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See accompanying Notes to Condensed Consolidated Financial Statements.

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See accompanying Notes to Condensed Consolidated Financial Statements.

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Note 1 - Summary of Significant Accounting Policies

Business
All of the operations of AirTran Holdings, Inc. are conducted by our wholly owned subsidiary, AirTran Airways, Inc. AirTran Airways, Inc. is one of the largest low-fare, scheduled airlines in the United States in terms of departures and seats offered. We operate scheduled air transportation of passengers principally in the eastern United States, primarily from our hub at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia.

Basis of Presentation
Our accompanying unaudited Condensed Consolidated Financial Statements include the accounts of AirTran Holdings, Inc. (Holdings) and our-wholly owned subsidiaries, including our principal subsidiary, AirTran Airways, Inc (Airways). All significant intercompany accounts and transactions have been eliminated in consolidation for all periods presented. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for reports on Form 10-Q. It is suggested that these unaudited interim finan cial statements be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003.

The preparation of the accompanying unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying Notes. Actual results may differ from those estimates and such differences may be material to the unaudited Condensed Consolidated Financial Statements.

Reclassification
Certain 2003 amounts have been reclassified to conform to 2004 classifications.

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Stock-Based Employee Compensation
We grant stock options and restricted stock awards from time to time to certain of our officers, directors and key employees. We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and accordingly recognize compensation expense when the exercise price of an award is less than the fair value of our common stock on the grant date. We issued approximately 1,400,355 shares of common stock pursuant to stock option exercises during 2004.

The following table illustrates the effect on net income (loss) and earnings (loss) per common share if we had applied the fair value based method to measure stock-based employee compensation, as required under the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure:

As required, the pro forma disclosures in the previous table include options granted since January 1, 1995. Consequently, the effects of applying SFAS No. 123 for providing pro forma disclosures may not be representative of the effects on reported net income for future years until all options outstanding are included in the pro forma disclosures. For purposes of pro forma disclosures, the estimated fair value of stock-based compensation plans and other options is amortized to expense primarily over the vesting period.

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Note 2 - Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

For the three months ended September 30, 2004, 3.5 million, 0.6 million and 11.2 million incremental shares related to our stock options, convertible debt and stock warrants, respectively, were not included in the diluted earnings per share calculation because the effect of including these shares would have been anti-dilutive. For the nine months ended September 30, 2004, 11.2 million incremental shares related to our convertible debt were not included in the diluted earnings per share calculation because the effect of including these shares would have been anti-dilutive.

On September 30, 2004, the Emerging Issues Task Force reached consensus on Issue No. 04-08 (EITF No. 04-08), The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which changes the treatment of contingently convertible debt instruments in the calculation of diluted earnings per share. EITF No. 04-08 provides that the shares issuable upon conversion of these debt instruments be included in the earnings per share computation, if dilutive, regardless of whether the contingent conditions for their conversion have been met. This change does not have any effect on net income, but it may affect the related earnings per share amounts. The new rules will be effective for reporting periods ending after December 15, 2004. We plan to adopt EITF No. 04-08 as of December 31, 2004. We will include, if dilutive, the assumed conversion of our 7% convertible notes issued May 2003 in all of our reported diluted earnings per share calculations. We expect this change to have an immaterial impact on our diluted earnings per share calculations.

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Note 3 - Comprehensive Income (Loss)

Comprehensive income (loss) encompasses net income (loss) and "other comprehensive income (loss)," which includes all other non-owner transactions and events that change stockholders' equity. Other comprehensive income (loss) is composed of reclassifications to earnings of deferred gains and losses related to derivative financial instruments used to manage our fuel costs that qualified for hedge accounting. These derivative instruments were terminated in March 2002. Amounts are reclassified to earnings as the related fuel is used. Comprehensive income (loss) was $(9.7) million and $19.7 million for the three months ended September 30, 2004 and 2003 and $11.3 million and $79.3 million for the nine months ended September 30, 2004 and 2003, respectively. The differences between net income (loss) and comprehensive income (loss) for each of these periods are as follows:

Because net deferred tax assets were offset in full by a valuation allowance during 2003 there was no tax effect on the unrealized loss for 2003.

An analysis of the amounts included in Accumulated other comprehensive loss is shown below:

Note 4 - Fuel Risk Management

Aircraft fuel is one of our significant expenditures, representing approximately 25.1 percent and 21.5 percent of our total operating expenses for the three months ended September 30, 2004 and 2003, respectively, and 23.3 percent and 21.8 percent of our total operating expenses for the nine months ended September 30, 2004 and 2003, respectively. Increases in fuel prices or a shortage of supply could have a material effect on our operations and operating results.

Our efforts to reduce exposure to increases in the price and availability of aircraft fuel include the utilization of fixed-price fuel contracts and fuel cap contracts (collectively "fuel contracts"). Fixed-price fuel contracts are agreements to purchase defined quantities of aircraft fuel from a third party at defined prices. Fuel cap contracts are agreements to purchase defined quantities of aircraft fuel from a third party at a price not to exceed a defined price, thereby limiting our exposure to increases in the price of aircraft fuel. As of September 30, 2004, we had fuel contracts to purchase approximately 60.1 percent and 13.2 percent of our fuel needs through the end of December 2004 and 2005, respectively. We expect the average price of fuel under these fuel contracts to be no higher than $0.92 and $1.07 per gallon, including delivery to our operations hub in Atlanta and other locations, through the end of December 2004 and 2005, respectively.

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Note 5 - Commitments and Contingencies

Aircraft Purchase Commitments
Our future commitments primarily consist of obligations to acquire Boeing 737-700 (B737) and Boeing 717-200 (B717) aircraft. During the third quarter of 2004, we exercised options for the purchase of two B737 aircraft to be delivered in 2006. The following table details our firm orders and options for aircraft acquisitions as of September 30, 2004.

We have lease-financing commitments from Boeing Capital Loan Corporation or affiliates thereof for our 10 B717 aircraft remaining on firm order, and pursuant to our agreement with an aircraft leasing company we have lease-financing commitments for 19 of the remaining B737 deliveries. Additionally, we have financing commitments in place for the delivery of four B737 deliveries (see Note 9 to the unaudited Condensed Consolidated Financial Statements for more information on B737 aircraft financing) and have obtained financing commitments from an affiliate of The Boeing Company (Boeing) for up to 80 percent of the purchase price for 16 of the B737 firm orders in the event we are unable to secure financing from the financial markets on acceptable terms. There can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financing commitments.

During the first nine months of 2004, in connection with Airways' agreement with Boeing, Airways was refunded $7.7 million in previously paid aircraft deposits. We paid $36.7 million to Boeing in aircraft deposits for the acquisition of B717 and B737 aircraft.

During 2003, we entered into an agreement with an air carrier to provide jet service between pre-determined pairs of cities. The air carrier provides its own aircraft, crew, maintenance, and hull and liability insurance in exchange for a fixed block hour rate for flights operated on our behalf. These payments are recorded on a net basis as a reduction of passenger revenues. We have agreed to phase out this jet service by the end of November 2004.

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and unpaid interest. The holders of the notes may require Holdings to repurchase the notes on July 1, 2010, 2013 and 2018 at a repurchase price of 100 percent plus any accrued and unpaid interest. Holdings filed a shelf registration statement with the U.S. Securities and Exchange Commission covering the resale of the notes and the underlying common stock which became effective in October 2003.

In June 2003, Boeing Capital Corporation (Boeing Capital) exercised its remaining conversion rights related to Holdings' 7.75% Series B Senior Convertible Notes. The conversion resulted in a decrease in Holdings' overall debt of $5.5 million. In connection with the conversion, Holdings issued approximately 1.0 million shares of its common stock to Boeing Capital. In accordance with accounting principles generally accepted in the United States, Holdings expensed $1.6 million of debt discount and $0.2 million of debt issuance costs that had not been amortized. These amounts are shown on the accompanying unaudited Condensed Consolidated Statements of Operations as "Other (Income) Expense - Convertible debt discount amortization."

In August 2003, Holdings redeemed the remaining balance of $10.3 million of its 13% Series A Senior Secured Notes.

In August 2004, in conjunction with the acquisition of three B737 aircraft, Airways executed the first of three equipment notes for $29.0 million due in August 2016. The note bears interest (and the two notes to be entered into will bear interest) at a floating rate equal to the six-month US Dollar LIBOR rate in effect at the commencement of each semi-annual period plus 1.5% and is payable semi-annually on February 16 and August 16. The note is (and the two notes to be entered into will be) secured by a first mortgage on the purchased aircraft. Airways will pay a commitment fee equal to 0.25% per annum of the undrawn portion of the loan amount.

In September 2004, in conjunction with the acquisition of three additional B737 aircraft, Airways executed the first of three equipment notes for $28.5 million due in September 2016. The note bears interest (and the two notes to be entered into will bear interest) at a floating rate equal to the six-month US Dollar LIBOR rate in effect at the commencement of each semi-annual period plus 1.5% and is payable March 17 and September 17. The note is (and the two notes to be entered into will be) secured by a first mortgage on the purchased aircraft and is unconditionally guaranteed by Airways. Airways will pay a commitment fee equal to 0.65% per annum of the undrawn portion of the loan amount.

Note 10 - Indemnifications and Guarantees

We are party to many routine contracts under which we indemnify third parties for various risks. We have not accrued any liability for any of these indemnities, as the likelihood of payment in each case is considered remote. These indemnities consist of the following:

Certain of Airways' debt agreements related to certain aircraft-secured notes payable through 2014 and 2017 contain provisions whereby we have agreed to indemnify certain holders of certificates evidencing the debt associated with such notes, as necessary, to compensate them for any costs incurred by, or any reduction in receivables due to such certificate holders resulting from broadly defined regulatory changes that impose or modify any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of such certificate holders. Additionally, if it becomes unlawful for such certificate holders to make or maintain the investment or credit evidenced by the certificates, we have agreed to pay such certificate holders an amount necessary to cause the interest rate with respect to the certificates to be a rate per annum equal to 4.88% over the rate specified by such certificate holders as the cost to them of obtaining funds i n United States dollars in an amount equal to the pool balance of the certificates. The maximum potential payment under these indemnities cannot be determined.

In our aircraft financing agreements, we typically indemnify the financing parties, trustees acting on their behalf and other related parties against liabilities that arise from the manufacture, design, ownership, financing, use, operation and maintenance of the aircraft and for tort liability, whether or not these liabilities arise out of or relate to the negligence of these indemnified parties, except for their gross negligence or willful misconduct. We believe we are

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covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to aircraft we operate. Additionally, if there is a change in the law which results in the imposition of any reserve, capital adequacy, special deposit, or similar requirement the result of which is to increase the cost to the lender, we will pay the lender the additional amount necessary to compensate the lender for the actual cost increase.

We expect that we would be covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to aircraft we operate.

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

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

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

Note 11 - Subsequent Events

On October 24, 2004, Airways agreed, subject to certain conditions, to assume the Chicago Midway Airport gate leases and acquire certain other related assets including takeoff and landing slots at New York's LaGuardia and Washington's Ronald Reagan National airports of ATA Airlines, Inc., a unit of ATA Holdings Corp. (ATA). ATA and certain of its subsidiaries have filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana. The purchase price of this transaction is approximately $90.0 million payable in cash upon the approval and transfer of the agreed upon gate leases and slots. We may use working capital and/or current cash on hand to complete the funding of this transaction. We may also raise capital through the issuance of new equity or debt, or a combination thereof. There can be no assurance we will obtain, if necessary, the financing sufficient to fund this transaction. In addition, the agreement must receive various approvals, including approval of the Bankruptcy Court in ATA's Chapter 11 proceeding.

During October 2004, we modified the delivery dates for two B717 aircraft previously scheduled for delivery in 2005. The two aircraft are now scheduled for delivery in 2006.

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RESULTS OF OPERATIONS

The tables below set forth selected financial and operating data for the indicated periods: