeking ways to modernize the CRAF fleet, and we believe the AMC may make additional changes in government fiscal year 2012 to provide incentives for the use of modern aircraft. Based on our discussions with AMC we believe all of our aircraft would qualify for these incentives. If these changes are implemented, the proportion of entitlement points awarded to us would likely increase, making us less reliant on paying commissions to other team members for their entitlement.

4

Table of Contents

We are paid by the AMC for flights based on the average costs of operations for all participating air carriers, weighted by the number of flights actually flown in the AMC international program, plus a fixed percentage margin, which the AMC sets annually. These rates are based on the capacity of the aircraft required by the AMC for a mission (measured in seats or tons), and the mileage of the mission. In addition, the AMC reimburses us for our fuel costs, eliminating our exposure to the risk of fuel price volatility. We render our invoices promptly after the completion of a mission and generally receive payment within 20 days of submission.

AMC rates for governmental fiscal year 2011 are down 5.2% for the large passenger category, down 5.5% for the medium passenger category and down 2.0% for the large cargo category.  The Company operates flights in each of these categories.  The fiscal year 2011 rates are down generally due to lower general escalation as measured in the base period, cost basis changes at other CRAF carriers and expected changes in the Company’s costs related to its DC-10 fleet. The AMC has audit and inspection rights under our contracts, both with respect to our mission operating costs and compliance with the regulatory requirements of the program. In addition, the AMC measures our on-time performance, reliability and other similar performance measures. For example, beginning in 2011, we are required to maintain 95% passenger and 92% cargo controllable on-time reliability record on a three-month rolling basis as measured by the DOD. Our right to fly missions can be affected by our performance.

Military Passenger.  We have been transporting troops and their families around the world since 1952 during times of both conflict and peace and we are the largest provider of air transport passenger services to the U.S. military. In 2010, we operated more than 1,400 passenger trips for the military using World and North American aircraft.

We believe the military’s demand for international passenger air transport services will remain significant even following further troop withdrawals from Iraq as a result of deployments to the many U.S. military bases located throughout the world. In 2010, in addition to the U.S. military personnel stationed in Iraq and Afghanistan, there were approximately 59,000 personnel stationed in other parts of the Middle East and Central Asia. Deployments outside those regions in locations such as Europe, Japan and South Korea totaled approximately 140,000 personnel. In 2008, we were the first carrier to begin operating passenger flights directly into Iraq, saving the military the time and cost of connecting troops from Kuwait. Over the last decade, we have supported many military operations including the following:

While many of our flights operate between multiple U.S. commercial airports or military bases to overseas training exercise locations and contingency destinations, we also operate recurring flight schedules for the military, some of which are contracted and scheduled up to a year in advance. Among these are Patriot Express routings that operate weekly between certain U.S. gateways and overseas bases. We also operate “R&R” missions for the military in which troops are granted approximately fifteen-day leaves of absence back into the U.S. during overseas deployments.

5

Table of Contents

The World fleet consists of large class wide-body MD-11 passenger aircraft while the North American fleet consists of the medium class wide-body B767 and narrow-body B757 aircraft. AMC passenger business awarded to us is flown by World or North American based on the passenger requirements and range of the specific mission.

Military Cargo.  We are the only provider of both passenger and cargo air transport services to the military. We have successfully grown our military cargo business in recent years with freighter aircraft provided by World. One factor in generating that growth is the military’s increasing use of large contoured cargo freighters, which began in 2007. World’s MD-11 freighter has an advantageous payload design and is modern, younger, and approximately 32% more fuel efficient than the B747-200 freighter, traditionally used for military air cargo transport. The AMC has indicated that it intends to direct approximately 20% of its wide-body cargo transport requirements to contoured freighters. As the largest operator of MD-11 freighter flights for the AMC, we are well-positioned to benefit from this greater use of contoured freighters.

Another factor in the growth of our military cargo business is the increased use of the B747-400 freighter, with its greater fuel efficiency and increased payload compared to the older B747-200 freighter. In 2009, we began to operate our B747-400 freighters for the military transporting, among other things, mine-resistant, ambush-protected all-terrain vehicles (M-ATVs) to Afghanistan. In government fiscal year 2010, the AMC began offering certain B747 freighter missions that would only be performed by the higher-payload B747-400 at a higher rate of pay per mile. In the government fiscal year 2011, the AMC began offering all B747-400 freighter missions at a higher rate of pay per mile.

In addition to offering the military attractive fleet characteristics, we also work collaboratively with the military to develop innovative solutions to better address its air transport needs. For instance, we were the first carrier to load six M-ATVs on a B747 freighter mission, saving 16% on unit transportation costs for the military. We also recently worked with the military to identify ways to better utilize the MD-11 freighter to fly greater payloads with greater frequency.

Commercial Cargo

We conduct our commercial cargo business through World, which operates freighter aircraft primarily under contracts pursuant to which we provide the aircraft, crew, maintenance and insurance at a fixed rate per block hour. These contracts, known as ACMI contracts, provide our air cargo customers with the flexibility to outsource their cargo aircraft requirements, add supplemental capacity in existing markets and serve increased demand in seasonal markets, without reactivating older freighters or acquiring new freighters and related resources, such as flight crews. Under ACMI contracts, the customer is responsible for paying most operating expenses, including fuel. Our ACMI contracts include provisions whereby the customer commits to paying for a minimum amount of block hours each month, at a pre-determined block hour rate. Some of our contracts provide the customer a lower block hour rate for block hours flown above specified minimums. Our current ACMI cargo customers include ANA Aviation Services, Cargolux, Etihad Airways and Jade Cargo.  We also enter into full-service charter contracts with customers for which we are paid a higher block hour rate, but assume responsibility for fuel, handling, landing and other operating expenses.

Many of our full service commercial cargo contracts are operated as flights returning to the United States after the completion of a one-way military mission. The military pays a “one-way” rate for these missions, which includes additional compensation for the empty return flight to the United States. Instead of flying an empty aircraft directly back to the U.S., we are able to take advantage of the imbalanced Asia-Pacific -U.S. trade flows by contracting a charter flight for that route. For example, aircraft returning to the United States from one-way missions to Afghanistan have frequently contracted commercial cargo charters from Asia-Pacific to the United States. This allows us to position the aircraft for our next military mission and increase our commercial cargo revenue. The revenue from the full service commercial charter more than offsets the expense of the time and extra distance flown.

We believe that our modern, reliable, fuel-efficient fleet is particularly attractive to our commercial cargo customers. We are the largest ACMI operator of the modern MD-11 freighter and, in 2008 we introduced the modern B747-400 freighter into our fleet.

Commercial Passenger Charter

We provide ACMI and full service passenger charters to government and commercial customers in certain specialty markets, including operating supplemental peak capacity flights for other air carriers, political campaigns, professional sports teams, tour operators and concert tours. Our range of passenger aircraft offerings enable us to operate for a variety of customers, including servicing supplemental peak capacity for other air carriers, political campaigns, professional sports teams, tour operators and concert tours.

Our commercial passenger charters are operated by World or North American depending on the customer specification and preference for aircraft capacity and range.

6

Table of Contents

Our Aircraft Fleet

A core concept of our business model is having a flexible aircraft fleet, which has allowed us to cross-utilize the same aircraft in our military and commercial businesses to maximize aircraft utilization. As of March 15, 2011, our combined fleet consisted of 28 leased passenger and freighter aircraft, as described in more detail in the table below:

To meet increased cargo demand, World has taken delivery of one additional leased B747-400 freighter in January of 2011, and will take delivery of a second later in the first quarter of 2011, each for a period of 72 months. In addition, World entered into an agreement to lease an MD-11 passenger aircraft, which was delivered during the fourth quarter of 2010.

We believe our staggered and relatively short lease terms allow us to respond and restructure our fleet costs as demand for our services changes. We also believe it will permit us the ability to renegotiate aircraft lease terms on more favorable terms over the next few years based on market conditions. We will carefully evaluate opportunities to acquire additional aircraft to grow our business.

All of our freighter aircraft are equipped with modern, digital, two-man cockpits, which provide us with a cost advantage over older wide-body freighter aircraft, such as the B747-200, that require a third pilot or flight engineer to operate all flights.

Our cargo fleet is built around the modern MD-11 freighter, which we believe, at full payload, provides the lowest transport costs per ton among large freighter aircraft for flights of more than 6 hours in length. We are the only significant ACMI operator of the MD-11 freighter. The MD-11 is also attractive to some of the largest air cargo companies, such as UPS, FedEx and Lufthansa, that already operate significant MD-11 freighter fleets. The MD-11 is particularly well-suited for operations within the following trade lanes due to its fuel and overall trip efficiency:

We introduced the modern B747-400 freighter into our fleet in 2008. The B747-400 is the largest commercial freighter currently in service, with greater payload capacity and range, better fuel efficiency and lower operating costs than the prior-generation B747-200 freighter, which is still operated by many of our competitors. The B747-400 freighter is typically used for long-range, large payload flights such as between Asia-Pacific and North America or Europe. The combination of capacity, range, fuel efficiency and cost characteristics of the B747-400 freighter results in lower unit costs for our military and ACMI contract customers, and reduces our operating expenses with respect to our full service contracts.

All of our aircraft and related engines are subject to operating lease agreements under customary lease terms with the various lessors. Under the terms of these agreements, we are required to return the aircraft or engine in an agreed-upon condition at the end of the lease. Although title remains with the lessor, we are responsible during the lease term for maintenance, servicing, insurance, repair and overhaul. As of December 31, 2010, scheduled aircraft and non-aircraft future minimum lease payments having non-cancelable terms of more than one year were approximately $531 million. For more information, see Note 5 to the consolidated financial statements included elsewhere in this annual report.

7

Table of Contents

Competition

Our military passenger and cargo transport business is conducted through the AMC international program under one-year contracts with the military, for which we have made available a substantial number of our aircraft to be used by the military in support of its operations. We operate these flights as part of the AMC international program’s entitlement-based contracts.

A number of factors affect the amount of AMC business we are awarded. These factors include the number and type of aircraft we make available to the AMC international program, the number of other independent air carriers wishing to operate AMC international program missions, the willingness of scheduled service or dedicated cargo air carriers to commit aircraft to the CRAF and the manner in which AMC international program entitlement points are awarded. We endeavor to participate in a large team to maximize entitlement points available to team members. Within the team, we seek to maximize our percentage of team flights flown, both by our participation in the team leadership and by negotiating priority positions within the team for flights for which our aircraft are well suited. In the event we receive a reduction in our awards under the AMC international program, we intend to re-deploy available aircraft to our other lines of business.

The market for commercial cargo services is highly competitive. We believe the most important bases for competition in the commercial cargo charter business include the fuel and trip efficiency of the aircraft fleet, the payload and cubic capacities of the aircraft and the price, flexibility, quality and reliability of the air transportation services provided.

The MD-11 freighter, although a smaller part of the overall ACMI air cargo market, has increasingly become an attractive alternative to the B747-200 freighter due to its efficiency and capacity characteristics. As the largest operator of ACMI MD-11 freighters, we are well positioned for payloads that do not require the capacity of a B747 freighter. We do not have direct competition with air carriers operating ACMI MD-11 wide-body freighters, although we compete on an indirect basis with operators of other types of wide-body freighter aircraft.

For larger cargo requirements traveling longer distances, we acquired our first two B747-400 freighters in 2008. We have contracted and have begun taking delivery of two additional B747-400 freighters in the first quarter of 2011. The B747-400 freighter is substantially more efficient than the predecessor B747-200 series and is also well positioned to compete for long-haul large payload ACMI customer requirements. Our principal direct commercial cargo competitors in the B747-400 freighter ACMI market include Atlas Air, Air Atlanta Icelandic and Kalitta Air. Atlas Air currently operates over 20 B747-400 aircraft. Certain of our principal competitors have ordered Boeing 747-8 freighters and others have ordered B777 freighters, which could increase competition for long-haul large payload ACMI customers that we currently serve with our B747-400s. We believe, however, that because of the higher expected costs associated with operating B747-8 freighters and B777 freighters, any such competition will only affect a limited number of customers in the ACMI long-haul large payload sub-market.

The competition in our passenger charter business is highly fragmented and includes both charter airlines and scheduled service airlines seeking to use marginal capacity. We believe that the most important criteria for competition in the passenger charter business include the range and passenger capacity of the aircraft, price per seat and the flexibility and reliability of the air transportation service provided. In addition to competing with the major U.S. airlines that use their excess capacity for charters, we compete with specialty charter airlines such as Omni Air International, Ryan International Airlines and Miami Air. Many international scheduled and charter airlines also compete for charter business on non-domestic routes.

8

Table of Contents

Employees

As of December 31, 2010, we employed approximately 1,237 personnel at World, 694 personnel at North American and 81 personnel at our holding company, excluding employees on leave as footnoted below. The following table summarizes our personnel represented under collective bargaining agreements:

(1)                                  Excludes 9 cockpit crewmembers and 73 flight attendants on leave.

(2)                                  Excludes 6 cockpit crewmembers and 4 flight attendants on leave.

(3)                                  International Brotherhood of Teamsters.

(4)                                  Transport Workers Union.

(5)                                  Air Line Pilots Association.

Relations between air carriers and labor unions in the United States are governed by the Railway Labor Act. Under the Railway Labor Act, collective bargaining agreements generally contain “amendable dates” rather than expiration dates. The Railway Labor Act requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage bargaining process overseen by the National Mediation Board. This process continues until either the parties have reached agreement on a new collective bargaining agreement or the National Mediation Board releases the parties to “self-help” such as strikes and lock-outs. We have only encountered one such “self-help” situation, when the World pilots conducted a nine-day strike in January 2006.

While we believe we have good relations with our employees, any prolonged dispute with employees or work stoppages, regardless of whether the affected employees are represented by a union, could have a material adverse effect on our business, financial condition and results of operations. However, under our collective bargaining agreements, our flight crews are not permitted to strike on military flights.

Flight Operations and Aircraft Maintenance

Each of our subsidiaries maintains a 24-hour operations center to enable the worldwide dispatch of our aircraft. We are able to dispatch maintenance and operations personnel and equipment as necessary to support flight operations around the world. Each of our subsidiaries uses both internal staff and third-party maintenance providers to maintain our aircraft under programs approved by the FAA.

Primary maintenance activities include scheduled and unscheduled work on airframes and engines. Scheduled maintenance activities encompass those activities specified in a carrier’s maintenance program approved by the FAA. The timing of scheduled maintenance is dependent on a number of factors relevant to the particular aircraft involved, including the type of aircraft and the number of calendar months, the number of block hours flown and the number of departures since the last scheduled maintenance. Unscheduled maintenance typically relates to unexpected parts breakage or damage. The costs necessary to adhere to these maintenance programs may increase over time, based on the age of the aircraft or engines or due to FAA airworthiness directives. Costs related to unscheduled maintenance are unpredictable.

Under the FAA airworthiness directives issued pursuant to its aging aircraft program, we are subject to extensive aircraft inspections and may be required to undertake structural modifications to our fleet from time to time to address the problems of corrosion and structural fatigue. As part of the program, the FAA has issued airworthiness directives requiring additional aircraft modifications. It is possible that additional airworthiness directives applicable to the type of aircraft or engines included in our fleet could be issued in the future and that the cost of complying with such airworthiness directives could be substantial.

9

Table of Contents

Insurance

We carry the types and amounts of insurance that we believe to be customary in our industry, including coverage for public liability, passenger liability, property damage, aircraft loss or damage, baggage and cargo liability and workers’ compensation.

Following the terrorist attacks of September 11, 2001, commercial aviation insurers significantly increased the premiums and reduced the amount of war-risk coverage available to commercial carriers. The U.S. government provides us with such “war-risk” insurance coverage through a program that currently is set to expire on September 30, 2011. We expect this government coverage to continue to be available for the foreseeable future, but if the government ceases this program and we must rely on commercial aviation insurers who provide war-risk coverage with substantially less desirable terms, then we may experience a material adverse effect on our financial condition and results of operations.

Regulation

General.  We are subject to regulation by the Department of Transportation (DOT), the Federal Aviation Administration (FAA), the Transportation Security Administration (TSA) and numerous other governmental agencies as well as the equivalent agencies in foreign countries.

The DOT principally regulates economic matters affecting air service, including air carrier citizenship, certification and fitness, insurance, operations for other carriers, allocation of route rights, authorization of proposed scheduled and charter operations, allocation of certain airport slots not controlled by the FAA, consumer protection and competitive practices. The DOT has the authority to investigate and institute proceedings to enforce its economic regulations and may assess civil penalties, order carriers to cease and desist from violations, revoke operating authority and seek criminal sanctions by referring criminal matters to the Department of Justice. Our air carrier certificates, originally issued to North American in 1990 and to World in 1948, authorize us to engage in scheduled air transportation within the United States, its territories and possessions and to various overseas destinations and to perform charter trips on a worldwide basis. The DOT may revoke or suspend any of these certificates, in whole or in part, for intentional failure to comply with certain provisions of the U.S. Transportation Code, or any order or regulation issued thereunder, or any term of such certificate after notice to the certificate holder and an opportunity to appeal. The DOT also may impose conditions or restrictions on air carrier certificates. Certain long-term ACMI agreements require separate authorization from the DOT.

The FAA primarily regulates flight operations and aircraft maintenance, particularly matters affecting air safety, including airworthiness requirements for each type of aircraft, the licensing of pilots, mechanics and dispatchers and the training of flight crew and flight attendants. The FAA requires each carrier to obtain an operating certificate authorizing the carrier to conduct certain operations using specified equipment. We have, and maintain, FAA certificates of airworthiness for all of the respective aircraft of World and North American, and have the necessary FAA authority to conduct all operations that each carrier currently performs.

If we fail to comply with FAA regulations, the FAA has the authority to modify, suspend temporarily or revoke permanently our authority, or that of our licensed personnel, to provide air transportation, after providing notice and opportunity for a hearing. The FAA can institute proceedings for the imposition and collection of civil penalties for the violation of certain FAA regulations. The FAA can revoke our authority to provide air transportation on an emergency basis, without providing notice and a hearing, where significant safety issues are involved. The FAA monitors our compliance with maintenance, flight operations and safety regulations, maintains onsite representatives and performs frequent spot inspections of our aircraft, employees and records.

The FAA also has the authority to issue maintenance directives and other mandatory orders relating to, among other things, inspection of aircraft and engines, fire retardant and smoke detection devices, collision and windshear avoidance systems, noise abatement and the mandatory removal and replacement of aircraft parts that have failed or may fail in the future. In addition, the FAA mandates extensive recordkeeping practices for aircraft maintenance.

The civil aviation security functions of the FAA were transferred to the TSA pursuant to the Aviation and Transportation Security Act. The TSA operates under the Department of Homeland Security and is responsible for all civil aviation security, including passenger and baggage screening, cargo security measures, airport security, assessment and distribution of intelligence, and security research and development. The TSA also has law enforcement powers and the authority to issue regulations. In cases of a national emergency, it may issue regulations without a notice or comment period.

Based upon bilateral or multilateral aviation agreements between the United States and other nations, or, in the absence of such agreements, comity and reciprocity principles, we, as charter carriers, are generally not restricted as to the frequency of our flights to and from most foreign destinations. These arrangements generally allow us to carry passengers and cargo on flights between the United States and foreign destinations with considerable flexibility as to the intermediate points that may be served. Where charter services are not specifically authorized under these aviation agreements, they must be specifically approved by the civil aeronautics authorities in the relevant countries. Approval of such requests is typically based on considerations of comity and reciprocity and

10

Table of Contents

cannot be guaranteed. Charter provisions specifying the terms and conditions under which charter traffic may be carried are generally established either by the terms of the applicable bilateral agreement or by the country of origin of the charter traffic.

We believe that we are currently operating in material compliance with DOT, FAA and TSA regulations and hold all necessary operating and airworthiness authorizations and certificates. A modification, suspension or revocation of any of our DOT or FAA authorizations or certificates could have a material adverse effect on our financial condition and results of operations.

CRAF.  By participating in the CRAF program, we have committed that the DOD may activate our aircraft during national emergencies when the need for military airlift exceeds the capability of military aircraft and commercial aircraft flown for the AMC under normal, voluntary charter arrangements. Only twice, during Operation Desert Shield/Storm in 1990 and again during Operation Iraqi Freedom in 2003, has the CRAF been activated. CRAF program participation makes us eligible to bid on and be awarded certain contracts with the military for non-emergency airlift requirements. The DOD audits our operations, maintenance and safety procedures every two years.

Foreign Ownership.  Under federal law and DOT regulations, we must be a citizen of the United States as defined by DOT. In this regard, we must be incorporated under the laws of the United States or one of the states, our president and at least two-thirds of our board of directors and key management officials must be U.S. citizens and not more than 25% of our voting interest may be owned or controlled by non-U.S. citizens. In addition, under existing precedent and policy, actual control of our Company must reside with U.S. citizens. As a matter of regulatory policy, the DOT has stated that it will not permit aggregate equity ownership of a domestic air carrier by non-U.S. citizens in an amount in excess of 25% in the case of ownership by citizens of countries not having liberal “open skies” bilateral agreements. Citizens of countries having open skies bilateral agreements may own additional non-voting equity taking the total foreign equity to 49%. We currently are in compliance with these ownership provisions.

Other Regulations.  Various aspects of airline operations are subject to regulation or oversight by federal agencies other than the DOT, the FAA and the TSA. Employee relations in the air transportation industry are generally regulated under the Railway Labor Act, which vests in the National Mediation Board certain regulatory powers with respect to disputes between airlines and employee unions arising under collective bargaining agreements. We also are subject to the jurisdiction of the Federal Communications Commission regarding the utilization of radio equipment. In addition, U.S. Immigration and Customs Enforcement, U.S. Customs and Border Protection and the Animal and Plant Health Inspection Service of the Department of Agriculture have jurisdiction over inspection of our aircraft, passengers and cargo to ensure compliance with U.S. immigration, customs and import laws. Moreover, while our aircraft are in foreign countries, we must comply with the requirements of similar authorities in those countries. The U.S. Commerce Department also regulates the export and re-export of our U.S.-manufactured aircraft and certain equipment.

We are also subject to state and local laws and regulations at locations where we operate and the regulations of various local authorities that operate the airports we serve.

Future Regulation.  The U.S. Congress, the DOT, the FAA, the TSA and other governmental agencies have under consideration, and in the future may consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, our operations, ownership and profitability. In the past, during a period of fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by the Department of Energy. We cannot predict what other matters might be considered in the future by the FAA, the TSA, the DOT or the U.S. Congress, nor can we judge what impact, if any, the implementation of any future proposals or changes might have on our business.

Environmental Matters

Our operations are subject to comprehensive federal, state and local laws and regulations relating to pollution and the protection of the environment, including those governing aircraft noise, the discharge of pollutants into the air and water, safe drinking water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites. Some of our operations require environmental permits and controls, and these permits are subject to modification, renewal and revocation by issuing authorities.

The federal government imposes noise restrictions on commercial aircraft operations. In addition, many airports, both domestic and foreign, have established restrictions to limit noise, which can include limits on the number of hourly or daily flights and the time of such flights, including curfews. These limitations serve to protect the noise-sensitive communities surrounding the airport. As a result, we have been and may continue to be required to reduce our hours of operation at particular airports, to install noise abatement equipment on our aircraft or to change operational procedures during takeoff and landing. At the present time, we believe that our aircraft and operated flights are in material compliance with these and other local noise abatement requirements to which we are subject. On occasion, World and North American have experienced irregular operations resulting in violations of these requirements. We do not believe that any such restrictions or violations will have a material adverse effect on our business, financial condition or results of operations.

11

Table of Contents

At our aircraft maintenance facilities and the airports we serve, materials are used such as aircraft deicing fluids, fuel, oils and other materials that are regulated as hazardous under federal, state or local laws. We are required to maintain programs to protect the safety of the employees who use these materials and to manage and dispose of any wastes generated by the use of these materials in compliance with applicable laws. The EPA regulates operations, including air carrier operations that affect the quality of air in the United States, such as the discharge of aircraft emissions exhaust into the environment. We believe that World and North American have made all necessary modifications to their respective operating fleets to meet fuel-venting requirements and smoke-emissions standards. Although we believe that we are in compliance in all material respects with applicable environmental laws, we could incur substantial costs, including cleanup costs, fines, civil or criminal penalties, or third-party property damage or personal injury claims as a result of violations of or liabilities under, environmental laws or noncompliance with the environmental permits required for our operations. In addition, the adoption of new or more stringent requirements could increase the cost of our operations, require significant capital expenditures or result in material restrictions on our operations.

There is increasing global regulatory focus on climate change and greenhouse gas emissions. In particular, the United States and the European Union, or EU, have developed regulatory requirements that may affect our business. On June 26, 2009, the U.S. House of Representatives proposed or passed the American Clean Energy and Security Act of 2009. The current version of the proposed law would regulate greenhouse gas emissions through a cap and trade system. Several states have also developed measures to regulate emissions of greenhouse gases, primarily through the planned development of greenhouse gas emissions inventories and/or regional greenhouse gas cap and trade programs. In late 2009 and early 2010, the EPA adopted regulations requiring reporting of greenhouse gas emissions from certain facilities, updating the renewable fuels standard and is considering additional regulation of greenhouse gases under the existing federal Clean Air Act. In addition, the EU has adopted legislation to include aviation within the EU’s existing greenhouse gas emission trading scheme effective in 2012. This legislation has been legally challenged in the EU but we may incur additional costs as a result of this legislation. While we cannot yet determine what the final regulatory scheme will be in the United States, the EU, or in any other areas in which we do business, such climate-related regulatory activity in the future may adversely affect our business and financial results.

Our History

Global was incorporated under Delaware law on January 26, 2006 under the name “New ATA Holdings Inc.” and acquired a controlling interest in ATA Holdings Corp. and ATA Airlines, Inc., on February 28, 2006. On August 14, 2007, Global acquired World Air Holdings, Inc., the parent company of World and North American. Following the 2007 acquisition, Global had three principal subsidiaries: ATA, World and North American. Each of these air transport companies specialized in military passenger and/or cargo transport. ATA and North American historically operated scheduled service and charter passenger service, while World operated passenger charter and ACMI cargo services. The scheduled service operations of both ATA and North American ceased in 2008. On April 2, 2008, ATA filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code primarily due to the unexpected and, we believe, wrongful termination by FedEx of ATA Airline’s military arrangement led by FedEx. See “Legal Proceedings” for a description of this litigation.

The Chapter 11 Plan of ATA was approved and confirmed on March 26, 2009 and became effective on March 31, 2009. ATA is in the process of completing an orderly liquidation of its assets and winding down its bankruptcy estate, and all remaining assets are held in plan trusts. We have already received distributions from the ATA bankruptcy estate, and we may be entitled to receive additional distributions in connection with the liquidation of ATA once the litigation against FedEx is resolved. Except for one pending matter involving an ATA aircraft lease guaranteed by us, we are aware of no further financial liabilities arising out of ATA or its bankruptcy. See “Legal Proceedings.”

Available Information

Our website address is http://www.glah.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed pursuant to Section 13(a) or 15(c) of the Securities and Exchange Act of 1934 are available free of charge through our website by clicking on “Our Company”, “At A Glance” page and selecting “Global Aviation Corporate Filings.” These reports will be available as soon as reasonably practicable after such material has been electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). These reports are also available through the SEC’s website at http://www.sec.gov. The information on these websites and the information contained therein or connected thereto are not intended to be incorporated by reference into this annual report on Form 10-K. In addition we will provide paper copies of these filings (without exhibits) free of charge to our security holders upon request.

12

Table of Contents

Item 1A. Risk Factors

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks.

Risks Related to Our Business

We are highly dependent on revenues from our participation in the AMC international program, which are derived from one-year contracts that the DOD is not obligated to renew. If our revenues from this business decline from current levels, whether due to decreased demand, reduction in paid rates for flying, termination, non-renewal, modification or otherwise, it could have a material adverse effect on our business, financial condition and results of operations.

For the years ended December 31, 2010, 2009, and 2008, our revenues from our participation in the AMC international program represented approximately 82%, 82%, and 79% of our total revenues, respectively, excluding ATA. Our revenues and net income from the AMC are derived from one-year contracts that the DOD is not obligated to renew. Our current contract runs from January 1, 2011 through September 30, 2011. Any future military contracts awarded to us may be on less favorable terms.

In addition, the volume of AMC business available to us is sensitive to changes in national and international political priorities, troop deployments and the U.S. federal budget. We currently anticipate a decrease in troop deployments from 2009-2010 levels starting in 2011 and continuing into 2013, which can be expected to result in reduced military flying. It is possible that troop deployments could decline more significantly than anticipated as political or military priorities change.

Like all government contracts, our current contract with the military is conditioned upon the continuing availability of funds through legislative appropriations. The DOD may cancel the contract if appropriations become unavailable.

It is possible that AMC rates will decrease in future years, which could have a material adverse effect on our business, financial condition and results of operations.

Our AMC contracts contain various operational performance requirements.  These include on-time performance, availability of aircraft and crews to meet committed missions, and successful completion of inspections. Under our 2011 AMC contract, on-time performance requirements, as measured on a rolling three-month period, were increased from an 85% to a 95% schedule reliability rate for passenger operations.  The penalties for failing to meet the new requirements were expanded to include:  contract default and potential termination for failure to meet an 87% passenger schedule reliability rate; a potential loss of rights to fly expansion missions (additional missions beyond the fixed buy contract requirements) and a 2% penalty on revenue on all newly awarded passenger missions performed during a subsequent 30-day period for achieving an 87% to 89% passenger schedule reliability rate; a potential penalty of 2% of revenue on all newly awarded passenger missions performed during a subsequent 30-day period for achieving a 90% to 91% passenger schedule reliability rate; and a potential penalty of 1% of revenue on all newly awarded passenger missions performed during a subsequent 30-day period for achieving a 92% to 94% passenger schedule reliability rate. Our North American operations have failed to meet these schedule reliability rates for the period from January 1, 2011 to date and, as a result, we expect that it will not meet the requirements for the initial rolling three-month period under its AMC contract.  Accordingly, the AMC could impose on North American a 2% penalty on revenue and disqualify it from further expansion missions for a period of time in the second quarter of 2011.  In the worst case, the AMC could terminate our North American AMC contract.

Because our contracts for the AMC international program are one-year contracts that the DOD is not obligated to renew, the DOD could change the structure and compensation of the AMC international program in future contracts. In 2011, we will begin the negotiation of the next memorandum of understanding addressing military rates which will go into effect beginning October 2012 and continue for five years. The rates are based primarily on carriers’ historical unit costs and inflation indices used by the AMC.  For the 2011 contract year, the calculated effective non-fuel rate for AMC missions is lower than in fiscal year 2010. AMC rates for fiscal year 2011 are down 5.2% for the large passenger category, down 5.5% for the medium passenger category and down 2.0% for the large cargo category.  The Company operates flights in each of these categories.  The fiscal year 2011 rates are down generally due to lower general escalation as measured in the base period, cost basis changes at other CRAF carriers and expected changes in the Company’s costs related to its DC-10 fleet.

The DOD can typically terminate or modify its contracts with us for convenience or for default by us or our teaming partners. If the DOD terminates our contract for convenience, our ability to recover any incurred costs is subject to the AMC having appropriated sufficient funds to cover the termination settlement costs. The costs of terminating for convenience may exceed the costs appropriated by the AMC in the applicable year, and the AMC may not have access to Congressionally-appropriated additional funding under such circumstances. Moreover, the DOD could terminate due to a failure to perform by us or, in limited circumstances, a failure to perform by our teaming partners. A termination arising from default may expose us to liability and have a material adverse effect on our ability to compete for future contracts. If the DOD terminates our contract for default due to the performance, or lack thereof, of one of our teaming partners, we are generally cross-indemnified by the defaulting teaming partner subject to limitations of liability set forth in our teaming agreement. If the AMC were to terminate its business with us or if our AMC business otherwise declines significantly, it would have a material adverse effect on our business, financial condition and results of operations.

13

Table of Contents

Unpredictability and variability in military demand for our services could make it difficult to optimize the use and maintenance schedule of our aircraft fleet, which could adversely affect our business, financial condition and results of operations.

Predicting the precise timing of the military’s demand for our services can be difficult, particularly in light of the confidential nature of troop deployment schedules. Our inability to precisely forecast demand for our aircraft can hinder our ability to optimize the use of and maintenance schedule for our fleet. In circumstances where we have planned for significant demand from the military that does not materialize, we may be unsuccessful in reallocating our aircraft for use by commercial cargo or passenger services customers. The failure to reallocate our aircraft to commercial use and the resulting reduction in their utilization could have an adverse effect on our business, financial condition and results of operations. Similarly, in circumstances where we have committed aircraft to commercial contracts, we may not have aircraft for military missions.

Our revenues from our AMC business are sensitive to teaming arrangements both with respect to our team and competing teams. If one of our team members reduces its commitments or withdraws from the team, or if carriers on other teams commit additional aircraft to this program, our share of AMC flying may decline. Any of these changes could have a material adverse effect on our business, financial condition and results of operations.

Each year, the AMC grants a certain portion of its business to different air carriers based on a point system. The number of points that an air carrier can accrue is determined by the number and type of aircraft pledged to the CRAF. Our operating subsidiaries along with the other air carriers in our team currently participate in the CRAF program and generate entitlement points for AMC business. Points from team members that do not fly AMC missions are used to increase the flights awarded to other team members that do fly AMC missions, such as World and North American, in return for a commission on the revenue derived from those points.

Continued participation by World and North American on the Alliance team is subject to significant risks. The formation of competing teaming arrangements, an increase by carriers from other teams in their commitment of aircraft to the CRAF program and the withdrawal of, or failure to renew a future teaming agreement with, any of the Alliance team’s current partners could materially and adversely affect the amount of our AMC business. There has been and continues to be significant consolidation in the air carrier industry. As a result of consolidation, we expect some air carriers may choose to join other teams. As a result of these changes, the Alliance team’s total share of entitlement points under the AMC international program will decrease for government fiscal year 2011. In addition, if any Alliance team member were to cease or restructure its operations or dispose of aircraft previously pledged to the CRAF program, the number of aircraft pledged to the CRAF program by the Alliance team could be reduced. Any of these developments could reduce the number of points allocated to the Alliance team and the Alliance team’s allocation of AMC business to us would likely decrease. If the military substantially reduces the amount of business it awards the Alliance team or if the Alliance team reduces the military missions it awards to us, we may not be able to replace the lost business and our business, financial condition and results of operations could be materially and adversely affected.

The costs we incur on our military missions may be greater than the amounts for which we are reimbursed by the AMC, which would reduce our profitability.

Under our contract with the DOD, we are paid on a cost-plus basis in which we receive a fixed rate per mission based on the route and aircraft type. The fixed rate is calculated using the average costs of all participating air carriers, weighted by flights flown in the AMC international program. The AMC sets the fixed rate for each AMC fiscal year using cost data for a 12-month period that ended 15 months prior to the start of such fiscal year as adjusted following consultation with the air carrier, multiplied by a weighted composite price index to account for cost increases in the industry. As a result, the actual operating costs of our military business may exceed the fixed rate, although those higher actual operating costs will provide the basis for the fixed rate used for missions flown in future contract periods. Should we incur unexpected costs for reasons outside our control, such as the additional costs we incurred to fly around the volcanic ash recently affecting flights over Europe, we are entitled to seek reimbursement from the DOD. Reimbursement is granted based on a reasonableness test. No assurance can be given, however, that any particular future increased costs would be adequately reimbursed, if at all. Insofar as the actual operating costs of our military business exceed the fixed rate paid by the AMC and such shortfall is not reimbursed, our profitability would be reduced.

If the DOD activates our aircraft pledged to the CRAF, the activated aircraft would not be available for other commercial use.

All of our aircraft are pledged to the CRAF and are therefore available for activation and use by the U.S. government in times of need. If the DOD activates our aircraft under the CRAF, we could not use them to serve commercial customers while they are used by the U.S. government pursuant to an activation. We cannot predict whether revenues from the DOD during the activation of our aircraft under the CRAF would be less than or more than would otherwise be generated by commercial customers. While our agreements with our commercial customers generally allow cancellation without penalty in the event of CRAF activation, activation could disrupt our operations, customer relationships and our competitive position as compared to charter operators with aircraft not pledged to the CRAF.

14

Table of Contents

Our business could be adversely affected by an adverse audit by the U.S. government.

DOD contracts are routinely subject to audit by government agencies. Such an audit involves a review of our performance under our contracts, cost structure and compliance with applicable laws and regulations. It may also involve a review of the adequacy of, and our compliance with, our internal control systems and policies, including our management, purchasing, property, estimating, compensation, accounting and information systems. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including termination of our government contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the Government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.

While our revenues may vary significantly over time, a substantial portion of our operating expenses are fixed. These fixed costs may limit our ability to quickly change our cost structure to respond to any declines in our revenues, which could reduce our profitability.

To maintain our level of operations, a substantial portion of our costs, such as aircraft lease payments, crew, maintenance and facility costs, are fixed. Operating revenues from our business are directly affected by our ability to maintain high utilization of our aircraft at favorable rates. The utilization of our aircraft and our ability to obtain favorable rates are affected by many factors, including military requirements, global demand for passenger and cargo air transport services, global economic conditions, fuel costs and the deployment by our current and potential customers of their own aircraft, among others, which may cause our revenues to vary significantly over time. We are particularly vulnerable to reductions in demand due to our relatively high fixed-cost structure, which is difficult to adjust to match shifting volume levels. Accordingly, if our revenues for a particular period fall below expectations, we may be unable to proportionately reduce our operating expenses for that period.

We depend on a limited number of significant customers for our commercial cargo business, and the loss of one or more of these customers could materially and adversely affect our business, financial condition and results of operations.

We depend on a limited number of significant customers for our commercial cargo business, most of which is conducted pursuant to contracts that are set to expire in the next two years. There is a risk that our customers may not renew their ACMI contracts with us on favorable terms or at all. Entering into ACMI contracts with new customers may require a long sales cycle. Because we generally lease our aircraft pursuant to non-cancelable operating leases, we could be forced to maintain aircraft in our fleet while they produce little or no revenue. In addition, certain of our principal competitors have ordered Boeing 747-8 freighters and Boeing 777 freighters, which could increase competition for long-haul large payload ACMI customers. As a result, if our ACMI contracts are not renewed or can only be renewed on less favorable terms, and if we are not able to obtain other business in a timely manner or at all, our business, financial condition and results of operations could be materially and adversely affected.

We depend on certain levels of worldwide economic activity to operate successfully. A significant reduction in demand for air cargo transport could materially and adversely affect our business, financial condition and results of operations.

Our success is highly dependent upon the level of business activity and overall global economic conditions. The recent economic downturn has decreased and may continue to decrease the volume of world trade and materially and adversely affect demand for the services offered by our ACMI customers, such as a significant reduction in the production of time-sensitive inventories, perishables and packages that have historically been transported via air freight. We cannot predict the effect or duration of any economic slowdown or the timing or strength of a subsequent economic recovery. We are particularly vulnerable to reductions in demand due to our relatively high fixed-cost structure, which is difficult to adjust to match shifting volume levels.

If we are unable to continue to lease aircraft at acceptable rates and terms in the future, or if we are unable to acquire compatible engines or spare parts, on terms favorable to us or at all, our business, financial condition and results of operations could be adversely affected.

All of our aircraft are leased. Our operating leases typically run from three to ten years from the date of delivery. We may face more competition for, or a limited supply of, leased aircraft, making it difficult for us to negotiate competitive terms upon expiration of our current operating leases or to lease additional capacity required for our targeted level of operations. If we are forced to pay higher lease rates in the future to maintain our fleet, our profitability would be adversely affected. Also, if available aircraft, whether by purchase or lease, are not compatible with the rest of our fleet in terms of takeoff weight, avionics, engine type or other factors, we would incur potentially significant costs of fleet induction and modification, and reduced efficiency of our operations. Any increase in demand could also impair our ability to obtain additional engines and spare parts on favorable terms or at all at the time needed for our operations or for the implementation of our growth plan.

15

Table of Contents

We are highly dependent upon our operating cash flows due to our lack of an established line of credit or borrowing facility and we may be unable to maintain sufficient liquidity to provide for our operating needs.

We have no lines of credit or current access to a borrowing facility. We are therefore dependent upon our operating cash flows and cash balances to fund our operations and to make scheduled payments on our debt and other fixed obligations. Many air carriers, including ATA previously, have defaulted on debt securities and bank loans in recent years and have had their equity extinguished in bankruptcy reorganizations. This history has led to limited access to the capital markets by companies in our industry. We cannot assure you that any additional financing will be available on terms that are acceptable to us, if at all.

Our substantial operating lease obligations could adversely affect our financial condition and results of operations.

We have a significant amount of fixed obligations under operating leases related to our aircraft, airport terminal space, other airport facilities and office space. As of December 31, 2010, future minimum lease payments under non-cancelable operating leases with initial or remaining terms in excess of one year were approximately $531 million, and we may incur significantly more fixed obligations if we take delivery of additional aircraft and other equipment. For example, see “Business—Our Aircraft Fleet,” for recent expansions of our fleet. Our level of fixed obligations has important consequences for our business. These significant fixed obligations could:

·                  make it difficult for us to satisfy our debt obligations;

·                  increase our vulnerability to general adverse economic and industry conditions;

·                  limit our flexibility in planning for, or reacting to, changes in our businesses and the industry and markets in which we operate and compete;

·                  affect our ability to obtain additional financing, particularly since substantially all of our assets are subject to security interests relating to existing indebtedness; and

·                  place us at a competitive disadvantage to our competitors that have fewer fixed obligations.

If we are unable to make payments on our operating lease obligations, we could be forced to renegotiate those obligations or obtain additional equity or debt financing. We cannot assure you that any renegotiation efforts would be successful or timely, or that we would be able to renegotiate our obligations on terms acceptable to us, if at all.

The terms of our indebtedness contain various covenants that limit our financial and operating flexibility and in some cases require us to meet certain financial ratios and maintenance tests. The failure to comply with such ratios, tests and covenants could have a material adverse effect on our business, financial condition and results of operations.

The terms of our indebtedness contain restrictive covenants that impose significant operating and financial restrictions on us, including those that restrict our ability to:

·                  incur additional indebtedness, including indebtedness secured by any lien;

·                  create liens on assets, including leasehold interests;

·                  sell or otherwise dispose of assets;

·                  serve as guarantors of additional obligations;

·                  change lines of business;

·                  pay dividends and distributions or repurchase common stock;

·                  make investments, loans or advances;

·                  engage in certain transactions with affiliates, including certain payments to MatlinPatterson Global Advisers LLC and its affiliates;

·                  enter into sale and leaseback transactions;

16

Table of Contents

·                  permit our consolidated cash flow, less capital expenditures, to fall below (i) $45 million for the period from September 30, 2009 through June 30, 2010 and (ii) $50 million thereafter, in each case, calculated quarterly on a trailing l2-month basis;

·                  engage in a merger, consolidation or sale or transfer of substantially all of our assets; and

·                  fail to hold any permit or authorization required to conduct business.

In addition, on June 30 and December 31 of each year, we are required to offer to purchase up to $10.0 million aggregate principal amount of the First Lien Notes at a purchase price in cash equal to 100% of the principal amount, plus accrued and unpaid interest thereon. The terms of our indebtedness also require mandatory prepayments regardless of whether there is excess cash flow. An anticipated failure to comply with the restrictions in any agreement governing our indebtedness may require us to seek a waiver and consent from the holders of our indebtedness.  For example, in March 2011, we entered into a Second Supplemental Indenture related to our First Lien Notes and a Second Amendment and Waiver related to our Second Lien Loan in order to receive covenant relief from complying with the requirement that our consolidated cash flow, less capital expenditures, exceed $50 million. We cannot assure you that we will be able to obtain any additional covenant relief, if required, in the future.  In addition, any failure to comply with the restrictions in any agreement governing our indebtedness may result in an event of default under those agreements. Such default may allow our creditors to accelerate our obligations under such indebtedness and such acceleration may trigger cross-acceleration or cross-default provisions in other debt or leases. Our assets and cash flow may not be sufficient to fully repay amounts outstanding under our debt instruments, either upon maturity or, if accelerated, upon an event of default.

Substantially all of our assets are pledged as collateral to secure our indebtedness, which may adversely affect our financial flexibility including our ability to obtain other loans or working capital lines of credit.

Our First Lien Notes are secured by liens on substantially all our assets, other than mobile equipment and rights under aircraft leases and other excluded assets. Accordingly, if an event of default were to occur under the First Lien Notes, the holders of the First Lien Notes would have a priority right to our assets, to the exclusion of our general creditors. In that event, our assets would first be used to repay in full all indebtedness and other obligations secured by the First Lien Notes resulting in all or a portion of our assets being unavailable to satisfy the claims of our subordinated or unsecured creditors. Additionally, the holders of the secured debt would have a prior claim on such assets in the event of our bankruptcy, insolvency, liquidation or reorganization, and we may not have sufficient funds to pay all of our creditors. In any such event, holders of our equity securities would not be entitled to receive any of our assets or the proceeds there from. In addition, the pledge of these assets and other restrictions limit our ability to incur additional secured or unsecured indebtedness, to enter into a line of credit to support our working capital needs, or to sell or dispose of assets to raise capital, which could have an adverse effect on our financial flexibility.

Fuel price volatility could adversely affect our business, financial condition and results of operations.

The price of aircraft fuel is unpredictable and has been increasingly volatile over the past few years. While our military and ACMI contracts require our customers to pay for or reimburse us for aviation fuel, if fuel costs increase significantly, our customers may reduce the volume and frequency of cargo shipments or find less costly alternatives for cargo delivery, such as land and sea carriers. If our customers reduce their use of air freight, our business, financial condition and results of operations could be materially and adversely affected.

In addition, as a result of the timing of reimbursement under contracts providing for our customers to reimburse us for fuel costs, our working capital position may be adversely affected by significant increases in fuel costs, which could affect our liquidity.

Volatility in international currency markets may adversely affect demand for our commercial cargo and passenger services.

Although we price our services and receive our payments in U.S. dollars, many of our customers’ revenues are denominated in other currencies. Any significant devaluation in such currencies relative to the U.S. dollar could have a material adverse effect on such customers’ ability to pay us or on their level of demand for our services, which could have a material adverse effect on our business, financial condition and results of operations. If there is a significant decline in the value of the U.S. dollar against other currencies, the demand for some of the products we transport could decline. Such a decline could reduce demand for our services and thereby have a material adverse effect on our business, financial condition and results of operations.

We may be subject to claims that were not released or discharged in either ATA’s or our predecessor’s bankruptcy proceedings.

On April 2, 2008, ATA filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana. The Chapter 11 Plan was approved and confirmed on March 26, 2009 with an effective date of March 31, 2009.

The terms of ATA’s Chapter 11 Plan provided that creditors of ATA that voted in favor of the Plan or accepted a distribution under the Plan were conclusively presumed to have released us from all claims that such creditors had against us relating to ATA based on events occurring on or before March 31, 2009, other than claims arising under our guarantees of ATA’s obligations. This provision of the Plan did not apply to the United States or its agencies, nor to claims that ATA’s secured lenders may have had against us under ATA’s term loan agreement and related loan documents or otherwise.

17

Table of Contents

ATA also granted us a release of all claims that such creditors had against us based on events occurring on or before March 31, 2009, including derivative claims that might have been asserted on ATA’s behalf. This release excluded certain claims arising under specified provisions of the U.S. Bankruptcy Code or comparable provisions of non-bankruptcy law, referred to as “Affiliate Avoidance Actions.” The Affiliate Avoidance Actions were contributed to a trust for the benefit of ATA’s secured lenders. We cannot provide any assurance that any such claims will not be brought against us by parties not subject to this release. However, as of this date, no such Affiliate Avoidance Actions have been brought, and we believe that defenses to any such actions would exist.

As the guarantor of ATA’s performance with respect to certain of its contractual lease obligations, we have been subject to claims made by lessors of ATA’s aircraft leases, all but one of which have been settled. On February 9, 2009, Wilmington Trust Company, in its capacity as the trustee lessor to a 15-year lease agreement entered into by ATA on February 28, 2006, brought an action in the New York Supreme Court Commercial Division to enforce the guaranty provided by us guaranteeing the performance of ATA under that lease. The plaintiff is seeking (a) approximately $333,000 plus interest on the lease; (b) the greater of (i) $35 million and (ii) the current market value of the aircraft and (c) attorneys’ fees and costs. The outcome of the litigation cannot be predicted and is dependent upon many factors beyond our control. See “Legal Proceedings.”

In addition, our predecessor, ATA Holdings Corp., emerged from Chapter 11 bankruptcy reorganization on February 28, 2006. Substantially all of the material claims against us that arose prior to the date of our predecessor’s bankruptcy filing were addressed during those Chapter 11 proceedings or were resolved in connection with the related Plan and Confirmation Order adopted by the U.S. Bankruptcy Court. In addition, the U.S. Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. Circumstances in which claims and other obligations that arose prior to the bankruptcy filing were not discharged primarily relate to certain actions by governmental units under police power authority, instances where we agreed to preserve a claimant’s claims, as well as, potentially, instances where a claimant had inadequate notice of the bankruptcy filing. In addition, claims against non-debtor subsidiaries, including foreign subsidiaries, are generally not subject to discharge under the U.S. Bankruptcy Code. To the extent that any pre-filing liability remains, the ultimate resolution of such claims and other obligations may have a material adverse effect on our business, financial condition and results of operations.

Some of our aircraft are periodically deployed in potentially dangerous situations, which may result in damage to our aircraft or cargo or harm to our employees.

Some of our aircraft are deployed in potentially dangerous locations and carry hazardous cargo incidental to the services we provide in support of U.S. military activities, particularly in shipments to the Middle East. Some areas through which our flight routes pass are subject to geopolitical instability, which may increase the risk of a loss of, or damage to, our aircraft or its cargo, or death or injury to our personnel. While we maintain insurance to cover the loss or damage to our aircraft or cargo and injury to our employees, we do not have insurance against the loss arising from business interruption. It is difficult to replace lost or substantially damaged aircraft due to the high capital requirements and long delivery lead times for new aircraft or to locate appropriate in-service aircraft for lease or sale. Any loss or damage to our aircraft or cargo or injury to our employees could have a material adverse impact on our business, financial condition and results of operations.

Governments may restrict or revoke our authority to operate flights to or over countries.

We have authority to operate flights anywhere in the world that U.S. carriers are permitted to operate. However, either the U.S. or foreign governments could limit or restrict our authority to operate flights to or over specified countries due to security concerns, armed conflict, international disputes, or for other reasons. For example, certain foreign governments currently restrict the number of charter flights that can be operated to these countries. In light of such restrictions, we may not be able to serve customers seeking charter services to or that would require flying over such countries, and our business, financial condition and results of operations could be adversely affected.

Our insurance coverage may become more expensive and difficult to obtain and may not be adequate to insure against all risks.

Aviation insurance premiums historically have fluctuated based on factors that include the loss history of the industry in general, and the insured carrier in particular. Future terrorist attacks, accidents and other adverse events involving aircraft could result in increases in insurance costs and could affect the price and availability of such coverage. We have, as have most other U.S. air carriers, purchased our war-risk coverage through a special program administered by the U.S. federal government through the Federal Aviation Administration (FAA). The FAA is currently providing war-risk hull and cargo loss, crew and third-party liability insurance through September 30, 2011. If the federal war-risk coverage program terminates or provides significantly less coverage in the future, we could face a material increase in the cost of war-risk insurance and may have difficulty in obtaining sufficient coverage.

There can be no assurance that we will be able to maintain our existing coverage on terms favorable to us, that the premiums for such coverage will not increase substantially or that we will not bear substantial losses and lost revenue from accidents or other adverse events. Substantial claims resulting from an accident in excess of related insurance coverage or a significant increase in our

18

Table of Contents

current insurance expense could have a material adverse effect on our business, financial condition and results of operations. Additionally, while we carry insurance against the risks inherent to our operations, which we believe is consistent with the insurance arrangements of other air carriers, we cannot provide assurance that we are adequately insured against all risks. If our liability exceeds the amounts of our insurance coverage, we would be required to pay the excess amount, which could be material to our business, financial condition and results of operations.

Union disputes, employee strikes and other labor-related disruptions may materially and adversely affect our business, financial condition and results of operations.

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

Our employees are organized into five labor groups: World’s pilots and flight attendants and North American’s flight attendants are represented by the International Brotherhood of Teamsters; North American’s pilots are represented by the Air Line Pilots Association; World’s aircraft dispatchers are represented by the Transport Workers Union. The collective bargaining agreement covering World’s flight attendants was ratified in October 2007 and does not become amendable until September 2012. World’s collective bargaining agreement with its cockpit crew is currently in negotiations. The collective bargaining agreement covering World’s aircraft dispatchers will become amendable in December 2013. The collective bargaining agreement covering North American’s flight attendants is also currently in negotiations. The collective bargaining agreement covering North American’s cockpit crew was ratified in May 2008 and does not become amendable until November 2012.

We are subject to risks of work interruption or stoppage and we may incur additional expenses associated with the union representation of our employees. We cannot assure you that disputes, including disputes with any unions representing of our employees, will not arise in the future or will result in an agreement on terms satisfactory to us. Such disputes and the inherent costs associated with their resolution could have a material adverse effect on our business, financial condition and results of operations.

There is also a risk that disgruntled employees, either with or without union involvement, could engage in illegal slowdowns, work stoppages, partial work stoppages, sick-outs or other action short of a full strike that could, individually or collectively, materially and adversely affect our operations and impair our financial performance. For example, in January 2006 there was a nine-day strike conducted by World’s pilots.

We may be liable for a share of any underfunding of the multiemployer defined pension plan in which some employees participate.

The flight attendants employed by World participate in a multiemployer defined benefit pension plan affiliated with the International Brotherhood of Teamsters. The plan’s actuary has certified that the plan is in critical status, determined in accordance with current pension plan funding rules. This means that the multiemployer plan has funding or liquidity problems, or both. As a result, our obligations to the multiemployer plan have increased and may be subject to further increases in the future. In addition, in the event of our partial or complete withdrawal from this multiemployer plan at a time when it is underfunded, we would be liable for a proportionate share of such plan’s unfunded vested benefits. In the event that any other contributing employer withdraws from the multiemployer plan at a time when it is underfunded, and such employer (or any member in its controlled group) cannot satisfy its obligations under the plan at the time of withdrawal, then we, along with the other remaining contributing employers, would be liable for our proportionate share of such plan’s unfunded vested benefits. Although the Company has no intention of voluntarily withdrawing from the multiemployer plan, if we were to do so, the plan’s actuaries have estimated our current share of withdrawal liability at approximately $15.9 million, subject to certain actuarial assumptions, including an interest rate of 6.75% and the 1983 GAM Mortality Table. Assessment of withdrawal liability could materially and adversely affect our business, financial condition and results of operations.

Our maintenance costs will increase as our fleet ages.

Our operating aircraft were manufactured between 1990 and 2001. In general, the cost to maintain aircraft increases as they age and exceeds the cost to maintain new aircraft. Regulations of the FAA require additional maintenance inspections for older aircraft. We also need to comply with other programs that require enhanced inspections of aircraft, including airworthiness directives, which typically increase as an aircraft ages and vary by aircraft or engine type depending on the individual characteristics of each aircraft or engine. It is possible that additional airworthiness directives applicable to the type of aircraft or engines in our fleet could be issued in the future and that the cost of complying with such airworthiness directives could be substantial.

19

Table of Contents

Our business would be materially and adversely affected if a mechanical problem with any of our aircraft were discovered that caused such aircraft to be grounded while the problem is corrected, assuming it could be corrected at all. The FAA could also suspend or restrict the use of certain of our aircraft in the event of any actual or perceived mechanical problems, whether involving our aircraft or that of another U.S. or foreign airline, while it conducted its own investigation.

Our reputation, business, financial condition and results of operations could be materially and adversely affected in the event of an accident or other incident involving any of our aircraft or the same types of aircraft we operate.

An accident or incident involving one of our aircraft could involve repair or replacement of a damaged aircraft, its consequential temporary or permanent loss from service and significant potential claims against us for injured passengers and others. Substantial claims resulting from an accident in excess of our insurance coverage would materially and adversely affect our business, financial condition and results of operations. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that we are less safe or reliable than other air carriers, which could materially and adversely affect our business, financial condition and results of operations. Because our operating air carriers are comparatively small, an accident would be likely to materially and adversely affect us to a greater degree than it would a larger, more established air carrier. Such accidents may materially and adversely affect our reputation, business, financial condition and results of operations.

Due to our limited fleet size, if any of our aircraft becomes unavailable, we may suffer greater damage to our service, reputation and profitability than airlines with larger fleets.

As of March 15, 2011, we have an operating fleet of 28 leased aircraft. Given the limited number of aircraft we operate, if an aircraft becomes unavailable due to unscheduled maintenance, repairs or other reasons, we could suffer greater adverse financial and reputational effects than larger air carriers if our flights are delayed or cancelled due to the absence of replacement aircraft. For example, our fleet includes only three B747-400s, which are in high demand in both our military and commercial cargo lines of business. If we are unable to operate those aircraft for a prolonged period of time for reasons outside our control, such as a catastrophic event or a terrorist act, our business, financial condition and results of operations could be disproportionately materially and adversely affected.

If we develop problems with any of our third-party service providers, our operations could be materially and adversely affected, resulting in a decline in revenue, increase in expenses or negative public perception about our services.

We rely upon others to provide essential services on behalf of our operations. This reliance upon others may result in our relative inability to control the efficiency and timeliness of contract services. We have entered into outsourcing agreements with contractors to provide various services required for our operations, including aircraft maintenance, ground facilities operations and baggage handling. In addition to these existing agreements, it is likely that we will enter into similar agreements in any new regions we decide to serve. Any material problems with the efficiency and timelines of contract services under new or existing service agreements with third parties could have a material adverse affect on our business, financial condition and results of operations.

We could be adversely affected by a failure or disruption of our computer, communications or other technology systems.

We are heavily and increasingly dependent, particularly at our operations centers, on technology to operate our business. The computer and communications systems on which we rely could be disrupted due to various events, some of which are beyond our control, including natural disasters, power failures, terrorist attacks, equipment failures, software failures and computer viruses and hackers. We have taken certain steps to help reduce the risk of some of these potential disruptions. There can be no assurance, however, that the measures we have taken are adequate to prevent or remedy disruptions or failures of these systems. Any substantial or repeated failure of these systems could adversely affect our operations, result in the loss of important data, loss of revenues, and increased costs, and generally harm our business. Moreover, a failure of certain of our vital systems could limit our ability to operate our flights for an extended period of time, which would have a material adverse effect on our business, financial condition and results of operations.

Our ability to use our substantial net operating losses for federal income tax purposes could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code.

We have substantial net operating losses (NOLs) and other tax attributes for U.S. federal income tax purposes in prior years that we may carry forward (currently, generally up to 20 years), subject to certain limitations, to offset and reduce our current and future U.S. federal taxable income and U.S. federal income tax liabilities. As of December 31, 2010, we have U.S. federal NOL carryforwards totaling approximately $215.5 million, of which approximately $2.7 million are subject to annual utilization limitations pursuant to the Internal Revenue Code, or IRC, Section 382. If not utilized, our NOL carryforwards will begin to expire in 2019.

IRC Section 382 contains rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to use its NOL carryforwards and certain built-in

20

Table of Contents

losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes among stockholders owning directly or indirectly 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Although we believe our initial public offering, if completed, will not result in an ownership change, we could experience an ownership change for purposes of IRC Section 382 as a result of future transactions involving our common stock, including purchases or sales of stock by 5%, or greater, stockholders. An ownership change that is the result of a future transaction with respect to our stock likewise would limit our ability to use our NOL carryforwards and to recognize certain built-in losses after the date such ownership change were to occur. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of NOL carryforwards and certain built-in losses after such change equals the applicable long-term tax exempt rate (currently roughly 4%) times the value of our stock immediately before the ownership change. Depending on the resulting limitation, a substantial portion of our NOL carryforwards and other tax attributes could expire before we would be able to use them. Our inability to use our NOL carryforwards or certain built-in losses to offset taxable income generated in the future could have an adverse effect on our financial condition and results of operations.

Our assets as of December 31, 2010 include a deferred tax asset, the full value of which we may not be able to realize.

We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities. As of December 31, 2010, our deferred tax assets (most of which were netted against our deferred tax liabilities on our consolidated balance sheet) were approximately $117.5 million, an increase from a balance of approximately $115.2 million at December 31, 2009. Our deferred tax assets are comprised primarily of the expected tax savings from the utilization of our NOL carryforwards. We regularly review our deferred tax assets for recoverability based on our history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income. Although we believe our initial public offering, if completed, will not result in an ownership change, an ownership change under IRC Section 382 that occurs in the future could affect our ability to realize fully these deferred tax assets.

As a U.S. government contractor, we are subject to a number of procurement and other laws and regulations that affect how we conduct our business and subject us to certain costs.

We must comply with and are affected by many laws and regulations governing the formation, administration and performance of U.S. government contracts. These laws and regulations, among other things:

·                  require, in some cases, certification and disclosure to the government of all of our cost and pricing information in connection with contract negotiations;

·                  impose acquisition regulations that define allowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. government contracts; and

·                  restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

These laws and regulations impose terms or rights that are more favorable to the government than those typically available to commercial parties in negotiated transactions. They have affected how we have conducted our business with our customers, and we expect that they will continue to affect how we conduct our business with our customers in the future. In addition, in some instances, these laws and regulations have imposed added costs on our business, and we expect that such added costs will be applicable to us going forward. A violation of these laws and regulations by us could result in the imposition of fines and penalties, the termination of our U.S. government contracts or debarment from bidding on future contracts. In addition, the violation of certain other generally applicable laws and regulations could result in our suspension or termination as a government contractor.

In addition, U.S. government contractors are generally subject to specific and unique cost accounting standards, or CAS, that may differ from generally accepted accounting principles, or GAAP, and that generally require more stringent disclosures and related certifications. The contract terms for the AMC international program currently include an exemption from CAS accounting for small businesses such as World and North American, but there can be no assurance that this exemption will continue to apply in the future. If we were to become subject to CAS accounting, we would incur significant costs in hiring third party consultants and implementing new management information systems to ensure compliance.

Furthermore, we have bid, and may in the future submit bids, for U.S. government contracts that require our employees to maintain various levels of security clearances and require us or our teaming partners to maintain certain security clearances in compliance with the DOD and other government requirements. Obtaining and maintaining security clearances for employees involves a lengthy process, and it can be difficult to identify, recruit and retain employees who already hold security clearances. If our employees or the employees of our teaming partners are unable to obtain or retain security clearances, or if our employees or the employees of our teaming partners who hold security clearances stop working for us or our teaming partners, we may face delays in

21

Table of Contents

fulfilling contracts, or be unable to fulfill or secure new contracts, with any customer involved in work requiring government clearance. Any breach of security for which we are responsible could seriously harm our business, damage our reputation and make us ineligible to work on any programs requiring government clearance. Furthermore, security requirements may limit our ability to hire non-United States persons to work for us.

Government regulations impose requirements and restrictions on our operations that increase our operating costs.

We are subject to extensive regulatory and legal requirements, both domestically and internationally, that involve significant compliance costs. In the last several years, the U.S. Congress has passed laws, and the FAA, the Department of Transportation (DOT) and the Transportation Security Administration (TSA) have issued regulations relating to the operation of air carriers that have required significant expenditures. Our business activities also fall within the jurisdiction of the DOD, U.S. Customs and Border Protection, the U.S. Treasury Department’s Office of Foreign Assets Control and the Environmental Protection Agency (EPA). Local governments and authorities in certain regions have also adopted regulations governing various aspects of aircraft operations, including noise abatement procedures, curfews and use of airport facilities. These agencies have the authority to modify, amend, suspend or revoke the authority and licenses issued to us necessary to operate our business for failure to comply with law or regulations and may impose civil or criminal penalties for such violations. We expect to continue to incur increased expenses in connection with complying with government regulations, including continuing costs for new security measures and flight duty limitation. Additional laws, regulations, taxes and airport charges have been proposed from time to time that could significantly increase the cost of our operations. For example, the FAA is now in the process of evaluating materials resulting from the Advisory Rulemaking Committee process and drafting a notice of proposed rulemaking to modify existing flight and duty time rules. It is likely that the FAA will issue its rulemaking in 2011, to be followed by a new rule that lessens the permissible amount of flight and duty time or increases pilot rest requirements. We can give no assurance that these and other laws or regulations enacted in the future will not materially and adversely affect our business, financial condition and results of operations.

In addition, the application of various sales, use, occupancy, value-added and other tax laws, rules and regulations to our services is subject to interpretation by the applicable taxing authorities. We cannot assure you that taxing authorities would not take positions that could materially and adversely affect our business, financial condition and results of operations.

Furthermore, our operating authority in international regions is subject to aviation agreements between the United States and foreign governments and to considerations of comity and reciprocity between the United States and the concerned foreign government. We are subject to these bilateral agreements, which are in turn subject to renegotiation or termination, and comity and reciprocity are subject to review by the relevant governments. Any alteration or termination of such agreements, or restrictions on aircraft operations by governments based on considerations of comity and reciprocity, could diminish the value of route authorities or otherwise adversely affect our international operations.

Initiatives to address global climate change may adversely affect our business and increase our costs.

Many existing aspects of aircraft operations are subject to stringent environmental regulations. Future legislative or regulatory action to address concerns about climate change in general and the emission of greenhouse gases, in particular, could result in substantial additional costs for us. In addition, the EU has adopted legislation to include aviation within the EU’s existing greenhouse gas emission trading schemes effective in 2012. We cannot assure you that the costs of complying with potential new environmental laws or regulations will not have a material adverse effect on our business, financial condition and results of operations.

We may not be able to retain or attract senior management and other key employees.

Our success will depend in part upon our ability to retain senior management and other key employees. Competition for qualified personnel can be very intense. Departures of senior management personnel and other key employees could materially and adversely affect our ability to execute our strategy and as a result our business, financial condition and results of operations may suffer.

We may experience difficulty finding, training and retaining employees.

Our business is labor intensive. We employ a large number of pilots, flight attendants, maintenance technicians and other operating and administrative personnel. Our industry has, from time to time, experienced a shortage of qualified personnel, specifically pilots and maintenance technicians. Should the turnover of employees, particularly pilots and maintenance technicians, sharply increase, our training costs will be significantly higher. We cannot assure you that we will be able to recruit, train and retain the qualified employees that we need to continue our current operations or replace departing employees. A failure to hire and retain qualified employees at a reasonable cost could materially and adversely affect our business, financial condition and results of operations.

22

Table of Contents

Our results of operations will vary among quarters, which will make comparison of our quarterly results difficult.

We expect our operating results to fluctuate among quarters in the future based on a variety of factors, including:

·                  fluctuations in demand in our business lines;

·                  the timing and success of our growth or strategic plans;

·                  increases in personnel, marketing, aircraft ownership and other operating expenses to support our anticipated growth; and

·                  the timing and amount of maintenance expenditures.

Quarter-to-quarter comparisons of our operating results may not be good indicators of our future performance. It is also possible that our operating results in any future quarter could be below the expectations of investors or any published reports or analyses regarding our company.

The selected consolidated historical financial data included in this annual report does not reflect the added costs we expect to incur in order to implement and comply with internal control reporting standards applicable to a public company.

As a public company, we will incur significant levels of legal, accounting and other expenses that we did not incur as a privately owned corporation. The Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, and related rules of the SEC and corporate governance practices for public companies impose significant requirements relating to disclosure controls and procedures and internal control over financial reporting. We expect that compliance with these public company requirements will increase our costs, place additional demands on our finance, legal and accounting staff and on our financial, accounting and information systems and may require additional resources. We expect that we will be required to expend considerable time and resources complying with public company regulations.

Failure to establish and maintain effective internal control over financial reporting may lead investors to lose confidence in our financial data.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. We are in the process of testing our internal control procedures to satisfy the requirements of Section 404 of Sarbanes-Oxley and the related rules of the SEC. These rules will require, among other things, our management to assess annually the effectiveness of our internal control over financial reporting. In addition, for any year that we are an “accelerated filer” under the rules of the SEC, we will be required to provide a report from our independent registered public accounting firm on our internal control over financial reporting. During the course of testing, we may identify deficiencies that we may be unable to remedy before the requisite deadline for those reports.  Currently, we are not considered an accelerated filer.

For example, we identified a material weakness in our internal control over financial reporting as of December 31, 2009 principally relating to the accounting for non-routine transactions related to the ATA bankruptcy. Deficiencies were identified in connection with the consolidation of the bankruptcy trust and the tax consequences of the bankrupt entity due to the lack of sufficient technical resources related to these matters.

A material weakness is defined as deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements that would not be prevented or detected on a timely basis by the company’s internal controls. We believe we have taken the necessary steps to remediate this material weakness. We believe that our remediation efforts have been successful but we cannot assure you that a similar or different material weakness will not recur. Implementing changes to our internal controls may distract our officers and employees, entail substantial costs to implement new processes and modify our existing processes and take significant time to complete. Moreover, these changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm the valuation of our securities.

The reorganization of our predecessor and liquidation of ATA limit the comparability of some of our historical financial information to our current financial information, which will make it more difficult to evaluate the performance of our business.

As a result of the emergence from the bankruptcy proceedings of our predecessor in 2006, we adopted fresh start accounting prescribed by GAAP. Accordingly, our financial condition and results of operations are not comparable to the financial condition and results of operations reflected in our predecessor’s financial statements for periods prior to February 28, 2006, included in the selected

23

Table of Contents

financial data contained in this annual report. We ceased consolidating the results and operations and financial condition of ATA in our consolidated financial statements as of April 3, 2008 when ATA discontinued all business operations following its Chapter 11 bankruptcy filing. As a result of these factors limiting the comparability of our historical financial statements to our more recent financial information, it may be more difficult for you to assess our future prospects when evaluating our business.

Our business can be affected by factors beyond our control, any of which could materially and adversely affect our business.

Our business is affected by factors beyond our control, including air traffic congestion at airports, adverse weather conditions, natural disasters, volcanoes, earthquakes and increased security measures. For example, the recent volcano eruptions in Iceland led to significant flight restrictions in European airspace, disrupting operations. Delays increase costs, which in turn affect profitability. During periods of fog, snow, rain, storms or other adverse atmospheric conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to atmospheric conditions, traffic control problems and breaches in security could materially and adversely affect our business, financial condition and results of operations.

We may not be able to successfully integrate any businesses that we may acquire.

From time to time, we may consider acquisition opportunities and may make acquisitions in the future, including acquisitions of companies that may constitute a significant part of our consolidated operations. Acquired businesses may not achieve the levels of revenue, profit or productivity anticipated or otherwise perform as expected. Acquisitions involve special risks, including the potential assumption of unanticipated liabilities and contingencies that could have a material adverse effect on our business, financial condition and results of operations and difficulties in integrating acquired businesses. While it is intended that our acquisitions will improve our competitiveness and profitability, we cannot assure you that future acquisitions will be accretive to our earnings or otherwise meet our operational or strategic expectations.

The integration of an acquisition involves a number of factors that may affect our operations. These factors include:

·                  diversion of management’s attention;

·                  incurrence of significant amounts of additional debt;

·                  creation of significant contingent earn-out obligations or other financial liabilities;

·                  difficulties in the integration of acquired operations and retention of personnel;

·                  unanticipated problems or legal liabilities; and

·                  tax and accounting issues.

A failure to integrate acquisitions may be disruptive to our operations and negatively impact our revenues or increase our expenses.

MatlinPatterson ATA Holdings LLC, an affiliate of MatlinPatterson Global Advisors LLC (MatlinPatterson) has significant influence over matters determined by our Board of Directors and is in a position to control the outcome of all matters submitted to our stockholders for approval.

MatlinPatterson owns approximately 92% of our outstanding shares as of December 31, 2010. For a description of our share ownership, see “Principal Stockholders.” As a result, MatlinPatterson has the ability to control the outcome of votes on all matters requiring stockholder approval, including the election of directors, adoption of amendments to our amended and restated certificate of incorporation and by-laws and approval of significant corporate transactions, as long as it continues to hold a controlling percentage of our outstanding common stock. MatlinPatterson will also be able to take actions that have the effect of delaying or preventing a change in control of us or discouraging others from making tender offers for our shares.

Conflicts of interest may arise, as MatlinPatterson and its affiliates do not have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do.

MatlinPatterson’s affiliates may invest in entities that directly or indirectly compete with us, or companies in which its affiliates currently invest may begin competing with us. As a result of these relationships, when conflicts between the interests of MatlinPatterson and the interests of our other stockholders arise, our directors who are nominated by MatlinPatterson may not be disinterested.

24

Table of Contents

Item 2. Properties

Global and World share corporate offices located in Peachtree City, Georgia. The lease expires in 2019. North American leases office space at JFK International Airport in New York for its administrative employees. This lease expires in 2017. In 2011, we will commence certain maintenance aircraft operations for World and North American at Tampa International Airport in Tampa, Florida and, as a result, entered into leases that expire in 2021.  We generally lease facility space on a short-term basis at or near airports in support of our operations. We also maintain a spare parts warehouse near Hartsfield-Jackson International Airport in Atlanta. This lease expires in 2011.  All of our leased space that is currently in service is well maintained and suitable for the operations conducted in it.

Item 3. Legal Proceedings

On February 9, 2009, Wilmington Trust Company, in its capacity as the trustee lessor to a 15-year lease agreement entered into by ATA on February 28, 2006, brought an action in the New York Supreme Court Commercial Division to enforce the guaranty provided by us of the performance of ATA under that lease. The plaintiff is seeking (a) approximately $333,000 plus interest on the lease; (b) the greater of (i) $35 million or (ii) the current market value of the aircraft; and (c) attorneys’ fees and costs. The complaint filed by the plaintiff does not seek a specified dollar amount in interest claimed, but rather seeks interest as provided under the terms of the lease and under applicable New York law. The lease provides for interest rates of between 8.25% to 9.64% with respect to various amounts owed under its terms. The appropriate rate of interest and methodology to be applied in calculating interest are in dispute. The outcome of the litigation cannot be predicted and is dependent upon many factors beyond our control. See Note 10 to our audited consolidated financial statements included in this annual report.

On June 11, 2008, the ATA bankruptcy estate (ATA) filed suit in the United States District Court for the Southern District of Indiana, Indianapolis Division, against FedEx for breach of a three-year contract with ATA for military flying (the FedEx Team Contract). FedEx thereafter filed a countersuit for damages in excess of $75,000 for ATA’s failure to perform (after cessation of operations) the FedEx Team Contract. The counterclaim is solely posed against ATA and does not affect us or our operating subsidiaries. On February 17, 2010, ATA served its Second Amended Statement of Special Damages estimating its total damages at $94.0 million. This estimate included $66.0 million in lost military profits (for a portion of 2008 and all of FY 2009) under the FedEx Team Contract and $28.0 million in damages ATA incurred in acquiring a number of DC-10 aircraft to support the FedEx Team Contract (the DC-10 Claim). On September 16, 2010, the court preliminarily granted FedEx’s motion in limine to exclude ATA’s DC-10 Claim.

On October 19, 2010, a federal jury returned a verdict against FedEx and awarded ATA 100% of its $66.0 million claim for breach of contract and denied FedEx’s counterclaim in its entirety. The court, on October 22, 2010, thereafter entered a judgment against FedEx without specifying the amount of damages. On November 1, 2010, ATA filed a post trial motion seeking to have the court enter a final judgment against FedEx for $66.0 million plus pre-judgment interest (under Tennessee law at a maximum rate of 10%) together with post-judgment interest. On November 18, 2010, FedEx filed three post trial motions seeking, among other things, to set aside the jury’s verdict, to disallow any pre-judgment interest under Tennessee law (or, in the alternative to calculate any pre-judgment interest at the federal post-judgment interest rate), to reduce the actual amount of damages awarded or, in the alternative, to order a new trial. The trial court denied FedEx’s motions on January 19, 2011.  On January 25, 2011, the trial court entered a judgment in the amount of $71.3 million.  On February 16, 2011, FedEx filed its Notice of Appeal.  ATA has filed a notice of cross-appeal (seeking to overturn the court’s decision disallowing ATA’s DC-10 Claim for $28.0 million and increasing the prejudgment interest).

Pursuant to ATA’s Chapter 11 Plan approved by the U.S. Bankruptcy Court, 85% of any damages recovered by ATA from FedEx will be distributed to the Company, 7.5% will be distributed to former ATA employees and 7.5% will be distributed to certain ATA unsecured creditors.

If we receive ATA distributions totaling more than $5.0 million, we are obligated pursuant to the terms of the indenture governing the First Lien Notes to use all such distributions to offer to purchase at par any outstanding First Lien Notes, and then, if remaining distributions total more than $1.3 million, we must offer to prepay, without premium, indebtedness outstanding under the Second Lien Loan equal to the entire amount of such remaining distribution. Any funds not so used would be available to us for general corporate purposes.

In addition, from time to time we may be a party to claims that arise in the ordinary course of business, none of which, in our view, is expected to have a material adverse effect on our financial position or results of operations.

Item 4. Reserved

25

Table of Contents

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

There is no established public trading market for our common equity.

As of March 15, 2011, there were 49 holders of our common stock.

Dividend Policy

We have not in the past paid, and do not currently intend to pay, cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms of our current financing agreements preclude us, and any future financing agreements may preclude us, from paying cash dividends.

Securities Authorized for Issuance under Equity Compensation Plans

See Item 12 of this report on Form 10-K.

Recent Sales of Unregistered Securities

During the last three years, we made the following sales of unregistered securities.

On August 14, 2007, we issued warrants for 226,100 shares of common stock, at an exercise price of $0.10 per share, to the lenders under a term loan. On October 23, 2007, MatlinPatterson purchased the warrants for 180,800 shares held by one of the lenders and immediately exercised such warrants, resulting in the issuance of 180,800 shares of common stock. The remaining warrants for 45,300 shares of common stock are held by Jefferies Finance LLC.

We issued 11,507,142 shares of Series A convertible preferred stock to MatlinPatterson for an aggregate purchase price of $161.1 million, or $14.00 per share, on August 14, 2007. The Series A preferred stock we issued had an annual cumulative dividend rate of 16.0% payable in common stock upon conversion but in no event would such dividend be equal to a value less than $8.0 million. On February 6, 2009, MatlinPatterson converted a $7.0 million note plus accrued interest into 548,558 shares of Series A convertible preferred stock, and purchased an additional 1,428,571 shares of Series A convertible preferred stock for $20 million in cash.

On April 6, 2009, MatlinPatterson, the holder of all the Series A convertible preferred stock, converted the outstanding Series A convertible preferred stock and accrued dividends and, as a result of a rights offering to accredited investors, we issued 23,825,900 shares of common stock.

On August 13, 2009, we issued $175 million of its First Lien Notes in a private offering to qualified institutional buyers, a limited number of institutional investors, and non-U.S. persons. Jefferies & Company, Inc.

On September 29, 2009, we issued GSO Capital Partners LP warrants to purchase 838,000 shares of common stock at an exercise price of $.0001 in consideration of making the Second Lien Loan. These warrants were immediately exercised, resulting in GSO Capital Partners LP acquiring 838,000 shares of common stock.

The issuance of securities described above was deemed to be exempt from registration under the Securities Act in reliance on the exemption provided by Section 4(2) thereof for transactions not involving a public offering. In addition, the issuance of common stock upon conversion of the Series A convertible preferred stock were also deemed to be exempt from registration in reliance on the exemption provided by Section 3(a)(9) for securities issued solely in exchange for other securities of the issuer.

26

Table of Contents

We have issued the following numbers of shares of common stock as restricted stock under the Registrant’s 2009 Long Term Incentive Plan. In each case, no cash consideration was received for the shares and no underwriter was involved. These issuances were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, given the limited number of recipients, the absence of general solicitation and the transfer restrictions applicable to such shares.

27

Table of Contents

Item 6. Selected Financial Data

The following table sets forth our selected consolidated historical financial data for each of the periods indicated. The selected statement of operations data for the years ended December 31, 2010, 2009, and 2008 and the selected balance sheet data as of December 31, 2010, and 2009 were derived from our audited consolidated financial statements included elsewhere in this annual report. The selected statement of operations data for the year ended December 31, 2007, the ten months ended December 31, 2006 and balance sheet data as of December 31, 2007 and 2006 were derived from our audited consolidated statements, which are not included in this annual report. The selected statement of operations data for the two months ended February 28, 2006 was derived from our predecessor’s audited consolidated financial statements, which are not included in this annual report.

The comparability of our selected historical financial data has been affected by the events described below. Our predecessor and certain of our affiliates, including ATA, our predecessor’s principal operating subsidiary at the time, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in October 2004. We emerged from bankruptcy protection on February 28, 2006 with a new capital structure. We applied fresh-start accounting as of March 1, 2006 for our consolidated financial statements. Fresh-start reporting reflects the value of the company as determined by the approved Chapter 11 reorganization plan. Fresh-start reporting required us to allocate our reorganization value to our assets and liabilities based upon their estimated fair values. In addition, fresh-start reporting also required that all liabilities, other than deferred taxes, be stated at the present value of amounts to be paid using appropriate interest rates. The determination of fair value of assets and liabilities is subject to significant estimation and assumptions and there can be no assurance that the estimates, assumptions and values reflected in the valuations will be realized and actual results could vary materially. As a result of the fresh-start change in the basis of accounting for our underlying assets and liabilities, our results of operations and cash flows are separated as pre-March 1, 2006 (predecessor) and post-February 28, 2006 (Global). We include as a reporting period of our predecessor its pre-emergence two-month period ended February 28, 2006. The historical periods of our predecessor also do not reflect the impact of the fundamental changes in our assets and operations effected through the reorganization. As a result of these changes (and other changes described below), we do not believe our business operations or our operating results for periods prior to March 1, 2006 are comparable to our current business operations or our operating results since that date.

We acquired World Air Holdings and its wholly owned subsidiaries, World and North American, on August 14, 2007. The results of World Air Holdings and its wholly owned subsidiaries have been included in our financial results since August 14, 2007.

As discussed more fully in “Note 2—ATA Impairment and Subsequent Bankruptcy” of the notes to our audited consolidated financial statements, on April 2, 2008, ATA filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code and ATA subsequently ceased all business operations. As of April 3, 2008, we ceased consolidating the results of operations and financial position of ATA in our consolidated financial statements. The results of operations of ATA through April 2, 2008 are included in our consolidated financial statements.

28

Table of Contents

During the year ended December 31, 2009 we restructured our senior secured debt and became the primary beneficiary of the ATA bankruptcy estate trust. As a result, we began consolidating our interest in the ATA bankruptcy estate in the second half of 2009. As of December 31, 2010, the estimated fair value of the ATA bankruptcy estate was $0.6 million.

29

Table of Contents

(1)           The consolidated financial statements of our predecessor have been prepared in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code and on a going-concern basis, which contemplates continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business. Reorganization expenses identify those costs that are not in the ordinary course of business and include aircraft lease rejection charges, impairments and professional fees related to the predecessor’s Chapter 11 filing.

(2)           As of February 28, 2006, the effective date of the plan of reorganization, we adopted fresh-start accounting for our financial statements. Because of the emergence from bankruptcy and adoption of fresh-start accounting, our historical financial data is not comparable to that of our predecessor.

(3)           Includes stock-based compensation expense of $5.3 million, $2.4 million, $5.7 million and $3.0 million for the years ended December 31, 2010, 2009, 2008 and 2007, respectively.

(4)           On April 6, 2009, our majority stockholder, the sole holder of the outstanding Series A Preferred Stock, converted the Series A Preferred Stock into Common Stock. The holder of our Series A Preferred Stock was entitled to cumulative dividends at an annual rate of 16.0% on the liquidation amount of the Series A Preferred Stock. The accumulated dividend at the time of conversion was $49.5 million. No common stock dividends were paid in any period presented.

The above list is not intended to identify all material changes in our business from 2006 to 2010.  Rather, we believe the above information is useful in understanding the period to period comparability of the above selected financial data.  Please read the information included elsewhere in this Form 10-K, including Business, Risk Factors, Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as other information contained herein for a more complete discussion of our business, financial condition, and results of operations.

30

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes. This discussion contains forward looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors.

Overview

We are a provider of customized, non-scheduled passenger and cargo air transport services, offering our customers a wide range of aircraft types, configurations, payloads and capabilities. We provide our services through our two operating air carriers, World and North American, which represent our two business segments. As of March 15, 2011, our combined fleet consisted of 28 wide-body and narrow-body leased aircraft, which support our two primary business lines: (1) military, which includes both passenger and cargo services, and (2) commercial cargo air transport service. We also offer passenger charter services to customers in specialty markets, such as providing supplemental peak capacity for other air carriers, political campaigns, professional sports teams, tour operators and concert tours. Our two primary lines of business combine the recurring revenue base of our established military business with the growth opportunities provided by our commercial cargo services.

We are the largest provider of military transport services in the Air Mobility Command (AMC) international program and have been flying for the military since 1952. Our contracts with the military contain cost-plus pricing and are not bid based on price but rather are awarded based on team entitlement and are priced using the average cost of all participating air carriers, weighted by flights flown in the AMC international program, plus a fixed operating margin. We are compensated on a per mission basis based on the mission’s route and the aircraft type employed, at a fixed rate, regardless of the number of passengers or tons of freight actually flown.

Our business model generally insulates our profitability from fluctuations in jet fuel prices, which are typically the largest and most volatile expenses for an air carrier. Under our military contracts and most of our commercial passenger and cargo charter arrangements, our customers are responsible for the cost of jet fuel. For the fiscal years ended December 31, 2010 and 2009, approximately 96% of our block hours were flown under either military or ACMI arrangements, in which the customer assumed the risk of fuel price volatility.

We were incorporated on January 26, 2006 under the name New ATA Holdings, Inc. and acquired a controlling interest in ATA on February 28, 2006, the effective date of ATA’s reorganization. On August 14, 2007, we acquired World Air Holdings, Inc., the parent company of World and North American. The acquisition of World Air Holdings, Inc. was accounted for using the purchase method of accounting and the results of World Air Holdings, Inc. have been included in our consolidated financial statements since August 14, 2007. Immediately following the 2007 acquisition, we had three major subsidiaries, ATA, World and North American, that each specialized in military passenger or cargo transport. In addition, ATA and North American historically operated in various scheduled service and charter passenger service markets, while World operated in passenger charter and ACMI cargo markets.

On April 2, 2008, ATA filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. On April 3, 2008, ATA discontinued all business operations and terminated the majority of its employees and began conducting an orderly liquidation of its assets and has now wound down the majority of its existing bankruptcy estate. As a result of the bankruptcy filing, beginning on April 3, 2008, we ceased consolidating the results of operations and financial position of ATA in our consolidated financial statements. As of this date, we adopted the cost method of accounting for ATA. We determined that our net investment in ATA under the cost method was $17.8 million as of April 3, 2008, and that this investment was fully impaired. The ATA bankruptcy estate trust has been consolidated in our consolidated financial statements since August 2009 due to our primary beneficial interest in the estate. On June 11, 2008, the ATA bankruptcy estate filed suit in the Federal District Court of Indiana against FedEx. On February 17, 2010, ATA served its Second Amended Statement of Special Damages estimating its total damages to be $94.0 million. The estimate was based on lost military profits of $66.0 million arising from the FedEx contract, and $28.0 million in losses associated with ATA’s acquisition of DC-10 aircraft in order to fulfill its obligations under the FedEx contract.

On September 16, 2010, the court preliminarily granted FedEx’s motion in limine to exclude the ATA’s DC-10 claim. On October 19, 2010, a federal jury returned a verdict against FedEx and awarded the ATA bankruptcy estate 100% of its $66.0 million claim for breach of contract and denied FedEx’s counterclaim in its entirety. The court, on October 22, 2010, thereafter entered a judgment against FedEx without specifying the amount of damages. On November 1, 2010, ATA filed a post trial motion seeking to have the court enter a final judgment against FedEx for $66.0 million plus pre-judgment interest (under Tennessee law at a maximum rate of 10%) together with post-judgment interest. On November 18, 2010, FedEx filed three post trial motions seeking, among other things, to set aside the jury’s verdict, to disallow any pre-judgment  interest under Tennessee law (or, in the alternative, to calculate any pre-judgment interest at the federal post-judgment interest rate), to reduce the actual amount of damages awarded or, in the alternative, to order a new trial. The trial court denied FedEx’s motions on January 19, 2011. On January 25, 2011, the trial court entered a judgment in the amount of $71.3 million. On February 16, 2011, FedEx filed its Notice of Appeal. ATA has filed a notice of cross-appeal (seeking to overturn the court’s decision disallowing ATA’s DC-10 claim for $28.0 million and increasing the prejudgment interest).

31

Table of Contents

Pursuant to ATA’s Chapter 11 Plan approved by the U.S. Bankruptcy Court, 85% of any damages recovered by ATA from FedEx in the FedEx litigation will be retained by the ATA estate and subsequently distributed to the Company, and 15% must be used to pay former ATA employees and creditor beneficiaries of ATA.

If we receive ATA distributions totaling more than $5.0 million, we are obligated pursuant to the terms of the indenture governing the First Lien Notes to use all such distributions to offer to purchase at par any outstanding First Lien Notes, and then, if remaining distributions total more than $1.3 million, we must offer to prepay, without premium, indebtedness outstanding under the Second Lien Loan equal to the entire amount of such remaining distribution. Any funds not so used would be available to us for general corporate purposes.

Operating Revenue

Military Passenger and Cargo Revenue. Our military revenues are derived from mission awards from the AMC. World operates both passenger and cargo missions for the AMC international program while North American operates only passenger missions. Revenue earned from each mission award is primarily based on the product of:

· the relevant rate paid per seat mile or ton mile per aircraft category, or Effective Rate (formerly known as the Line Haul Rate), multiplied by

· the number of seats or tons contracted for purchase by the AMC for each aircraft type, or Allowable Cabin Load, multiplied by

· mission miles, which are calculated flight miles based on awarded routing.

Because our revenues are based on the Allowable Cabin Load, the revenue we earn is not affected by the number of troops or tons of freight we transport. Under our contract with the Department of Defense (DOD), we are paid on a cost-plus basis in which we receive a fixed rate per mission based on the route and aircraft type. The fixed rate is calculated using the average costs of all participating air carriers, weighted by flights flown in the AMC international program. The AMC sets the fixed rate for each fiscal year using cost data for a 12-month period ending 15 months prior to the start of such fiscal year as adjusted following consultation with the air carrier, multiplied by a weighted composite price index to account for cost increases or decreases in the industry. As a result, the actual operating costs of our military business may exceed the fixed rate, although those higher actual operating costs will provide the basis for the fixed rate used for missions flown in the following contract year.

Our contracts for passenger and cargo missions under the AMC international program are one-year contracts with rates based on the average costs of all participating air carriers, weighted by flights flown in the AMC international program, plus a fixed operating margin that the AMC sets annually. The governmental fiscal year 2011 AMC rates will be down by 5.2% for large category passenger aircraft, 5.5% for medium category aircraft, and 2.0% for our large category freighter aircraft as compared to the fiscal year 2010 rates. This is mainly due to a combination of lower costs from the carriers, changes in the AMC’s allowable carrier costs, and a low inflation rate from industry and trade association cost indices used in the process.  Based on 2010 flights flown in the large and medium category passenger and large category freighter aircraft, total AMC revenue would be $46.0 million lower utilizing 2011 AMC rates.  We have a number of initiatives currently underway to streamline our operations and reduce our unit costs, which we would seek to accelerate to minimize margin erosion from reduced AMC rates. The fiscal year 2011 rates were effective January 1, 2011. For additional information please see our risk factor entitled “We are highly dependent on revenues from our participation in the AMC international program, which are derived from one-year contracts that the DOD is not obligated to renew. If our revenues from this business decline from current levels, whether due to decreased demand, termination, non-renewal, modification or otherwise, it could have a material adverse effect on our business, financial condition and results of operations”.

The AMC also reimburses us for our fuel costs. Fuel costs are included in the calculation of the relevant Effective Rate through the inclusion of a Fuel Peg Rate mechanism, which is determined based on a weighted average forecast of commercial and the DOD fuel prices, including into-plane fees and taxes. The weighted average forecast for fuel prices varies between our military passenger and military cargo operations due to the relative mix of sources of fuel accessed to service each of the respective operations. While the price we pay for fuel may affect our revenue from award to award, changes in fuel prices do not materially affect our results of operations due to the military’s monthly fuel price reconciliation process. Each month, the military compares the actual fuel prices we paid for missions during the previous month with the Fuel Peg Rate used in the calculation of the relevant Effective Rate. In instances where we overpaid, the military reimburses us the difference, and in instances where we underpaid, we reimburse the military for the difference. Operating income may be incrementally affected, positively or negatively, by a change in the Fuel Peg Rate due to the cost-plus nature of the Effective Rate calculation.

Our AMC contracts contain various operational performance requirements.  These include on-time performance, availability of aircraft and crews to meet committed missions, and successful completion of inspections. Under our 2011 AMC contract, on-time performance requirements, as measured on a rolling three-month period, were increased from an 85% to a 95% schedule reliability rate for passenger operations.  The penalties for failing to meet the new requirements were expanded to include:  contract default and potential termination for failure to meet an 87% passenger schedule reliability rate; a potential loss of rights to fly expansion missions (additional missions beyond the fixed buy contract requirements) and a 2% penalty on revenue on all newly awarded passenger missions performed during a subsequent 30-day period for achieving an 87% to 89% passenger schedule reliability rate; a potential penalty of 2% of revenue on all newly awarded passenger missions performed during a subsequent 30-day period for achieving a 90% to 91% passenger schedule reliability rate; and a potential penalty of 1% of revenue on all newly awarded passenger missions performed during a subsequent 30-day period for achieving a 92% to 94% passenger schedule reliability rate. In addition, the 2011 AMC contract was expanded to include performance bonuses:  a bonus of 1% of revenue on the previous month’s revenues for achieving a 98% or greater passenger schedule reliability rate; and, a bonus of ½% of revenue on the previous month’s revenues for achieving a 96% to 97% passenger schedule reliability rate. Our North American operations have failed to meet required schedule reliability rates for the period from January 1, 2011 to date and, as a result, we expect that it will not meet the requirements for the initial rolling three-month period under its AMC contract.  Accordingly, the AMC could impose on North American a 2% penalty on revenue and disqualify it from further expansion missions for a period of time in the second quarter of 2011. Although we believe it is unlikely, in the worst case, the AMC could terminate our North American AMC contract. The AMC has discretion with respect to waiving or lessening penalties, imposing additional cure periods, and taking other similar actions.

                We analyze the performance of our military business based on block hours flown and block hour rates earned. A block hour is the time interval from an aircraft’s departure from one terminal to its arrival at another. We calculate the block hour rate by dividing total operating revenue by the total block hours flown for a period.

Commercial Cargo and Passenger Revenue. Our commercial revenues are principally driven by overall macroeconomic trends that affect cargo and passenger demand, capacity available in the markets in which we compete and general pricing dynamics. World operates both commercial cargo and passenger services while North American operates only passenger services.

32

Table of Contents

We provide our services through two contract structures: ACMI contracts and full service contracts. ACMI contracts are aircraft operational arrangements whereby we provide the aircraft, crew, maintenance and insurance to a customer for a fee that is generally based on the expected block hours multiplied by a block hour rate. An ACMI contract includes a minimum block hour commitment per month over the term of the contract, which is typically one year. In contrast, a full service contract is an aircraft operational arrangement whereby we provide the aircraft, crew, maintenance, insurance, fuel, landing, ground handling and other necessary operating services to a customer for a single fee that is either based on a fixed fee or a fee based on block hours multiplied by a block hour rate. Full service contracts generally involve higher rates than ACMI contracts because of the full array of services paid for by us, such as fuel, and in turn provided to the customers. Due to this price differential per block hour, the mix of full service and ACMI block hours flown in any period can affect our period-over-period commercial revenue results. An increase in relative full service block hours flown will generate higher commercial revenue, all else equal. A decrease in relative full service block hours flown will have the converse effect. The mix of full service and ACMI block hours will not have a similar effect on operating income, however, because of the greater operating expenses we incur with respect to full service contracts.

Since our ACMI customers are responsible for fuel costs, our commercial ACMI revenues are not directly affected by fuel price changes. However, a significant increase in fuel prices could have an adverse effect on demand for the use of our aircraft. Our commercial full service revenues are fuel price sensitive (although operating income is much less so), as we generally increase or decrease full service block hour rates to reflect the fuel costs in our pricing model. Our full service contracts generally will have a block hour rate adjustment provision to mitigate losses created by differences between the fuel prices stated in the contract and the actual fuel price paid by us.

We also analyze the performance of our commercial cargo and passenger businesses based on block hours flown and the block hour rate earned.

Scheduled Service Revenue. Scheduled service revenue historically included revenue derived from scheduled services operated by ATA, which ceased business operations on April 3, 2008, and by North American, which discontinued scheduled service in May 2008. Through 2009, North American continued to recognize some scheduled service revenue related to expired tickets, which typically expire 12 months after purchase if unused. At expiration, the value of the tickets is recorded as earned revenue.

Other Revenue. Other revenue primarily consists of revenue generated from the rebill to our customers of operating costs incurred by us under ACMI contracts. We refer to this as “ACMI rebill revenue.” We promptly rebill our ACMI customers when we purchase certain products or services on behalf of our ACMI customers, such as fuel, ground handling or catering, as necessary in certain circumstances or to expedite operations. In fiscal year 2010, ACMI rebill revenue was less than 3% of our total ACMI revenue. Subservice events refer to flights where we are paid by our customer, but classify the amounts payable as other revenue because we have contracted the operation of the flight to another air carrier due to capacity constraints, aircraft maintenance events, or scheduling conflicts.

Operating Expenses

Aircraft Fuel. Aircraft fuel expense includes all fuel costs incurred by us under our military and full service commercial contracts. In addition, in certain circumstances, we purchase fuel for our ACMI commercial customers and subsequently rebill them. Aircraft fuel expense is a variable cost; however, our fuel price volatility exposure is limited to our full service commercial contracts. At times, we have experienced temporary favorable and unfavorable fluctuations in working capital due to the timing of significant fuel price changes and reimbursement for these costs. For the fiscal years ended December 31, 2010 and 2009, 96% of our block hours were flown under military or ACMI commercial contracts providing for our actual fuel costs to be paid or reimbursed by our customers.

Aircraft Rentals. Aircraft rentals include aircraft and engine rent expense under our various operating leases for aircraft and spare engines. These costs are generally fixed for the duration of the leases. Aircraft rentals can also include certain supplemental rents paid to fund future maintenance events, commonly referred to as maintenance reserves. In circumstances where we determine a maintenance reserve will not be refundable to us, or paid to us to fund scheduled maintenance events or meet aircraft redelivery requirements, we record those payments to the lessor as aircraft rentals.

Maintenance, Materials and Repairs. Maintenance, materials and repairs expense includes the cost of repairing our aircraft, which includes the repair or replacement of parts as appropriate, certain scheduled airframe maintenance events, company and contract labor for maintenance activities, line maintenance and other non-capitalized direct costs related to fleet maintenance, including short-term spare engine leases, loan and exchange fees for spare parts, and shipping costs. It also includes the engine usage costs incurred under hourly engine maintenance agreements, which we have for certain of our aircraft. These agreements require us to pay monthly fees to the vendor based on a specified rate per engine flight hour, in exchange for the vendor’s performance of overhauls and maintenance as required. Also included in maintenance, materials and repairs expense is the cost of our maintenance employees including their benefits. We generally view a large portion of our maintenance, materials and repairs expense as a variable cost.

Flight Operations. Flight operations expense includes the wages and benefits paid to our pilots, training costs for our personnel, flight operations management functions and our hull insurance expense. We generally view the non-salary portion of flight operations expense as a variable cost. Our pilots are represented by collective bargaining agreements, and as such, their wages and benefits are generally fixed, although we have some flexibility to adjust staffing levels.

33

Table of Contents

Aircraft and Traffic Servicing. Aircraft and traffic servicing expense includes the costs incurred at airports to land and service our aircraft and to handle passenger check-in, security, cargo, and baggage. It also includes navigation fees, which are incurred when our aircraft fly through certain foreign air space and are paid to the relevant foreign authorities, and all aircraft and traffic servicing employee costs and benefits for line and management functions such as ground operations. The non-salary portions of aircraft and traffic servicing expenses are variable costs. We typically do not incur aircraft and traffic servicing expenses under ACMI contracts.

Passenger Services. Passenger services expense includes the wages and benefits paid to our flight attendants, training costs for our personnel, on-board costs of meal and beverage catering for our non-ACMI commercial departures, passenger liability insurance and passenger services management functions, such as flight attendant management. In addition, these expenses include passenger fees and costs incurred for mishandled baggage and costs related to compensation for passengers who have been inconvenienced due to flight delays or cancellations. We generally view the non-salary portion of passenger services expense as a variable cost based on the number of aircraft we operate and block hours flown by us. Our flight attendant groups are represented by collective bargaining agreements, and as such, their wages and benefits are generally fixed, although we have some flexibility to adjust staffing levels.

Crew Positioning. Crew positioning expenses are primarily the cost of air and ground transportation and hotels incurred to position crewmembers in locations around the world from which they can operate their flights and then return to their home bases. World’s crews are home-based throughout the United States, while North American’s crews are based at John F. Kennedy (JFK) International Airport in New York. These are variable costs.

Selling and Marketing. Selling and marketing expenses primarily include the commissions we pay to Alliance team members as compensation for military missions we operate that were awarded to our team based on their AMC entitlement points. These commissions are negotiated as a percentage of the revenue we earn from those military missions. We pay these commissions monthly. We consider commissions as a variable cost. Selling and marketing expenses also include salaries, wages and benefits and professional fees related to our selling and marketing functions and advertising and product marketing activity. These are mainly variable costs.

Depreciation and Amortization. Depreciation reflects the periodic expensing of the recorded cost of owned airframe and engines, capitalized engine overhauls and related life limited parts, referred to as LLPs, and certain scheduled airframe and landing gear maintenance events, aircraft improvements, and rotable parts for all fleet types, together with our property and equipment. Amortization reflects the periodic expensing of the recorded value of our definite-lived intangible assets. These are fixed costs.

General and Administrative. General and administrative expenses principally include corporate and management’s salaries, wages and benefits, professional fees, including legal and accounting, the cost of general insurance policies, such as workers’ compensation insurance, and rent and facility costs. Also included in general and administrative expense is the cost of certain contingent liability provisions, including our guarantees of ATA leasing obligations. These are fixed costs.

Asset Impairment and Aircraft Retirements. Asset impairment and aircraft retirements include all identifiable costs relating to impaired assets, both tangible and intangible, as well as costs associated with the retirement of aircraft and engines. For discussion regarding impairment testing, see “Critical Accounting Policies and Estimates” below.

Other Expenses. Other expenses primarily include the expense related to subservice events and customer reimbursement for damaged cargo. Other expenses are generally variable in nature.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities.

Certain significant accounting policies used in the preparation of the financial statements require us to make difficult, subjective or complex judgments and thus we consider these critical accounting policies. We have identified the following as critical accounting policies.

Accounting for Long-Lived Assets. As of December 31, 2010, we had $142.1 million of net property and equipment and $167.1 million of definite-lived net intangible assets on our balance sheet. Generally, our property and equipment is depreciated to residual values over their estimated useful service lives using the straight-line method. Leasehold improvements and rotable parts related to our aircraft are depreciated over the period of benefit or the terms of the related leases, whichever is less. Our facilities and ground equipment are generally depreciated over three to seven years. Definite-lived intangible assets are amortized on a straight-line basis over the estimated lives of the related assets.

We evaluate our long-lived assets by segment, including definite-lived intangible assets, for impairment when events or changes in circumstances indicate that the book value of the asset may not be recoverable. In testing for impairment, we compare the undiscounted estimated future cash flows from the expected use of those assets to their net book value to determine if impairment is indicated. Assets deemed impaired are written down to their estimated fair value through a charge to earnings. Fair values may be estimated using discounted cash flow analysis or quoted market prices, together with other available information. This requires the exercise of significant judgment and the preparation of numerous significant estimates.

34

Table of Contents

We record asset impairments and aircraft retirement (or return) charges based on operational needs and specific, non-recurring events. To date these non-routine impairments have not been required on a regular basis but rather on an infrequent basis under unusual circumstances. In 2010, asset retirement charges were recorded related to the retirement of World’s DC-10 fleet and the sublease of a North American B757-200 aircraft.

In accordance with ASC 360, Property, Plant and Equipment and the AICPA Audit and Accounting Guide: Airlines, when impairment indicators are present, we assess the aircraft and aircraft-related assets for recoverability and record impairment charges as appropriate. Such impairment indicators have included management’s commitment to permanently ground an aircraft and damage caused to an aircraft.

When impairment indicators are present and aircraft or aircraft-related assets are tested for recoverability, an assessment is also made to determine if it is necessary to adjust the remaining useful lives and salvage values of such assets, regardless of whether an impairment charge is recorded.

The actual aircraft asset impairment charges recorded in the periods presented resulted in the assets being written down to zero or to their salvage values, and management determined no adjustments to useful lives of other aircraft within its fleet were required.

Indefinite-Lived Intangible Assets. We do not amortize our indefinite-lived intangible assets. We test the book value of our intangible assets for impairment on an annual basis and, if certain events or circumstances indicate that an impairment loss may have incurred, on an interim basis. This requires the exercise of significant judgment and the preparation of numerous estimates.

Airframe and Engine Maintenance and Lease Requirements. The cost of major engine overhauls for fleet types not covered under a maintenance agreement, and the cost of certain overhauls related to heavy airframe, engine, LLPs, landing gear and auxiliary power units, which we refer to as APUs, for all fleet types, are capitalized when performed and amortized over estimated useful lives based upon usage, or to earlier fleet or aircraft calendar limits, for all aircraft. Depreciation expense related to overhauls of heavy airframe, engine, LLPs, landing gear and APUs totaled $44.8 million, $23.4 million and $10.4 million for the years ended December 31, 2010, 2009 and 2008, respectively.  We have maintenance agreements for certain items, such as engines, which require us to pay a monthly fee per engine flight hour in exchange for major overhaul, spares, and maintenance of those engines. We expense the cost per flight hour under these agreements as incurred. Under certain of our aircraft and engine leases, we are required to make periodic maintenance reserve payments to lessors for certain future maintenance work such as airframe, engine, LLP, landing gear and APU overhauls. In addition, under our aircraft and engine leases, we are required to return the airframes, engines, LLP, landing gear, and APUs to the lessors in a specified maintenance condition at the end of the lease (return condition). If the return condition is not met, the leases generally require us to provide financial compensation to the lessor. Under certain leases, the maintenance reserve deposits are not refundable to us. Consequently, we periodically review the balances of the maintenance reserve deposits and write off any amounts that are no longer probable of being used for maintenance. We have adopted the provisions of EITF 08-3, “Accounting by Lessees for Non-Refundable Maintenance Deposits,” which became effective on January 1, 2009. In determining whether it is probable that maintenance deposits will be used to offset the liability for future maintenance costs, we consider the condition of the aircraft, including but not limited to the airframe and engines, and the projected future usage of the aircraft based on our business and fleet plans. For the year ended December 31, 2010 and 2009, we expensed $7.5 million, and $9.6 million, respectively, of maintenance reserve payments on certain aircraft leases where we determined that it was not probable that payments would be used to offset the liability for future maintenance costs.

In June 2008, the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) reached a consensus in Issue No. 08-3 (EITF 08-3), included in Accounting Standards Codification (ASC 840-10), pertaining to maintenance deposits under certain equipment lease agreements, whereby a lessee is legally or contractually responsible for repair and maintenance of the leased asset throughout the lease term. Additionally, certain lease agreements include provisions requiring the lessee to make deposits to the lessor to financially protect the lessor in the event the lessee does not properly maintain the leased asset. This issue applies to the lessee’s accounting for maintenance deposits paid by a lessee under an arrangement accounted for as a lease that are refunded only if the lessee performs specified maintenance activities. The accounting by lessees for maintenance deposits was effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We adopted the provisions of ASC 840-10 effective January 1, 2009. The cumulative effect of the change in accounting for nonrefundable maintenance deposits as of January 1, 2009 increased our maintenance deposits by $7.3 million, increased our long-term deferred tax liabilities by $2.7 million and decreased our accumulated deficit by $4.6 million, net of tax.

If an operating lease has return conditions, our policy is to accrue and expense ratably the return condition costs once they are estimable and probable. We recognized $3.5 million, and $0.1 million of return condition expense as part of maintenance, materials and repairs expense in our consolidated statement of operations for the year ended December 31, 2010, and 2009, respectively.

Income Taxes. We account for income taxes under the asset and liability method. Under this method, we recognize deferred income taxes based upon the tax effects of temporary differences between the financial statement and tax basis of assets and liabilities, as measured through the application of current enacted tax rates. When necessary, deferred income tax assets are reduced by a valuation allowance to an amount that is determined to be more likely than not recoverable. We make significant estimates and assumptions about future taxable income and future tax consequences when determining the amount of a valuation allowance.

35

Table of Contents

Our income tax provisions are based on calculations, estimates, and assumptions that are subject to potential examination by the Internal Revenue Service (IRS) and other taxing authorities. Although we believe the positions taken on previously filed tax returns are reasonable, we have established tax and interest reserves in recognition that taxing authorities may challenge the positions we have taken, which could result in additional liabilities of both taxes and interest. We review and adjust these reserves as circumstances warrant or as events occur that affect our potential liability, such as the lapsing of applicable statutes of limitation, conclusion of audits, a change based upon current calculations, identification of new issues, releases of administrative guidance or the rendering of a court decision affecting a particular issue. Any adjustment to the tax provision would be made in the period in which the facts that gave rise to the change become known.

We adopted the provisions of ASC 450, Contingencies, on January 1, 2007. We developed and implemented a process, consistent with ASC 450 and ASC 740, Income Taxes, to ensure that uncertain tax positions are properly identified, recognized, and measured in our financial statements. We adopted ASC 805, Business Combinations, effective January 1, 2009. As such, the total unrecognized income tax benefits as of December 31, 2008, if recognized in future periods, will be recorded through income tax expense and will impact our effective tax rate.

Stock-based Compensation. On June 29, 2009, we approved certain new equity awards to certain employees under a 2009 Long-Term Incentive Plan that replaced awards granted under previous plans adopted in 2006 and 2007. This Plan allows us to grant incentives to employees in the form of incentive stock options, nonqualified stock options, restricted stock awards and various other performance awards. We accounted for the cancelled and replaced awards as modifications of existing awards with the new incremental fair value recognized over the vesting period beginning in the third quarter of 2009. In June 2010, the compensation committee of the board of directors approved a plan to accelerate the vesting of all awards currently outstanding under the 2009 Long-Term Incentive Plan, which we refer to as LTIP, in the event that an initial public offering of common stock is consummated on or before September 30, 2011. In addition, in November 2010, the board of directors authorized and reserved a total of 7,500,000 shares of common stock for issuance related to the settlement of awards granted under the LTIP increasing those shares previously reserved for issuance under the LTIP.

We measure the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of the awards. Options under each plan were granted with an exercise price not less that the market price at the grant date. None of our grants include performance-based or market-based vesting conditions. We estimate the fair value of stock option awards on the date of grant using a modified Black-Scholes option-pricing model, which requires us to make assumptions, some of which are subjective, including risk-free interest rate, stock price volatility and expected life of the options.

Our assumption of the risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. We base our stock price volatility assumptions on historical volatilities of comparable air carriers whose shares are traded using monthly stock price returns equivalent to the contracts term of the option. The expected life of the options is determined based upon an assumption that the options will be exercised evenly from vesting to expiration. As of December 31, 2010, we had $11.6 million of total unrecognized compensation costs related to stock-based compensation arrangements. We expect to recognize this expense over a weighted-average period of 2.6 years.

Key Factors Affecting Results for the Year Ended December 31, 2010

Several factors influenced our results for the year ended December 31, 2010 and the comparison to the corresponding period in 2009:

Shift in Military Passenger Demand. During the year ended December 31, 2010, the military requested higher capacity aircraft to accommodate troop movements, and we experienced more competition for the medium-size passenger missions. As a result, World’s larger DC-10 and MD-11 aircraft operated more passenger block hours and our smaller B767 and B757 aircraft, at North American, operated fewer passenger block hours for the military compared to the year ended December 31, 2009. Overall, our consolidated revenue was positively affected for the year ended December 31, 2010 due to the higher per block hour rates paid by the military for the larger aircraft.

Strong Military Cargo Demand. During year ended December 31, 2010, we continued to experience strong demand for our MD-11 and B747-400 freighter aircraft from AMC. During the year ended December 31, 2010, this positive trend was driven primarily by a larger AMC market and strong demand for our B747-400 freighters in the first half of 2010 for transport of M-ATV’s to Afghanistan.

Improvement in Commercial Cargo Demand. In the year ended December 31, 2010, we experienced a continued improvement in commercial cargo demand compared to 2009. Improvement in revenue was driven by higher block hours, higher yields and increased utilization on both our MD-11 and B747 cargo aircraft.

Weak Commercial Passenger Demand. During the year ended December 31, 2010, the market for commercial passenger service continued to soften as compared to 2009. The expiration of a significant ACMI contract at the end of May was the primary reason for lower hours in the year ended December 31, 2010 compared to the same period in 2009.

Fuel Price Increase. On a consolidated basis, our average price per gallon paid for fuel was approximately 29% higher for the year ended December 31, 2010 compared to the same period in 2009. The majority of our fuel expenses is driven by military flights, both passenger and cargo. Our operating results were not materially affected by this increase as the military reimburses us for

36

Table of Contents

our fuel costs. The increase in the price of fuel for our military flights is reflected as revenue in both our passenger and cargo military revenue and generally offset in our aircraft fuel expense line item.

Changes to Our Fleet. In 2009, we completed the early return of two DC-10 freighter aircraft to the lessor. With the addition of the three MD-11 freighter aircraft in 2008 along with the economic downturn, we no longer needed these less efficient, older aircraft to meet demand from the military. We also retired our one owned DC-10 passenger aircraft as continued operation would have required significant maintenance expense. We returned one other DC-10 passenger aircraft to its lessor due to damage sustained in a hard landing during 2009. We added two additional MD-11 passenger aircraft — one in 2009 and one in 2010 — to replace the lost DC-10 capacity in our military business. During the third quarter of 2010, we signed an agreement to lease two additional B747 freighter aircraft.  We accepted delivery of the first aircraft on January 7, 2011 and anticipate taking delivery of the second aircraft before March 31, 2011, respectively. The aircraft will be converted from a passenger to cargo configuration and we anticipate them entering revenue service during the first quarter of 2011. In addition, during the third quarter of 2010, we returned one of our MD-11 freighter aircraft to revenue service from temporary storage and during December 2010 and January 2011, respectively, retired two and one of our three remaining DC-10 passenger aircraft. Finally, in the fourth quarter of 2010, we made the decision to retire the remaining DC-10 passenger fleet and we entered into a sublease of one of our B757 passenger aircraft to a third party.  We retired two of three remaining DC-10’s in the fourth quarter and the final DC-10 in the first quarter of 2011.

Financial Overview for the Years Ended December 31, 2010 and 2009

Segment and Key Operating Data

We have two reporting segments: World and North American. Selected financial data for the years ended December 31, 2010 and 2009 are set forth below (in thousands):

37

Table of Contents

The following table sets forth selected key metrics by segment: