S-1/A 1 a2181854zs-1a.htm S-1/A
QuickLinks -- Click here to rapidly navigate through this document

As filed with the Securities and Exchange Commission on January 9, 2008

Registration Statement No. 333-146958



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


Global Aero Logistics Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  4512
(Primary Standard Industrial
Classification Code Number)
  No. 20-4222196
(I.R.S. Employer
Identification Number)

HLH Building
101 World Drive
Peachtree City, Georgia 30269
(770) 632-8000

(Address, including ZIP Code, and telephone number, including area code, of registrant's principal executive offices)


Mark M. McMillin, Esq.
Senior Vice President, General Counsel and Secretary
Global Aero Logistics Inc.
HLH Building
101 World Drive
Peachtree City, Georgia 30269
(770) 632-8215

(Name, address, including ZIP Code, and telephone number, including area code, of agent for service)


Copy to:
Ronald Cami, Esq.
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
(212) 474-1000

        Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

CALCULATION OF REGISTRATION FEE


Title of Each Class of
Securities to be Registered

  Proposed Maximum
Offering Price
Per Unit

  Proposed Maximum
Aggregate
Offering Price(1)(2)

  Amount of
Registration
Fee


Subscription rights   $14.00   $50,000,000   (3)

Shares of Class A common stock issuable upon exercise of subscription rights   $14.00   $50,000,000   $1535.00(4)

(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o).

(2)
The maximum aggregate offering price is based on the $14.00 offering price per share. There is no market price for the Class A common stock.

(3)
Pursuant to Rule 457(g), no separate registration fee is required for the subscription rights, since they are being registered in the same registration statement as the Class A common stock underlying the subscription rights.

(4)
Previously paid.

        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 9, 2008

PRELIMINARY PROSPECTUS

                 Shares

GRAPHIC

Global Aero Logistics Inc.

Class A Common Stock, par value $0.0001 per Share
Rights to Purchase up to                        Shares of Common Stock
at $14.00 per Share


        All holders of our Class A common stock as of 5:00 p.m., New York City time, on                        , 2008, are being granted rights to purchase additional shares of our common stock from our largest stockholder, MatlinPatterson ATA Holdings LLC.

        Nontransferable subscription certificates are being delivered to you along with this prospectus.

        Each right entitles you to purchase one share of our common stock for a subscription price of $14.00 per share. Each shareholder is being granted            rights for each share of our common stock held as of 5:00 p.m., New York City time, on                        , 2008, but fractional rights held by a shareholder after aggregating all rights to which the shareholder is entitled will be rounded up to the nearest whole number. You will be able to exercise your rights until 5:00 p.m., New York City time, on                        , 2008, unless we extend the expiration date to a date not later than            , 2008.


        Global Aero Logistics Inc. intends to have its common stock quoted on the Pink Sheets under the symbol "            ."

        The shares are being offered directly by the selling stockholder, MatlinPatterson. Global will not receive any of the proceeds from the sale of the shares being sold, and all proceeds from this offering will be paid to MatlinPatterson.

        You should consider carefully the risks that we have described in "Risk Factors" beginning on page 18 before deciding whether to invest in our common stock.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


The date of this prospectus is                        , 2008



TABLE OF CONTENTS

 
  Page
Prospectus Summary   1
Summary Consolidated Historical Financial and Operating Data of Global   12
Summary Consolidated Historical Financial and Operating Data of World Air Holdings   15
Summary Unaudited Pro Forma Combined Statements of Operations Information   17
Risk Factors   18
Forward-Looking Statements   39
Industry and Market Data   40
Use of Proceeds   40
Dividend Policy   40
Dilution   40
Capitalization   41
Unaudited Pro Forma Combined Statements of Operations   42
Selected Consolidated Historical Financial and Operating Data of Global   50
Selected Consolidated Historical Financial and Operating Data of World Air Holdings   54
Management's Discussion and Analysis of Financial Condition and Results of Operations of Global   56
Management's Discussion and Analysis of Financial Condition and Results of Operations of World Air Holdings   83
Business   99
Management   111
Security Ownership   136
Certain Relationships   138
Description of Certain Indebtedness   140
The Rights Offering   144
Plan of Distribution   150
Description of Capital Stock   151
Shares Eligible for Future Sale   155
Material U.S. Federal Income Tax Consequences   156
Legal Matters   157
Experts   157
Where You Can Find More Information   158
Index to Consolidated Financial Statements   F-1

i



PROSPECTUS SUMMARY

        The following summary highlights selected information contained elsewhere in this prospectus. It does not contain all the information that may be important to you. You should read this entire prospectus carefully, particularly the "Risk Factors" section and the financial statements and related notes to those financial statements contained in this prospectus. As used in this prospectus, the terms "we," "us," "Global," "our Company" and "the Company" refer to Global Aero Logistics Inc. and its subsidiaries on a consolidated basis as of the date hereof unless the context requires otherwise. As used in this prospectus, the term "common stock" refers to our Class A common stock, par value $0.0001 per share, which is the only class of common stock issued and authorized under our Certificate of Incorporation. As used in this prospectus, the term "MatlinPatterson" refers to MatlinPatterson ATA Holdings LLC, a Delaware limited liability company, our principal shareholder and an affiliate of MatlinPatterson Global Advisers LLC.

        Global and World Air Holdings, Inc. ("World Air Holdings") consummated their merger (as described below) on August 14, 2007. Pro forma combined information in this prospectus gives pro forma effect to, among other things, the merger and the financing (as described below) as if they had occurred on January 1, 2006, for statement of operations purposes. See "Summary Unaudited Pro Forma Combined Statements of Operations Information" and "Unaudited Pro Forma Combined Statements of Operations" and the related notes thereto.

Our company

        We are a global provider of diversified contract airlift services, offering our customers a range of aircraft types, configurations, payloads and capabilities. Our contracted flying can range from a single trip to contracts that span more than a year. We offer military and commercial charter services through our three operating airlines: ATA Airlines, Inc. ("ATA"), North American Airlines, Inc. ("North American"), and World Airways, Inc. ("World"). Our fleet of 55 aircraft consists of a combination of passenger and freighter aircraft that support our three business lines. Our business lines—Military/Commercial Charter, ACMI and scheduled service—are diversified by service offering, customer base and geography, which we believe reduces our vulnerability to economic downturns.

    Our Military/Commercial Charter business is the largest transporter of U.S. military personnel and their families to and from overseas deployments, during times of conflict as well as peacetime. To a lesser extent, we provide customers of our Military/Commercial Charter business with cargo capacity. The U.S. Department of Defense relies almost exclusively on the commercial sector for its passenger transportation needs, and in 2006 we earned approximately 73% of the $1.2 billion in spending for international troop movement.

    Our ACMI business, which refers to arrangements in which our customers lease our aircraft at a rate based on aircraft, crew, maintenance and insurance costs, services primarily the global air cargo market. The air cargo market has experienced strong growth in the past ten years and is projected to grow at a rate of more than 6% annually over the next 20 years as international trade continues to expand.

    Our scheduled service business is primarily designed around ATA's codeshare arrangement with Southwest Airlines ("Southwest"). A codeshare agreement is an agreement between airlines which allows an airline to sell seats on another airline's flights. Our codeshare agreement enables us to connect Southwest customers to destinations that Southwest does not serve, primarily Hawaii, while also allowing us to sell ATA-only itineraries on southwest.com. We also continue to explore strategic opportunities for our scheduled service businesses, including network restructuring, international expansion, business combinations and partial or complete divestitures.

1


        The following chart sets forth our total revenues by business line for the year ended December 31, 2006, on a pro forma basis:


(dollars in billions)

         GRAPHIC

Total Revenues = $1.6 billion

        For the year ended December 31, 2006, after giving pro forma effect to the merger, we generated revenues of $1.6 billion.

Military/Commercial Charter

        We have been active in the business of transporting military service personnel and their families to and from overseas destinations since 1952. The U.S. Department of Defense relies almost exclusively on the commercial sector for its passenger transportation needs, and in 2006, we earned approximately 73% of the $1.2 billion in spending for international troop movement. We contract with the U.S. Department of Defense's Air Mobility Command (the "AMC"), participating primarily in their International Program. To a lesser extent, we provide AMC cargo capacity mainly to move military supplies overseas. We are currently operating two McDonnell Douglas DC-10-30 wide-body freighters to service this market.

        Our military charter service contracts reimburse us based on the average costs of all participating airlines, plus a fixed operating margin. Because our contracts provide for a pass-through of actual fuel costs to the military, this business is insulated from fuel price volatility.

        New entrants into the AMC's International Program must typically overcome significant obstacles. Participants in the AMC's International Program must (1) be U.S. registered airlines, (2) demonstrate twelve continuous months of comparable flying as will be utilized in AMC charters, (3) have the fleet capability to fly long-range, over-water and heavy payload flights, (4) have labor contracts that allow for flexibility to conduct extended international missions with relatively short notice as to specific routings and (5) be admitted as a member of a participating AMC team or be otherwise entitled to fly international missions under the AMC program. These requirements have historically precluded international carriers, as well as most low cost carriers and major domestic airlines from participating in these programs.

        We also sell charter services to other governmental and commercial customers using our military charter fleet, primarily during off-peak periods in our military service. Our recent charter air travel customers include tour operators, professional and collegiate sports teams and organizations and

2



corporations. Typically, we enter into charter agreements that limit our exposure to variability in the price of fuel.

        For the year ended December 31, 2006 and the nine months ended September 30, 2007, our Military/Commercial Charter business generated pro forma revenues of $941 million and $778 million, respectively, which represented approximately 62% and 62% of our total pro forma revenues, respectively. For the year ended December 31, 2006, our AMC business represented approximately 56% of our total pro forma revenue.

ACMI

        We participate in the global air cargo market primarily through the operation of freighter aircraft under ACMI contracts and believe we are well-positioned to capitalize on the growing ACMI cargo market. ACMI, or wet lease, contracts offer our airline customers the flexibility to supplement capacity in existing markets, and/or to serve increased demand in seasonal markets, all without committing dedicated aircraft for extended periods. The customer leases aircraft from us at a revenue rate based on aircraft, crew, maintenance and insurance costs, and is responsible for paying for all other operating expenses, including fuel.

        We currently operate six McDonnell Douglas MD-11 wide-body freighters and up to two McDonnell Douglas DC-10-30 wide-body freighters to service this growing market and have entered into long-term lease agreements for two Boeing 747-400 freighter aircraft delivering in mid-2008. Currently, we have ACMI cargo contracts with Lufthansa, DHL, and other carriers in American, European, and Asian markets, and the Persian Gulf.

        We also provide ACMI passenger services with aircraft that are well-suited to provide supplemental capacity to other airlines in times of increased demand and/or operational challenges. We have provided ACMI passenger services for carriers such as Air Jamaica, Aer Lingus and JetBlue over the last twelve months. We also operate a specifically configured MD-11 aircraft on behalf of Sonair Servico Aero, SARL, a subsidiary of the Angolan national oil company, transporting oil workers and executives within the U.S.-Africa Energy Association, a not-for-profit corporation, three times a week between Houston and Luanda, Angola.

        For the year ended December 31, 2006 and in the nine months ended September 30, 2007, our ACMI business generated pro forma revenues of $165 million and $122 million, respectively, which represented approximately 10% and 10% of our total pro forma revenues, respectively.

Scheduled service

        We offer scheduled passenger service through ATA and North American. ATA designs its scheduled service operations around a codeshare agreement with Southwest. We operate more than 45 daily scheduled service flights from various western U.S. airports to Hawaii and over certain routes on the U.S. mainland.

        A significant portion of our passengers purchase ATA tickets through Southwest distribution channels or come to ATA on connecting flights through Southwest focus cities. Most of our domestic flights are available for purchase on southwest.com.

        Our North American subsidiary provides international non-stop scheduled flights to Georgetown, Guyana; Accra, Ghana; and Lagos, Nigeria.

        For the year ended December 31, 2006 and in the nine months ended September 30, 2007, our scheduled service business generated pro forma revenues of $448 million and $353 million, respectively, which represented approximately 28% and 28% of our total pro forma revenues, respectively. We also

3



continue to explore strategic opportunities for our scheduled service businesses including network restructuring, international expansion, business combinations and partial or complete divestitures.

Our Aircraft

        Our fleet of 55 aircraft consists of a combination of passenger and freighter planes that support our three businesses. We lease all of our aircraft, except as indicated below:

 
  Number of Each Aircraft Type
   
Aircraft Type

  ATA
  World
  North
American

  Total
  Average Age
(in years)

Boeing 737-300   1       1   17
Boeing 737-800   12       12   6
Boeing 757-200   6     5   11   9
Boeing 757-300   4       4   5
Boeing 767-300       5   5   11
Lockheed L-1011-500   3 *     3   25
McDonnell Douglas MD-11     8     8   14
McDonnell Douglas DC-10-30   2   1 *   3   30
McDonnell Douglas DC-10-30 freighter     2     2   32
McDonnell Douglas MD-11 freighter     6     6   13
   
 
 
 
 
    28   17   10   55    

*
Owned aircraft.

Competitive strengths

        

    Diversified revenue base—Each of our business lines—Military/Commercial Charter, ACMI and scheduled service—relies on a different customer base with diverse underlying performance drivers that we believe reduce our exposure to downturns in any single market. Our Military Charter service is primarily dependent upon U.S. military spending for transporting troops and cargo overseas, which in turn is partially driven by current geo-political events affecting the United States. ACMI is primarily dependent on international freight transportation, which in turn is driven by global trade. Scheduled service is primarily dependent upon the general health of the travel and tourism industry and the level of

    corporate spending on business travel, which in turn are driven by the Gross Domestic Product ("GDP") growth.

    Unique business model—We believe that our unique business model cushions our operating and financial results from many of the economic and other factors that affect other airlines, and distinguishes us from our competitors. A significant percentage of our revenues are derived from contracts that are payable regardless of the number of passengers flown and freight carried. As a result, our operating and financial results are not disproportionately affected by factors such as changes in consumer preferences, perceptions, spending patterns, or demographic trends that can result in a change in the number of passengers. Additionally, a significant portion of our business is generated from customer contracts designed to reimburse us for actual fuel purchased and used. Therefore, we have reduced exposure to fluctuations in the price of jet fuel, which has increased dramatically since December 31, 2001. Finally, our military and many of our commercial charter and ACMI contracts are designed with a cost-plus pricing structure, and new entrants into the AMC's International Program must typically overcome significant obstacles. We believe interest from potential new competitors is limited as a result of AMC aircraft payload and range requirements and the inflexibility of U.S. commercial airline labor work rules.

    Largest provider of military passenger transport services—According to publicly available data published by the AMC, collectively, our airline subsidiaries are the largest provider of military

4


      passenger transport services to the AMC. Through our teaming arrangements, we have the ability to capture approximately three-quarters of the AMC expenditures for the current government fiscal year. The U.S. Department of Defense continues to rely almost exclusively on the commercial sector to meet its passenger transportation needs.

    Well-positioned to benefit from increase in international trade—The air cargo market has experienced tremendous growth due to continued global economic expansion. The market is expected to more than triple over the next 20 years, growing at a rate of more than 6% annually. We believe our wide-body fleet is well positioned to capture this market, particularly on transatlantic, North-South America, transpacific and intra-Asia cargo routes. World currently operates six McDonnell Douglas MD-11 and two McDonnell Douglas DC-10-30 wide-body freighter aircraft and has entered into long-term lease agreements for two Boeing 747-400 freighter aircraft, which we believe are attractive aircraft in the current cargo market due to their superior capabilities and limited availability.

    Proven management team—We believe that our strong management team has enabled us and will continue to allow us to effectively execute our growth strategies. Our President and Chief Executive Officer, Subodh Karnik, has 18 years of airline experience that includes broad leadership experience at three major carriers, including Delta Air Lines. The chief operating officers of our three airline subsidiaries have an aggregate of over 50 years of aviation experience. Our executive team has eight executives with prior CEO, CFO and COO-level experience in the airline industry.

Business strategy

        Our strategy is to offer different product lines to a range of customers in order to diversify our revenue base and reduce risk. The key elements of our strategy are:

    Optimize the fleet to support our diverse product portfolio—We will continue to optimize our fleet to meet the increasing demand in aircraft transportation for the markets we serve. We are expanding our fleet to include seven McDonnell Douglas DC-10-30 passenger wide-body aircraft and have entered into long-term lease agreements for two Boeing 747-400 freighter aircraft. Our fleet strategy is designed to enable us to maximize our share of the AMC market and capture more of the growing ACMI market. In addition, we will have the flexibility to shift aircraft among our business lines to effectively manage future changes in the markets we serve.

    Expand ACMI cargo business—We are focused on further diversifying our revenue base by continuing the expansion of our ACMI cargo business. We plan to increase our freighter fleet to include aircraft suited for Transpacific and intra-Asia routes, which are forecasted to be two of the fastest growing air cargo markets. We have entered into long-term lease agreements for two Boeing 747-400 freighter aircraft.

    Selectively pursue strategic acquisitions and opportunities in our core business lines—We believe that there are significant opportunities for future growth through a select number of strategic acquisitions, particularly in our international AMC and ACMI cargo business. We regularly evaluate potential acquisition candidates, which we believe could fit our business strategy, which may or may not be material in size and scope. We intend to continue to apply a selective and disciplined acquisition strategy, which is focussed on improving our financial performance in the long-term, expanding the services we provide to existing customers and, in some cases, providing us with new customers, who further diversify our customer base. An important component of our strategy is to achieve substantial profit growth and shift our resources to focus on the expansion of our international AMC and ACMI cargo business and the continued integration of World. As such, we continue to evaluate selective and strategic opportunities in our scheduled

5


      service business at our airline entities-including significant restructuring of the network, international expansion, business combinations and partial or complete divestitures.

    Maintain efficient cost structure and extract synergies—Our contract airlift business model has required us to develop and maintain a competitive cost structure. In addition to having a fuel-efficient business model, we have reduced our fixed costs by outsourcing our maintenance, ground handling and reservation systems. We will continue to seek other opportunities to streamline our operations. As we complete the integration of the World Air Holdings acquisition, we plan to further reduce our costs through rationalization of back office and other functions and by leveraging the commonality of our fleets.

Industry overview

        According to data from the International Civil Aviation Organization ("ICAO"), the global airline industry reported revenues of more than $450 billion in 2006, representing approximately 8% of the GDP. The state of the airline industry continues to improve both financially and operationally after three of the worst years in its history from 2001 through 2003. Since 2002, the global economy has expanded rapidly, driving sustained growth in worldwide travel demand. As a result of positive economic trends and recent recovery, the global airlines are set to achieve operating profits of almost $16 billion in 2007 and approximately $21 billion in 2008.

        Similar to the recent resurgence in global airline activity, years of progress in reducing operating costs within U.S. passenger and cargo airlines were finally matched by a strong revenue environment. According to the Air Transport Association of America, U.S. airline revenues increased by approximately 8% between 2005 and 2006 to approximately $164 billion, with load factors steadily increasing in the last five years. At the same time, operating profits increased to $7.5 billion in 2006 from an operating profit of approximately $427 million in 2005.

        The charter, or non-scheduled, business segment of the airline industry in the U.S. is a significant source of revenue, representing between $4.3 billion and $5.6 billion in revenue during the years 1999 through 2006. Of these results, approximately $1.6 billion to a peak of $2.5 billion in 2005 represented passenger charters, with the balance earned from cargo charters.

        The air cargo industry generally consists of airline operators that have dedicated fleets of freighter aircraft as well as airlines that offer cargo capacity in the belly compartments of their aircraft flown on passenger missions. North America is the largest air cargo market in the world, carrying over 7.2 billion metric tons in 2006, according to the International Air Transport Association. The greatest areas of growth are on routes between North America and Asia, between Europe and Asia and intra-Asia, which are benefiting from the rapid economic and trade growth in the Asia Pacific region. ACMI is a method of pricing wet-lease charters within the air cargo industry. ACMI operators play a key role in the cargo market by supplying additional capacity in existing markets and providing services on a short-term basis when demand is uncertain and/or highly seasonal.

Our recent consolidation

    The merger

        On August 14, 2007, Global acquired World Air Holdings for an aggregate purchase price of approximately $313 million or $12.50 per share for each outstanding share of common stock of World Air Holdings and $9.9 million of direct acquisition costs. Pursuant to an agreement and plan of merger dated April 5, 2007 between Global, Hugo Acquisition Corp. ("Hugo"), an indirect wholly owned subsidiary of Global and World Air Holdings, Hugo was merged with and into World Air Holdings with World Air Holdings as the surviving entity (the "merger"). As a result of the merger, the combined company operates three independent airlines under one umbrella: ATA, North American and World.

6


    The financing

        In order to fund the acquisition of World Air Holdings, on August 14, 2007, Global's subsidiary, New ATA Acquisition Inc. ("ATA Acquisition") entered into a $340.0 million senior secured payment-in-kind ("PIK") term loan agreement with the lenders party thereto (which are JPMorgan Chase Bank, N.A. ("JPMorgan") and Jefferies Finance LLC ("Jefferies") as of the date of this prospectus), Jefferies as documentation agent, and JPMorgan as administrative agent (the "JPMorgan Term Loan"). See "Description of Certain Indebtedness—JPMorgan Term Loan."

        JPMorgan and Jefferies also, respectively, received 1,808,986 and 452,247 immediately exercisable warrants to purchase Global's common stock at an exercise price of $0.01 per share, (the "Warrants"). On October 23, 2007, MatlinPatterson purchased the Warrants held by JPMorgan and on that date, MatlinPatterson exercised these Warrants, resulting in MatlinPatterson owning 1,808,986 shares of Global's common stock, in addition to the 7,500,000 shares of common stock that MatlinPatterson owned prior to this exercise. The Warrants acquired by Jefferies continue to be owned by Jefferies and remain unexercised.

        In addition, Global issued 11,507,142 shares of Series A preferred convertible stock (the "Series A preferred stock") to MatlinPatterson for an aggregate purchase price of $161.1 million or $14.00 per share. The Series A preferred stock has an annual cumulative dividend rate of 16.0% payable in common stock upon conversion but in no event will such dividend be equal to a value less than $8.0 million. In connection with the completion of this rights offering, MatlinPatterson will convert its Series A preferred stock into common stock.

        We refer to the borrowing of $340.0 million under the JPMorgan Term Loan, the issuance of the Warrants and the issuance of the Series A preferred stock collectively as the "financing". In connection with funding the acquisition of World Air Holdings, we used the proceeds from, or exchanged for securities issued in, the financing to repay or extinguish $135.9 million in previously outstanding indebtedness, consisting of (1) the exchange for Series A preferred stock of $54.3 million owed to MatlinPatterson in respect of borrowings under a $24.2 million term loan and a $28.0 million bridge loan and (2) the repayment of $81.6 million owed to the Air Transportation Stabilization Board ("ATSB"), International Lease Finance Corporation, Citibank, Boeing Capital Corporation and GECAS ("ATSB loan"). The proceeds of this repaid or extinguished indebtedness were previously used for general corporate purposes.

7



Summary of the Rights Offering

        The following material is qualified in its entirety by the information appearing elsewhere in this prospectus, including the section entitled "The Rights Offering."


Issuer

 

Global Aero Logistics Inc.

Background

 

As part of the financing in connection with the merger, Global obtained additional equity by issuing 11,507,142 shares of Series A preferred stock to MatlinPatterson at a purchase price of $14.00 per share. The Series A preferred stock will be converted into common stock in connection with this offering and a portion of the converted shares will be offered to existing shareholders in connection with the offering.

Rights

 

Each holder of common stock (other than MatlinPatterson) will be granted rights for each share of common stock held as of 5:00 p.m., New York City time, on                        2008, the record date. The number of rights granted to each holder of common stock will be rounded up to the nearest whole number. An aggregate of up to        rights will be granted pursuant to the rights offering. Each right will be exercisable for one share of common stock. An aggregate of up to         shares of common stock will be sold upon exercise of the rights. Any shares of common stock which are not purchased pursuant to the rights offering will be held by MatlinPatterson.

Subscription Privilege

 

Holders of rights are entitled to purchase for the subscription price one share of common stock for each right.

Oversubscription Right

 

Each holder of common stock that exercises all of its rights offered pursuant to this rights offering will also have the right to purchase a portion of the shares remaining after giving effect to the aggregate amount initially subscribed for in this offering. These additional shares will be sold at the subscription price. Stockholders wishing to purchase additional shares must complete an additional subscription form and deliver it, along with payment in full for the number of remaining shares for which such stockholder elects to subscribe to our subscription agent with its completed subscription agreement prior to the offering expiration date.

 

 

The number of extra shares that each holder will have the right to purchase will be equal to the product of (x) the number of shares to be issued
less the total number of shares that are initially subscribed for by each holder times (y) a fraction the numerator of which will be the aggregate number of shares of common stock on the record date owned by all offerees hereunder and the denominator of which will be the total number of outstanding shares of common stock on the record date times (z) a fraction, the numerator of which will be the number of shares of common stock on the record date owned by such purchaser and the denominator of which will
     

8



 

 

be the total number of shares of common stock on the record date owned by all offerees that elected to exercise all of their rights in this rights offering and MatlinPatterson.

Subscription Price

 

$14.00 in cash per share of common stock subscribed for. This amount is payable by personal check, certified check, cashiers check or wire transfer. As described in greater detail under "The Rights Offering", this subscription price was established as part of the process by which we sold the Series A preferred stock to MatlinPatterson on August 14, 2007, the proceeds of which were used in part to complete the acquisition of World Air Holdings. An independent investment bank issued an opinion on August 14, 2007, indicating that the price paid by MatlinPatterson for the Series A Preferred Stock was fair to our stockholders. This price of $14.00 per share is the same price paid by MatlinPatterson for the Series A preferred stock, as negotiated on our behalf by an independent special committee of our board.

Shares of Common Stock outstanding after Rights Offering

 

24,071,816 based on the number of shares outstanding on September 30, 2007 and giving pro forma effect to the conversion of the Series A preferred stock (but without giving effect to any payment of dividends in respect of the preferred stock in the form of accretion) and the purchase by MatlinPatterson of the 1,808,986 Warrants held by JPMorgan and their subsequent exercise into an equal number of common stock.

Transferability of Rights

 

Except in the limited circumstances described under "The Rights Offering—Transferability of Rights," the rights are not transferable and may be exercised only by the persons to whom they are granted. Any attempt to transfer rights will render them null and void. The subsequent transfer after the record date of shares of common stock for which rights were granted will not have any effect on the selling stockholder's subscription privilege in respect of any such rights.

Record Date

 

As of 5:00 p.m., New York City time, on                        , 2008.

Expiration Date

 

As of 5:00 p.m., New York City time, on                        , 2008. The Expiration Date may be extended to a date not later than                        , 2008. The Rights Offering will be open for a period of not longer than 30 days.

Procedure to Exercise Rights

 

Subscription privileges may be exercised by properly completing a subscription certificate and forwarding such subscription certificate, with payment of the subscription price for each share subscribed for, to the subscription agent at or prior to 5:00 p.m., New York City time, on the Expiration Date. Uncertified personal checks used to pay the subscription price must be received by the subscription agent at least five business days before the Expiration Date to allow sufficient time for the check to clear. Accordingly, rights holders who wish to pay the subscription price by means of uncertified personal check are urged to consider, in the alternative, payment by means of certified check, bank draft or money order. If the mail is used to forward subscription certificates, it is recommended that insured, registered mail be used. See "The Rights Offering—Procedure to Exercise Rights." Once you exercise your rights, you cannot revoke your exercise, even if there is a decline in the price of our common stock. See "Risk Factors—Risks Relating to the Rights Offering—Once you exercise your rights, you may not revoke your exercise."
     

9



Persons Holding Shares, or
Wishing to Exercise Rights, Through Others

 

Persons holding shares of common stock, to whom rights are granted with respect thereto, through a broker, dealer, trustee, depository for securities, custodian bank or other nominee, should contact the appropriate institution or nominee and request it to effect the transaction for them. See "The Rights Offering—Procedure to Exercise Rights."

Delivery of Common Stock

 

As soon as practicable after the completion of the offering, shares of common stock subscribed for pursuant to exercise of the rights will be delivered to subscribers. Such shares will be issued in the same form, certificated or book-entry, as the shares of common stock held by the subscriber exercising rights for such shares.

Federal Income Tax Consequences

 

The granting of rights to you pursuant to this rights offering should not be taxable to you, and we will take this position for tax reporting purposes. However, the tax consequences to you of the rights offering are unclear, and it is possible that the IRS would take the position that you would be subject to tax upon receipt of the rights, whether or not you exercise the rights.

Use of Proceeds

 

MatlinPatterson will receive all proceeds from the sale of the securities under this offering.

Subscription Agent

 

Computershare Trust Company, N.A.

Information Agent

 

Georgeson Inc. will act as our information agent to respond to any questions that you may have regarding the mechanics of exercising your subscription rights for this offering. All questions or requests for assistance concerning the method of exercising rights or requests for additional copies of this prospectus or the ancillary documents should be directed to the information agent at the address and telephone numbers set forth below:

 

 

Georgeson
199 Water St., 26th Floor
New York, NY 10038

 

 

Shareholders should call (toll-free): (866) 733-9485. Banks and brokers should call (212) 440-9800.
     

10



Risk Factors

 

Exercising subscription rights for shares of our common stock involves a high degree of risk. See the "Risk Factors" section of this prospectus for a description of certain of the risks you should carefully consider before exercising your rights.

        Our principal executive office is located at HLH Building, 101 World Drive, Peachtree City, Georgia 30269 and our telephone number at this address is (770) 632-8000.

11



SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND
OPERATING DATA OF GLOBAL

        The following table sets forth Global's summary consolidated historical financial and operating data for each of the periods indicated. The summary historical financial data for the dates and periods ended prior to March 1, 2006 were derived from the audited consolidated financial statements of ATA's former parent, ATA Holdings Corp., which we sometimes refer to as our "predecessor." The statement of operations data for the years ended December 31, 2004 and 2005, for the two months ended February 28, 2006, for the ten months ended December 31, 2006 and the balance sheet data as of December 31, 2004, 2005 and 2006, were derived from Global's or its predecessor's audited consolidated financial statements included elsewhere in this prospectus. The statement of operations data for the nine month period ended September 30, 2006 was derived from Global's unaudited consolidated financial statements for the seven month period ended September 30, 2006 and from Global's predecessor's audited consolidated financial statements for the two months ended February 28, 2006 included elsewhere in this prospectus. The statement of operations data for the nine month period ended September 30, 2007 and the balance sheet data as of September 30, 2007, were derived from Global's unaudited interim financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited interim financial statements for Global and its predecessor included in this prospectus include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of that information for such unaudited interim periods. The financial information presented for the interim periods has been prepared in a manner consistent with the accounting policies of Global described elsewhere in this prospectus, and should be read in conjunction therewith. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period. The summary historical financial information should be read in conjunction with the sections entitled "Summary Unaudited Pro Forma Combined Statements of Operations Information", "Use of Proceeds," "Capitalization," "Unaudited Pro Forma Combined Statements of Operations," "Selected Consolidated Historical Financial and Operating Data of Global," "Management's Discussion and Analysis of Financial Condition and Results of Operations of Global" and the consolidated financial statements of Global and its predecessor and the related notes included elsewhere in this prospectus.

        The comparability of Global's summary historical financial and operating data has been affected by its reorganization. As we discuss more fully in "Note 1—Fresh-Start Reporting" of the notes to Global's audited consolidated financial statements as of and for the ten months ended December 31, 2006, Global's predecessor and certain of its affiliates, including ATA, Global's principal operating subsidiary, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in October 2004. Global emerged from bankruptcy protection on February 28, 2006 with a new capital structure. Global has applied fresh-start accounting as of March 1, 2006 for its consolidated financial statements. As a result of the fresh-start change in the basis of accounting for Global's underlying assets and liabilities, Global's results of operations and cash flows are separated as pre-March 1, 2006 (predecessor) and post-February 28, 2006 (successor). Global includes as a reporting period of its 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 Global's assets and operations it effected through its reorganization. As a result of these changes, Global does not believe that its business operations or its operating results for periods prior to March 1, 2006 are comparable to its current business operations or its operating results since that date.

12


 
  Predecessor
  Global
  Predecessor
and Global

  Global
 
 
  Year Ended December 31,
  Two Months
Ended
February 28,

  Ten Months
Ended
December 31,

  Nine Months
Ended
September 30,

  Nine Months
Ended
September 30,

 
 
  2004(1)
  2005(1)
  2006(1)(2)
  2006(2)
  2006(1)(2)(3)
  2007
 
 
   
   
   
   
  (unaudited)

  (unaudited)

 
 
  (Dollars in thousands, except per share data)

 
Statement of Operations Data:                                      
Operating revenues:                                      
  Scheduled service   $ 1,099,944   $ 635,232   $ 53,527   $ 332,255   $ 294,398   $ 306,241  
  Charter     358,870     408,714     58,753     288,256     276,979     372,186  
  Other     73,757     48,355     2,771     16,551     15,069     15,072  
   
 
 
 
 
 
 
Total operating revenues     1,532,571     1,092,301     115,051     637,062     586,446     693,499  
   
 
 
 
 
 
 
Operating expenses:                                      
  Fuel and oil     368,273     322,094     37,086     202,613     186,075     227,929  
  Salaries, wages and benefits     422,430     281,791     36,066     150,929     145,441     153,885  
  Aircraft rentals     242,602     148,614     16,181     69,439     64,840     82,146  
  Flight costs     100,327     82,243     11,488     52,769     48,682     59,354  
  Handling, landing and navigation fees     119,963     89,453     8,077     48,553     43,730     55,069  
  Selling and marketing     111,041     66,050     7,624     36,452     34,674     38,187  
  Aircraft maintenance, materials and repairs     74,992     44,801     3,103     29,051     24,306     44,324  
  Depreciation and amortization     52,013     36,270     5,219     17,386     16,716     23,352  
  Asset impairments and aircraft retirements     7,887     403         13,476         4,844  
  Other     133,206     101,973     10,197     41,045     42,455     40,653  
   
 
 
 
 
 
 
Total operating expenses     1,632,734     1,173,692     135,041     661,713     606,919     729,743  
   
 
 
 
 
 
 
Operating loss     (100,163 )   (81,391 )   (19,990 )   (24,651 )   (20,473 )   (36,244 )
Other income (expenses):                                      
  Reorganization items, net     (638,479 )   (369,632 )   1,456,000         1,456,000      
  Interest income     2,283     2,467     397     6,154     4,552     6,959  
  Interest expense     (51,145 )   (6,235 )   (4,666 )   (18,231 )   (17,757 )   (23,333 )
  Loss on extinguishment of debt     (27,314 )                    
  Other     (911 )   (796 )   (233 )   266     (180 )   (820 )
   
 
 
 
 
 
 
Total other income (expenses)     (715,566 )   (374,196 )   1,451,498     (11,811 )   1,442,615     (17,194 )
   
 
 
 
 
 
 
Income (loss) before income taxes     (815,729 )   (455,587 )   1,431,508     (36,462 )   1,422,142     (53,438 )
Income taxes                         488  
   
 
 
 
 
 
 
Net income (loss)     (815,729 )   (455,587 )   1,431,508     (36,462 )   1,422,142     (53,926 )
Preferred stock dividends     (1,125 )                   (3,435 )
   
 
 
 
 
 
 
Income (loss) available to common stockholders(4)   $ (816,854 ) $ (455,587 ) $ 1,431,508   $ (36,462 ) $ 1,422,142   $ (57,361 )
   
 
 
 
 
 
 
Basic earnings per common share:                                      
  Weighted average shares outstanding                       10,752,688           10,755,358  
  Net loss per share                     $ (3.39 )       $ (5.33 )
Diluted earnings per common share:                                      
  Average shares outstanding                       10,752,688         $ 10,755,358  
  Net loss per share                     $ (3.39 )       $ (5.33 )

Financial and Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Cash flows provided by (used in):                                      
  Operating activities   $ (26,200 ) $ (67,010 ) $ (19,577 ) $ (34,847 ) $ (57,682 ) $ (25,456 )
  Reorganization activities     66,194     18,309     (6,014 )       (6,014 )    
  Investing activities     531     (18,731 )   (10,406 )   8,689     973     (318,755 )
  Financing activities     (61,517 )   6,997     (6,777 )   51,924     48,750     379,968  
Capital expenditures     (26,660 )   (22,884 )   (8,447 )   (27,570 )   (15,528 )   (28,335 )

Selected Consolidated Operating Statistics (Unaudited):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Revenue passengers carried (thousands)     11,653.4     5,868.1     449.0     2,519.8     2,274.4     2,387.9  
Revenue passenger miles (millions)     14,678.5     8,709.7     816.2     4,799.2     4,302.9     4,664.7  
Available seat miles (millions)     21,242.0     13,360.2     1,362.9     6,804.2     6,239.4     6,338.2  
Passenger load factor     69.1 %   65.2 %   59.9 %   70.5 %   69.00 %   73.60 %

13


 
  Predecessor
  Global
 
  As of December 31,
  As of December 31,
  As of September 30,
 
  2004
  2005
  2006
  2006(2)
  2007
 
   
   
   
  (unaudited)

 
  (Dollars in thousands)

   
   
Balance Sheet Data:                              
Cash and cash equivalents   $ 139,652   $ 79,217   $ 62,209   $ 65,244   $ 97,966
Property and equipment, net   $ 182,759   $ 101,267   $ 89,947   $ 83,551   $ 143,678
Total assets   $ 651,065   $ 389,450   $ 370,366   $ 411,785   $ 1,009,570
Total debt   $ 41,000   $ 54,600   $ 146,662   $ 147,190   $ 357,102
Liabilities subject to compromise(5)   $ 1,279,676   $ 1,475,447   $   $   $
Mandatorily redeemable preferred stock(6)   $   $   $   $   $
Convertible redeemable preferred stock   $   $   $   $   $ 158,644
Stockholders' equity (deficit)   $ (920,556 ) $ (1,376,143 ) $ 72,290   $ 98,785   $ 178,992

(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. See Note 1 to our predecessor's audited consolidated financial statements for more information.

(2)
As of February 28, 2006, the effective date of the plan of reorganization, we adopted fresh-start accounting for our financial statements. See Note 1 to our audited consolidated financial statements with respect to our fresh-start financial reporting. Because of the emergence from bankruptcy and adoption of fresh-start accounting, the historical financial data for Global is not comparable to that of our predecessor.

(3)
The statement of operations data for the nine month period ended September 30, 2006 was derived from Global's unaudited consolidated financial statements for the seven month period ended September 30, 2006 and from Global's predecessor's audited consolidated financial statements for the two months ended February 28, 2006.

(4)
Preferred stock dividends of $1.1 million were recorded in 2004. No preferred stock dividends were recorded in 2005 and for the ten months ended December 31, 2006. No common stock dividends were paid in any period presented.

(5)
Liabilities subject to compromise refers to liabilities to be accounted for under a plan of reorganization, including claims incurred prior to the petition date. These amounts result from known or potential claims to be resolved through the Chapter 11 process and such claims remain subject to future adjustments.

(6)
Mandatorily redeemable preferred stock of $50.0 million was outstanding as of December 31, 2003 and as of December 31, 2004 and December 31, 2005 was classified on the balance sheet as a liability subject to compromise.

14



SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND
OPERATING DATA OF WORLD AIR HOLDINGS

        The following tables set forth World Air Holdings' summary historical financial and operating data for the periods ended and at the dates indicated below. World Air Holdings' summary historical financial information for the fiscal years ended, and as of, 2004, 2005 and 2006 has been derived from World Air Holdings' audited annual financial statements included elsewhere in this prospectus. The summary historical financial information for the six month periods ended, and as of, June 30, 2006 and 2007 has been derived from World Air Holdings' unaudited interim financial statements included elsewhere in this prospectus, which, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of that information for such unaudited interim periods. The financial information presented for the interim periods has been prepared in a manner consistent with the accounting policies of World Air Holdings described elsewhere in this prospectus, and should be read in conjunction therewith. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period.

        The summary historical financial information should be read in conjunction with the sections entitled "Summary Unaudited Pro Forma Combined Statements of Operations Information," "Use of Proceeds," "Capitalization," "Unaudited Pro Forma Combined Statements of Operations," "Selected Consolidated Historical Financial and Operating Data of World Air Holdings," "Management's Discussion and Analysis of Financial Condition and Results of Operations of World Air Holdings" and the Consolidated Financial Statements of World Air Holdings and the related notes included elsewhere in this prospectus.

 
  Years Ended December 31,
  Six Months Ended June 30,
 
 
  2004
  2005(1)
  2006(2)
  2006
  2007
 
 
   
   
   
  (unaudited)

  (unaudited)

 
 
  (in thousands except per share data)

 
Statement of Operations Data:                                
  Operating revenues                                
    Flight operations   $ 501,698   $ 783,939   $ 824,098   $ 392,167   $ 452,180  
    Other     2,202     3,199     1,558     743     703  
   
 
 
 
 
 
      Total operating revenues     503,900     787,138     825,656     392,910     452,883  
   
 
 
 
 
 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Flight     157,147     218,498     233,951     115,370     137,023  
  Maintenance     76,004     113,769     147,241     66,875     65,045  
  Aircraft costs     77,243     109,562     121,114     59,950     64,781  
  Fuel     74,474     168,526     194,515     89,299     108,743  
  Flight operations subcontracted to other carriers     1,812     2,928     3,759     2,111     238  
  Commissions     23,352     36,265     38,050     18,352     23,703  
  Depreciation and amortization     5,283     6,286     7,514     3,310     3,688  
  Sales, general and administrative     48,302     72,588     80,292     41,145     42,650  
  Legal expense—California matter         2,100                  
   
 
 
 
 
 
    Total operating expenses     463,617     730,522     826,436     396,412     445,871  
   
 
 
 
 
 

Operating income/(loss)

 

 

40,283

 

 

56,616

 

 

(780

)

 

(3,502

)

 

7,012

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Interest expense     (5,139 )   (4,467 )   (3,657 )   (3,573 )   (27 )
  Interest income     584     1,173     1,655     767     800  
  Other, net     (1,696 )   (1,721 )   135     (314 )   (110 )
   
 
 
 
 
 
    Total other income (expense)     (6,251 )   (5,015 )   (1,867 )   (3,120 )   663  
   
 
 
 
 
 

Earnings/(loss) before income tax expense

 

 

34,032

 

 

51,601

 

 

(2,647

)

 

(6,622

)

 

7,675

 
   
 
 
 
 
 
Income tax expense/(benefit)     8,445     19,973     (355 )   (2,685 )   3,256  

 

 



 



 



 



 



 
  Net earnings/(loss)   $ 25,587   $ 31,628   $ (2,292 ) $ (3,937 ) $ 4,419  
   
 
 
 
 
 
                                 

15


Basic earnings/(loss) per share                                
  Net earnings/(loss)   $ 1.95   $ 1.40   $ (0.10 ) $ (0.16 ) $ 0.20  
   
 
 
 
 
 
Weighted average shares outstanding     13,095     22,588     23,643     23,986     22,541  

Diluted earnings/(loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Net earnings/(loss)   $ 1.09   $ 1.19   $ (0.10 ) $ (0.16 ) $ 0.18  
   
 
 
 
 
 
Weighted average shares outstanding     24,591     26,824     23,643     23,986     25,038  

Financial and Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Cash flows provided by (used in):                                
    Operating activities   $ 25,150   $ 33,855   $ 36,098   $ 14,966   $ 13,990  
    Investing activities     (21,649 )   (1,099 )   (7,538 )   (22,086 )   (17,762 )
    Financing activities   $ (3,730 ) $ (2,860 ) $ (43,564 ) $ (23,064 ) $ 1,054  

Selected Consolidated Operating Statistics (Unaudited):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Block Hours     47,759     75,690     83,577     39,552     44,570  
  Revenue per Block Hour   $ 10,551   $ 10,400   $ 9,879   $ 9,934   $ 10,161  
  Operating expense per Block Hour   $ 9,707   $ 9,652   $ 9,888   $ 10,023   $ 10,004  
  Average daily utilization (block hours flown per day per aircraft)     8.1     8.4     9.0     8.4     9.2  
 
  As of December 31,
  As of June 30,
 
  2004
  2005(1)
  2006(2)
  2006
  2007
 
   
   
   
  (unaudited)

  (unaudited)

 
  (in thousands)

Balance Sheet Data:                              
  Cash and cash equivalents   $ 16,306   $ 46,202   $ 31,198   $ 16,018   $ 28,480
  Property and equipment, net     33,193     33,726     35,435     35,030     39,097
  Total assets     179,317     260,646     198,750     219,004     225,839
  Total liabilities     148,919     173,808     131,619     134,490     152,553
  Stockholders' equity   $ 30,398   $ 86,838   $ 67,131   $ 84,514   $ 73,286

(1)
Financial and statistical data include the results of North American from April 28, 2005 to December 31, 2005.

(2)
Financial and statistical data include the full year results of North American for 2006.

16



SUMMARY UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS INFORMATION

        The following table sets forth summary unaudited pro forma combined statements of operations information for the year ended December 31, 2006 and the nine months ended September 30, 2007.

        The pro forma combined statement of operations information gives effect to the merger and the financing as if they occurred on January 1, 2006. The summary unaudited pro forma combined statement of operations information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Global would have been had the merger, the financing and the rights offering occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations.

        The pro forma information has been derived from, and should be read in conjunction with, the "Unaudited Pro Forma Combined Statements of Operations" and related notes, which are included in this prospectus and give pro forma effect to the merger, the financing and the rights offering.

 
  Pro Forma Year
Ended
December 31, 2006

  Pro Forma Nine Months
Ended
September 30, 2007

 
 
  (Dollars in millions)

  (Dollars in millions)

 
Statement of Operations Information:              
  Revenues   $ 1,578   $ 1,268  
  Costs and expenses     1,624     1,320  
  Operating loss     (46 )   (51 )
  Interest expense, net     (61 )   (40 )
  Loss available to common shareholders     (106 )   (92 )

17



RISK FACTORS

        You should carefully consider the risks described below and all other information contained in this prospectus before you make a decision to participate in the rights offering.

Risks Relating to Our Business

We may not be able to successfully implement our business plan and, even if we do so, this business plan may not result in the combined company being profitable.

        Our business plan was developed by, and reflects the current intentions of, Global's management and board of directors. See "Business—Business strategy". The success of this business plan is subject to, among other things, our ability to:

    successfully integrate Global's and World Air Holdings' businesses following the merger;

    benefit from ATA's codeshare agreement with Southwest;

    expand Global's Hawaii and international routes and acquire the aircraft to support this growth;

    reduce workforce costs and related expenses;

    induct seven McDonnell Douglas DC-10-30 wide-body passenger aircraft and two Boeing 747-400 freighter aircraft into our fleet and successfully deploy these aircraft in our business; and

    generally improve the efficiency and effectiveness of the combined company's business processes.

        We cannot assure you that our business plan will be successful or that we will be able to operate profitably even if the new business plan is successfully executed. If implementation of our business plan is not successful and we are unable to generate sufficient operating revenues to pay debt service requirements and aircraft leasing obligations, we cannot assure you that alternative sources of financing will be available or, if available, that such financing will be available on terms that we can afford.

Global and World Air Holdings may experience difficulties in integrating their businesses, which could cause the combined company to fail to realize many of the anticipated potential benefits of the merger.

        Achieving the anticipated benefits of the merger will depend in part upon whether our two companies integrate our businesses in an efficient and effective manner. We may not be able to accomplish this integration process smoothly or successfully. The difficulties of combining the two companies' businesses potentially will include, among other things:

    the necessity of coordinating geographically separated organizations and addressing possible differences in corporate cultures and management philosophies, and the integration of certain operations following the transactions will require the dedication of significant management resources, which may temporarily distract management's attention from the day-to-day business of the combined company;

    any inability of our management to integrate successfully the operations of our two companies or to adapt to the addition of any lines of business in which Global has not historically engaged; and

    any inability of our management to cause best practices to be applied to the combined company's businesses.

        An inability to realize the full extent of the anticipated benefits of the merger, as well as any delays encountered in the transition process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company.

18



We are highly dependent on revenues from our military charter business. The success of our military charter business is dependent on it continuing at current demand levels, the method by which the U.S. military awards contracts and the availability of suitable aircraft.

        For the years ended December 31, 2006 and 2005, revenues from the AMC represented 43.4% and 36.0% of Global's total revenues, respectively, and 67.4% and 73.8% of World Air Holdings' total revenues, respectively. Each year, the AMC grants a certain portion of its business to different airlines based on a point system. The number of points an airline can accrue is determined by the number and types of aircraft pledged to the Civil Reserve Air Fleet ("CRAF"). Our airline subsidiaries currently participate in the CRAF program through teaming arrangements with other airlines. We intend to continue operating our participating airlines in their respective teams. The formation of competing teaming arrangements, an increase by other carriers in their commitment of aircraft to the program or the withdrawal of either team's current partners could adversely affect the amount of our AMC business in future years. In addition, if any of either team's members were to cease or restructure its operations, the number of planes pledged to the CRAF program by the applicable team could be reduced. As a result, the number of points allocated to such team could be reduced and such team's allocation of AMC business would likely decrease. If we lose military charter contracts, or if the military reduces substantially the amount of business it awards to the teams on which we participate, or if either of the teams reduces the number of points it awards to us, we may not be able to replace the lost business and our financial condition and results of operations could be materially adversely affected.

        Our revenues and net income from the AMC are derived from one-year contracts that the AMC is not obligated to renew. In addition, the AMC can typically terminate or modify its contracts with us for convenience, if we fail to perform or if we fail to pass semi-annual inspections. Any such termination would result in a loss of revenue and net income and could expose us to significant liability or hinder our ability to compete for future contracts with the federal government. If the AMC were to terminate its business with us or if our AMC business declines significantly, it would have a material adverse effect on our financial condition and results of operations. Even if the AMC continues to award business to us, we cannot assure you that we will continue to generate the same level of revenue and net income from our military charter operations that Global and World Air Holdings have independently derived in the past or that we currently derive. The volume of the AMC business that is available to us is sensitive to changes in national and international political priorities and the U.S. federal budget.

As a U.S. government contractor, we are subject to a number of procurement and other laws and regulations.

        In order to do business with U.S. government agencies, 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 of all cost and pricing data in connection with contract negotiations;

    impose accounting rules 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 have affected how we have conducted business with their respective customers and we expect that they will affect how we do business with our customers in the future. In addition, in some instances, these laws and regulations have imposed added costs on our respective businesses, and we expect that such added costs will be applicable to us going forward. A violation of

19



these laws and regulations by us or by any of our employees could result in the imposition of fines and penalties or the termination of our U.S. government contracts. In addition, the violation of certain other generally applicable laws and regulations could result in our suspension or termination as a government contractor.

Our substantial indebtedness and fixed obligations could adversely affect our financial condition and prevent us from fulfilling our obligations under our outstanding indebtedness.

        We will have incurred significant debt to fund the cash consideration paid to the World Air Holdings shareholders in the merger. As of December 31, 2006, on a pro forma basis giving effect to the merger and the financing and to the repayment and/or satisfaction of certain of our outstanding indebtedness, we had long-term debt (including capital leases) of $384.0 million. In addition to long-term debt, 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, 2006, future minimum lease payments under non-cancelable operating leases with initial or remaining terms in excess of one year were approximately $1.7 billion and we expect to incur significantly more fixed obligations as we take delivery of additional aircraft and other equipment and continue to expand into new regions. Our level of indebtedness and other fixed obligations has important consequences for our business. For example, it could:

    make it difficult for us to satisfy our debt obligations;

    increase our vulnerability to general adverse economic and industry conditions;

    require us to dedicate a substantial portion of our cash flow from operations and proceeds of any equity issuances (including proceeds from this offering) to payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;

    make it difficult for us to optimally capitalize and manage the cash flow for our businesses;

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

    place us at a competitive disadvantage to our competitors that have less debt; and

    limit our ability to borrow money or sell stock to fund our working capital, capital expenditures, acquisitions and debt service requirements and other financing needs.

        If we are unable to make payments on our debt and other fixed 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 refinance our obligations on terms acceptable to us, if at all.

        In addition, we may need to incur additional indebtedness in the future in the ordinary course of business. To the extent we finance our activities or future aircraft acquisitions with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our growth strategy. If new debt is added to current debt levels, the risks described above could intensify. Furthermore, if future debt financing is not available to us when required or is not available on acceptable terms, we may be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or refinance maturing debt, any of which could have a material adverse effect on our results of operations and financial condition. Moreover, our ability to satisfy financial tests may be adversely impacted if our credit ratings are downgraded below current levels.

20



We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions that may not be successful, in order to satisfy our obligations under our indebtedness.

        Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. See "Forward-Looking Statements", "Management's Discussion and Analysis of Financial Condition and Results of Operations of Global" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of World Air Holdings". If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our future indebtedness may restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them. In addition, these proceeds may not be adequate to meet any debt service obligations then due. See "Description of Certain Indebtedness." If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable and we could be forced into bankruptcy or liquidation, which could result in you losing your investment in the stock. The holders of our debt will be entitled to receive any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us prior to receipt of any such proceeds by holders of our common stock.

The terms of our indebtedness and our operating leases contain and/or may in the future 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 us.

        The terms of the JPMorgan Term Loan and our operating leases relating to most of our aircraft contain restrictive covenants that impose significant operating and financial restrictions on us, including those that restrict our ability to:

    incur certain additional indebtedness;

    pay dividends and make certain distributions, investments and other restricted payments;

    create certain liens;

    limit the ability of restricted subsidiaries to make payments to us;

    agree to certain restrictions on the ability of restricted subsidiaries to make payments to Global or ATA Acquisition, as applicable;

    sell or otherwise dispose of assets, including capital stock of subsidiaries;

    enter into transactions with affiliates;

    merge, consolidate, sell or otherwise dispose of all or substantially all of our assets;

    designate subsidiaries as unrestricted subsidiaries;

    enter into sale/leaseback transactions; and

21


    enter into new lines of business.

        Any failure to comply with the restrictions in any agreement governing our indebtedness or operating leases may result in an event of default under those agreements. Such default may allow our creditors to accelerate our obligations under the JPMorgan Term Loan, or allow the lessors to repossess the equipment leased under our operating leases, which acceleration or repossession may trigger cross-acceleration or cross-default provisions in other debt. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments and operating leases, either upon maturity or, if accelerated, upon an event of default. See "Description of Certain Indebtedness."

Our military charter business operates in volatile overseas regions and could be negatively impacted by changes in U.S. foreign relations, foreign governments and foreign economies.

        Our military charter business is sensitive to changes in economic and political conditions that could increase our security and insurance costs or reduce our aircraft utilization rates. Changes in any of the following areas of risk could disrupt or adversely affect our military charter operations in overseas regions:

    potential adverse changes in diplomatic relations between foreign countries and the United States;

    instability of foreign governments and risks of insurrections;

    terrorism and foreign hostility directed at U.S. companies;

    U.S. government policies that restrict the conduct of business by U.S. citizens in certain foreign countries; and

    policies of foreign governments that restrict the ownership or conduct of business by non-nationals.

        Any disruption in our military charter operations could have a material adverse effect on our business, financial condition and results of operations.

ATA's codeshare agreement with Southwest is essential to the operations of the combined company's scheduled service business.

        The success of our scheduled service business is highly dependent upon ATA's codeshare agreement with Southwest. Our scheduled service business is focused on flying between (1) airports where Southwest has a significant presence, such as Chicago Midway, Phoenix Sky Harbor and Las Vegas McCarran and (2) airports that are not served by Southwest, such as Hawaii. See "Business—Our business lines—Scheduled service—Codeshare agreement". For the year ended December 31, 2006, the codeshare agreement with Southwest accounted for 9.6% of Global's consolidated revenues. We cannot assure you that the codeshare agreement that ATA has entered into will enable our scheduled service business to operate profitably, or that it will deliver the benefits expected. We also cannot assume that Southwest will not alter its strategy and thereby diminish the benefits of ATA's codeshare agreement and adversely affect our financial condition and results of operations. Finally, we cannot assure you that Southwest will be able to implement in a timely manner the technical changes to its systems to enable the extension of ATA's codeshare arrangements to international flights.

        ATA's codeshare agreement is directly affected by the financial and operating strength of Southwest. Any event that negatively impacts the financial strength of Southwest or that has a long-term effect on the use of Southwest by airline travelers will have a material adverse effect on the benefits ATA derives from the codeshare agreement and, therefore, on our financial condition and results of operations. In the event of a substantial decrease in the financial or operational strength of

22



Southwest, it may seek to reduce, or be unable to make, the payments due to ATA under the codeshare agreement, which would also have such a material adverse effect.

        Southwest has wide discretion concerning which flights are eligible for codeshare status. Southwest could, for instance, choose to limit such flights based on minimum and maximum connecting times that would limit the number of codeshare flights. Southwest could also choose not to price codeshare flights aggressively, which would limit the number of codeshare tickets likely to be sold through its distribution channels and reduce overall revenues in our scheduled service business.

        Under the codeshare agreement, ATA and Southwest are subject to customer service-related and other covenants. The agreement is subject to early termination by either party if the other party materially breaches the agreement. Any termination of ATA's codeshare agreement with Southwest would have a material adverse effect on our financial condition and results of operations.

Our scheduled service business is heavily dependent on a limited number of regions, and a reduction in demand or an increase in competition for air travel in these regions could adversely affect our business.

        The combined company offers scheduled service travel in a limited number of regions. We will be adversely affected by any circumstance that causes a reduction in demand for air transportation to or from those regions, such as adverse changes in local economic conditions, political disruptions or violence (including any terrorist attacks), negative public perception of the cities or regions or significant price increases linked to increases in airport access costs and fees imposed on passengers. Likewise, any disruption of services or facilities that support our scheduled service in these regions could adversely affect this business. We may decide to discontinue either particular routes or the entire scheduled service line of our business in the future. For example, we recently decided to discontinue our Chicago Midway routes to NY-LaGuardia, effective January 7, 2008; Washington D.C., effective November 28, 2007; and Honolulu to Ontario, effective January 7, 2008. Moreover, it is possible other airlines will begin to provide non-stop services to and from these regions or otherwise target these regions. Any increase in competition with respect to these regions could cause us to reduce fares or take other competitive measures that might adversely affect our financial condition and results of operations.

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

        We depend on a limited number of significant customers for our ACMI business. 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 generally requires a long sales cycle. As a result, if our ACMI contracts are not renewed and if we are not able to obtain other business in a timely manner or at all, our financial condition and results of operations could be adversely affected.

If our mix of business creates lower yields relative to the cost per block hour, our financial condition and results of operations could be adversely affected.

        Due to the high fixed costs of leasing and maintaining our aircraft and the costs for cockpit crewmembers and flight attendants, each of our contracts must achieve an appropriate balance between utilization of the aircraft and yield in order to operate profitably. We look to expand contracts with existing customers while at the same time searching for new opportunities that will allow us to increase both utilization and yields. Our current contracts do not fully utilize all aircraft each day. New customer needs may not fit with the available time on each aircraft. In addition, we may not be able to charge a rate sufficient to cover the total cost of providing the service including overhead. Our financial condition and results of operations could be adversely affected by periods of low aircraft utilization and low yields.

23



We do not in most cases execute customer contracts that match aircraft lease lives to the terms of such customer contracts.

        Although we seek to enter into long-term contracts with certain of our customers, the terms of our existing customer contracts are in most cases substantially shorter than the terms of our aircraft lease obligations. We cannot provide assurance that we will be able to enter into additional contracts with new or existing customers or that we will be able to obtain enough additional business to fully utilize each aircraft over the remaining term of our leases for our aircraft. Our financial condition and results of operations could be adversely affected by the mismatch between our aircraft lease obligations and customer contracts.

Insurance availability and costs have fluctuated significantly since the September 11, 2001 terrorist attacks.

        As a result of the terrorist attacks on September 11, 2001, the amount of insurance coverage available to commercial air carriers for claims resulting from acts of terrorism, war and similar events has fluctuated significantly. At the same time, the cost for such coverage, and for aviation insurance in general, has also fluctuated. The U.S. government currently provides us with such insurance coverage, but this program is set to expire on March 30, 2008. Therefore, there is the risk that after that date, this coverage may only be available to us through commercial aviation insurers which may have substantially less desirable terms, result in higher costs and not be adequate to protect our respective risks, any of which could have a material adverse effect on our financial condition and results of operations. Future terrorist attacks involving aircraft, or the threat of such attacks, as well as other factors, could result in further volatility in the availability and cost of aviation insurance.

Our results of operations are affected materially by the price and availability of aircraft fuel.

        Fuel costs have constituted a substantial portion of our total operating expenses. On a pro forma basis, fuel costs would have comprised 27% of the combined company's total operating expenses for 2006. The historically high fuel costs experienced in the last two years negatively affected Global and World Air Holdings' results of operations even though for the international military charter business we passed fuel price increases to the U.S. Department of Defense. Due to the highly competitive nature of the airline industry, we have generally not been able to increase fares for our scheduled service business sufficiently to offset the immediate rise in fuel prices in the past, and we may not be able to do so in the future. Further increases in fuel costs or a shortage of supply would adversely affect our financial condition and results of operations.

        Fuel costs typically are subject to wide price fluctuations based on geopolitical issues and supply and demand. Fuel availability is also affected by demand for home heating oil, gasoline and other petroleum products, oil refining capacity and the occurrence of natural catastrophes, such as hurricanes. Because of the effect of these events on the price and availability of fuel, the cost and future availability of fuel cannot be predicted with any degree of certainty. A fuel supply shortage or further increases in fuel prices could affect our scheduled service business, particularly if market conditions continue to restrict our ability to implement price increases to pass fuel cost increases to our customers. Moreover, there can be no assurance that any such price increases would realize sufficient revenue to offset increases in fuel prices or would not reduce the competitive advantage we seek by offering affordable prices. In addition, there is no assurance that our creditworthiness will be sufficient to enable us to implement a hedging program that could provide some protection against significant increases in fuel prices for our scheduled service business.

24


Union disputes, employee strikes and other labor-related disruptions may adversely affect our operations.

        Our business plan includes assumptions about labor costs for the combined company going forward. Currently, we believe our labor costs will be competitive within the airline industry. However, we cannot assure you that our labor costs will in fact be competitive, either because agreements to which our airline subsidiaries are parties become amendable or in the event competitors may significantly reduce their labor costs.

        Relations between air carriers and labor unions in the United States are governed by the Railway Labor Act (the "RLA"). Under the RLA, collective bargaining agreements generally contain "amendable dates" rather than expiration dates, and the RLA 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 parties have been released to "self-help" by the National Mediation Board. After release by the National Mediation Board, carriers and unions are free to engage in self-help measures such as strikes and lock-outs. None of ATA's labor agreements are currently amendable; however, certain World and North American labor contracts are currently being renegotiated.

        The majority of our employees are unionized and a majority of our employees will be represented for collective bargaining purposes by labor unions. Employees of the combined company are organized into 11 labor groups. The collective bargaining agreement covering World's flight attendants became amendable in August 2006, and a tentative agreement was reached on July 30, 2007. World's collective bargaining agreement for its pilots does not become amenable until March 1, 2009. North American's pilots rejected a tentative agreement on October 10, 2007 and, if it is determined that there is a case for further discussions the parties will resume negotiations, while its flight attendants continue to negotiate the terms of their first collective bargaining agreement. ATA's pilots are represented by Air Line Pilot's Association ("ALPA") while its flight attendants are represented by the Association of Flight Attendants ("AFA"). Both World's and North American's pilots and flight attendants, respectively, are represented by the International Brotherhood of Teamsters (the "IBT").

        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 certified collective bargaining representative 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 financial condition and results of operations.

        There is also a risk that disgruntled employees, either with or without union involvement, could engage in illegal slow-downs, work stoppages, partial work stoppages, sick-outs or other action short of a full strike that could, individually or collectively, adversely affect our operations and impair our financial performance.

We may not be able to successfully integrate any businesses that are acquired.

        We continuously consider acquisition opportunities, and we expect to make acquisitions in the future, including acquisitions of companies that may constitute a significant part of our consolidated operations. Although we intend to actively pursue our growth strategy in the future, we cannot provide any assurance that we will be able to identify appropriate acquisition candidates, or, if we do, that we will be able to negotiate successfully the terms of the acquisition, finance the acquisition or integrate the acquired business effectively and profitably into our existing 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 financial condition and difficulties in

25



integrating acquired businesses. While it is intended that our acquisitions will improve competitiveness and profitability, we cannot assure you that future acquisitions will be accretive to 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.

Any inability to acquire and maintain additional compatible aircraft, engines or spare parts, on terms favorable to us or at all, would increase our operating costs and could adversely affect our profitability.

        Any increase in demand for the types of aircraft we fly, or will fly in the future, could impair our ability to obtain additional aircraft, engines and spare parts. We may be unable to obtain additional suitable aircraft, engines or spare parts on satisfactory terms or at the time needed for our operations or for the implementation of our growth plan. If applicable 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. For example, World has entered into long-term lease agreements for two Boeing 747-400 freighter aircraft and because we do not currently operate any Boeing 747-400 aircraft, these aircraft will not share components used in other aircraft we currently operate, which could result in increased maintenance costs for the fleet as a whole. There is also greater risk associated with acquiring used aircraft because we may incur additional costs to remedy any mechanical issues and, generally, the cost to maintain used aircraft exceeds the cost to maintain new aircraft. In addition, our ability to retain a significant market share of the military charter business will depend on our ability to obtain aircraft suitable for such business.

Our maintenance costs will increase as our fleet ages.

        Our aircraft were manufactured between 1975 and 2003. In general, the cost to maintain aircraft increases as they age and exceeds the cost to maintain new aircraft. FAA regulations require additional maintenance inspections for older aircraft. We also need to comply with other programs that require enhanced inspections of aircraft, including Aging Aircraft Airworthiness Directives, which typically increase as an aircraft ages and vary by aircraft or engine type depending on the unique characteristics of each aircraft and/or engine. In April 2006, the FAA proposed to issue regulations limiting the age of aircraft that may be flown by U.S. airlines. The announcement did not indicate the maximum age that would be allowed, the effective date of the regulation or any grandfathering provisions. Comments regarding this proposal were submitted in September 2006, and it is unclear when a final decision will be made. This proposal, if and when implemented, may have a material effect on our future operations.

26



Our reputation and financial results could be adversely affected in the event of an accident or incident involving any of our aircraft or involving the same types of aircraft operated by other airlines.

        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 made against us for injured passengers and others. Substantial claims resulting from an accident in excess of our insurance coverage would adversely affect our business. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that we are less safe or reliable than other airlines, which would adversely affect our business. Because we operate small airlines, an accident would be likely to adversely affect us to a greater degree than it would a larger, more established airline.

        Our business would be significantly adversely affected if a mechanical problem with any of our aircraft was discovered that caused such aircraft to be grounded while any such problem was 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 another U.S. or foreign airline's aircraft, while it conducted its own investigation. Our business would also be significantly adversely affected if the public avoided flying our aircraft, or if the U.S. military avoided using our aircraft, due to an adverse perception of our aircraft because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving one of our aircraft types.

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

        We currently operate a fleet of 55 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 impacts than larger airlines if our flights are delayed or cancelled due to the absence of replacement aircraft. If we are unable to operate those aircraft for a prolonged period of time for reasons outside of our control, for example, due to a catastrophic event or a terrorist act, our financial condition and results of operations could be disproportionately adversely affected.

Our lack of an established line of credit or borrowing facility will make the combined company highly dependent upon its operating cash flows.

        We have no lines of credit and rely on operating cash flows to provide working capital. Unless we secure a line of credit or borrowing facility, we will be 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. If we fail to generate sufficient funds from operations to meet these cash requirements or do not secure a line of credit, other borrowing facility or equity financing, we could default on our debt and other fixed obligations. Our inability to meet our obligations as they become due would materially restrict our ability to grow and would materially adversely affect our financial condition and results of operations.

        Our operations are capital intensive and will be financed from operating cash flows and term loan debt. Many airlines, including ours, have defaulted on debt securities and bank loans in recent years and have had their equity eliminated in bankruptcy reorganizations. This history has led to limited access to the capital markets by companies in our industry. Our access to the capital markets may also be limited for the foreseeable future due to limited liquidity in our securities, among other things. Restrictions on our ability to access capital and obtain sufficient financing to fund our operations may diminish our financial and operational flexibility and could curtail our operations and adversely affect

27



our ability to take advantage of opportunities for expansion of our business. We cannot assure you, however, that any additional financing will be available on terms that are favorable or acceptable to us.

If all credit card processing companies serving us were to require 100% holdbacks for processing credit card transactions for the purchase of air travel and other services, as they have from time to time in the past, our cash flows would be adversely affected.

        Credit card companies frequently require significant holdbacks when future air travel and other future services are purchased through credit card transactions. A holdback is a portion of the cash from a merchant's credit card transactions held in reserve by the credit card processing companies to cover possible disputed charges, chargeback fees and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Global's credit card processing companies maintain significant holdbacks for processing Global's credit card transactions for the purchase of air travel and other services. As we expect that virtually all of our scheduled service and ancillary services will be paid for with credit cards as has been the practice for payments for such services at Global and World Air Holdings in the past, if all the credit card processing companies were to increase holdbacks to 100%, cash flows would be adversely affected. This risk would be exacerbated by the fact that we do not currently anticipate that we will have any established line of credit or borrowing facility.

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

        We rely upon others to provide essential services on behalf of their operations and we expect the combined company to continue to do so. 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 that we will enter into similar agreements in any new regions we decide to serve. Any material problems with the efficiency and timeliness of contract services under new or existing service agreements with third parties could have a material adverse effect on our financial condition and results of operations.

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, Congress has passed laws, and the FAA, the Department of Transportation and the Transportation Security Administration have issued regulations, relating to the operation of airlines that have required significant expenditures. Local governments and authorities in certain regions also have adopted regulations governing various aspects of aircraft operations, including noise abatement procedures, curfews and use of airport facilities. We expect to continue to incur increased expenses in connection with complying with government regulations, including continuing costs for new security measures. Historically, we have been unable to recoup these increased costs through increased prices. Additional laws, regulations, taxes and airport charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising ticket prices, reducing revenue and increasing costs. We can give no assurance that these and other laws or regulations enacted in the future will not adversely affect our business.

28


        In addition, we are subject to various laws, rules and regulations relating to the Internet and online commerce, consumer protection and privacy, and sales, use, occupancy, value-added and other taxes. Any new laws or changes in existing laws could decrease demand for our services, increase our costs and/or subject us to additional liabilities, which could adversely affect our business. For example, there is, and will likely continue to be, an increasing number of laws and regulations pertaining to Internet and online commerce, which may relate to liability for information retrieved from or transmitted over the Internet, user privacy, taxation and the quality of products and services. Furthermore, the growth and development of online commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on online businesses generally.

        In addition, the application of various sales, use, occupancy, value-added and other tax laws, rules and regulations to our products and services is subject to interpretation by the applicable taxing authorities. We cannot assure you taxing authorities will not take a contrary position, or that such positions would not materially adversely affect our 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. The combined company will be subject to these bilateral agreements, which are in turn subject to periodic renegotiation or renewal, and comity and reciprocity are subject to review by the relevant governments. Any alteration or termination of such agreements, or restrictions on airline operations by governments based on considerations of comity and reciprocity, could diminish the value of route authorities or otherwise adversely affect our international operations.

Our processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

        In the processing of customer transactions, we have received and stored a large volume of identifiable personal data. This data is increasingly subject to legislation and regulation. This government action is typically intended to protect the privacy of personal data that is collected, processed and transmitted. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices in ways that negatively affect our business, financial condition and results of operations. As privacy and data protection become more sensitive issues, we also may become exposed to potential liabilities as a result of differing views on the privacy of travel data. These and other privacy developments are difficult to anticipate and could adversely affect our financial condition and results of operations.

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:

    changes in fuel, security and insurance costs;

    the timing and amount of maintenance expenditures;

    the timing and success of our growth or strategic plans;

    fluctuations in demand in the military charter business line; and

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

        In addition, our scheduled service business is seasonal by nature, with peak activity occurring during the Spring and Summer holiday seasons. This typically results in a decline in demand for these services in the first and fourth quarters of our fiscal year. Quarter-to-quarter comparisons of our operating results may not be good indicators of our future performance. It is also possible that our

29



operating results in any future quarter could be below the expectations of investors or any published reports or analyses regarding our company.

Our business could be adversely affected if we do not successfully deploy our newly leased McDonnell Douglas DC-10-30 wide-body aircraft and two Boeing 747-400 freighter aircraft for which we have entered into long-term lease agreements, or if such aircraft do not meet their performance specifications.

        ATA has entered into lease agreements for seven McDonnell Douglas DC-10-30 wide-body passenger aircraft that we expect to be fully operational by the first quarter of 2008. World has entered into long-term agreements for two Boeing 747-400 freighter aircraft that are scheduled to be delivered in mid-2008. If ATA experiences delays in the initial dates of operation of any of these DC-10-30 aircraft, we may not be able to fly our full allocation of passenger requirements for the FedEx and Alliance teams. In addition, if World experiences delays in the conversion or initial date of operations with the Boeing 747-400 freighter aircraft, we may default on the long-term ACMI contracts entered into prior to delivery and our financial condition and results of operations could be adversely affected. If we are not able to otherwise successfully deploy these additional aircraft in our business, our financial condition and results of operations could be adversely affected. There is also a risk that the new aircraft may not meet the performance specifications that are important to our customers or that there exists a limited availability of qualified flight crews to operate, or FAA personnel required to approve the operation of, these aircraft pursuant to the related operating certificate. Each of these risks could adversely affect our ability to deploy these aircraft in a timely manner or on favorable terms.

ATA may be unable to renew its gate leases or continue to access slots at the major domestic airports we serve.

        ATA currently leases one gate at Chicago's Midway Airport. Our U.S. mainland scheduled service business depends upon ATA's ability to maintain continued access to this airport on favorable terms. Any adverse change in ATA's gate lease agreements at Midway could have a material adverse effect on our financial condition and results of operations.

The combined company operates on a broader geographical and operational scope than either Global or World Air Holdings did prior to the merger and is exposed to a broader range of political, social, geographical and operational risks than either company had been exposed to on an individual basis.

        Global's scheduled service business, through ATA, is focused on flights to and from Chicago's Midway Airport and between the western United States and Hawaii while North American's scheduled service business has been focused on providing non-stop service to niche international markets such as Georgetown, Guyana; Accra, Ghana; and Lagos, Nigeria from New York's JFK Airport. In addition to its military transport services and scheduled service travel, North American and Global also provide customized transportation services that Global has not traditionally provided, including providing air transport services for cargo carriers and international freight forwarders.

World Air Holdings identified material weaknesses in its internal control over financial reporting, and its failure to remedy effectively the five material weaknesses identified as of December 31, 2006 could result in material misstatements in our consolidated financial statements going forward.

        When we acquired World Air Holdings we became subject to a number of risks associated with inadequate internal control over financial reporting at World Air Holdings. World Air Holdings' management was responsible for establishing and maintaining adequate internal control over its financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act. World Air Holdings' management identified five material weaknesses in its internal control over financial reporting as of December 31, 2006. A material weakness is defined by the Public Company Accounting Oversight Board (United States) as a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or deleted.

30



        The material weaknesses identified by World Air Holdings' management as of December 31, 2006 consisted of:

    1.
    World Air Holdings' control environment did not sufficiently promote effective internal control over financial reporting throughout the organization. Specifically, the following deficiencies in the control environment existed as of December 31, 2006:

    (a)
    World Air Holdings lacked formal policies and procedures to clearly communicate management's and employees' roles and responsibilities in the company's internal control over financial reporting.

    (b)
    World Air Holdings lacked formal written accounting policies and procedures for the initiation and processing of transactions and formal account reconciliations and related management review.

    2.
    World Air Holdings' information and communication controls did not sufficiently promote effective internal control over financial reporting throughout the organization. Specifically, World Air Holdings did not have formal policies and procedures in place to ensure that potential accounting or disclosure matters relevant to financial reporting were communicated to its accounting and finance personnel by others within the company in an appropriate form or timeframe to enable accurate financial reporting.

        Each of the material weaknesses described above contributed to the material weaknesses discussed in the following items 3 through 5:

    3.
    World Air Holdings did not maintain effective policies and procedures regarding the accounting for income taxes, including taxes payable, deferred income tax assets and liabilities and the related income tax provision. Specifically, the company's policies and procedures did not provide for the effective internal preparation and review of complex tax calculations, the review of the tax provision, or the preparation of sufficient documentation of the company's income tax accounting. These deficiencies resulted in material errors in World Air Holdings' income tax provision in its preliminary 2006 consolidated financial statements.

    4.
    World Air Holdings did not maintain effective policies and procedures related to its accounting for accrued liabilities. Specifically, the company did not effectively perform and document procedures to evaluate the reasonableness of assumptions used to estimate liabilities associated with maintenance, flight costs, legal and other expense accruals. Further, existing procedures were not subject to adequate supervisory review. This deficiency resulted in material errors in maintenance, flight costs, legal and other expense accruals within its preliminary 2006 consolidated financial statements.

    5.
    World Air Holdings did not have effective controls over the financial reporting close process. Specifically, the company did not have a sufficient number of accounting professionals with requisite technical and financial reporting knowledge to ensure the proper selection of accounting policies and the correct application of generally accepted accounting principles in the consolidated financial statements, and to ensure that accurate and reliable financial statements were prepared and reviewed on a timely basis. Also, World Air Holdings lacked effective policies and procedures to identify and record correctly the accounting implications of complex and non-routine transactions and to provide for sufficient review of financial information and related presentation and disclosures. These deficiencies resulted in material errors in its preliminary 2006 consolidated financial statements.

        Each of the aforementioned material weaknesses results in more than a remote likelihood that a material misstatement in World Air Holdings' annual or interim consolidated financial statements would not be prevented or detected.

        World Air Holdings was implementing remedial measures designed to address the five material weaknesses identified as of December 31, 2006 prior to the merger, and this work will continue by

31


Global. If these remedial measures are insufficient to address these material weaknesses and significant deficiencies, or if additional material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future, our consolidated financial statements may contain material misstatements, we could be required to restate our prior period financial results, our operating results may be harmed and we may be subject to class action litigation. Internal control deficiencies could also cause investors to lose confidence in our reported financial information. We can give no assurance that the measures World Air Holdings has taken to date, or any future measures by Global, will remediate the material weaknesses and significant deficiencies identified or that any additional material weaknesses and significant deficiencies or additional restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

The historical consolidated financial information included in this prospectus does not reflect the added costs we expect to incur in order to implement and comply with internal control reporting standards.

        As a public company, we will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), which will require annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm that addresses our internal controls. This requirement will apply to us starting with our annual report for the year ended December 31, 2008. The Sarbanes-Oxley Act, as well as new rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board, also require changes in the corporate governance practices and controls of public companies. We expect these rules and regulations to result in both a significant initial cost to us as we initiate certain internal controls and other procedures designed to comply with the requirements of the Sarbanes-Oxley Act, and an ongoing increase in our legal, audit and financial compliance costs. Compliance could also divert management's attention from operations and strategic opportunities and will make legal, accounting and administrative activities more time-consuming and costly. We also expect to incur higher costs to maintain directors and officers insurance. As a result of, among other things, the history of inadequate internal control over financial reporting at World Air Holdings, we currently anticipate increased annual costs following this offering and we expect to incur additional costs during the first year following the offering in implementing and verifying internal control procedures as required by Section 404 of the Sarbanes-Oxley Act, and the rules and regulations thereunder, and in connection with preparing our financial statements on a timely basis to meet the SEC reporting requirements.

        During the course of documenting and testing our internal control procedures to satisfy the requirements of Section 404, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which likely would cause investors to lose confidence in our reported financial information. This could lead to a significant decline in the market price of our common stock. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets, regulatory investigations and civil or criminal sanctions. Similar adverse effects could result if our auditors express an adverse opinion or disclaim or qualify an opinion on management's assessment or on the effectiveness of our internal control over financial reporting.

32



        Moreover, due to inadequate internal control over financial reporting at World Air Holdings, and its consequent failure to timely produce financial statements, during the time that World Air Holdings was a public reporting company it did not file its Annual Report on Form 10-K for fiscal years 2005 and 2006 on a timely basis, and did not file its Quarterly Reports on Form 10-Q on a timely basis since the first quarter of 2005. As a result of World Air Holdings' failure to timely file its annual and quarterly reports, World Air Holdings' common stock was delisted from the Nasdaq National Market in May 2006 and began trading on the Pink Sheets. We may similarly be unable to timely produce financial statements and to timely file our periodic reports with the SEC. We may become subject to disciplinary action by the SEC as a result of any such failure to meet our filing obligations.

We may not be able to retain or attract the senior management and other key employees that we need to integrate World Air Holdings with Global or to execute our strategy for the combined company.

        Our success will depend in part upon our ability to retain senior management and other key employees of all our airlines. We will depend on the services of senior management and other key employees to integrate Global's and World Air Holdings' businesses and to execute our strategy. Competition for qualified personnel can be very intense. In addition, senior management and key employees may depart because of issues relating to the uncertainty or difficulty associated with the continuing integration of the companies or a desire not to remain with the combined company. Departures of senior management personnel and other key employees could adversely affect our ability to combine Global and World Air Holdings and our ability to execute our strategy and as a result our business, financial condition and results of operations may suffer.

We recently emerged from a Chapter 11 bankruptcy reorganization, have a history of losses and may not achieve or maintain profitability.

        We emerged from a Chapter 11 bankruptcy reorganization on February 28, 2006, approximately 16 months after filing a voluntary petition for bankruptcy reorganization. ATA recorded a consolidated net loss of $455.6 million for the year ended December 31, 2005, and a consolidated net loss of more than $1.2 billion during the three years ended December 31, 2005. Despite significant labor cost reductions and other cost savings we achieved through our reorganization, our consolidated net loss for the ten months ended December 31, 2006 was $36.5 million. Our return to profitability will be affected by a number of factors, including the successful implementation of our new business plan and our ability to continue to successfully integrate ATA, North American and World's businesses.

We may be subject to claims that were not discharged in our bankruptcy proceedings.

        Substantially all of the material claims against us that arose prior to the date of the bankruptcy filing were addressed during the Chapter 11 proceedings or were resolved in connection with the Plan and Confirmation Order adopted by the U.S. Bankruptcy court. In addition, the Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation and certain debts arising afterwards. 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, except in limited circumstances, claims against non-debtor subsidiaries, including foreign subsidiaries, are generally not subject to discharge under the Bankruptcy Code. To the extent any pre-filing liability remains, the ultimate resolution of such claims and other obligations may have a material adverse effect on our financial condition and results of operations.

You will not be able to compare 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 our emergence from bankruptcy, we have operated our business with a new capital structure, fewer aircraft, more economical aircraft lease terms, significantly different and reduced

33



scheduled service and significantly reduced employee and occupancy costs. We adopted fresh start accounting prescribed by generally accepted accounting principles. Accordingly, unlike other companies that have not previously filed for bankruptcy protection, our financial condition and results of operations are not comparable to the financial condition and results of operations reflected in its predecessor's financial statements for periods prior to February 28, 2006, contained in this prospectus. Without historical financial statements to compare to our current performance, it may be more difficult for you to assess our future prospects when evaluating our business.

A significant stockholder controls us and may have conflicts of interest with us or you in the future.

        As of December 31, 2007, on a pro forma basis, MatlinPatterson owned approximately 74.1% of our outstanding shares of common stock, assuming the conversion of the 11,507,142 shares of Series A preferred stock by MatlinPatterson and that the amount of shares to be sold in this rights offering is 2,980,350. To the extent that all offerees do not subscribe for their fully entitled amount pursuant to this rights offering, MatlinPatterson's ownership of our common stock will increase relative to the other shareholders.

        As a result of its substantial ownership of our common stock, MatlinPatterson has the ability to effectively control all matters requiring stockholder approval, including the determination to enter into a corporate transaction or to prevent any transaction, regardless of whether or not our other stockholders believe that any such transaction is in their own best interests. For example, MatlinPatterson could cause us to make acquisitions that increase the amount of our indebtedness or could cause us to sell revenue-generating assets.

        Additionally, MatlinPatterson may invest in entities that directly or indirectly compete with us, or companies in which it currently invests may begin competing with us. MatlinPatterson may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. As a result of these relationships, when conflicts between the interests of MatlinPatterson and the interests of our other stockholders or our noteholders arise, our directors who were nominated by MatlinPatterson may not be disinterested. So long as MatlinPatterson continues to own a substantial number of shares of our common stock, MatlinPatterson will effectively control all of our corporate decisions.

Risks Relating to the Airline Industry

The airline industry has recently incurred significant losses resulting in airline restructurings, consolidations and bankruptcies, which could result in further changes in the industry.

        In 2006, the domestic airline industry as a whole reported a net profit of only approximately $3 million after five consecutive years of losses. These losses have resulted in airlines renegotiating aircraft leases, reconfiguring flight schedules, furloughing or terminating employees and implementing other efficiency and cost-cutting measures. Despite these actions, several airlines commenced cases under Chapter 11 of the U.S. Bankruptcy Code in the past several years, enabling these airlines to reduce labor rates, restructure debt, terminate pension plans and generally reduce their cost structure. Such events may have a greater impact during time periods when the airline industry encounters continued financial losses, as passenger air carriers under financial pressures may institute pricing structures to achieve near-term survival rather than long-term viability. Further airline reorganizations, bankruptcies or consolidations may occur, the effects of which we are unable to predict but which could adversely affect our competitive position in the industry.

The airline industry is highly competitive and is characterized by low profit margins and high fixed costs.

        The airline industry is highly competitive, fragmented and capital intensive. Successful competition depends on price, quality, safety and reliability of service. Greater financial resources, newer aircraft, larger facilities and lower cost structures provide air carriers with financial and operating advantages over their competitors. The U.S. airline industry is characterized generally by low profit margins and

34



high fixed costs, primarily for personnel, aircraft fuel, aircraft and engine leases and debt service. The expenses of a passenger aircraft flight do not vary significantly with the number of passengers carried. As a result, a relatively small change in the number of passengers or in pricing can have a disproportionate effect on a passenger air carrier's operating and financial results. Accordingly, shortfalls in expected passenger levels significantly adversely affect our business. In addition, the U.S. airline industry in general, and the low-fare sector in particular, is highly competitive and is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats. The advent of Internet websites has lowered the cost to airlines of selling tickets. However, it has also had a significant negative impact on airline revenues because travel consumers now have access to nearly perfect pricing information and, as a result, have become more efficient in finding lower fare alternatives.

The airline and travel industry tends to experience adverse financial results during general economic downturns.

        Since a substantial portion of airline travel, for both business and leisure, is discretionary, the airline and travel industries tend to experience adverse financial results during general economic downturns. Any general downturn in the U.S. or global economies could lead to a reduction in airline passenger traffic, which likely would adversely affect the airline industry, including us.

Future terrorist attacks, the threat of such attacks or the escalation of U.S. military involvement overseas could materially adversely affect our scheduled service and commercial charter businesses.

        The terrorist attacks of September 11, 2001 materially adversely affected the airline industry. Increased security procedures have adversely affected the air travel experience and increased our costs. Additional terrorist attacks, even if not made directly on the airline industry, or fear of such attacks, could have a further adverse effect on us and the rest of the airline industry. In the event of a terrorist attack, we may experience significantly reduced demand for our travel services, which could have an adverse effect on our financial condition and results of operations.

Airlines often are affected by factors beyond their control, including traffic congestion at airports, weather conditions, increased security measures and public health threats, any of which could adversely affect our operating results and financial condition.

        Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, adverse weather conditions, increased security measures and the outbreak of disease. Delays frustrate passengers and increase costs, which in turn affect profitability. During periods of fog, snow, rain, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic control problems and breaches in security could adversely affect our financial condition and results of operations. Additionally, public health threats that affect travel behavior, such as SARS or avian flu, could have a material adverse effect on the airline industry, including us.

Risks Relating to our Common Stock

The market price of our common stock may be volatile.

        The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including those described above under "Risks Relating to our Business" and "Risks Relating to the Airline Industry" and the following:

    our financial performance or the performance of our competitors and similar companies;

    announcements concerning our competitors, the airline industry or the economy in general;

    strategic actions by us or our competitors, such as acquisitions or restructurings;

    media reports and publications about the safety of our aircraft or the aircraft type we operate;

35


    new regulatory pronouncements and changes in regulatory guidelines;

    general and industry-specific economic conditions;

    changes in financial estimates or recommendations by securities analysts;

    sales of our common stock or other actions by investors with significant shareholdings;

    general market conditions;

    loss of key personnel; and

    availability of capital.

        The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect the trading price of our common stock.

        In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management's attention and resources, and adversely affect our business or results of operations.

There has not been an existing market for our common stock and we do not know if one will develop to provide our stockholders with adequate liquidity.

        There has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market or how liquid that market might become. If an active trading market does not develop, our stockholders may have difficulty selling any shares of our common stock that they own.

We intend to have our securities quoted on the Pink Sheets, which will limit the liquidity and price of our securities more than if our securities were quoted or listed on the NASDAQ Stock Market or a national exchange.

        A market maker has applied to have our common stock quoted for trading on the Pink Sheets, maintained by the National Quotation Bureau. We cannot assure you that our stock will be accepted for quotation on the Pink Sheets. If our stock is quoted on the Pink Sheets, it will limit our ability to have a liquid trading market develop for our common stock and it will make it difficult for our stockholders to dispose of their common stock. This could significantly diminish the value of our common stock.

If a significant number of shares of our common stock are sold into the market, the market price of our common stock could decline significantly, even if our business is doing well.

        Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could cause the prevailing market price of our common stock to decline significantly.

        We may sell shares of our common stock in public offerings. We may also issue shares of our common stock to finance future acquisitions. As at the date of this prospectus, 12,564,674 shares of our common stock are outstanding. 9,311,986 of these shares are owned by our executive officers, directors (including Messrs. Tepner and Han, each of whom resigned from our board, on November 15, 2007 and November 16, 2007, respectively) and "affiliates", as that term is defined under Rule 144 of the Securities Act of 1933, as amended (the "Securities Act"), and thus are "restricted securities" under the Securities Act and may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. 11,507,142 shares of Series A preferred stock are outstanding as of the date of this prospectus.

36



        In addition, as at the date of this prospectus, 3,481,093 shares of our common stock are issuable upon the exercise of outstanding stock options. 900,276 shares of our common stock also are issuable upon the exercise of outstanding warrants as of the date of this prospectus.

        We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of a substantial number of shares of our common stock in the public market (including shares issued in connection with an acquisition), or the perception that such sales may occur, could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

We do not intend to pay cash dividends.

        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 any dividends. As a result, appreciation, if any, in the market value of our common stock will be the sole source of potential financial gain from our common stock for the foreseeable future.

Our certificate of incorporation and by-laws contain provisions that could delay, deter or prevent a change of control.

        Our amended and restated certificate of incorporation, as amended, and our amended and restated by-laws contain provisions that might enable our management to resist a proposed takeover of our company. These provisions could discourage, delay or prevent a change of control of our company or an acquisition of our company at a price that our stockholders may find attractive. These provisions also may discourage proxy contests and make it more difficult for our stockholders to elect directors and take other corporate actions. The existence of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. The provisions include:

    limitations as to who may call special meetings of both our board of directors and stockholders;

    advance notice requirements for stockholder proposals; and

    the authority of our board to issue, without stockholder approval, preferred stock with such terms as our board may determine.

Our certificate of incorporation and by-laws include provisions limiting voting by non-U.S. citizens.

        To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our amended and restated certificate of incorporation, as amended, and amended and restated by-laws restrict voting of shares of our capital stock by non-U.S. citizens. The restrictions imposed by federal law currently require no more than 25% of our stock be voted, directly or indirectly, by persons who are not U.S. citizens, that our president and at least two-thirds of the members of our board of directors be U.S. citizens, and that we remain under the actual control of U.S. citizens. The "actual control" doctrine, among other things, limits the amount of non-voting equity that may be held by non-U.S. citizens. Our by-laws provide that no shares of our capital stock may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which we refer to as the foreign stock record.

Risks Relating to the Rights Offering

The subscription price is not an indication of our value.

        The subscription price does not necessarily bear any relationship to the book value of our assets, past operations, cash flows, losses, financial condition or any other established criteria for value. You

37



should not consider the subscription price an indication of our value or any assurance of future value. After the date of this prospectus, our common stock may trade at prices above or below the subscription price.

Once you exercise your rights, you may not revoke your exercise.

        Once you exercise your rights, unless we materially amend the terms of the rights offering, you cannot revoke your exercise even if there is a decline in the price of our common stock or you learn information about us that you consider unfavorable before the expiration date. You should not exercise your rights unless you are certain that you wish to purchase additional shares of our common stock at the subscription price.

The subscription rights are not transferable and there is no market for the subscription rights.

        You may not sell, give away or otherwise transfer your subscription rights. Because the subscription rights are nontransferable, there is no market or other means for you to directly realize any value associated with the subscription rights. You must exercise the subscription rights and acquire additional shares of our common stock to realize any value.

If you exercise your subscription rights, you may be unable to sell any shares you purchase at a profit and your ability to sell may be delayed by the time required to deliver the stock certificates.

        The public trading market price of our common stock may decline after you elect to exercise your subscription rights. If that occurs, you will have committed to buy shares of common stock at a price above the prevailing market price and you will have an immediate unrealized loss. Moreover, we cannot assure you that following the exercise of subscription rights you will be able to sell your shares of common stock at a price equal to or greater than the subscription price. Until shares are delivered after completion of the rights offering, you may not be able to sell the shares of our common stock that you purchase in the rights offering. Certificates representing shares of our common stock purchased in the rights offering will be delivered as soon as practicable after completion of the rights offering. We will not pay you interest on any funds delivered to the subscription agent pursuant to the exercise of subscription rights.

To exercise your subscription rights, you must act promptly and follow the subscription instructions carefully.

        Eligible shareholders who desire to purchase shares in the rights offering must act promptly to ensure that all required forms and payments are actually received by the subscription agent at or prior to the expiration date. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to your desired transaction, the subscription agent may, depending on the circumstances, reject your subscription or accept it to the extent of the payment received. Neither we, the subscription agent or the information agent has any obligation to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form or payment. We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures.

38



FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements 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 prospectus 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," "will" and similar terms and phrases, including references to assumptions, in this prospectus 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. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

    high fuel costs, significant disruptions in the supply of aircraft fuel and further significant increases in fuel prices;

    terrorist attacks;

    risks inherent to airlines, such as demand for air services to and from the regions served by us and our ability to implement our growth strategy;

    our relationship with Southwest;

    our dependence on certain regions;

    our competitive environment, including significant fare pricing activities by major airlines;

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

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

    our fixed obligations;

    problems with our aircraft;

    levels of military spending for the transportation of military personnel and their families;

    economic and other conditions in regions in which we operate;

    governmental regulation of our operations;

    increases in maintenance and security costs and insurance premiums;

    cyclical and seasonal fluctuations in our operating results;

    the risk that future acquisitions and divestitures will have a negative impact on us; and

    risks related to our divestiture and acquisition strategies, including the risks related to the integration of acquired business.

        All of our forward-looking statements should be considered in light of these factors. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events or otherwise.

39



INDUSTRY AND MARKET DATA

        Unless otherwise indicated, information contained in this prospectus concerning the airline industry, its segments, business lines and related markets and our general expectations concerning such industry and its segments and related markets are based on management estimates. Such estimates are derived from publicly available information released by third-party sources, as well as data from our internal research and on assumptions made by us based on such data and our knowledge of such industry and markets, which we believe to be reasonable.

        While we believe the industry and similar data presented herein that is derived from information released by third-party sources is accurate, we have not independently verified this information. Industry and market data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors" in this prospectus.


USE OF PROCEEDS

        Global will not receive any of the proceeds from the sale of the stock being offered in this prospectus. All of the proceeds will be received by the issuer, MatlinPatterson.


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 any dividends.


DILUTION

        No new shares will be issued by the Company as part of this rights offering. The shares being offered to existing stockholders are currently held by MatlinPatterson.

40



CAPITALIZATION

        The following table shows Global's cash and cash equivalents and capitalization as of September 30, 2007, as follow:

    on an actual basis; and

    on a pro forma, as adjusted, basis to give effect to the conversion of 11,507,142 shares of Series A preferred stock into 11,507,142 shares of common stock in connection with the completion of this rights offering and the purchase and subsequent exercise by MatlinPatterson of 1,808,986 Warrants previously held by JPMorgan.

        This financial information in this table is unaudited and should be read in conjunction with "Use of Proceeds", "Unaudited Pro Forma Combined Financial Statements", "Selected Consolidated Historical Financial and Operating Data of Global", "Selected Consolidated Historical Financial and Operating Data of World Air Holdings", "Management's Discussion and Analysis of Financial Condition and Results of Operations of Global", "Management's Discussion and Analysis of Financial Condition and Results of Operations of World Air Holdings" and the financial statements and related notes of Global and World Air Holdings, which are included elsewhere in this prospectus.

 
  As of September 30, 2007
 
(Dollars in thousands)

  Actual
  Pro Forma,
as Adjusted

 
Cash and cash equivalents   $ 97,966   $ 97,966  
   
 
 
Debt(1):              
  Existing indebtedness of Global     42,893     42,893  
  JPMorgan Term Loan, including PIK interest     345,349     345,349  
  Discount on Notes related to Warrants     (31,140 )   (31,140 )
   
 
 
  Total debt     357,102     357,102  
Shareholders equity (deficit)              
  Series A Convertible Cumulative Preferred Stock, $.0001 par value: 15,000,000 shares authorized, 11,507,142 shares issued and outstanding, actual and 0 shares issued and outstanding, as adjusted     158,644      
  Common Stock, $.0001 par value: 50,000,000 shares authorized and 10,755,688 shares outstanding, actual and 24,071,816 outstanding, as adjusted     1     2  
  Warrants     1,434     1,434  
  Additional paid in capital(2)     109,029     292,998  
  Other comprehensive income     272     272  
  Accumulated earnings (deficit)     (90,388 )   (90,388 )
   
 
 
Total stockholders' equity     178,992     204,318  
   
 
 
Total capitalization   $ 536,094   $ 561,420  
   
 
 

(1)
In addition to the items listed below, both Global and World Air Holdings have substantial operating lease obligations. For a description of these obligations, see "Management's discussion and analysis of financial condition and results of operations of Global—Off-Balance Sheet Arrangements", "Management's discussion and analysis of financial condition and results of operations of World Air Holdings—Off-Balance Sheet Arrangements" and "Description of certain indebtedness—Aircraft Operating Leases".

(2)
The pro forma, as adjusted, additional paid in capital balance includes:

 
  As of
September 30, 2007

Actual balance   $ 109,029
Conversion of Series A preferred stock into common shares     158,643
Exercise of 1,808,986 Warrants     25,326
   
    $ 292,998
   

41



UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS

        The following unaudited pro forma combined statements of operations are based on Global's and World Air Holdings' historical annual and interim statements of operations included elsewhere in this prospectus, adjusted to illustrate the pro forma effect of the merger, the financing and the rights offering and should be read in conjunction with "Summary Unaudited Pro Forma Combined Statements of Operations Information".

        The unaudited pro forma combined statements of operations for the year ended December 31, 2006 and for the nine months ended September 30, 2007 give effect to the merger and the financing as if they had occurred on January 1, 2006.

        The unaudited pro forma adjustments are based upon currently available information and certain assumptions that we believe to be reasonable under the circumstances. The acquisition of World Air Holdings has been accounted for, and the unaudited pro forma combined statements of operations have been prepared, using the purchase method of accounting. The pro forma combined column represents the combination of Global and World Air Holdings' historical results, adjusted for the financing and purchase accounting adjustments necessary to reflect the fair value of World Air Holdings' net assets. The pro forma, as adjusted column represents the pro forma combined statement of operations adjusted for the conversion of the Series A preferred stock by MatlinPatterson to common stock in connection with the rights offering and the purchase and subsequent exercise by MatlinPatterson of 1,808,986 Warrants previously held by JPMorgan.

        The unaudited pro forma combined and pro forma, as adjusted statements of operations are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of Global would have been had the merger, the financing and the rights offering occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. In this regard, the reader should note that the unaudited pro forma combined statements of operations do not give effect to (1) any integration costs that may be incurred as a result of the merger, or (2) synergies, operating efficiencies and cost savings that are expected to result from the merger.

        The allocation of the purchase price to acquired assets and liabilities in the unaudited pro forma combined statements of operations is based on preliminary valuation estimates. Such allocations will be finalized based on valuation and other studies to be performed by management with the services of outside valuation specialists in accordance with Financial Accounting Standards Board Financial Accounting Standards No. 141, Business Combinations. Accordingly, the purchase price allocation adjustments and related impacts on the unaudited pro forma combined statements of operations are preliminary and are subject to revision, which may be material, until final completion of the valuations.

        The unaudited pro forma combined and pro forma, as adjusted statements of operations should be read in conjunction with the section entitled "Summary Unaudited Pro Forma Combined Statements of Operations" and the separate historical consolidated financial statements and accompanying notes of Global and World Air Holdings included elsewhere in this prospectus.

42



Unaudited Pro Forma Combined Statement of Operations for the Year Ended December 31, 2006
(dollars in thousands, except share and per share amounts)

 
  Global
Successor
Ten Months
Ended
December 31,
2006
Historical

  Global
Predecessor
Two Months
Ended
February 28,
2006
Historical

  Global
Fresh Start
Adjustments

  Global
Adjusted
Year Ended
December 31,
2006

  World Air
Holdings
Historical*

  Purchase
Accounting
Adjustments

  Pro Forma
Combined

  Preferred
Stock
Conversion

  Pro Forma, as
Adjusted

 
Operating revenues:                                                        
  Scheduled service   $ 332,255   $ 53,527   $   $ 385,782   $ 62,371   $   $ 448,153   $   $ 448,153  
  Charter     288,256     58,753         347,009     759,911         1,106,920           1,106,920 (f)
  Other     16,551     2,771         19,322     3,374         22,696           22,696  
   
 
 
 
 
 
 
 
 
 
Total operating revenues     637,062     115,051         752,113     825,656         1,577,769         1,577,769  

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Fuel and oil     202,613     37,086         239,699     194,517         434,216           434,216  
  Salaries, wages and benefits     150,929     36,066         186,995     146,098         333,093           333,093  
  Aircraft rentals     69,439     16,181     (673 )   84,947     113,462         198,409           198,409  
  Flight costs     52,769     11,488         64,257     75,976         140,233           140,233  
  Handling, landing and navigation fees     48,553     8,077         56,630     50,578         107,208           107,208  
  Selling and marketing     36,452     7,624         44,076     41,798         85,874           85,874  
  Aircraft maintenance, materials and repairs     29,051     3,103         32,154     142,959     (63,206 )(e)   111,907           111,907  
  Depreciation and amortization     17,386     5,219     (1,742 )   20,863     6,641     65,960  (a)   93,464           93,464  
  Asset impairments and aircraft retirements     13,476             13,476             13,476           13,476  
  Other     41,045     10,197         51,242     54,407         105,649           105,649  
   
 
 
 
 
 
 
 
 
 
Total operating expenses     661,713     135,041     (2,415 )   794,339     826,436     2,754     1,623,529         1,623,529  
   
 
 
 
 
 
 
 
 
 

Operating income (loss)

 

 

(24,651

)

 

(19,990

)

 

2,415

 

 

(42,226

)

 

(780

)

 

(2,754

)

 

(45,760

)

 


 

 

(45,760

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Reorganization items, net         1,456,000     (1,456,000 )                          
  Interest income     6,154     397         6,551     1,655         8,206           8,206  
  Interest expense     (18,231 )   (4,666 )   829     (22,068 )   (3,657 )   (43,487 )(b)   (69,212 )         (69,212 )
  Other     266     (233 )   269     302     135         437           437  
   
 
 
 
 
 
 
 
 
 
Other income (expense)     (11,811 )   1,451,498     (1,454,902 )   (15,215 )   (1,867 )   (43,487 )   (60,569 )       (60,569 )

Income (loss) before income taxes

 

 

(36,462

)

 

1,431,508

 

 

(1,452,487

)

 

(57,441

)

 

(2,647

)

 

(46,241

)

 

(106,329

)

 

 

 

 

(106,329

)
Income tax (benefit)                     (355 )   299  (g)   (56 )         (56 )
   
 
 
 
 
 
 
 
 
 
Net income (loss)     (36,462 )   1,431,508     (1,452,487 )   (57,441 )   (2,292 )   (46,540 )   (106,273 )         (106,273 )
Preferred stock dividends                         (25,776 )(c)   (25,776 )   25,776 (d)    
   
 
 
 
 
 
 
 
 
 
Income (loss) available to common shareholders   $ (36,462 ) $ 1,431,508   $ (1,452,487 ) $ (57,441 ) $ (2,292 ) $ (72,316 ) $ (132,049 )   25,776   $ (106,273 )
   
 
 
 
 
 
 
 
 
 

Basic and diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Average shares outstanding (in thousands)     10,753                 10,753                 10,753           24,069 (d)
  Net loss per share   $ (3.39 )             $ (5.34 )             $ (12.28 )       $ (4.42 )

*
Certain amounts have been reclassified to conform with Global's presentation.

See accompanying notes to these pro forma combined financial statements.

43



Unaudited pro forma combined statement of operations for the nine months ended September 30, 2007
(dollars in thousands, except share and per share amounts)

 
  Global
Historical

  World Air
Holdings
Historical*

  Purchase
Accounting
Adjustments

  Pro Forma
Combined

  Preferred
Stock
Conversion

  Pro Forma,
as Adjusted

 
Operating revenues:                                      
Scheduled service   $ 306,241   $ 46,376   $   $ 352,617   $   $ 352,617  
Charter     372,186     527,607         899,793         899,793   (f)
Other     15,072     816         15,888         15,888  
   
 
 
 
 
 
 
Total operating revenues     693,499     574,799         1,268,298         1,268,298  

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Fuel and oil     227,929     138,543         366,472         366,472  
Salaries, wages and benefits     153,885     112,424         266,309         266,309  
Aircraft rentals     82,146     79,037         161,183         161,183  
Flight costs     59,354     54,913         114,267         114,267  
Handling, landing and navigation fees     55,069     39,828         94,897         94,897  
Selling and marketing     38,187     29,768         67,955         67,955  
Aircraft maintenance, materials and repairs     44,324     74,316     (24,859 )(e)   93,781         93,781  
Depreciation and amortization     23,352     4,671     44,398   (a)   72,421         72,421  
Asset impairments and aircraft retirements     4,844             4,844         4,844  
Other     40,653     36,877         77,530         77,530  
   
 
 
 
 
 
 
Total operating expenses     729,743     570,377     19,539     1,319,659         1,319,659  
   
 
 
 
 
 
 
Operating income (loss)     (36,244 )   4,422     (19,539 )   (51,361 )       (51,361 )

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Reorganization items, net                          
Interest income     6,959     1,011         7,970         7,970  
Interest expense     (23,333 )   (83 )   (24,812 )(b)   (48,228 )       (48,228 )
Other     (820 )   699         (121 )       (121 )
   
 
 
 
 
 
 
Other income (expense)     (17,194 )   1,627     (24,812 )   (40,379 )       (40,379 )
Income (loss) before income taxes     (53,438 )   6,049     (44,351 )   (91,740 )       (91,740 )
Income taxes     488     2,427     (2,539 )(g)   376         376  
   
 
 
 
 
 
 
Net income (loss)     (53,926 )   3,622     (41,812 )   (92,116 )         (92,116 )
Preferred stock dividends     (3,435 )       (18,990 )(c)   (22,425 )   22,425 (d)    
   
 
 
 
 
 
 
Income (loss) available to common shareholders   $ (57,361 ) $ 3,622   $ (60,802 ) $ (114,541 )   22,425   $ (92,116 )
   
 
 
 
 
 
 
Basic and diluted earnings per common share:                                      
Average shares outstanding
(in thousands)
    10,755                 10,755         24,071   (d)
Net loss per share   $ (5.33 )             $ (10.65 )     $ (3.83 )

*
Certain amounts have been reclassified to conform with Global's presentation. Amounts represent results from January 1, 2007 through August 14, 2007.

See accompanying notes to these pro forma combined financial statements.

44


    Notes to the unaudited pro forma combined statements of operations

    (dollars in thousands)

Note 1. Basis of Presentation, the merger and the financing

        The historical financial information for the year ended December 31, 2006 and the nine months ended September 30, 2007 is derived from the historical consolidated financial statements of Global and World Air Holdings. The pro forma adjustments have been prepared as if the merger, the financing and the rights offering had taken place on January 1, 2006.

        The unaudited pro forma combined column reflects the following:

    the acquisition of World Air Holdings by Global for $323,200 (which includes $9,900 of related acquisition costs);

    the issuance of 11,507,152 shares or $161,100 of Series A preferred stock;

    borrowing of $340,000 under the JPMorgan Term Loan and related issuance of 2,261,333 Warrants, which were valued at $14.00 per Warrant using the Black-Scholes option pricing method;

    repayment of $81,557 debt, including interest and a prepayment penalty, guaranteed by the Air Transportation Stabilization Board, or ATSB; and

    repayment of $54,261 debt, including interest owed to MatlinPatterson.

        The unaudited pro forma combined statements of operations, as adjusted column reflects the conversion of the preferred stock into common stock in connection with the rights offering.

Note 2. Sources and uses of funds related to the merger and the financing

Proceeds received from:      
  Issuance of preferred stock(1)   $ 161,100
  Borrowings under JP Morgan Term Loans and issuance of Warrants(2)     340,000
   
    $ 501,100
   

Use of proceeds:

 

 

 
  Acquisition of World Air Holdings(3)   $ 323,233
  Repayment of ATSB debt(4)     79,282
  Repayment of MatlinPatterson debt(5)     51,318
  Debt issuance costs     15,108
  Interest on MatlinPatterson debt     2,943
  ATSB extinguishment costs     2,275
  Preferred stock issuance costs     2,456
  General corporate purposes(6)     17,285
  Restricted cash(6)     7,200
   
    $ 501,100
   

      (1)
      Reflects the recording of $161,100 of proceeds of the issuance of 11,507,142 shares of preferred stock at $14 per share.

      (2)
      Reflects borrowings of $340,000 under the JPMorgan Term Loan.

      (3)
      Reflects aggregate purchase price of World Air Holdings which includes $313,300 cash paid for the stock of World Air Holdings plus related acquisition costs of $9,900.

45


      (4)
      Reflects repayment of $21,802 of current and $57,480 of long term debt guaranteed by the Air Transportation Stabilization Board.

      (5)
      Reflects repayment of $34,384 of current and $16,834 of long term owed to MatlinPatterson.

      (6)
      Reflects cash received for general corporate purposes including $7,200 required to be restricted cash related to collateralize World Air Holdings letters of credit.

Note 3. Merger and Purchase Price Allocation

The Company commenced the consolidation of World Air Holdings on August 15, 2007 and the acquisition was accounted for using the purchase method of accounting in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations ("SFAS 141"). The following summarizes the total purchase price for World Air Holdings (in thousands):

Cash consideration   $ 313,315
Direct acquisition costs     9,918
   
    $ 323,233
   

        Under the purchase method of accounting, the total purchase price will be allocated to World Air Holdings' net tangible and intangible assets based upon their estimated fair value as of the date of the acquisition with any amount paid in excess of the fair value of the net assets recorded as goodwill. This allocation is preliminary. Specifically, the Company is in the process of finalizing the fair value assigned to inventory, property and equipment, maintenance reserve deposits with lessors, lease contracts, military contract intangibles, other intangibles and other liabilities.

        Based upon the purchase price and review of the net assets acquired and liabilities assumed, the preliminary purchase price allocation is as follows (in thousands):

 
  Fair Value of
Assets Acquired
and Liabilities
Assumed

Cash and cash equivalents   $ 39,646
Other current assets     131,326
Property and equipment, net     39,696
Deposits and other assets     62,250
Intangible assets acquired:      
  Military contracts     256,680
  Other intangibles     5,130
Goodwill     64,446
   
  Total assets acquired     599,174
Liabilities assumed:      
  Current liabilities     144,889
  Long-term liabilities     131,052
   
Net assets acquired   $ 323,233
   

46


Note 4. Statement of Operations Pro forma Adjustments and Assumptions

        

    (a)
    Represents adjustments to conform World Air Holdings to the method of accounting which has been followed by Global to amortize heavy maintenance. Adjustments also include the incremental depreciation on property and equipment and amortization on intangible assets resulting from purchase accounting.

 
  Year Ended
December 31, 2006

  Nine Months
Ended
September 30, 2007

Amortization on heavy maintenance activities(1)   $37,910   $ 27,333
Amortization on newly acquired intangibles(2)   25,898     15,451
Incremental depreciation on property and equipment(3)   2,152     1,614
   
 
Total adjustment to depreciation and amortization expense   $65,960   $ 44,398
   
 

      (1)
      Reflects an adjustment to conform World Air Holdings to the capitalize and amortize method of accounting for heavy maintenance.

      (2)
      Reflects the addition of definite-lived intangible assets or adjustments to intangible assets to be recorded as a result of the acquisition, consisting of the following;

 
  Asset Lives
  Amount
  2006
Amortization

  January 1, 2007
to August 14,
2007
Amortization

 
Amortized intangible assets                        
  Military contracts(i)   10 years   $ 256,680   $ 25,668   $ 15,901  
  Tradenames(ii)   1 year     1,130     1,130      
  Less historical amortization         (6,187 )   (900 )   (450 )
       
 
 
 
        $ 251,623   $ 25,898   $ 15,451  
       
 
 
 

        (i)
        Reflects estimated values of the World and North American AMC contracts.

        (ii)
        Reflects estimated values of the World and North American tradenames.

      (3)
      Reflects an adjustment to report World Air Holdings' property and equipment at fair value as part of purchase accounting. The estimated fair value of World Air Holdings' property and equipment resulted in total increase to property and equipment of $15,063. This increase in value was depreciated over the estimated weighted average useful lives of the assets of seven years.

47


    (b)
    Represents adjustment to interest expense to reflect borrowings in connection with the acquisition of World Air Holdings:

 
  Year Ended
December 31, 2006

  Nine Months
Ended
September 30, 2007

 
Interest expense on JPMorgan Term Loan:              
  JPMorgan Term Loan(1)   $ 43,109   $ 40,359  
  Amortization of deferred financing costs(2)     12,274     304  
  Amortization of discount on debt(3)     3,957     2,968  
  Interest expense recorded on borrowings which were not extinguished     9,872     4,597  
   
 
 
Total pro forma interest expense   $ 69,212   $ 48,228  

Less historical interest expense and related amortization of deferred financing costs

 

 

(25,725

)

 

(23,416

)
   
 
 
Adjustment to interest expense   $ 43,487   $ 24,812  
   
 
 

      (1)
      Represents interest on the JPMorgan Term Loan, which is calculated as follows:

 
  Year Ended
December 31, 2006

  Nine Months
Ended
September 30, 2007

 
Estimated average outstanding borrowings   $ 356,137   $ 399,854  
Interest rate     12.10 %   13.46 %
Portion of year outstanding     100 %   75 %
Calculated interest   $ 43,109   $ 40,359  
      (2)
      The 2006 adjustment represents amortization of deferred financing costs of $12,300 over the initial term of the JPMorgan Term Loan of 12 months. The 2007 adjustment represents amortization of deferred financing costs of $2,800 over the automatic extension period of the JPMorgan Term Loan of 7 years.

      (3)
      Represents amortization of discount on debt related to the issuance of 2,261,233 Warrants in connection with the financing over the entire period of the JPMorgan Term Loan of 8 years.

    (c)
    Assumes preferred dividends declared at 16% for entire period, are cumulative, shall accrete day to day and remain unpaid.

    (d)
    Represents adjustment to eliminate preferred stock dividends to reflect conversion of Series A preferred stock into common stock in connection with the rights offering, and an increase number of shares of common stock by 11,507,142. Share number also reflects the purchase of 1,808,986 Warrants by MatlinPatterson from JPMorgan and subsequent exercise into shares of Global's common stock.

48


    (e)
    Represents adjustments to conform World Air Holdings to the method of accounting which has been followed by Global for heavy maintenance activities from expense as incurred to capitalize and amortize, as well as from expense as incurred to capitalize for maintenance reserve payments and reimbursements.

    (f)
    Charter revenue is comprised of the following:

 
  Year Ended
December 31, 2006

  Nine Months
Ended
September 30, 2007

Military/Commercial Charter Revenue   $ 941,804   $ 778,099
ACMI Revenue     165,116     121,694
   
 
    $ 1,106,920   $ 899,793
   
 
    (g)
    Adjustment to reflect no federal income tax expense or benefit due to Global's losses in both periods.

49



SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA OF GLOBAL

        The following table sets forth Global's selected consolidated historical financial and operating data for each of the periods indicated. The selected historical financial data for the dates and periods ended prior to March 1, 2006 were derived from the audited consolidated financial statements of ATA's former parent, ATA Holdings Corp., which we sometimes refer to as our "predecessor". The statement of operations data for the years ended December 31, 2002, 2003, 2004 and 2005, for the two months ended February 28, 2006, for the ten months ended December 31, 2006 and the balance sheet data as of December 31, 2003, 2004, 2005 and 2006, were derived from Global's or its predecessor's audited consolidated financial statements included elsewhere in this prospectus. The statement of operations data for the nine month period ended September 30, 2006 was derived from Global's unaudited consolidated financial statements for the seven month period ended September 30, 2006 and from Global's predecessor's audited consolidated financial statements for the two months ended February 28, 2006 included elsewhere in this prospectus. The statement of operations data for the nine month period ended September 30, 2007 and the balance sheet data as of September 30, 2007, were derived from Global's unaudited interim financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited interim financial statements for Global and its predecessor included in this prospectus include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of that information for such unaudited interim periods. The financial information presented for the interim periods has been prepared in a manner consistent with the accounting policies of Global described elsewhere in this prospectus, and should be read in conjunction therewith. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period. The selected historical financial information should be read in conjunction with the sections entitled "Summary Unaudited Pro Forma Combined Statements of Operations Information", "Use of Proceeds", "Capitalization", "Unaudited Pro Forma Combined Statements of Operations", "Selected Consolidated Historical Financial and Operating Data of Global", "Management's Discussion and Analysis of Financial Condition and Results of Operations of Global" and the consolidated financial statements of Global and its predecessor and the related notes included elsewhere in this prospectus.

        The comparability of Global's selected historical financial and operating data has been affected by its reorganization. As we discuss more fully in "Note 1—Fresh-Start Reporting" of the notes to Global's audited consolidated financial statements as of and for the ten months ended December 31, 2006, Global's predecessor and certain of its affiliates, including ATA. Global's principal operating subsidiary, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in October 2004. Global emerged from bankruptcy protection on February 28, 2006 with a new capital structure. Global has applied fresh-start accounting as of March 1, 2006 for its consolidated financial statements. As a result of the fresh-start change in the basis of accounting for Global's underlying assets and liabilities, Global's results of operations and cash flows are separated as pre-March 1, 2006 (predecessor) and post-February 28, 2006 (successor). Global includes as a reporting period of its 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 Global's assets and operations it effected through its reorganization. As a result of these changes, Global does not believe

50



that its business operations or its operating results for periods prior to March 1, 2006 are comparable to its current business operations or its operating results since that date.

 
  Predecessor
  Global
  Predecessor
and Global

  Global
 
 
  Year Ended December 31,
  Two Months
Ended
Feb. 28,

  Ten Months
Ended
Dec. 31,

  Nine Months
Ended
September 30,

  Nine Months
Ended
September 30,

 
 
  2002
  2003
  2004(1)
  2005(1)
  2006(1)(2)
  2006(2)
  2006(1)(2)(3)
  2007
 
 
   
   
   
   
   
   
  (unaudited)

  (unaudited)

 
 
  (in thousands, except per share data)

 
Statement of Operations Data:                                                  
Operating revenues:                                                  
  Scheduled service   $ 886,579   $ 1,085,420   $ 1,099,944   $ 635,232   $ 53,527   $ 332,255   $ 294,398   $ 306,241  
  Charter     309,242     366,207     358,870     408,714     58,753     288,256     276,979     372,186  
  Other     81,549     66,906     73,757     48,355     2,771     16,551     15,069     15,072  
   
 
 
 
 
 
 
 
 
Total operating revenues     1,277,370     1,518,533     1,532,571     1,092,301     115,051     637,062     586,446     693,499  
   
 
 
 
 
 
 
 
 
Operating expenses:                                                  
  Fuel and oil     206,574     276,057     368,273     322,094     37,086     202,613     186,075     227,929  
  Salaries, wages and benefits     355,201     399,622     422,430     281,791     36,066     150,929     145,441     153,885  
  Aircraft rentals     190,148     226,559     242,602     148,614     16,181     69,439     64,840     82,146  
  Flight costs     93,119     105,055     100,327     82,243     11,488     52,769     48,682     59,354  
  Handling, landing and navigation fees     110,528     113,781     119,963     89,453     8,077     48,553     43,730     55,069  
  Selling and marketing     107,288     110,527     111,041     66,050     7,624     36,452     34,674     38,187  
  Aircraft maintenance, materials and repairs     52,254     45,741     74,992     44,801     3,103     29,051     24,306     44,324  
  Depreciation and amortization     76,727     56,729     52,013     36,270     5,219     17,386     16,716     23,352  
  U.S. Government grants     16,221     (37,156 )                          
  Asset impairments and aircraft retirements     66,787     5,288     7,887     403         13,476         4,844  
  Goodwill impairment     6,893                                
  Other     155,667     138,789     133,206     101,973     10,197     41,045     42,455     40,653  
   
 
 
 
 
 
 
 
 
Total operating expenses     1,437,407     1,440,992     1,632,734     1,173,692     135,041     661,713     606,919     729,743  
   
 
 
 
 
 
 
 
 
Operating income (loss)     (160,037 )   77,541     (100,163 )   (81,391 )   (19,990 )   (24,651 )   (20,473 )   (36,244 )
Other income (expenses):                                                  
  Reorganization items, net             (638,479 )   (369,632 )   1,456,000         1,456,000      
  Interest income     2,829     2,878     2,283     2,467     397     6,154     4,552     6,959  
  Interest expense     (35,746 )   (56,324 )   (51,145 )   (6,235 )   (4,666 )   (18,231 )   (17,757 )   (23,333 )
  Loss on extinguishment of debt             (27,314 )                    
  Other     (1,260 )   (2,350 )   (911 )   (796 )   (233 )   266     (180 )   (820 )
   
 
 
 
 
 
 
 
 
Total other income (expenses)     (34,177 )   (55,796 )   (715,566 )   (374,196 )   1,451,498     (11,811 )   1,442,615     (17,194 )
   
 
 
 
 
 
 
 
 
Income (loss) before income taxes     (194,214 )   21,745     (815,729 )   (455,587 )   1,431,508     (36,462 )   1,422,142     (53,438 )
Income taxes (credits)     (24,950 )   1,311                         488  
   
 
 
 
 
 
 
 
 
Net income (loss)     (169,264 )   20,434     (815,729 )   (455,587 )   1,431,508     (36,462 )   1,422,142     (53,926 )
Preferred stock dividends     (5,720 )   (4,642 )   (1,125 )                   (3,435 )
   
 
 
 
 
 
 
 
 
Income (loss) available to common stockholders(4)    $ (174,984 ) $ 15,792   $ (816,854 ) $ (455,587 ) $ 1,431,508   $ (36,462 ) $ 1,422,142   $ (57,361 )
   
 
 
 
 
 
 
 
 
Basic earnings per common share:                                                  
  Weighted average shares outstanding                                   10,752,688           10,755,358  
  Net loss per share                                 $ (3.39 )       $ (5.33 )
                                                   

51


Diluted earnings per common share:                                                  
  Average shares outstanding                                   10,752,688           10,755,358  
  Net loss per share                                 $ (3.39 )       $ (5.33 )

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Cash flows provided by (used in):                                                  
  Operating activities   $ (59,014 ) $ 93,779   $ (26,200 ) $ (67,010 ) $ (19,577 ) $ (34,847 ) $ (57,682 ) $ (25,456 )
  Reorganization activities             66,194     18,309     (6,014 )       (6,014 )    
  Investing activities     88,931     (98,694 )   531     (18,731 )   (10,406 )   8,689     973     (318,755 )
  Financing activities     (14,196 )   (34,601 )   (61,517 )   6,997     (6,777 )   51,924     48,750     379,968  
Capital expenditures     (59,346 )   (42,534 )   (26,660 )   (22,884 )   (8,447 )   (27,570 )   (15,528 )   (28,335 )

Selected Consolidated Operating Statistics (Unaudited):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Revenue passengers carried (thousands)     10,046.7     11,226.9     11,653.4     5,868.1     449.0     2,519.8     2,274.4     2,387.9  
Revenue passenger miles (millions)     12,384.2     14,358.7     14,678.5     8,709.7     816.2     4,799.2     4,302.9     4,664.7  
Available seat miles (millions)     17,600.0     21,125.9     21,242.0     13,360.2     1,362.9     6,804.2     6,239.4     6,338.2  
Passenger load factor     70.4 %   68.0 %   69.1 %   65.2 %   59.9 %   70.5 %   69.00 %   73.60 %
 
  Predecessor
  Global
  Global
 
  As of December 31,
  As of
December 31,

  As of September 30,
 
  2003
  2004
  2005
  2006
  2006(2)
  2007
 
   
   
   
   
  (unaudited)

  (unaudited)

 
  (in thousands)

Balance Sheet Data:                                    
Cash and cash equivalents   $ 160,644   $ 139,652   $ 79,217   $ 62,209   $ 65,244   $ 97,966
Property and equipment, net     253,482     182,759     101,267     89,947     83,551     143,678
Total assets     869,987     651,065     389,450     370,366     411,785     1,009,570
Total debt     494,696     41,000     54,600     146,662     147,190     357,102
Liabilities subject to compromise(5)         1,279,676     1,475,447            
Mandatorily redeemable preferred stock(6)     56,330                    
Convertible redeemable preferred stock     32,907                     158,644
Stockholders' equity (deficit)   $ (104,007 ) $ (920,556 ) $ (1,376,143 ) $ 72,290   $ 98,785   $ 178,992

(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. See Note 1 to our predecessor's audited consolidated financial statements for more information.

(2)
As of February 28, 2006, the effective date of the plan of reorganization, we adopted fresh-start accounting for our financial statements. See Note 1 to our audited consolidated financial

52


    statements with respect to our fresh-start financial reporting. Because of the emergence from bankruptcy and adoption of fresh-start accounting, the historical financial data for Global is not comparable to that of our predecessor.

(3)
The statement of operations data for the nine month period ended September 30, 2006 was derived from Global's unaudited consolidated financial statements for the seven month period ended September 30, 2006 and from Global's predecessor's audited consolidated financial statements for the two months ended February 28, 2006.

(4)
Preferred stock dividends of $5.7 million, $4.6 million, $1.1 million were recorded in 2002, 2003 and 2004. No preferred stock dividends were recorded in 2005, for the ten months ended December 31, 2006 or for the nine months ended September 30, 2007. No common stock dividends were paid in any period presented.

(5)
Liabilities subject to compromise refers to liabilities to be accounted for under a plan of reorganization, including claims incurred prior to the petition date. These amounts result from known or potential claims to be resolved through the Chapter 11 process and such claims remain subject to future adjustments.

(6)
Mandatorily redeemable preferred stock of $50.0 million was outstanding as of December 31, 2003 and as of December 31, 2004 and December 31, 2005 was classified on the balance sheet as a liability subject to compromise.

53



SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA OF WORLD AIR HOLDINGS

        The following tables set forth World Air Holdings' selected consolidated historical financial and operating data for the periods ended and at the dates indicated below. World Air Holdings' consolidated historical financial information for the fiscal years ended, and as of, 2004, 2005 and 2006 has been derived from World Air Holdings' audited annual financial statements included elsewhere in this prospectus. The consolidated historical financial information for the six month periods ended, and as of, June 30, 2006 and 2007 has been derived from World Air Holdings' unaudited interim financial statements included elsewhere in this prospectus, which, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of that information for such unaudited interim periods. The financial information presented for the interim periods has been prepared in a manner consistent with the accounting policies of World Air Holdings described elsewhere in this prospectus, and should be read in conjunction therewith. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period.

        The consolidated historical financial information should be read in conjunction with the sections entitled "Summary Unaudited Pro Forma Combined Statements of Operations Information," "Use of proceeds," "Capitalization," "Unaudited Pro Forma Combined Statements of Operations", "Management's Discussion and Analysis of Financial Condition and Results of Operations of World Air Holdings" and the consolidated financial statements of World Air Holdings and the related notes included elsewhere in this prospectus.

 
  Year Ended December 31,
  Six Months Ended
June 30,

 
  2002
  2003(1)
  2004
  2005(2)
  2006(3)
  2006
  2007
 
   
   
   
   
   
  (unaudited)

  (unaudited)

 
  (in thousands except per share data)

   
   
Statement of Operations Data:                                          
Operating revenues   $ 384,489   $ 474,850   $ 503,900   $ 787,138   $ 825,656   $ 392,910   $ 452,883
Operating expenses     377,367     446,422     463,617     730,522     826,436     396,412     445,871
Operating income (loss)     7,122     28,428     40,283     56,616     (780 )   (3,502 )   7,012
Earnings (loss) before income taxes     2,041     19,123     34,032     51,601     (2,647 )   (6,622 )   7,675
Income tax expense/(benefit)         3,802     8,445     19,973     (355 )   (2,685 )   3,256
Net earnings (loss)   $ 2,041   $ 15,321   $ 25,587   $ 31,628     (2,292 )   (3,937 )   4,419
Basic earnings (loss) per common share   $ 0.18   $ 1.37   $ 1.95   $ 1.40   ($ 0.10 )   (0.16 )   0.20
Basic weighted average common shares outstanding     11,073     11,224     13,095     22,588     23,643     23,986     22,541
Diluted earnings (loss) per common share   $ 0.18   $ 0.95   $ 1.09   $ 1.19   ($ 0.10 ) ($ 0.16 ) $ 0.18
Diluted weighted average common shares outstanding     11,073     17,783     24,591     26,824     23,643     23,986     25,038

54


 
  As of December 31,
  As of June 30,
 
  2003(1)
  2004
  2005(2)
  2006(3)
  2006
  2007
 
   
   
   
   
  (unaudited)

  (unaudited)

 
  (in thousands)

   
   
Balance Sheet Data:                                    
Total assets   $ 157,301   $ 179,317   $ 260,646   $ 198,750   $ 219,004   $ 225,839
Notes payable and long-term debt including current maturities     76,534     49,879     24,000            
Stockholders' equity (deficiency)   $ (8,030 ) $ 30,398   $ 86,838   $ 67,131   $ 84,514   $ 73,286

(1)
Includes the impact of a $3.0 million loss on debt extinguishment.

(2)
On April 27, 2005, World Air Holdings completed the acquisition of North American for approximately $34.8 million in cash. The financial data includes the results of North American from April 28, 2005 to December 31, 2005.

(3)
Financial data include the full year results of North American for 2006.

55



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF GLOBAL

        As used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations of Global", the terms "we", "us", "Global", and "the Company", refer to Global Aero Logistics Inc. and its subsidiaries on a consolidated basis as of September 30, 2007, unless the context requires otherwise. This section should be read in conjunction with the financial statements and related notes of Global, which are included elsewhere in this prospectus. For further information about Global, see "Prospectus Summary—Our company" and "Business."

Overview

        On August 14, 2007, Global acquired World Air Holdings and its wholly-owned subsidiaries World Airways, North American and World Risk Solutions, Ltd ("World Risk Solutions"). World Airways provides long-range passenger and cargo charter and wet-lease air transportation serving the U.S. Government, international freight and passenger airlines, tour operators, and customers requiring specialized aircraft services. North American provides passenger charter and wet-lease air transportation serving the U.S. Government, tour operators and other airlines. North American also operates international scheduled passenger service in selected markets. World Risk Solutions is a corporation whose business operation is to underwrite certain risk mainly associated with Global's aircraft. In addition, Global owns ATA which is a diversified passenger airline operating in two principal business lines: a low cost carrier providing scheduled service that leverages a codeshare agreement with Southwest Airlines ("Southwest"), and a charter operator that focuses primarily on serving the U.S. Government/military. We also continue to explore strategic opportunities for our scheduled service businesses—including network restructuring international expansion, business combinations and partial or complete divestitures. The results of operations for World Air Holdings and its subsidiaries from the date of acquisition, as well as ATA, have been consolidated into Global's financial statements as of and for the period ended September 30, 2007.

        The comparability of Global's historical financial data has been affected by ATA's reorganization. As discussed more fully in "Note 1—Fresh-Start Reporting" of the notes to Global's audited consolidated financial statements as of and for the ten months ended December 31, 2006, Global's predecessor and certain of its affiliates, including ATA, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in October 2004. Global emerged from bankruptcy protection on February 28, 2006 with a new capital structure. Global has applied fresh-start accounting as of March 1, 2006 for its consolidated financial statements. As a result of the fresh-start change in the basis of accounting for Global's underlying assets and liabilities, its results of operations and cash flows are separated as pre-March 1, 2006 (predecessor) and post-February 28, 2006. Global includes as a reporting period of its predecessor the pre-emergence two-month period ended February 28, 2006. The historical periods of Global's predecessor also do not reflect the impact of the changes in Global's assets and operations Global effected through its reorganization. As a result of these changes, we do not believe that Global's business operations or its operating results for periods prior to March 1, 2006 are comparable to Global's current business operations or Global's operating results since that date.

        The current environment in our business lines and the completion of the acquisition of World Air Holdings presents several opportunities as well as challenges for the Company. One of our key objectives is to take advantage of our fleet, especially with the acquisition of the World Air Holdings which provided us with 27 additional aircraft. Consistent with our strategy, we intend to use the additional aircraft to better optimize our fleet in order to more effectively meet the increasing demand in aircraft transportation for the markets we serve. In addition, as a result of the acquisition, we have the flexibility to shift aircraft among our business lines to manage future changes in the markets we serve more effectively. Managing and optimizing the additional aircraft, if effectively done, should result in greater revenues and reduced costs for our business. To the extent we are unable to optimize

56



our fleet, however, our results may suffer. In addition, we intend to diversify our revenue base by continuing the expansion of our military charter and ACMI cargo businesses, which is when a customer leases our aircraft, mainly in the cargo market, at a rate based on the aircraft, crew, maintenance, and insurance costs. Expanding our ACMI cargo business will involve increasing our freighter fleet to include aircraft suited for transpacific and intra-Asia routes, which are forecasted to be two of the fastest growing air cargo markets. Expanding our military charter cargo business involves providing the U.S. military contoured, wide-body cargo capacity to meet its specialized international cargo requirements on aircraft with payloads ranging between 65 and 90 tons. In this regard, on December 14, 2007, we entered into lease agreements on two Boeing 747-400 freighter aircraft. This expansion, however, may not succeed if our expectations regarding market demand are not correct, our management is unable to execute the expansion effectively, or for reasons beyond our control.

        We also continue to seek opportunities to streamline our operations and cost structure. As we execute the integration of the World Air Holdings acquisition, we plan to reduce our costs through rationalization of back office and other functions and leveraging the commonality in our newly combined fleet. We face the risk that we may not realize anticipated synergies or may otherwise face difficulties and costs in integrating the businesses of Global and World Air Holdings, which could have a material impact on our results of operations.

        Finally, we continue to face challenges in our scheduled service markets, where the competitive landscape is particularly difficult. For example, we recently announced that ATA discontinued routes from Chicago Midway to Washington Reagan (effective November 28, 2007), and will discontinue routes from Chicago Midway to New York—La Guardia (effective January 7, 2008) and from Chicago-Midway to Ontario/Honolulu (effective January 7, 2008) due to extreme financial pressure on our East Coast scheduled service segment. Due to a competitive pricing environment in these markets, ATA experienced low fares and yields, which negatively impacted its cash flow and results of operations, resulting in ATA management's decision to discontinue these routes. ATA currently has an agreement to enhance its current codeshare with Southwest to include near international markets in 2009. Our fleet has the long-range, over-water capability that Southwest's fleet does not provide, allowing us to fly Southwest's customers to Hawaii and near international destinations. Because of the numerous challenges in the scheduled service business, many of which are beyond our control, we may not succeed in achieving our plans.

57



Results of Operations

        The following tables set forth, for the periods indicated, selected statement of operations data of Global and its Predecessor.

 
  Predecessor
  Global
 
 
  Year Ended December 31,
  Ten Months
Ended
December 31,

  Ten Months
Ended
December 31,

 
 
  2004
  2005
  2005
  2006
 
 
  (in thousands)

   
  (unaudited)

   
 
Operating revenues:                          
  Scheduled service   $ 1,099,944   $ 635,232   $ 526,435   $ 332,255  
  Charter     358,870     408,714     333,081     288,256  
  Other     73,757     48,355     37,006     16,551  
   
 
 
 
 
Total operating revenues     1,532,571     1,092,301     896,522     637,062  
   
 
 
 
 
Operating expenses:                          
  Fuel and oil     368,273     322,094     267,095     202,613  
  Salaries, wages and benefits     422,430     281,791     219,777     150,929  
  Aircraft rentals     242,602     148,614     116,927     69,439  
  Flight costs     100,327     82,243     67,774     52,769  
  Handling, landing and navigation fees     119,963     89,453     69,710     48,553  
  Selling and marketing     111,041     66,050     53,611     36,452  
  Aircraft maintenance, materials and repairs     74,992     44,801     34,576     29,051  
  Depreciation and amortization     52,013     36,270     28,107     17,386  
  Asset impairments and aircraft retirements     7,887     403     214     13,476  
  Other     133,206     101,973     79,570     41,045  
   
 
 
 
 
Total operating expenses     1,632,734     1,173,692     937,361     661,713  
   
 
 
 
 
Operating income (loss)     (100,163 )   (81,391 )   (40,839 )   (24,651 )
Other income (expenses):                          
  Reorganization items, net     (638,479 )   (369,632 )   (363,811 )    
  Interest income     2,283     2,467     2,177     6,154  
  Interest expense     (51,145 )   (6,235 )   (5,162 )   (18,231 )
  Loss on extinguishment of debt     (27,314 )            
  Other     (911 )   (796 )   (639 )   266  
   
 
 
 
 
Other expense     (715,566 )   (374,196 )   (367,435 )   (11,811 )
   
 
 
 
 
Income (loss) before income taxes     (815,729 )   (455,587 )   (408,274 )   (36,462 )
Income taxes                  
   
 
 
 
 
Net income (loss)   $ (815,729 ) $ (455,587 ) $ (408,274 ) $ (36,462 )
   
 
 
 
 

58


        The following tables set forth, for the periods indicated, selected statement of operations data of Global and its Predecessor. The results of World Air Holdings and its wholly-owned subsidiaries, World Airways, North American and World Risk Solutions, have been included since the date of acquisition on August 14, 2007.

 
   
   
   
   
  Predecessor
 
 
  Three Months Ended
September 30,

   
   
 
 
  Nine Months
Ended
September 30,
2007

  Seven Months
Ended
September 30,
2006

  Two Months
Ended
February 28,
2006

 
 
  2007
  2006
 
 
  (in thousands)
(unaudited)

 
Operating revenues                                
  Charter   $ 211,676   $ 102,041   $ 372,186   $ 218,226   $ 58,753  
  Scheduled service     134,023     107,645     306,241     240,871     53,527  
  Other     7,134     5,169     15,072     12,298     2,771  
   
 
 
 
 
 
    Total operating revenues     352,833     214,855     693,499     471,395     115,051  
   
 
 
 
 
 
Operating expenses                                
  Fuel and oil     114,649     68,532     227,929     148,989     37,086  
  Salaries, wages, and benefits     65,181     44,566     153,885     109,375     36,066  
  Aircraft rentals     40,686     20,786     82,146     48,659     16,181  
  Flight cost     30,494     20,293     59,354     37,194     11,488  
  Handling, landing and navigation fees     29,536     16,427     55,069     35,653     8,077  
  Aircraft maintenance, materials and repairs     21,697     11,279     44,324     21,203     3,103  
  Selling and marketing     19,213     12,800     38,187     27,050     7,624  
  Depreciation and amortization     11,579     5,350     23,352     11,497     5,219  
  Asset impairment and aircraft retirements     1,195         4,844          
  Other expenses     16,731     10,564     40,653     32,258     10,197  
   
 
 
 
 
 
    Total operating expenses     350,961     210,597     729,743     471,878     135,041  
   
 
 
 
 
 
Operating income (loss)     1,872     4,258     (36,244 )   (483 )   (19,990 )

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  Interest income     2,933     1,790     6,959     4,155     397  
  Interest expense     (11,196 )   (5,541 )   (23,333 )   (13,091 )   (4,666 )
  Other, net     (992 )   (19 )   (820 )   53     (233 )
  Reorganization items, net                     1,456,000  
   
 
 
 
 
 
    Total other income (expense)     (9,255 )   (3,770 )   (17,194 )   (8,883 )   1,451,498  
   
 
 
 
 
 
Income (loss) before income tax expense     (7,383 )   488     (53,438 )   (9,366 )   1,431,508  

Income tax expense

 

 

488

 

 


 

 

488

 

 


 

 


 

Net income (loss)

 

$

(7,871

)

$

488

 

$

(53,926

)

$

(9,366

)

$

1,431,508

 

Preferred stock dividend

 

 

(3,435

)

 


 

 

(3,435

)

 


 

 


 
   
 
 
 
 
 
Income (loss) available to common shareholders   $ (11,306 ) $ 488   $ (57,361 ) $ (9,366 ) $ 1,431,508  
   
 
 
 
 
 

59


Three and Nine Months Ended September 30, 2007 Compared to Three and Nine Months Ended September 30, 2006

        The following table sets forth selected segment information for the periods indicated. In April 2006, Global began reporting results of operations for ATA's two business lines: military charter and scheduled service. For additional information regarding Global's operating business lines, see "Note 10—Segment Reporting" of Global's unaudited interim financial statements as of and for the period end September 30, 2007. Comparative data for the nine months ended September 30, 2006 is not available. The results of World Air Holdings and its wholly-owned subsidiaries, World Airways, North American and World Risk Solutions have been included since the date of acquisition on August 14, 2007.

 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

  Three Months
Ended September 30,

 
  2007
  2007
  2006
 
  (unaudited)

  (unaudited)

  (unaudited)

Operating revenue                  
  ATA Airlines—Scheduled Service   $ 126,907   $ 306,438   $ 111,585
  ATA Airlines—Military Charter     87,148     248,283     103,270
  World Airways     89,050     89,050    
  North American     50,204     50,204    
  Other, including eliminations     (476 )   (476 )  
   
 
 
Total operating revenue     352,833     693,499     214,855

Operating expense

 

 

 

 

 

 

 

 

 
  ATA Airlines—Scheduled Service     131,473     357,308   $ 116,033
  ATA Airlines—Military Charter     87,762     240,456     94,564
  World Airways     86,370     86,370    
  North American     45,162     45,162    
  Other, including eliminations     194     447    
   
 
 
Total operating expense     350,961     729,743     210,597
   
 
 
Operating income (loss)   $ 1,872   $ (36,244 ) $ 4,258
   
 
 

        The following table sets forth selected key metrics related to ATA, World Airways and North American's financial and statistical performance. The results of World Air Holdings, World Airways, and North American have been included since the date of acquisition on August 14, 2007.

 
  Three Months Ended September 30,
 
 
  2007
  2006
 
ATA Airlines—Scheduled Service              
  Passengers enplaned     804,129     693,046  
  Revenue passenger miles ("RPMs") (000s)     1,425,910     1,104,772  
  Available seat miles ("ASMs") (000s)     1,571,070     1,298,978  
  Load factor (RPMs divided by ASMs)     90.76 %   85.05 %
  Operating revenue per ASMs (in cents)     7.80 ¢   8.29 ¢
  Number of aircraft in fleet, end of period     20     19  
  Average daily aircraft utilization (block hours flown per day per aircraft)     11.33     10.73  
               

60



ATA Airlines—Charter

 

 

 

 

 

 

 
  Block hours     6,500     7,827  
  Operating revenue per block hour   $ 13,407   $ 13,194  
  Number of aircraft in fleet, end of period     9     10  
  Average daily aircraft utilization (block hours flown per day per aircraft)     7.57     8.30  

World Airways

 

 

 

 

 

 

 
  Block hours     7,258      
  Operating revenue per block hour   $ 12,269   $  
  Number of aircraft in fleet, end of period     17      
  Average daily aircraft utilization (block hours flown per day per aircraft)     9.5      

North American

 

 

 

 

 

 

 
  Block hours     4,434      
  Operating revenue per block hour   $ 11,323   $  
  Number of aircraft in fleet, end of period     10      
  Average daily aircraft utilization (block hours flown per day per aircraft)     9.8      
 
  Nine Months Ended September 30,
 
 
  2007
  2006
 
ATA Airlines—Scheduled Service              
  Passengers enplaned     2,078,275     2,015,211  
  Revenue passenger miles ("RPMs") (000s)     3,512,314     3,054,596  
  Available seat miles ("ASMs") (000s)     4,052,988     3,817,871  
  Load factor (RPMs divided by ASMs)     86.67 %   80.01 %
  Operating revenue per ASMs (in cents)     7.27 ¢   7.71 ¢
  Number of aircraft in fleet, end of period     19     19  
  Average daily aircraft utilization (block hours flown per day per aircraft)     10.60     10.56  

ATA Airlines—Charter

 

 

 

 

 

 

 
  Block hours     19,776     21,031  
  Operating revenue per block hour   $ 12,555   $ 13,170  
  Number of aircraft in fleet, end of period     10     10  
  Average daily aircraft utilization (block hours flown per day per aircraft)     7.33     7.75  

World Airways

 

 

 

 

 

 

 
  Block hours     7,258      
  Operating revenue per block hour   $ 12,269   $  
  Number of aircraft in fleet, end of period     17      
  Average daily aircraft utilization (block hours flown per day per aircraft)     9.5      

North American

 

 

 

 

 

 

 
  Block hours     4,434      
  Operating revenue per block hour   $ 11,323   $  
  Number of aircraft in fleet, end of period     10      
  Average daily aircraft utilization (block hours flown per day per aircraft)     9.8      

61


Operating Revenues

        Total operating revenues for the three months ended September 30, 2007 increased 64.2% to $352.8 million, as compared to $214.9 million for the three months ended September 30, 2006; and total operating revenues for the nine months ended September 30, 2007 increased 18.3% to $693.5 million, as compared to $586.4 million for the nine months ended September 30, 2006.

        Military and Commercial Charter Revenues.    Military and commercial charter revenues for the three months ended September 30, 2007 increased $109.7 million, or 107.5%, to $211.7 million, as compared to $102.0 million for the three months ended September 30, 2006; and military and commercial charter revenues for the nine months ended September 30, 2007 increased $95.2 million, or 34.4%, to $372.2 million, as compared to $277.0 million in the nine months ended September 30, 2006. World Air Holdings accounted for $127.4 million of the increases for the three and nine months ended September 30, 2007, respectively. Collectively 10,579 block hours, or 90.5% of the block hours, operated by World Airways and North American are on military and commercial charters. ATA's military and commercial charter revenues decreased $17.7 million and $32.2 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods of 2006. These decreases were primarily the result of fewer block hours having been flown, due to a change in the mix of aircraft flying.

        Scheduled Service Revenues.    Scheduled service revenues for the three months ended September 30, 2007 increased $26.4 million, or 24.5%, to $134.0 million, as compared to $107.6 million in the three months ended September 30, 2006; and scheduled service revenues for the nine months ended September 30, 2007 increased $11.8 million, or 4.0%, to $306.2 million, as compared to $294.4 million in the nine months ended September 30, 2006. North American accounted for $11.4 million of the increases for the three and nine months ended September 30, 2007, respectively. ATA's scheduled service revenue increased $15.0 million and $0.4 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods of 2006. These increases were the result of increases in ATA's scheduled service load factor in both periods of 2007. This was partially offset by ATA experiencing lower yields in both periods of 2007, as compared to the same periods of 2006, due to a more competitive pricing environment in 2007 mainly in ATA's East Coast markets.

Operating Expenses

        Total operating expenses for the three months ended September 30, 2007 increased 66.7% to $351.0 million, as compared to $210.6 million for the three months ended September 30, 2006; and total operating expenses for the nine months ended September 30, 2007 increased 20.2% to $729.7 million, as compared to $606.9 million for the nine months ended September 30, 2006.

        Fuel and Oil.    Fuel and oil expenses for the three months ended September 30, 2007 increased $46.1 million, or 67.3%, to $114.6 million, as compared to $68.5 million for the three months ended September 30, 2006; and fuel and oil expense for the nine months ended September 30, 2007 increased $41.8 million, or 22.5%, to $227.9 million, as compared to $186.1 million for the nine months ended September 30, 2006. World Air Holdings accounted for $40.0 million of the increases for the three and nine months ended September 30, 2007, respectively.

        ATA's increases in fuel and oil expense for the three and nine months ended September 30, 2007, as compared to the same periods of 2006, were primarily due to an increase in fuel consumption driven by the change in the mix of aircraft flying, which resulted in an increase in fuel and oil expense of $5.5 million and $0.7 million, respectively. These increases were partially offset by a decrease in the average cost per gallon of jet fuel of 1.8% and 0.1% resulting in a decrease in fuel and oil expense of $1.3 million for the three months ended September 30, 2007 and $0.6 million for the nine months ended September 30, 2007.

62



        Salaries, Wages and Benefits.    Salaries, wages and benefits expense includes the cost of salaries and wages paid to Global's employees, together with Global's cost of employee benefits and payroll-related local, state and federal taxes. Salaries, wages and benefits expense for the three months ended September 30, 2007 increased $20.6 million, or 46.2%, to $65.2 million, as compared to $44.6 million for the three months ended September 30, 2006; and salaries, wages and benefits expense for the nine months ended September 30, 2007 increased $8.5 million, or 5.8%, to $153.9 million, as compared to $145.4 million for the nine months ended September 30, 2006. World Air Holdings accounted for $21.8 million of the increases for the three and nine months ended September 30, 2007, respectively. ATA's salaries, wages and benefits decreased $1.2 million and $13.3 million in the three and nine months ended September 30, 2007, as compared to the same periods of 2006, due to the average number of employees decreasing 6.9% and 21.4%, respectively, partially offset by an increase in the average employee wage.

        Aircraft Rentals.    Aircraft rental expense for the three months ended September 30, 2007 increased $19.9 million, or 95.7%, to $40.7 million, as compared to $20.8 million for the three months ended September 30, 2006; and aircraft rental expense for the nine months ended September 30, 2007 increased $17.3 million, or 26.7%, to $82.1 million, as compared to $64.8 million for the nine months ended September 30, 2006. World Air Holdings accounted for $17.7 million of the increases for the three and nine months ended September 30, 2006, respectively. ATA's aircraft rental expense for the three months ended September 30, 2007 increased $2.2 million, as compared to the same period of 2006, mainly due to new lease agreements entered into for seven McDonnell Douglas DC-10-30 ("DC-10") aircraft in 2007. ATA's aircraft rental expense for the nine months ended September 30, 2007 decreased $0.4 million primarily due to ATA returning six aircraft to the lessors between January 1, 2006 and September 30, 2007, partially offset by the additional aircraft rental expense for the seven DC-10s.

        Flight Costs.    Flight costs are primarily the cost of air transportation, hotels and per diem incurred to position crewmembers away from their bases to operate flights throughout the world. Additionally, they include the onboard costs of meal and non-alcoholic beverage catering, the cost of alcoholic beverages and the cost of onboard entertainment programs, together with certain costs incurred for mishandled baggage and passengers inconvenienced due to flight delays or cancellations.

        Flight costs for the three months ended September 30, 2007 increased $10.2 million, or 50.2%, to $30.5 million, as compared to $20.3 million for the three months ended September 30, 2006; and flight costs for the nine months ended September 30, 2007 increased $10.7 million, or 22.0%, to $59.4 million, as compared to $48.7 million for the nine months ended September 30, 2006. World Air Holdings accounted for $12.3 million of the increases for the three and nine months ended September 30, 2007, respectively. ATA's flight costs decreased $2.1 million and $1.6 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods of 2006, primarily due to the decrease in military charter flying in 2007.

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

        Handling, landing, and navigation fees for the three months ended September 30, 2007 increased $13.1 million, or 79.9%, to $29.5 million, as compared to $16.4 million for three months ended September 30, 2006; and handling, landing and navigation fees for the nine months ended September 30, 2007 increased $11.4 million, or 26.1%, to $55.1 million, as compared to $43.7 million for the nine months ended September 30, 2006. World Air Holdings accounted for $10.7 million of the

63



increases for the three and nine months ended September 30, 2007, respectively. ATA's handling, landing and navigation fees increased $2.4 million for the three months ended September 30, 2007, as compared to the same period of 2006, primarily due to increased system-wide flight activity (departures) and a change in the mix of flying including operating out of more costly airports. ATA's handling, landing, and navigation fees increased $0.7 million for the nine months ended September 30, 2007, as compared to the same period of 2006, due to the receipt of a landing credit of $2.1 million from an airport in early 2006, partially offset by a decrease in flight activity (departures) between periods.

        Aircraft Maintenance, Materials, and Repairs.    Aircraft maintenance, materials, and repairs expense includes the cost of expendable aircraft spare parts, repairs to repairable and rotable aircraft components, contract labor for maintenance activities and other non-capitalized direct costs related to fleet maintenance, including spare engine leases, parts loan and exchange fees and shipping costs. It also includes the costs incurred under hourly engine maintenance agreements Global has on certain of its aircraft fleets. These agreements provide for Global to pay monthly fees based on a specified rate per engine flight hour in exchange for major engine overhauls and maintenance.

        Aircraft maintenance, materials, and repairs expense for the three months ended September 30, 2007 increased $10.4 million, or 92.0%, to $21.7 million, as compared to $11.3 million for the three months ended September 30, 2006; and aircraft maintenance, materials, and repairs expense for the nine months ended September 30, 2007 increased $20.0 million, or 82.3%, to $44.3 million, as compared to $24.3 for the nine months ended September 30, 2006. World Air Holdings accounted for $11.1 million of the increases for the three and nine months ended September 30, 2007, respectively.

        Aircraft maintenance, materials, and repairs expense for ATA for the three months ended September 30, 2007, as compared to the same period of 2006, decreased $0.7 million. This decrease was mainly due to less contract labor due to changes in the mix of maintenance activities; and the removal of two Boeing 737-300 aircraft from revenue service in May 2007 and September 2007. Aircraft maintenance, materials, and repairs expense for ATA for the nine months ended September 30, 2007 increased $8.9 million, as compared to the same period of 2006, due to the outsourcing of maintenance inventory management beginning in mid-2006, the addition of DC-10 aircraft to ATA's fleet, and unscheduled maintenance work related to unexpected aircraft parts breakage or damage, which was required on ATA's fleet in the first half of 2007 but that was not required in the same periods of 2006. ATA is not able to predict the level of unscheduled maintenance work in future periods.

        Selling and Marketing.    Selling and marketing expenses are comprised primarily of commissions on scheduled service sales by travel agents and on certain military and commercial charter flights, credit card processing fess incurred when selling to customers using credit cards for payments, and advertising costs.

        Selling and marketing expenses for the three months ended September 30, 2007 increased $6.4 million, or 50.0%, to $19.2 million, as compared to $12.8 million for the three months ended September 30, 2006; and selling and marketing expenses for the nine months ended September 30, 2007 increased $3.5 million, or 10.1%, to $38.2 million, as compared to $34.7 million for the nine months ended September 30, 2006. World Air Holdings accounted for $7.5 million of the increases for the three and nine months ended September 30, 2007, respectively. ATA's selling and marketing expenses decreased $1.1 million and $4.0 million for the three and nine months ended September 30, 2007, respectively, as compared to the same periods of 2006, primarily due to fewer commissionable military charter flights. For the three months ended September 30, 2007, this decrease was partially offset by an increase in selling and marketing expenses related to the increase in scheduled service flying, as compared to the same period of 2006.

64



        Depreciation and Amortization.    Depreciation reflects the periodic expensing of the recorded cost of owned airframe and engines, leasehold improvements, and rotable parts for all fleet types, together with our property and equipment. Amortization reflects the periodic expensing of the recorded value of Global's definite-lived intangible assets. Depreciation and amortization expense for the three months ended September 30, 2007 increased $6.2 million, or 114.8%, to $11.6 million, as compared to $5.4 million for the three months ended September 30, 2006; and depreciation and amortization expense for the nine months ended September 30, 2007 increased $6.7 million, or 40.1%, to $23.4 million, as compared to $16.7 million for the nine months ended September 30, 2006. World Air Holdings accounted for $4.6 million of the increases for the three and nine months ended September 30, 2007, respectively. ATA's depreciation and amortization expense increased $1.6 million and $2.1 million for the three and nine months ended 2007, respectively, as compared to the same periods of 2006, primarily due to engine and airframe overhauls, completed in late 2006 and the first nine months of 2007, which were and are being amortized over their useful lives.

        Asset Impairments and Aircraft Retirements.    In the first nine months of 2007, Global entered into agreements with two of its aircraft lessors to return its fleet of three Boeing 737-300 aircraft earlier than the termination dates set forth in the leases. One aircraft was removed from revenue service and returned in May 2007, one aircraft was removed from revenue service in September 2007 and returned in the fourth quarter of 2007, and the third aircraft was removed from revenue service and returned to the lessor in the fourth quarter of 2007. Global determined that it no longer needed these aircraft to support its scheduled service business. For the three and nine months ended September 30, 2007, the Company recorded $1.2 million and $4.8 million, respectively, to asset impairments and aircraft retirements expense related to the return of these aircraft.

        Other.    Other operating expenses primarily includes the cost of hull and liability insurance, the cost of general insurance policies such as worker's compensation insurance, facility and equipment rentals, technology related expense, external professional services and other items. Other operating expenses for the three months ended September 30, 2007 increased $6.1 million, or 57.5%, to $16.7 million, as compared to $10.6 million for the three months ended September 30, 2006; and other operating expenses for the nine months ended September 30, 2007 decreased $1.8 million, or 4.2%, to $40.7 million, as compared to $42.5 million for the nine months ended September 30, 2006. World Air Holdings accounted for a $6.0 million increase in other operating expenses for the three and nine months ended September 30, 2007, respectively. For the three and nine months ended September 30, 2007, as compared to the same periods of 2006, ATA's other operating expenses increased $0.1 million and decreased $7.8 million. In both periods of 2007, ATA experienced declining costs related to Global's restructuring and changes in flight activity. However, in the three months ended September 30, 2006, ATA recognized a one-time favorable adjustment of $1.5 million to its allowance for uncollectible accounts related to the collection of a significantly aged receivable. A similar adjustment was not recognized in the three months ended September 30, 2007.

        Reorganization Expense.    In accordance with SOP 90-7, Global's costs associated with the reorganization and restructuring of the business were reported separately as reorganization items in the consolidated statement of operations for the two months ended February 28, 2006.

        Global did not recognize reorganization expenses in the nine months ended September 30, 2007 or the seven months ended September 30, 2006, as Global had emerged from Chapter 11 bankruptcy. For

65



the two months ended February 28, 2006, Global recognized the following reorganization expenses in the consolidated statement of operations:

 
  Two Months Ended
February 28, 2006

 
Discharge of claims   $ (1,304,653 )
Revaluation of assets and liabilities     (178,895 )
Aircraft and engine lease rejection charges     10,522  
Other agreement and lease rejection charges     3,364  
Professional fees     11,046  
Interest income     (387 )
Other     3,003  
   
 
Total   $ (1,456,000 )
   
 

        The discharge of claims primarily relates to those unsecured claims arising during the bankruptcy process. In accordance with the Plan (as defined below), the Company discharged its obligations to unsecured creditors in exchange for cash or shares of Class A Common Stock of New ATA Holdings.

        The revaluation of assets and liabilities relates to the revaluing of Global's assets and liabilities at their estimated fair values or present values of amounts to be paid.

        The aircraft and engine lease rejection charges are non-cash charges comprised of Global's estimate of claims resulting from the rejection or return of the aircraft and engines as part of the bankruptcy process. They also include the write-off of assets and liabilities related to aircraft and engine leases that Global has rejected and returned to the lessor. The other agreement and lease rejection charges are non-cash charges that are comprised of Global's estimate of claims resulting from the rejection of non-aircraft agreements and leases.

        Interest Expense.    Interest expense for the three months ended September 30, 2007 increased $5.7 million, or 103.6%, to $11.2 million, as compared to $5.5 million for the three months ended September 30, 2006; and interest expense for the nine months ended September 30, 2007 increased $5.5 million, or 30.9%, to $23.3 million, as compared to $17.8 million for the nine months ended September 30, 2006. The increases were attributable to the recognition of interest expense related to a $28.0 million loan agreement entered into on January 16, 2007. In addition, 2007 includes interest expense related to a $340.0 million loan agreement entered into on August 14, 2007 in connection with the acquisition of World Air Holdings, partially offset by the repayment of $130.6 million in other indebtedness. See "Liquidity and Capital Resources—Financing Transactions" below for further information.

        Income Taxes.    Global did not record federal income tax expense or benefit for the three or nine month periods ended September 30, 2007 and 2006 due to its sustained losses. Global recorded $0.5 million of state income taxes in the three and nine month periods ended September 30, 2007. Global did not record state income tax expense in either period of 2006.

66


Ten Months Ended December 31, 2006 Compared to Ten Months Ended December 31, 2005

Results of Operations in Cents Per ASM

        The following tables set forth, for the periods indicated, Global's operating revenues and expenses expressed as cents per ASM.

 
  Cents per ASM
Ten Months Ended
December 31

 
 
  2005
  2006
 
Consolidated operating revenues   8.52   9.36  

Consolidated operating expenses:

 

 

 

 

 
  Fuel and oil   2.54   2.98  
  Salaries, wages and benefits   2.09   2.22  
  Aircraft rentals   1.11   1.02  
  Flight costs   0.64   0.78  
  Handling, landing and navigation fees   0.66   0.71  
  Aircraft maintenance, materials and repairs   0.33   0.43  
  Selling and marketing   0.51   0.54  
  Depreciation and amortization   0.27   0.26  
  Aircraft impairments and retirements   0.00   0.20  
  Other   0.76   0.59  
   
 
 
Total consolidated operating expenses   8.91   9.73  
   
 
 
Consolidated operating loss   (0.39 ) (0.37 )
   
 
 
ASMs (000s)   10,520,439   6,804,230  
   
 
 

67


Key Operating and Financial Data

        The following table sets forth certain key operating and financial data for Global for the periods indicated.

 
  Ten Months Ended December 31,
   
   
 
 
   
  Change (%)
 
 
  2005
  2006
  Change
 
Scheduled Service:                        
  Departures     37,428     17,085     (20,343 ) (54.35 )
  Block Hours     102,084     61,171     (40,913 ) (40.08 )
  RPMs (000s)(a)     5,545,854     3,477,503     (2,068,351 ) (37.30 )
  ASMs (000s)(b)     7,500,735     4,265,534     (3,235,201 ) (43.13 )
  Load Factor(c)     73.94     81.53     7.59   10.27  
  Passengers Enplaned(d)     4,442,602     2,226,307     (2,216,295 ) (49.89 )
  Revenue (000s)   $ 526,435   $ 332,255   $ (194,180 ) (36.89 )
  RASM in cents(e)     7.02     7.79     0.77   10.97  
  Yield in cents(f)     9.49     9.55     0.06   0.63  
  Revenue per passenger enplaned   $ 118.50   $ 149.24   $ 30.74   25.94  

Military/Commercial Charter:

 

 

 

 

 

 

 

 

 

 

 

 
  Departures     5,574     5,202     (372 ) (6.67 )
  Block Hours     25,748     22,384     (3,364 ) (13.07 )
  ASMs (000s)(b)     2,983,894     2,503,921     (479,973 ) (16.09 )
  Revenue (000s)   $ 333,081   $ 288,256   $ (44,825 ) (13.46 )
  RASM in cents(e)     11.16     11.51     0.35   3.14  
  RASM excluding fuel escalation(g)     10.82     11.33     0.51   4.71  

Percentage of Consolidated Revenues:

 

 

 

 

 

 

 

 

 

 

 

 
  Scheduled Service     58.7 %   52.2 %   (6.5 )    
  Military/Commercial Charter     37.2 %   45.3 %   8.0      

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

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

(c)
Passenger load factor is the percentage derived by dividing RPMs by ASMs.

(d)
Passengers enplaned are the number of revenue passengers who occupied seats on Global's flights.

(e)
Revenue per ASM (expressed in cents), or RASM, is total operating revenue divided by total ASMs. RASM measures Global's unit revenue using total available seat capacity.

(f)
Revenue per RPM (expressed in cents), or yield, is total operating revenue divided by total RPMs.

(g)
The military assumes an average fuel price for each contract year. If actual fuel prices differ from the contract rate, revenues are adjusted up or down to neutralize the impact on Global. Certain commercial charter contracts also provide for reimbursement to Global for certain fuel costs.

68


Operating Revenues

        Total operating revenues for the ten months ended December 31, 2006 decreased 28.9% to $637.1 million, as compared to $896.5 million for the ten months ended December 31, 2005.

        Scheduled Service Revenues.    Scheduled service revenues for the ten months ended December 31, 2006 decreased 36.9% to $332.3 million, as compared to $526.4 million for the ten months ended December 31, 2005. The decrease in revenues was mainly due to Global returning 26 jet aircraft, or 49% of its total aircraft fleet, to lessors between March 1, 2005 and December 31, 2006 as part of its reorganization.

        Military and Commercial Charter Revenues.    Military and commercial charter revenues for the ten months ended December 31, 2006 decreased 13.4% to $288.3 million, as compared to $333.1 million for the ten months ended December 31, 2005. The decrease in revenues was mainly the result of Global's continuing retirement of Lockheed L-1011 aircraft, partially offset by Global's utilization of additional narrow-body aircraft on military and commercial charters.

Operating Expenses

        Fuel and Oil.    Fuel and oil expense for the ten months ended December 31, 2006 decreased 24.1% to $202.6 million, as compared to $267.1 million for the ten months ended December 31, 2005. For the ten months ended December 31, 2006, system-wide block hours decreased by 34.5% as compared to the ten months ended December 31, 2005, resulting in a decrease in fuel and oil expense of approximately $94.1 million between these periods. This decrease was partially offset by an increase in the average cost per gallon of jet fuel. For the ten months ended December 31, 2006, the average cost per gallon of jet fuel consumed increased by 16.3% compared to the ten months ended December 31, 2005, resulting in an increase in fuel and oil expense of approximately $28.3 million between periods. Global also benefited from fuel reimbursement clauses and guarantees in its military/government and commercial charter contracts, as well as bulk scheduled service, but the benefit of these price guarantees was accounted for as revenue when realized during these periods.

        Salaries, Wages and Benefits.    Salaries, wages and benefits expense for the ten months ended December 31, 2006 decreased 31.3% to $150.9 million, as compared to $219.8 million for the ten months ended December 31, 2005. This decrease was mainly due to Global's average number of employees decreasing 40.0% between periods, partially offset by an increase in benefits expenses per employee between these periods.

        Aircraft Rentals.    Aircraft rentals expense for the ten months ended December 31, 2006 decreased 40.6% to $69.4 million, as compared to $116.9 million for the ten months ended December 31, 2005. This decrease was mainly due to Global returning 26 jet aircraft to lessors between March 1, 2005 and December 31, 2006 as part of its reorganization.

        Flight Costs.    Flight costs for the ten months ended December 31, 2006 decreased 22.1% to $52.8 million, as compared to $67.8 million for the ten months ended December 31, 2005. This decrease was due primarily to the decrease in system-wide jet departures of 45.7% between periods, partially offset by an increase in crewmember hotel and positioning costs primarily associated with military flying.

        Handling, Landing and Navigation Fees.    Handling, landing and navigation fees for the ten months ended December 31, 2006 decreased by 30.3% to $48.6 million, as compared to $69.7 million for the ten months ended December 31, 2005. This decrease was due primarily to a 45.7% decrease in system-wide jet departures between periods, partially offset by an increase in costs per departure for handling and landing between periods due mainly to less frequent flying to scheduled service stations.

69



        Selling and Marketing.    Selling and marketing expenses for the ten months ended December 31, 2006 decreased 31.9% to $36.5 million, as compared to $53.6 million for the ten months ended December 31, 2005. This decrease was primarily due to the decline in scheduled service activity between these periods.

        Aircraft Maintenance, Materials and Repairs.    Aircraft maintenance, materials and repairs expense for the ten months ended December 31, 2006 decreased 15.9% to $29.1 million, as compared to $34.6 million for the ten months ended December 31, 2005. This decrease was due to the rejection by Global of hourly engine maintenance agreements related to its Boeing 757-200 and Boeing 757-300 aircraft in the first half of 2005. This decrease was partially offset by outsourcing of maintenance activities and unscheduled maintenance work required on the Lockheed L-1011 fleet in 2006 that was not required in 2005.

        Depreciation and Amortization.    Depreciation and amortization expense for the ten months ended December 31, 2006 decreased 38.1% to $17.4 million, as compared to $28.1 million for the ten months ended December 31, 2005, due mainly to the reduction of certain aircraft parts and the revaluation of assets as part of Global's application of fresh-start accounting under American Institute of Certified Public Accountants Statement of Position No. 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, or SOP 90-7, in 2006.

        Asset Impairments and Aircraft Retirement.    In November 2006, Global executed an agreement to purchase seven McDonnell Douglas DC-10-30 wide-body aircraft from a third party, along with associated engines and two spare airframes. The DC-10-30s will go into service throughout 2007 and Global expects to hold the Lockheed L-1011 fleet as operational spares while transitioning to the DC-10-30 fleet. Beyond the fourth quarter of 2007, Global has no revenue commitments for use of Lockheed L-1011 time. In accordance with Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or FAS 144, Global determined that the estimated future undiscounted cash flows expected to be generated by the Lockheed L-1011 fleet were less than the current net book value of these aircraft and the related rotable parts and inventory. In 2006, Global recorded an asset impairment charge of $13.5 million to reduce the carrying amount of the Lockheed L-1011 aircraft and related assets to their estimated fair market value. In 2005, Global recorded an asset charge of $0.2 million related to the remaining net book value of its Boeing 727-200 aircraft.

        Other Operating Expense.    Other operating expense for the ten months ended December 31, 2006 decreased 48.5% to $41.0 million, as compared to $79.6 million for the ten months ended December 31, 2005. This decrease was attributable mainly to declining costs related to Global's reduction in fleet size and Global exiting leased space in certain airport locations.

        Reorganization Expense.    In accordance with SOP 90-7, Global's revenues, expenses (including professional fees), realized gains and losses and provision for losses that can be directly associated with the reorganization and restructuring of the business were reported separately as reorganization items in the consolidated statement of operations for 2005.

70



        Global did not recognize reorganization expenses for the ten months ended December 31, 2006 as Global had emerged from Chapter 11 bankruptcy. For the ten months ended December 31, 2005, Global recognized the following reorganization expenses in the consolidated statement of operations:

 
  Ten Months Ended
December 31, 2005

 
 
  (in thousands)

 
Aircraft and engine lease rejection charges   $ 138,180  
Other agreement and lease rejection charges     39,240  
ALPA claim     128,850  
Impairment of assets held for sale     10,799  
Aircraft impairment     18,347  
Professional fees     23,761  
Interest income     (2,107 )
Goodwill impairment      
Other     6,741  
   
 
  Total   $ 363,811  
   
 

        The aircraft and engine lease rejection charges are non-cash charges comprised of Global's estimate of claims resulting from the rejection or return of the aircraft and engines as part of the bankruptcy process. They also include Global's write-off of assets and liabilities related to aircraft and engine leases that Global has rejected and returned to the lessor. The other agreement and lease rejection charges are non-cash charges that are comprised of Global's estimate of claims resulting from the rejection of non-aircraft agreements and leases.

        The ALPA claim includes an unsecured pre-petition claim against Global by the Air Line Pilots Association, or ALPA, for the benefit of its members in the total amount of $128.9 million. On September 28, 2005, the cockpit crewmembers voted to ratify a new collective bargaining agreement effective October 1, 2005, which included, among other things, wage and benefit concessions and the pre-petition claim. The Bankruptcy Court approved the claim on October 12, 2005.

        The impairment of assets held for sale is a non-cash charge related to the discontinuance of the operations of C8 Airlines, Inc. (f/k/a Chicago Express Airlines, Inc.), or C8, and the sale of certain related assets. The aircraft impairment charge is related to repairable and rotable parts related to Global's Boeing 757-200, Boeing 757-300 and Boeing 737-800 fleets. Global conducted an impairment review on these parts in 2005 based on impairment indicators under FAS 144.

        Interest Expense.    Interest expense for the ten months ended December 31, 2006 increased 250% to $18.2 million, as compared to $5.2 million for the ten months ended December 31, 2005. In accordance with SOP 90-7, following its Chapter 11 filing, Global did not record interest expense with respect to pre-petition unsecured debt or secured debt in which the collateral value was less than the principal amount of the debt in 2005. Upon emergence from bankruptcy on February 28, 2006, Global began recording interest expense on its post-emergence outstanding debt.

        Income Taxes.    Global did not record any income tax expense or benefit for the ten months ended December 31, 2006 applicable to its pre-tax loss of $36.5 million for that period, nor did it record any income tax expense or benefit for the ten months ended December 31, 2005 applicable to its pre-tax loss of $408.3 million for that period. Global has recorded a full valuation allowance against its net deferred tax asset.

71



Fiscal Year Ended December 31, 2005 Compared to Fiscal Year Ended December 31, 2004

Results of Operations in Cents Per ASM

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

 
  Cents per ASM
Fiscal Year Ended
December 31,

 
 
  2004
  2005
 
Consolidated operating revenues   7.21   8.18  
Consolidated operating expenses:          
  Fuel and oil   1.73   2.41  
  Salaries, wages and benefits   1.99   2.11  
  Aircraft rentals   1.14   1.11  
  Flight costs   0.47   0.62  
  Handling, landing and navigation fees   0.56   0.67  
  Aircraft maintenance, materials and repairs   0.35   0.34  
  Selling and marketing   0.52   0.49  
  Depreciation and amortization   0.24   0.27  
  Asset impairments and aircraft retirements   0.04   0.00  
  Other   0.64   0.76  
   
 
 
Total consolidated operating expenses   7.68   8.78  
   
 
 
Consolidated operating loss   (0.47 ) (0.60 )
   
 
 
ASMs (000s)   21,242,000   13,360,194  
   
 
 

72


Key Operating and Financial Data

        The following table sets forth, for the periods indicated, certain key operating and financial data.

 
  Fiscal Year Ended
December 31,

   
   
 
 
   
  Change (%)
 
 
  2004
  2005
  Change
 
Scheduled Service:                        
  Departures     130,338     51,693     (78,645 ) (60.34 )
  Block Hours     276,287     134,701     (141,586 ) (51.25 )
  RPMs (000s)(a)     12,728,760     6,783,054     (5,945,706 ) (46.71 )
  ASMs (000s)(b)     17,450,098     9,610,306     (7,839,792 ) (44.93 )
  Load Factor(c)     72.94     70.58     (2.36 ) (3.24 )
  Passengers Enplaned(d)     11,190,961     5,493,998     (5,696,963 ) (50.91 )
  Revenue (000s)   $ 1,099,944   $ 635,232   $ (464,712 ) (42.25 )
  RASM in cents(e)     6.30     6.61     0.31   4.92  
  Yield in cents(f)     8.64     9.36     0.72   8.33  
  Revenue per passenger enplaned   $ 98.29   $ 115.62   $ 17.33   17.63  

Military/Commercial Charter:

 

 

 

 

 

 

 

 

 

 

 

 
  Departures     7,366     7,015     (351 ) (4.77 )
  Block Hours     32,520     32,460     (60 ) (0.18 )
  ASMs (000s)(b)     3,755,547     3,711,171     (44,376 ) (1.18 )
  Revenue (000s)   $ 358,870   $ 408,714   $ 49,844   13.89  
  RASM in cents(e)     9.56     11.01     1.45   15.17  
  RASM excluding fuel escalation(g)     9.16     10.74     1.58   17.25  

Percentage of Consolidated Revenues:

 

 

 

 

 

 

 

 

 

 

 

 
  Scheduled Service     71.8 %   58.2 %   (13.6 )    
  Military/Commercial Charter     23.4 %   37.4 %   14.0      

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

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

(c)
Passenger load factor is the percentage derived by dividing RPMs by ASMs.

(d)
Passengers enplaned are the number of revenue passengers who occupied seats on Global's flights.

(e)
Revenue per ASM (expressed in cents), or RASM, is total operating revenue divided by total ASMs. RASM measures Global's unit revenue using total available seat capacity.

(f)
Revenue per RPM (expressed in cents), or yield, is total operating revenue divided by total RPMs.

(g)
The military assumes an average fuel price for each contract year. If actual fuel prices differ from the contract rate, revenues are adjusted up or down to neutralize the impact on Global. Certain commercial charter contracts also provide for reimbursement to Global for certain fuel costs.

Operating Revenues

        Global's total operating revenues for the year ended December 31, 2005 decreased 28.8% to $1.092 billion, as compared to $1.533 billion for the year ended December 31, 2004.

73



        Scheduled Service Revenues.    Scheduled service revenues for the year ended December 31, 2005 decreased 42.3% to $635.2 million, as compared to $1.1 billion for the year ended December 31, 2004, consistent with the decline in ASMs. During 2005, Global returned 33 jet aircraft to lessors as part of its reorganization under Chapter 11. Approximately 51.1% of Global's scheduled service capacity was generated by flights either originating or terminating at Chicago-Midway in 2005, as compared to 64.8% in 2004. The Hawaiian market generated approximately 31.1% of scheduled service capacity in 2005, as compared to 14.9% in 2004. Another 13.4% of scheduled service capacity was generated in the Indianapolis market in 2005, as compared to 14.7% in 2004. On January 9, 2006, Global suspended scheduled service to and from Indianapolis.

        Military and Commercial Charter Revenues.    Military and commercial charter revenues for the year ended December 31, 2005 increased 13.9% to $408.7 million, as compared to $358.9 million for the year ended December 31, 2004. Military charter revenues increased due to increased demand and a change in the mix of aircraft flying as narrow body aircraft, which result in a higher yield, continued to replace retired wide-body aircraft. Offsetting this increase was a less significant decrease in commercial charter revenues due primarily to the retirement of certain Lockheed L-1011 aircraft that Global traditionally used in commercial charter flying.

Operating Expenses

        Fuel and Oil.    Fuel and oil expense for the year ended December 31, 2005 decreased 12.5% to $322.1 million in 2005, as compared to $368.3 million for the year ended December 31, 2004. During 2005, system-wide block hours decreased by 45.8% compared to 2004, resulting in a decrease in fuel and oil expense of approximately $136.2 million between periods. This decrease was partially offset by an increase in the average cost per gallon of jet fuel. During 2005, the average cost per gallon of jet fuel consumed increased by 37.8% compared to 2004, resulting in an increase in fuel and oil expense of approximately $91.4 million between periods. Global also benefited from fuel reimbursement clauses and guarantees in its military/government and commercial charter contracts, as well as bulk scheduled service, which were recorded as revenue.

        Salaries, Wages and Benefits.    Salaries, wages and benefits expense for the year ended December 31, 2005 decreased 33.3% to $281.8 million, as compared to $422.4 million for the year ended December 31, 2004, consistent with the average number of Global's full-time equivalent employees decreasing by approximately 35.4% between periods. On September 28, 2005, the cockpit crewmembers, who are represented by ALPA, voted to ratify a new three-year collective bargaining agreement that became effective October 1, 2005 and amendable on September 30, 2008. Under the new agreement, the cockpit crewmembers agreed to an 18% reduction in wages until January 1, 2007, modifications to the Cockpit Crewmember Money Purchase Plan and conversion to a new health insurance plan. The new agreement also provides the cockpit crewmembers with additional future wage compensation and incentives, as well as stock options representing 4% of Global's common stock.

        In October 2004, Global and its cabin crewmembers who are represented by the Association of Flight Attendants, or AFA, executed an amendment to the AFA agreement. Under the amended AFA agreement, the cabin crewmembers agreed to reduce their base hourly pay rate by 10% for the period from October 15, 2004 through October 15, 2006.

        Aircraft Rentals.    Aircraft rentals expense for the year ended December 31, 2005 decreased 38.7% to $148.6 million, as compared to $242.6 million for the year ended December 31, 2004. This decrease was partially attributable to the renegotiation of aircraft lease rates related to Boeing 757-300 and Boeing 757-200 aircraft after Global filed for bankruptcy protection. In addition, during 2005, Global returned 33 jet aircraft to lessors as part of its reorganization.

74


        Flight Costs.    Flight costs for the year ended December 31, 2005 decreased 18.0% to $82.2 million, as compared to $100.3 million for the year ended December 31, 2004. This decrease was mainly attributable to the decrease in scheduled service activity between periods, partially offset by an increase in military/government activity during 2005. Military flying requires more crew positioning costs and passengers on these flights require a more expensive catering product.

        Handling, Landing and Navigation Fees.    Handling, landing and navigation fees for the year ended December 31, 2005 decreased by 25.5% to $89.4 million, as compared to $120.0 million for the year ended December 31, 2004. This decrease was due primarily to a 38.1% decrease in system-wide jet departures between periods, partially offset by an increase in costs per departure for handling and landing between periods, mainly due to less frequent flying to scheduled service stations.

        Selling and Marketing.    Selling and marketing expenses for the year ended December 31, 2005 decreased 40.5% to $66.1 million, as compared to $111.0 million for the year ended December 31, 2004. This decrease was primarily due to the decline in scheduled service activity between periods.

        Aircraft Maintenance, Materials and Repairs.    Aircraft maintenance, materials and repairs expense for the year ended December 31, 2005 decreased 40.3% to $44.8 million, as compared to $75.0 million for the year ended December 31, 2004. This decrease was due primarily to the rejection by Global of hourly engine maintenance agreements related to its Boeing 757-200 and Boeing 757-300 aircraft in the first half of 2005. This decrease was also due to Global having a smaller aircraft fleet in 2005 as compared to 2004.

        Depreciation and Amortization.    Depreciation and amortization expense for the year ended December 31, 2005 decreased 30.2% to $36.3 million, as compared to $52.0 million for the year ended December 31, 2004. In the fourth quarter of 2004, Global recorded a significant impairment charge against its L1011-500 fleet. As a result, the fleet's depreciable value in 2005 was considerably less than its depreciable value in 2004. At the same time, the depreciable life of the fleet was shortened to reflect the most current planned fleet retirement schedule. In addition, depreciation expense in 2005 decreased as compared to 2004 as assets associated with furniture and fixtures, computer hardware and software, equipment and buildings became fully depreciated.

        Asset Impairments and Aircraft Retirements.    Global began performing impairment reviews on its 727-200 fleet in 2000 and the fleet became impaired in 2001, subsequent to the terrorist attacks of September 11. Global continues to monitor current fair market values of previously impaired assets. In 2004, Global recorded an asset impairment charge of $7.9 million against its investment in BATA Leasing LLC, or BATA, a joint venture with The Boeing Company that leases 727-200 aircraft as freighters to third parties.

        Other Operating Expense.    Other operating expense for the year ended December 31, 2005 decreased 23.4% to $102.0 million, as compared to $133.2 million for the year ended December 31, 2004. This decrease was primarily attributable to exiting or reducing lease space in certain airport locations, the reduction of fleet size and the reduction of the workforce as part of Global's restructuring.

        Reorganization Expenses.    In accordance with SOP 90-7, Global's revenues, expenses (including professional fees), realized gains and losses and provision for losses that can be directly associated with the reorganization and restructuring of the business are reported separately as reorganization items in the consolidated statement of operations.

75



        For the years ended December 31, 2005 and December 31, 2004, Global recognized the following reorganization expenses in the consolidated statement of operations:

 
  Fiscal Year Ended December 31,
 
 
  2004
  2005
 
 
  (in thousands)

 
Aircraft lease rejection charges   $ 568,317   $ 140,969  
Other agreement and lease rejection charges         39,240  
ALPA claim         128,850  
Impairment of assets held for sale         10,799  
Aircraft and related parts impairment charges     44,499     18,347  
Professional fees     8,747     27,895  
Interest income     (275 )   (2,532 )
Goodwill impairment     6,399     4,576  
Other     10,792     1,488  
   
 
 
  Total   $ 638,479   $ 369,632  
   
 
 

        The aircraft and engine lease rejection charges are non-cash charges comprised of Global's estimate of claims resulting from the rejection or return of the aircraft and engines as part of the bankruptcy process. They also include the write-off of assets and liabilities related to aircraft and engine leases that Global has rejected, committed to return dates with the lessor or intended to reject as of December 31, 2005. The other agreement and lease rejection charges are non-cash charges that are comprised of Global's estimate of claims resulting from the rejection of non-aircraft agreements and leases.

        The ALPA claim includes an unsecured pre-petition claim against Global by ALPA for the benefit of its members in the total amount of $128.9 million. On September 28, 2005, the cockpit crewmembers voted to ratify a new collective bargaining agreement effective October 1, 2005, which included, among other things, wage and benefit concessions and the pre-petition claim. The Bankruptcy Court approved the claim on October 12, 2005.

        The impairment of assets held for sale is a non-cash charge related to the discontinuance of C8 operations and the sale of certain related assets.

        Interest Expense.    Interest expense for the year ended December 31, 2005 decreased 87.9% to $6.2 million, as compared to $51.1 million for the year ended December 31, 2004. In accordance with SOP 90-7, following its Chapter 11 filing, Global did not record interest expense with respect to pre-petition unsecured debt or secured debt in which the collateral value was less than the principal amount of the debt.

        Loss on Extinguishment of Debt.    On January 30, 2004, Global completed exchange offers and issued Senior Notes due 2009 ("2009 Notes") and cash consideration for certain of its $175.0 million 101/2% Senior Notes due August 2004 ("2004 Notes") and issued Senior Notes due 2010 ("2010 Notes") and cash consideration for certain of its $125.0 million 95/8% Senior Notes due December 2005 ("2005 Notes"). Global issued $163.1 million in aggregate principal amount of 2009 Notes and delivered $7.8 million in cash in exchange for $155.3 million in aggregate principal amount of 2004 Notes tendered. Global also issued $110.2 million in aggregate principal amount of 2010 Notes and delivered $5.2 million in cash in exchange for $105.0 million in aggregate principal of 2005 Notes tendered. As a result of these transactions, Global recorded a non-operating loss on extinguishment of debt of $27.3 million in the first quarter of 2004 in accordance with FASB Emerging Issues Task Force Issue

76


No. 96-19, Debtor's Accounting for Modification of Exchange of Debt Terms. The loss mainly related to the accounting for the $13.0 million cash consideration paid at the closing of the exchange offers and the $13.0 million of incremental notes issued during the exchange offers.

        Income Taxes.    Global did not record any income tax expense or benefit for the year ended December 31, 2005 applicable to its pre-tax loss of $455.6 million for that period, nor did it record any income tax expense or benefit for the year ended December 31, 2004 applicable to its pre-tax loss of $815.7 million for that period. Global has recorded a full valuation allowance against its net deferred tax asset.

Liquidity and Capital Resources

        Predecessor Bankruptcy.    In the fourth quarter of 2004, ATA Holdings Corp. ("Holdings") and seven of its subsidiaries, including ATA, C8 and Ambassadair Travel Club, Inc. ("Ambassadair"), filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana.

        Holdings, ATA, American Trans Air ExecuJet, Inc. ("ExecuJet"), ATA Cargo, Inc. ("ATA Cargo") and ATA Leisure Corp. ("Leisure") received an order approving the Amended Joint Chapter 11 Plan for the Reorganizing Debtors as immaterially modified (the "Plan") on January 31, 2006. The Plan of reorganization became effective on February 28, 2006. Holdings did not reorganize and, prior to February 28, 2006, a new holding company, Global (f/k/a New ATA Holdings Inc.), was formed. ATA Cargo and Leisure were merged into Global prior to February 28, 2006. Holdings dissolved in mid-2006. The Chapter 11 cases of Ambassadair, Amber Travel, Inc. and C8 continue separately.

        The Plan of reorganization provided for the full payment pursuant to the Bankruptcy Code of all allowed administrative and priority claims, and provided for the restructuring of the loan agreement with, and the allowed secured loan indebtedness claim of, the Air Transportation Stabilization Board (or the ATSB) and other lenders. Holders of general unsecured claims of $1.0 million or less were approved to be paid a pro rata share, based on 1.0% recovery, up to a maximum total payout of $1.5 million. Holders of general unsecured claims over $1.0 million recovered an estimated 0.7% of their respective claims in shares and warrants of New ATA Holdings, based on the Company's value as estimated in the Plan. There were no material unresolved claims as of September 30, 2007.

        Liquidity.    As of September 30, 2007, Global had unrestricted cash of $98.0 million and a restricted cash balance of $26.1 million, which primarily secures letters of credit. In addition, Global had $53.8 million of cash on advance scheduled service ticket sales held by credit card processors until service is provided and recorded as a receivable on Global's balance sheet as of September 30, 2007. Global had no revolving credit facility and had no funds available through other unused financing options. Global expects that cash generated by operations will be sufficient to fund operations during the next twelve months.

        In the nine months ended September 30, 2007, net cash used in operating activities was $25.5 million mainly related to the Company's operating loss for the period. Cash used by the changes in operating assets and liabilities was $15.3 million. This mainly represented an increase in accounts receivable primarily associated with ATA's advanced scheduled service tickets sales for future flights held by credit card processors until service is provided as well as ATA's accounts receivable from its military charter business. This was partially offset by an increase in ATA's air traffic liability for advanced scheduled service ticket sales for future flights.

77



        Net cash used in investing activities in the nine months ended September 30, 2007 was $318.8 million, which mainly consisted of the acquisition of World Air Holdings, net of cash acquired, of $283.6 million and capital expenditures of $28.3 million.

        Net cash provided by financing activities for the nine months ended September 30, 2007 was $380.0 million, which mainly consisted of the receipt of $340.0 million under a term loan agreement and the receipt of $161.1 million related to the issuance of preferred stock. (See "Financing Transactions" below for further details) These receipts were offset by the net repayment of long-term debt of $107.1 million in the nine months ended September 30, 2007, and the payment of costs incurred related to the issuance of the term loan agreement and preferred stock.

        Financing Transactions.    On August 14, 2007, Global entered into a $340.0 million senior secured payment-in-kind ("PIK") term loan agreement with JPMorgan Chase Bank N.A. ("JPMorgan"), and Jefferies Finance LLC (the "Term Loan") in order to fund the acquisition of World Air Holdings. The Term Loan bears interest annually at LIBOR, plus a margin, payable-in-kind through August 14, 2009, and cash thereafter. The Term Loan has an automatic extension feature pursuant to which its final maturity is August 14, 2015. The lenders under the Term Loan may convert the loans into notes due in 2015 having terms substantially similar to the Term Loan. The Term Loan is secured by a significant portion of the Global's unencumbered assets. The lenders under the Term Loan received warrants to purchase 2.3 million shares of Global Common Stock with an exercise price of $0.01 per share immediately exercisable. On October 23, 2007, MatlinPatterson purchased the warrants held by JPMorgan and on that date MatlinPatterson exercised these warrants. Global has allocated $31.7 million as the total fair value of the warrants issued and has recorded this amount as a discount on the Term Loan. The discount will be accreted to interest expense over the stated term of the debt. The effective rate on the Term Loan, including the impact of the discount is 12.9%.

        In addition, on August 14, 2007 Global issued approximately $161.1 million of Series A preferred stock to an affiliate of MatlinPatterson with an annual cumulative dividend rate of 16.0% payable in common stock upon conversion but in no event will such dividend be equal to a value less than $8.0 million. The Series A preferred stock is convertible into common stock of Global at $14 per share. Upon conversion of the Series A preferred stock to common stock (the "Conversion Shares"), MatlinPatterson is required to complete a rights offering to shareholders of Global's common stock to purchase a pro rata share of the Conversion Shares at a price per share equal to the conversion price. In the fourth quarter of 2007, MatlinPatterson initiated both the process of converting the Series A preferred stock into shares of Global's common stock and the rights offering. The Company expects this transaction to be completed in the first quarter of 2008.

        Additionally on August 14, 2007, using funds from the Term Loan and the Series A preferred stock, Global repaid an $81.6 million loan, including accrued interest and a prepayment premium, totaling $2.3 million, which was partially guaranteed by the Air Transportation Stabilization Board ("ATSB"). Furthermore, Global repaid its two loans from MatlinPatterson totaling $54.3 million, including accrued interest.

        See "Note 11—Shareholder's Equity" on Global's unaudited financial statements as of and for the period ending September 30, 2007 for further information on the Series A preferred stock and warrants.

        Aircraft and Fleet Transactions.    In the fourth quarter of 2006, the Company signed a definitive purchase agreement with a third party in which the Company agreed to purchase seven McDonnell Douglas DC 10-30 ("DC-10") aircraft, two McDonnell Douglas DC 10-30 airframes, two spare engines, and certain other related property. The Company received a commitment from a lessor under which the Company assigned its purchase rights, and leased back the aircraft and other equipment. In

78



addition to the assignment, the Company and lessor agreed to share in the capital investment necessary to make the fleet operational. Then lease agreements require the Company to make payments aggregating approximately $38.0 million over approximately six years. As of September 30, 2007, one of these aircraft was in revenue service.

        On December 14, 2007 the Company entered into 10-year lease agreements for two Boeing 747-400 freighter aircraft. The aircraft are expected to be delivered in March and October 2008, respectively.

Critical Accounting Policies and Estimates

        The preparation of Global's financial statements in conformity with generally accepted accounting principles requires management 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 account policies used in the preparation of the financial statements require management to make difficult, subjective or complex judgments and are considered critical accounting policies by Global. Global has identified the following areas as critical accounting policies.

        Revenue Recognition.    Passenger revenue derived from ticket sales is recognized when transportation is provided. Passenger ticket sales for which transportation has not yet been provided are recorded as air traffic liability. The balance of the air traffic liability fluctuates throughout the year based on seasonal travel patterns and fare changes. Tickets that are sold but not flown on the scheduled travel date can be exchanged and reused for another flight, up to a year from the date of sale, or can be refunded if the ticket is sold under a refundable tariff. A small percentage of tickets (or partially used tickets) expire unused. Revenue from unused tickets is recognized upon the expiration of the ticket.

        Fresh-Start Reporting.    In accordance with SOP 90-7, Global adopted fresh-start reporting as of February 28, 2006. Fresh-start reporting required Global to value its assets and liabilities at their estimated fair value in accordance with FASB Statement of Financial Accounting Standards No. 141, Business Combinations, or FAS 141. The fair values of assets and liabilities represent Global's best estimates.

        Accounting for Long-Lived Assets.    As of December 31, 2006, Global had $89.9 million of net property and equipment and $51.6 million of definite-lived net intangible assets on its balance sheet. Generally, 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 Global's aircraft are depreciated over the period of benefit or the terms of the related leases, whichever is less. Properties under capital lease are amortized on a straight-line basis over the life of the lease. Global's facilities and ground equipment is generally depreciated over lives of three to seven years. Definite-lived intangible assets are amortized on a straight-line basis over the estimated lives of the related assets.

        In accordance with FASB Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or FAS 144, Global evaluates it long-lived assets, including definite lived intangible assets, for impairment when events or changed in circumstances indicate that the book value of the asset may not be recoverable. In testing for impairment, FAS 144 requires the undiscounted estimated future cash flows from the expected use of those assets to be compared to their net book value to determine if impairment is indicated. FAS 144 requires that assets deemed impaired be 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

79



information. The application of FAS 144 requires the exercise of significant judgment and the preparation of numerous significant estimates.

        Stock-Based Compensation.    Upon emergence from Chapter 11 bankruptcy, Global adopted share-based compensation plans for officers and key employees of Global, including Global's board of directors ("Management Plans"), and for cockpit crewmember employees (the "ALPA Plan"). Options under both the Management Plans and the ALPA Plan were granted with an exercise price not less that the market price at the grant date. None of Global's grants include performance-based or market-based vesting conditions. Global accounts for these plans in accordance with FASB Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment, or FAS 123R. FAS 123R requires companies to measure the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of the awards.

        Global estimates the fair value of stock option awards on the date of grant utilizing a modified Black-Scholes option-pricing model. Utilizing this method requires Global to make assumptions, some of which are subjective, including risk-free interest rate, stock price volatility and expected life of the options.

        The risk-free rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. Stock price volatility assumptions were based on historical volatilities of comparable airlines whose shares are traded using weekly stock price returns equivalent to the contracts term of the option. The expected life of the options was determined based upon a simplified assumption that the options will be exercised evenly from vesting to expiration under the transitional guidance of Staff Accounting Bulletin No. 107, Topic 14, Shared-Based Payments.

        As of December 31, 2006, Global had $5.1 million of total unrecognized compensation costs related to share-based compensation arrangements. Global expects to recognize this expense over a weighted-average period of 2.38 years.

Off-Balance Sheet Arrangements

        Debt and Operating Lease Cash Payment Obligations.    Global finances most of its aircraft with operating leases and consequently does not include assets and obligations associated with operating leases in its consolidated balance sheet. The following table summarizes Global's material contractual obligations and commitments and their currently scheduled impact on liquidity and cash flows as of September 30, 2007.

 
  Cash Payments Currently Scheduled
 
  Total
As of
September 30,
2007

  Q4 2007
  2008
  2009
  2010–2011
  After
2011

 
  (in thousands)

Current and long-term debt(1)   $ 349,209   $ 349   $ 1,443   $ 497   $ 208   $ 346,712
Capital leases     72,450     1,350     5,400     5,400     10,800     49,500
Operating leases(2)     1,483,274     57,819     201,764     188,144     332,588     702,959
   
 
 
 
 
 
Total contractual cash obligations   $ 1,904,933   $ 59,518   $ 208,607   $ 194,041   $ 343,596   $ 1,099,171
   
 
 
 
 
 

(1)
Amounts reflect scheduled principal payments. Amounts do not include scheduled interest payments, including payment of the PIK interest on the Term Loan. The Term Loan, which represents the most significant portion of Global's outstanding indebtedness, bears interest

80


    annually at LIBOR, plus a margin. (See "Liquidity and Capital Resources—Financing Transactions" for further information).

(2)
Amounts include estimated payments related to Global's acquisition of seven McDonnell Douglas DC-10- 30 aircraft leased beginning in January, 2007.

        Global is secondarily liable for gates and a hangar facility at Chicago Midway Airport assigned to Southwest. This position has been interpreted as a guaranty that is accounted for in accordance with FIN 45. In accordance with FIN 45, Global estimates the maximum potential amount of future payments (undiscounted) that could be required under this guaranty to be approximately $12.9 million as of September 30, 2007. However, Global has estimated the fair value of the guaranty as of September 30, 2007 to be minimal due to the remote likelihood that Global would be required to perform under the obligation and the mitigating steps that could be taken to eliminate the liability if such a need arose.

Inflation.

        To date, inflation has not had a significant effect on Global's operations.

Seasonality.

        Our scheduled service operations are seasonal by nature, with peak activity occurring during the spring and summer holiday seasons. This typically results in a decline in demand for these services in the first and fourth quarters of Global's fiscal year.

Quantitative and Qualitative Disclosures About Market Risk

        Global is subject to certain market risks, including commodity price risk resulting from aircraft fuel price fluctuations and interest rate risk. The adverse effects of potential changes in these market risks are discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional actions management might take to mitigate the adverse impact of such changes on Global. See the notes to Global's consolidated financial statements for a description of Global's accounting policies and other information related to these financial instruments.

        Aircraft fuel.    Global's results of operations are impacted by changes in the price of aircraft fuel. For the three and nine months ended September 30, 2007, aircraft fuel accounted for approximately 32.7% and 31.2%, respectively, of Global's operating expenses.

        World Airways, North American and ATA obtain fuel price fluctuation protection for their military and commercial charter flights. The military contracts include a fuel reconciliation process whereby the military compensates the airlines to the extent fuel costs exceed a fixed price, and the airlines reimburse the military to the extent fuel costs are below this fixed price. World Airways, North American and ATA also include fuel escalation clauses in certain commercial and bulk scheduled service contracts.

        ATA and North American's results of operations are affected by changes in the price of fuel for scheduled service flights and maintenance ferries. Market risk is estimated as a hypothetical 10% increase in the average 2007 cost per gallon of fuel. Based on the fuel usage for scheduled service flights and maintenance ferries, such a change would have resulted in an increase in aircraft fuel expense for Global of approximately $11.7 million. Based on the projected fuel usage for the 12 months

81


following September 30, 2007 for scheduled service flights and maintenance ferries, such a change would result in an increase in Global's aircraft fuel expense of approximately $16.7 million.

        Interest Rates.    Global's results of operations are affected by fluctuations in market interest rates. As of September 30, 2007, Global's variable-rate debt was comprised of the $340.0 million Term Loan. Holding other variables constant (such as debt levels), a one-hundred basis point change in interest rates on Global's variable-rate debt as of September 30, 2007 would be expected to have an impact on net income and cash flows of approximately $3.4 million.

        Foreign currency exchange rate risks.    Although some of the Company's revenues are derived from foreign customers, all revenues and substantially all expenses are denominated in U.S. dollars. The Company maintains minimal balances in foreign bank accounts to facilitate the payment of expenses.

82



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF WORLD AIR HOLDINGS

        As used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations of World Air Holdings", the term "World Air Holdings" refers to World Air Holdings, Inc. and its subsidiaries on a consolidated basis as of June 30, 2007, unless the context requires otherwise. This section does not reflect Global's acquisition of World Air Holdings and should be read in conjunction with the financial statements and related notes of World Air Holdings, which are included elsewhere in this prospectus. For further information about the combined company, see "Prospectus Summary—Our company", "Summary Unaudited Pro Forma Combined Statements of Operations Information" and "Business".

Overview and Results of Operations

Overview

        World Air Holdings' consolidated net loss was $2.3 million for the year ended December 31, 2006, as compared to net earnings of $31.6 million for the year ended December 31, 2005, and net earnings of $25.6 million for the year ended December 31, 2004. Net earnings were $4.4 million for the six months ended June 30, 2007, as compared to a net loss of $3.9 million for the six months ended June 30, 2006.

Results of Operations

        The following table sets forth selected information for the periods indicated:

 
  Year Ended December 31,
  Six Months Ended
June 30,

 
 
  2004
  2005*
  2006
  2006
  2007
 
 
  (in thousands)

 
Operating revenue                                
  World   $ 503,900   $ 623,719   $ 559,809   $ 273,987   $ 283,302  
  North American         163,333     267,195     119,290     170,372  
  World Air Holdings, World Risk Solutions and Eliminations         86     (1,348 )   (367 )   (791 )
   
 
 
 
 
 
Total operating revenue     503,900     787,138     825,656     392,910     452,883  

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  World     463,617     570,059     557,211     275,247     274,722  
  North American         162,201     271,144     121,212     171,926  
  World Air Holdings, World Risk Solutions and Eliminations         (1,738 )   (1,919 )   (47 )   (777 )
   
 
 
 
 
 
Total operating expense     463,617     730,522     826,436     396,412     445,871  

Operating income/(loss)

 

 

40,283

 

 

56,616

 

 

(780

)

 

(3,502

)

 

7,012

 

Total other income/(expense)

 

 

(6,251

)

 

(5,015

)

 

(1,867

)

 

(3,120

)

 

663

 
   
 
 
 
 
 
Earnings/(loss) before income tax expense     34,032     51,601     (2,647 )   (6,622 )   7,675  
Income tax expense/(benefit)     8,445     19,973     (355 )   (2,685 )   3,256  
   
 
 
 
 
 
Net earnings/(loss)   $ 25,587   $ 31,628   $ (2,292 ) $ (3,937 ) $ 4,419  
   
 
 
 
 
 

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006.

        For the second quarter of 2007, World Air Holdings' consolidated operating income was $6.2 million compared to operating loss of $12.9 million for the same period in 2006, an increase of

83



$19.1 million or 148.1%. Net income for the 2007 second quarter was $3.9 million compared to a net loss of $7.5 million for the second quarter of 2006, an increase of $11.4 million or 152.0%.

        The following table sets forth selected information for the periods indicated:

 
  Three Months Ended June 30,
 
 
  2006
  2007
 
 
  (in thousands)

 
Operating revenue              
  World   $ 115,605   $ 144,495  
  North American     61,192     85,545  
  World Air Holdings, World Risk Solutions and Eliminations     (140 )   (8 )
   
 
 
Total operating revenue     176,657     230,032  

Operating expense

 

 

 

 

 

 

 
  World     126,614     139,124  
  North American     63,426     85,123  
  World Air Holdings, World Risk Solutions and Eliminations     (435 )   (397 )
   
 
 
Total operating expense     189,605     223,850  

Operating income (loss)

 

 

(12,948

)

 

6,182

 

Total other income

 

 

228

 

 

397

 
   
 
 
Earnings (loss) before income tax expense     (12,720 )   6,579  
Income tax expense (benefit)     (5,241 )   2,678  
   
 
 
Net earnings (loss)   $ (7,479 ) $ 3,901  
   
 
 

        The following table sets forth selected key metrics related to World Airways and North American Airlines financial and statistical performance:

 
  Three Months Ended June 30,
 
  2006
  2007
Block Hours            
  World     13,000     13,693
  North American     5,944     7,930
   
 
Total     18,944     21,623

Revenue per Block Hour

 

 

 

 

 

 
  World   $ 8,893   $ 10,552
  North American   $ 10,295   $ 10,788
Total   $ 9,325   $ 10,638

Operating Expense per Block Hour

 

 

 

 

 

 
  World   $ 9,740   $ 10,160
  North American   $ 10,671   $ 10,734
Total   $ 10,009   $ 10,352

Operating aircraft at quarter end

 

 

 

 

 

 
  World     16     17
  North American     9     10

Average available aircraft per day

 

 

 

 

 

 
  World     16.3     17.0
  North American     9.0     10.0

Average daily utilization (Block Hours flown per day per aircraft)

 

 

 

 

 

 
  World     8.8     8.9
  North American     7.3     8.7

84


        Operating Revenues.    Total consolidated operating revenues increased $53.3 million, or 30.2%, to $230.0 million in the second quarter of 2007. The increase was primarily driven by a $55.9 million or 49% increase in AMC revenues, a $33.2 million increase at World and $22.7 million increase at North American. The increase at World is primarily driven by the AMC penalty status in the second quarter of 2006 not repeating in the second quarter of 2007. Additionally, in April 2007 World received $1.4 million related to certain AMC ferry flights flown in 2002 through 2004, which had previously been denied by AMC. The increase at North American is primarily a result of joining the largest teaming arrangement servicing the military during the fourth quarter of 2006. Additionally, North American's scheduled service revenues increased $7.2 million or 70% associated with the maturing West Africa routes. These increases were partially offset by a consolidated $9.4 million decrease in commercial charter passenger revenue as commercial capacity utilized in second quarter 2006 was utilized by AMC demand in second quarter 2007.

        Operating Expenses.    Total consolidated operating expenses increased $34.2 million, or 18.0%, to $223.8 million for the second quarter of 2007, compared to $189.6 million for the comparable quarter in 2006.

        Consolidated flight expenses increased $14.9 million, or 27.6%, to $68.9 million in the second quarter of 2007. The increase was due to an $8.5 million increase at North American and a $6.4 million increase at World. The increase at North American was primarily the result of a 55% increase in full service block hours flown during the second quarter of 2007. The increase at World was primarily the result of a 45% increase in full service military block hours flown.

        Consolidated maintenance expenses decreased $4.9 million, or 13.5%, to $31.5 million in the second quarter of 2007. North American increased by $1.1 million resulting from more time driven maintenance expense related to the increase in block hours flown. World decreased $6.0 million due to fewer heavy engine maintenance and normal scheduled airframe structural checks. In second quarter 2006, World Air Holdings was also impacted by airworthiness directive compliance costs related to MD-11 engines that did not repeat in second quarter of 2007.

        Consolidated aircraft costs which include aircraft rent and insurance, increased $2.3 million, or 7.5%, to $33.0 million in the second quarter of 2007. This is primarily due the B-767 aircraft added at North American in the first quarter of 2007.

        Consolidated fuel expenses were higher by $17.0 million, or 42.5%, increasing to $57.0 million in the second quarter of 2007. This was primarily driven by the 46% increase in consolidated full service block hours flown and a 1.6% increase in the average fuel price per gallon. The exposure to fuel cost at World is partially reduced by contracts with customers to provide for a pass-through of fuel costs on approximately 97% of fuel purchased. North American is exposed to changes in fuel prices for its scheduled service operations, which accounted for 24% of North American's block hours during the second quarter of 2007.

        Consolidated commission expense increased $4.5 million, or 60.8% to $11.9 million in the second quarter of 2007. This increase was primarily due to the 55% increase in consolidated AMC block hours flown.

        Consolidated other income (expense) net, increased $0.2 million to $0.4 million income in the second quarter of 2007. This favorable variance was primarily a result of the prepayment of the loan guaranteed by the Air Transportation Stabilization Board. The impact of the prepayment was that World Air Holdings did not incur any interest expense, amortization of debt issuance, warrant costs, or guarantee fees associated with this loan during the second quarter of 2007.

        The effective income tax rate for World Air Holdings was 40.7% for the second quarter of 2007 compared to a benefit of 41.2% in the same quarter of 2006. The increase in the effective rate is due to the impact of certain non-deductible items that do not fluctuate with the level of income, such as meal and entertainment expenses and penalties.

85


Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

        For the first six months of 2007, World Air Holdings' consolidated operating income was $7.0 million compared to operating loss of $3.5 million for the same period of 2006, an increase of $10.5 million or 300.0%. Net income for the first six months of 2007 was $4.4 million compared to net loss of $3.9 million for the same period in 2006, an increase of $8.3 million or 212.8%.

        The following table sets forth selected information for the periods indicated:

 
  Six Months Ended
June 30,

 
 
  2006
  2007
 
 
  (in thousands)

 
Operating revenue              
  World   $ 273,987   $ 283,302  
  North American     119,290     170,372  
  World Air Holdings, World Risk Solutions and Eliminations     (367 )   (791 )
   
 
 
Total operating revenue     392,910     452,883  

Operating expense

 

 

 

 

 

 

 
  World     275,247     274,722  
  North American     121,212     171,926  
  World Air Holdings, World Risk Solutions and Eliminations     (47 )   (777 )
   
 
 
Total operating expense     396,412     445,871  

Operating income/(loss)

 

 

(3,502

)

 

7,012

 
   
 
 
Total other income/(expense)     (3,120 )   663  
   
 
 
Earnings/(loss) before income tax expense     (6,622 )   7,675  
Income tax expense/(benefit)     (2,685 )   3,256  
   
 
 
Net earnings/(loss)     (3,937 )   4,419  
   
 
 

        The following table sets forth selected key metrics related to World and North American financial and statistical performance:

 
  Three Months Ended
June 30,

 
  2006
  2007
Block Hours            
  World     27,772     28,354
  North American     11,780     16,216
   
 
Total     39,552     44,570

Revenue per Block Hour

 

 

 

 

 

 
  World   $ 9,866   $ 9,992
  North American   $ 10,126   $ 10,506
Total   $ 9,934   $ 10,161

Operating Expense per Block Hour

 

 

 

 

 

 
  World   $ 9,911   $ 9,689
  North American   $ 10,290   $ 10,602
Total   $ 10,023   $ 10,004

Operating aircraft at year or quarter end

 

 

 

 

 

 
  World     16     17
  North American     9     10

Average available aircraft per day

 

 

 

 

 

 
  World     16.7     17.0
  North American     8.6     9.7

Average daily utilization (Block Hours flown per day per aircraft)

 

 

 

 

 

 
  World     9.2     9.2
  North American     7.6     9.2

86


        Operating Revenues.    Total consolidated operating revenues increased $60.0 million, or 15.3%, to $452.9 million during the six months ended June 30, 2007. The increase was primarily driven by a $51.1 million increase in revenues at North American. The North American performance was driven by a 62% increase in military revenue, primarily as a result of joining the largest teaming arrangement servicing the military during the fourth quarter of 2006. Additionally, North American's scheduled service revenues increased 67% associated with the maturing West Africa routes. World Airways' revenue increased $9.3 million primarily driven by a 7% increase in cargo demand and a 3% increase in military revenue. Additionally, in April 2007 World received $1.4 million related to certain AMC ferry flights flown in 2002 through 2004, which had previously been denied by AMC.

        Operating Expenses.    Total consolidated operating expenses increased $49.4 million, or 12.5%, to $445.8 million for the first six months of 2007, compared to $396.4 million for the comparable period in 2006.

        Consolidated flight expenses increased $21.7 million, or 18.8%, to $137.0 million during the first six months of 2007. The increase was due to a $20.7 million increase at North American which was primarily the result of a 38% increase in block hours flown during the first six months of 2007.

        Consolidated maintenance expenses decreased $1.9 million, or 2.8%, to $65.0 million during the first six months of 2007. The decrease was driven by a $5.2 million decrease at World Airways resulting from fewer heavy engine maintenance and normal scheduled airframe structural checks. During the first six months of 2006, the Company was also impacted by airworthiness directive compliance costs related to MD-11 engines that did not repeat in first six months of 2007. North American maintenance expense increased $3.3 million due to increased maintenance expenses related to the 38% increase in block hours flown and an increase in the number of scheduled airframe maintenance events. During the first quarter of 2007, the Company received $1.4 million insurance proceeds related to a maintenance event. This amount was recorded as a reduction to maintenance expense during the first six months of 2007.

        Consolidated aircraft costs, which include aircraft rent and insurance, increased by $4.8 million, or 8.0%, to $64.8 million during the first six months of 2007. This is primarily due to the addition of a B-767 aircraft during the first quarter of 2007, plus the full quarter effect of the B-767 added in March 2006.

        Consolidated fuel expenses were higher by $19.4 million, or 21.7%, increasing to $108.7 million during the first six months of 2007. This was primarily driven by the 24% increase in consolidated full service block hours flown and a 2.8% increase in the average fuel price per gallon. The exposure to fuel cost at World Airways is partially reduced by contracts with customers to provide for a pass-through of fuel costs on approximately 97% of fuel purchased. North American is exposed to changes in fuel prices for its scheduled service operations, which accounted for 24% of North American's block hours during the first six months of 2007.

        Consolidated flight operations subcontracted to other carriers decreased $2.0 million to $0.2 million. During the first quarter of 2006, the Company incurred increased subcontracted flights to other carriers as a result of a pilot strike at World Airways, which did not repeat in 2007.

        Consolidated commission expense increased $5.4 million, or 29.5% to $23.7 million during the first six months of 2007. This increase was primarily due to the 29% increase in consolidated AMC block hours flown.

        Consolidated other income (expense) net, increased $3.7 million to $0.6 million income during the first six months of 2007. This favorable variance was primarily a result of the prepayment of the ATSB Loan. The impact of the prepayment was that the Company did not incur any interest expense, amortization of debt issuance, warrant costs, or guarantee fees associated with this loan during the first quarter of 2007.

87



        The effective income tax rate for the Company was 42.4% for the first six months of 2007 compared to a benefit of 40.5% in the same period of 2006. The increase in the effective rate is due to the impact of certain non-deductible items that do not fluctuate with the level of income, such as meal and entertainment expenses and penalties.

    Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

        The following table sets forth selected key metrics related to World Airways and North American Airlines financial and statistical performance for the periods presented:

 
  Year Ended December 31,
 
  2004
  2005*
  2006
Block Hours                  
  World     47,759     58,515     56,102
  North American         17,175     27,475
   
 
 
Total     47,759     75,690     83,577

Revenue per Block Hour

 

 

 

 

 

 

 

 

 
  World   $ 10,551   $ 10,659   $ 9,978
  North American   $   $ 9,510   $ 9,725
Total   $ 10,551   $ 10,400   $ 9,879

Operating Expense per Block Hour

 

 

 

 

 

 

 

 

 
  World   $ 9,707   $ 9,742   $ 9,932
  North American   $   $ 9,444   $ 9,869
Total   $ 9,707   $ 9,652   $ 9,888

Operating aircraft at year or quarter end

 

 

 

 

 

 

 

 

 
  World     16     17     17
  North American         8     9

Average available aircraft per day

 

 

 

 

 

 

 

 

 
  World     16.0     16.6     16.6
  North American         8.0     8.8

Average daily utilization (block hours flown per day per aircraft)

 

 

 

 

 

 

 

 

 
  World     8.1     9.7     9.3
  North American         8.7     8.6

*
Financial and statistical data include the results of North American from April 28, 2005 to December 31, 2005

        Operating revenues increased $38.6 million, or 4.9%, to $825.7 million in 2006 from $787.1 million in 2005. The increase was primarily driven by the full year impact of North American offset by a decline in revenues at World. The decline at World was driven by lower flying under the World contract with the AMC of $78.9 million partially offset by an increase of $16.4 million in full service and ACMI cargo and passenger flying. The majority of the decrease in AMC flying at World was due to being placed on penalty status by the AMC during the second quarter. This occurred due to World failing to maintain minimum performance standards in the prior quarter. AMC capacity was further reduced by the conversion of an aircraft from passenger to freighter service and the curtailment of troop movement during the fourth quarter of 2006.

        Operating expenses increased $96.0 million or 13.1% to $826.5 million in 2006 from $730.5 million in 2005. Flight operation expenses include all costs related directly to the operation of the aircraft other than maintenance, aircraft rent, insurance and fuel. Flight operations expense increased

88



$15.5 million, or 7.1%, in 2006 to $234.0 million from $218.5 million in 2005. The full year impact of North American operations was partially offset by a cost decrease at World of $16.5 million primarily due to an overall decrease in total block hours. The decrease in expense at World was partially offset by a $2.6 million signing bonus paid to the cockpit crewmembers under the terms of the amended collective bargaining agreement.

        Maintenance expenses increased $33.4 million in 2006, or 29.3% to $147.2 million compared to $113.8 million in 2005. Maintenance cost at World increased $19.9 million mainly driven by incremental vendor-based maintenance events and related parts and material costs which included airworthiness directive compliance costs primarily related to MD-11 engines and significant maintenance required on the airframe of a purchased DC-10 aircraft.

        Aircraft costs, which include aircraft rent and insurance, increased $11.5 million, or 10.5%, to $121.1 million in 2006 compared to $109.6 million in 2005. The full year impact of North American operations was partially offset by lower hull liability insurance rates and a decrease in certain lease restructuring fees payable to a lessor.

        Fuel expenses increased $26.0 million, or 15.4%, to $194.5 million in 2006 from $168.5 million in 2005. Total gallons consumed decreased 2.3 million and the average price per gallon of fuel increased 18.4% to $2.20. World's contracts with its customers provided for a pass-through of fuel costs of approximately 96% of fuel gallons purchased. North American's exposure to fluctuations in fuel prices is limited to scheduled service operations, which accounted for approximately 24% of North American's block hours.

        Commissions increased $1.8 million, or 5.0%, to $38.1 million in 2006 compared to $36.3 million in 2005. The increase in overall block hours primarily drove the increase in commissions as they represent a percentage of revenue.

        Sales, general and administrative expenses increased $7.7 million, or 10.6%, to $80.3 million in 2006 from $72.6 million in 2005. The increase was primarily due to the impact of a full year of North American, and additional stock compensation expense. As a percent of total revenue, sales, general and administrative expenses increased from 9.2% to 9.7%.

        Operating income/loss decreased $57.4 million to a $0.8 million loss compared to a $56.6 million income in 2005.

        Other income (expense), net decreased $3.1 million or 62.0% to a $1.9 million expense in 2006 compared to a $5.0 million expense in 2005. As a result of the prepayment of World Air Holdings' loan from the ATSB, World Air Holdings recorded approximately $2.3 million in additional interest expense, representing the write-off of unamortized debt issuance, warrant costs and guarantee fees associated with this loan during the first quarter of 2006 which was offset by a $3.1 million reduction in interest expense for the remainder of 2006, a $0.5 million increase in interest income and a $1.8 million decrease in miscellaneous other expense due to the lower losses from disposal of assets.

        Income tax expense decreased $20.3 million to $0.4 million benefit in 2006 from $19.9 million expense in 2005. Tax expense includes a benefit from a decrease in state income taxes based on actual and expected state activity, partially offset by an increase in foreign taxes. The effective tax rate for the year ended December 31, 2006 was 13.4% compared to an effective tax rate of 38.7% for the year ended December 31, 2005.

    Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

        The consolidated financial statements for World Air Holdings include North American's results from April 28 through December 31, 2005. The comparative financial information shown below is

89


derived from World Air Holdings consolidated financial statements for the year ended December 31, 2005.

        Total consolidated operating revenues increased $283.2 million, or 56.2%, to $787.1 million in 2005 from $503.9 million in 2004. North American revenues were $163.3 million. The higher operating revenue was primarily attributable to an $86.9 million increase in flying under the World contract with the AMC, as well as an increase of $39.5 million in commercial cargo ACMI flying. These increases were offset by lower commercial full service cargo revenue of $3.1 million and commercial passenger revenue of $5.3 million than in 2004.

        Total consolidated operating expenses increased $266.9 million or 57.6% to $730.5 million in 2005 from $463.6 million in 2004.

        Flight expense increased $61.4 million, or 39.1%, in 2005 to $218.5 million from $157.1 million in 2004. The impact of North American on flight expense for 2005 was $44.5 million. The higher flight costs for World are directly attributable to the overall increase in total block hours.

        Maintenance expenses increased $37.8 million in 2005, or 49.7% to $113.8 million compared to $76.0 million in 2004. North American represented $19.7 million of the increase. World incurred higher maintenance expenses principally due to the increase in overall block hours and $8.8 million in incremental engine overhaul expense.

        Aircraft costs, which include aircraft rent and insurance, increased $32.4 million, or 42.0%, to $109.6 million in 2005 compared to $77.2 million in 2004. The increase reflects $22.5 million of cost related to North American and an increase of $9.9 million related to World. This is primarily due to the three additional MD-11 aircraft added to the fleet in late 2004 and in 2005, as well as short-term leasing of additional spare engines during 2005.

        Fuel expenses increased $94.0 million, or 126.2%, to $168.5 million in 2005 from $74.5 million in 2004. The inclusion of North American in consolidated results accounted for $40.4 million of the increase. Total gallons consumed increased due to the overall increase in block hours flown. Fuel prices increased 45.2% in 2005 compared to 2004. However, fluctuations in the price of fuel did not have a significant impact on operating income in 2005 because World's contracts with its customers provided for a pass-through of fuel costs of 97.2% of fuel purchased. North American's exposure to fuel prices is limited to scheduled service operations, which accounted for 25.6% of North American's block hours since its acquisition on April 27, 2005.

        Commissions increased $12.9 million, or 55.1%, to $36.3 million in 2005 compared to $23.4 million in 2004. The increase in overall block hours primarily drove the increase in commissions as they represent a percentage of revenue.

        Sales, general and administrative expenses increased $24.3 million, or 50.3%, to $72.6 million in 2005 from $48.3 million in 2004. The increase reflects $26.6 million of cost related to North American and a decrease of $2.3 million of costs related to World Air Holdings, World, and World Risk Solutions. These decreases were partially offset by professional fees and other costs associated with the acquisition of North American, increased audit fees, and costs associated with Sarbanes-Oxley Act compliance efforts. Also, included in 2004 were $1.1 million of personnel costs associated primarily with contractual obligations arising from the retirement of World Air Holdings' former Chairman/CEO on May 6, 2004.

        World Air Holdings recorded legal expense of $2.1 million in 2005 representing the settlement in 2006 of a wrongful termination lawsuit brought by a former pilot at North American.

        Income tax expense increased $11.5 million to $19.9 million in 2005 from $8.4 million in 2004. The effective tax rate for the year ended December 31, 2005 was 38.7% compared to an effective tax rate of 24.8% for the year ended December 31, 2004. For further information regarding this matter, see

90



Note 12 of World Air Holdings' "Notes to Consolidated Financial Statements". The change in the tax rate for 2005 was a result of a minimal change in the valuation allowance for deferred tax assets as compared to a significant reduction in the valuation allowance for 2004.

Liquidity and Capital Resources

        At June 30, 2007, World Air Holdings had $38.7 million of cash and cash equivalents and short-term investments compared to $31.2 million at December 31, 2006. Restricted cash was $2.0 million at June 30, 2007 and $1.1 million at December 31, 2006 representing prepayments from customers for flights that are scheduled to be flown within 30 to 60 days of the respective balance sheet date (unearned revenue).

        At December 31, 2006, World Air Holdings had $31.2 million of cash and cash equivalents and short-term investments compared to $47.0 million at December 31, 2005. Restricted cash was $1.1 million at December 31, 2006, representing prepayments from customers for flights that are scheduled to be flown within 30 to 60 days of the balance sheet date (unearned revenue). Restricted cash, current and non-current, was $7.1 million at December 31, 2005, which consisted of $4.2 million for letters of credit that had to be collateralized, $2.1 million of prepayments from customers for flights that are scheduled to be flown within 30 days of the balance sheet date (unearned revenue) and approximately $0.8 million held by the courts in the Dominican Republic. The acquisition of North American in April 2005 represented a cash cost of $36.2 million to World Air Holdings, less North American's unrestricted cash of $8.6 million.

Cash Flows from Operating Activities

        Operating activities provided $14.0 million in cash for the six-months ended June 30, 2007. The cash provided in 2007 principally reflects the $4.4 million net earnings, an $18.5 million effect in cash due to changes in operating assets and liabilities other than trade accounts receivable, a $1.6 million increase from net non-cash charges, and a $10.5 million decrease due to an increase in trade accounts receivable. For the six-months ended June 30, 2006, operating activities provided $15.0 million in cash. The cash provided in 2006 principally reflects the $3.9 million net loss, a $26.0 million decrease in cash due to changes in operating assets and liabilities other than trade accounts receivable, net non-cash statement of income charges of $9.1 million, and a $35.8 million increase due to a reduction in trade accounts receivable.

        Operating activities provided $36.1 million in cash for the year ended December 31, 2006 as compared to $33.9 million in 2005. The cash provided in 2006 principally reflects the $2.3 million net loss, an $8.9 million decrease in cash due to changes in operating assets and liabilities other than trade accounts receivable, a $13.0 million increase from net non-cash charges, and a $34.3 million increase due to a reduction in trade accounts receivable. The cash provided in 2005 principally reflects the $31.6 million net earnings, a $5.1 million increase in cash due to changes in operating assets and liabilities other than trade accounts receivable, and net non-cash statement of operations charges of $12.2 million, offset by a $15.0 million decrease due to an increase in trade accounts receivable.

Cash Flows from Investing Activities

        Investing activities used $17.8 million of cash for the six-months ended June 30, 2007. World Air Holdings' capital expenditures for the first six-months of 2007 were approximately $7.6 million, principally for the purchase of aircraft-related assets. Additionally World Air Holdings purchased $10.2 million in short term investments. Investing activities used $22.1 million of cash for the six months ended June 30, 2006. World Air Holdings' capital expenditures for the first six months of 2006 were approximately $4.7 million, principally for the purchase of aircraft-related assets. Cash flow from

91



investing activities also includes the proceeds from disposals of equipment and property of $0.3 million. Additionally World Air Holdings purchased $17.7 million in short term investments.

        Investing activities used $7.5 million in cash for the year ended December 31, 2006, compared to using $1.1 million in 2005. Cash flow from investing activities includes the proceeds from disposals of equipment and property of $0.6 million and the sale and purchase of short-term investments, which increased by a net amount of $0.8 million during 2006 compared to a decrease of $32.8 million in the prior year. In addition, during 2005, $26.9 million in net cash was used by World Air Holdings to acquire North American.

        World Air Holdings' capital expenditures for the year ended December 31, 2006 were approximately $8.9 million, principally for the purchase of aircraft-related assets. World Air Holdings financed these capital expenditures through internally generated funds.

        In April 2005, World Air Holdings purchased North American for approximately $34.8 million in an all-cash transaction plus direct acquisition costs of $1.4 million. See Note 10 of World Air Holdings' "Notes to Consolidated Financial Statements" for additional information.

        The following is a reconciliation of the purchase price paid for North American to the net acquisition cost:

Cash paid for acquisition of North American   $ 34,750  
Direct acquisition cost     1,408  
   
 
Total cash cost     36,158  
Less:        
North American cash and cash equivalents at April 27, 2005     (8,640 )
Adjustment to distribution made to Seller to cover tax payments as provided in Stock Purchase Agreement     (565 )
   
 
Total cash used to acquire North American   $ 26,953  
   
 

Cash Flows from Financing Activities

        Financing activities provided $1.1 million in cash for the six-months ended June 30, 2007, primarily the result of proceeds and related tax benefits from the exercise of stock options. For the six-months ended June 30, 2006, financing activities used $23.1 million, which was principally due to the use of $24.0 million of cash to prepay the remaining balance of the ATSB loan and $0.4 million of debt issuance cost associated with the March 30, 2006 Wachovia loan described below. This amount was partially offset by proceeds and related tax benefits from the exercise of stock options of $1.3 million.

        Financing activities used $43.6 million in cash for the year ended December 31, 2006. This was principally due to the use of $20.8 million of cash for the repurchase of 2.22 million shares of World Air Holdings' common stock and a $24.0 million principal repayment of the ATSB loan. These amounts were partially offset by proceeds and related tax benefits from the exercise of stock options of $1.7 million and $0.5 million in debt issuance cost associated with the Wachovia Loan (described below). For the year ended December 31, 2005, financing activities used $2.9 million, which was primarily due to the $1.7 million used to repay the contractual aircraft rent obligations to a lessor and a $6.0 million principal repayment of the ATSB loan. These amounts were partially offset by proceeds from the exercise of warrants and stock options of $2.5 million and $2.3 million, respectively.

        In the first quarter of 2005, The Boeing Company exercised warrants to purchase 1,000,000 shares of common stock at $2.50 per share. In addition, the ATSB exercised warrants to purchase 111,111 shares, and pursuant to the net exercise provisions of the warrants, received 76,345 shares of World Air Holdings' common stock.

92


        On February 22, 2005, World Air Holdings issued a notice of redemption of its Debentures, giving the holders until March 22, 2005 to exercise their conversion rights at a conversion price of $3.20 per share. The holders converted all of the Debentures outstanding by March 22, 2005. Future annual interest expense has been reduced by approximately $2.0 million due to the conversion of all of the Debentures.

Description of Certain Indebtedness.

        On December 30, 2003, World Air Holdings secured a $30.0 million ATSB loan. At December 31, 2005, World Air Holdings' indebtedness of $24.0 million outstanding under its $30.0 million ATSB loan was secured by substantially all of the company's assets. On March 30, 2006 World Air Holdings prepaid the remaining principal balance of $24.0 million under the ATSB Loan with working capital. World Air Holdings had recorded the $24.0 million outstanding balance as a current liability as of December 31, 2005 in the Consolidated Balance Sheets due to covenant violations. As a result of this prepayment, during the first quarter of 2006, World Air Holdings expensed $2.3 million in unamortized debt issuance cost and unamortized warrant costs associated with the ATSB loan.

        On March 30, 2006 the Company prepaid the remaining principal balance of $24.0 million outstanding under the $30.0 million the ATSB loan, which was 90% guaranteed by the ATSB and 10% guaranteed by a third party, with working capital. As a result of this prepayment, World Air Holdings expensed an additional $2.3 million in unamortized debt issuance and warrant costs associated with the ATSB loan during the first quarter of 2006.

        Additionally on March 30, 2006, World and North American entered a Loan and Security Agreement with Wachovia Bank, National Association, for the issuance of loans and letters of credit up to $50.0 million subject to certain terms, conditions, and limitations. World Air Holdings had no borrowings outstanding at June 30, 2007 or December 31, 2006. As part of the acquisition of World Air Holdings by Global on August 14, 2007 the Wachovia loan agreement was terminated.

Contractual Cash Obligations and Other Commitments and Contingencies

        World Air Holdings has significant long-term obligations relating to operating leases for aircraft and spare engines. In 2002 and 2001, World Air Holdings' predecessor paid amounts less than its original contractual aircraft rent obligations pursuant to agreements with its lessors that amended the terms of the original aircraft lease agreements to provide for the repayment of the unpaid contractual rent obligations. In April 2005, World Air Holdings made a final payment of $1.7 million related to these unpaid contractual aircraft rent obligations. In the first quarter of 2004, World Air Holdings reached an agreement with one of its MD-11 aircraft lessors to restructure certain leases. In exchange for reduced fixed monthly lease rates and a reduction in the lease term, World Air Holdings agreed to an annual restructuring fee based on net income. Payments commenced in 2005 based on 2004 results, and continue through the lease terminations in 2011, which will be paid in 2012. Over the term of the agreement, the total obligation of World Air Holdings is limited to $24.2 million on a cumulative basis. In individual years, the cash payment is limited to $1.6 million for 2005, $3.6 million per year for 2006 through and including 2011, and $1.0 million in 2012. Although cash disbursements are limited each year, due to the cumulative nature of the agreement, expense recognized in a given year may differ from the related cash obligation to be disbursed in the following year. During the second quarter of 2005, World Air Holdings and the lessor agreed to a definitive methodology used to calculate the restructuring fee. As a result, the company recognized a credit of $0.7 million related to the expense recorded during 2004. World Air Holdings paid $3.6 million and $1.6 million of this liability in the third quarter of 2006 and second quarter of 2005, respectively.

        Due to its bankruptcy filing, Delta Air Lines rejected and terminated certain subleases with World, as lessee, for three MD-11 aircraft. In October 2005, World signed a forbearance agreement, to extend

93



the leases, with the Indenture Trustee, who represented the owners of the aircraft, to prevent the repossession of the aircraft until November 30, 2005, and this forbearance agreement was subsequently extended until March 31, 2006. The lease payments prior to the bankruptcy were based on block hours flown, while the maximum monthly lease payment during the interim period was $0.3 million per aircraft. On March 31, 2006, World signed lease agreements with the new owner for two of the three aircraft, which will keep the aircraft in the World fleet through February 2008 and March 2008, respectively. On May 2, 2006, World signed a lease agreement with the new owner for the remaining MD-11 aircraft, with a lease term expiring in December 2007.

        World Air Holdings' aircraft leases require the company to pay certain maintenance reserves for airframes, engines, auxiliary power units and landing gears based on flight hours. Certain return conditions also must be met prior to returning the aircraft to the lessor. World Air Holdings also pays maintenance fees to certain maintenance providers for auxiliary power units based on flight hours. The aggregate amount World Air Holdings paid and expensed in 2006, 2005, and 2004 for maintenance reserves for airframes, engines, auxiliary power units and landing gears and maintenance fees for auxiliary power units was $50.5 million, $45.3 million, and $29.8 million, respectively.

        The following table presents aggregated information about World Air Holdings' contractual obligations, excluding contingent rentals related to maintenance reserve payments, at the date of issuance:

 
  Payment Due by Period
Contractual Obligations(1)

  Total
  1 Year
  2-3
Years

  4-5
Years

  More than
5 Years

 
  (in thousands)

Operating leases   $ 636,738   $ 124,980   $ 214,551   $ 164,441   $ 132,766
Accrued post-retirement benefits     6,138     353     873     1,112     3,800
   
 
 
 
 
Total   $ 642,876   $ 125,333   $ 215,424   $ 165,553   $ 136,566
   
 
 
 
 

(1)
Contractual obligations including lease extensions and aircraft commitments signed by World Air Holdings as of December 31, 2006.

        Under the Wachovia loan agreement, certain restrictions and requirements may limit World Air Holdings' financial and operating flexibility. In addition, if the company fails to comply with these restrictions or to satisfy these requirements, its obligations under the loan agreement and its operating leases may be accelerated. World Air Holdings cannot assure its stockholders that it would be able to satisfy all of these obligations upon acceleration. The failure to satisfy these obligations would materially adversely affect the company's business, operations, financial results or liquidity as well as the value of its common stock. There were no amounts outstanding on this loan facility at December 31, 2006.

        Although there can be no assurances, World Air Holdings believes that the combination of its existing contracts and additional business that it expects to obtain, along with its existing cash and financing arrangements, will be sufficient to allow World Air Holdings to meet its cash requirements related to operating and capital requirements through 2007.

Critical Accounting Policies and Estimates.

        The preparation of World Air Holdings financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amount reported in the consolidated financial statements and accompanying notes. World Air Holdings believes its estimates and assumptions are reasonable; however, actual results and the timing of the recognition

94



of such amounts could differ from those estimates. World Air Holdings' significant accounting policies are described in Note 1 of World Air Holdings' "Notes to Consolidated Financial Statements".

        The following are explanations of World Air Holdings' critical accounting policies, the judgments and uncertainties affecting the application of these policies, and the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

Accounting for Aircraft Repair and Maintenance Costs.

        World Air Holdings' maintenance costs, including Manufacturers Service Bulletins ("MSBs") and FAA Airworthiness Directives ("ADs"), are expensed as incurred. Under this method, costs are recognized when maintenance services are completed and as nonrefundable maintenance payments required by lease agreements and when maintenance contracts with outside maintenance providers become due.

        World Air Holdings' aircraft are maintained by outside maintenance providers. In certain cases, aircraft maintenance costs are covered by maintenance "reserve" payments made to the lessors of World Air Holdings' aircraft. In these cases, World Air Holdings is required to set aside funds monthly through nonrefundable payments to lessors to cover future maintenance work. After qualifying maintenance is completed, World Air Holdings records a maintenance receivable from the lessors and is reimbursed for amounts paid from the funds held by the lessors. The result of this arrangement is that World Air Holdings recognizes maintenance costs each month based on the amount of nonrefundable maintenance reserves required to be paid to its lessors (usually based on a rate per hour flown). In some cases, maintenance work does not qualify for reimbursement from maintenance reserves held by the lessor. This could be due to the type of maintenance performed or whether the aircraft component being maintained is covered by a lease agreement. For maintenance that is not covered by lessor reserves, World Air Holdings recognizes the costs when maintenance services are completed. Therefore, maintenance costs will fluctuate from period to period as scheduled maintenance work comes due or in the event unscheduled maintenance work must be performed. It is also important to note that aggregate maintenance reserves paid to each of World Air Holdings' lessors may not be sufficient to cover actual maintenance costs incurred. In these cases, the company incurs the cost of any shortfall when the maintenance services are completed and the costs are determinable.

Impairment of Long-Lived Assets.

        World Air Holdings reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. To the extent that appraisals of long-lived assets or the future undiscounted net cash flows expected to be generated from an asset are less than the carrying amount of the asset, an impairment loss will be recognized based on the difference between the asset's carrying amount and its estimated fair market value. Assets to be disposed of are reclassified as assets held for sale at the lower of their carrying amount or fair value less cost to sell.

Goodwill and Intangible Assets.

        Under the purchase method of accounting, the total purchase price was allocated to North American's net tangible and intangible assets based upon their estimated fair value at the date of acquisition with any amount paid in excess of the fair value of net assets recorded as goodwill. Intangible assets from the North American acquisition included the trademark, aircraft leases at market rates in excess of rental rates, Extended Range Two Engine Operations ("ETOPs") and goodwill (see Note 10 of World Air Holdings' "Notes to Consolidated Financial Statements"). World Air Holdings accounted for the intangible assets of North American in accordance with Statement of Financial Accounting Standards No. 142 ("SFAS No. 142"), Goodwill and Other Intangible Assets. Pursuant to

95



SFAS No. 142, goodwill and indefinite-lived intangibles, such as the trademark and ETOPs, are not amortized but are subject to periodic impairment reviews. World Air Holdings performed an annual impairment test as of October 1, 2006 for goodwill and indefinite-lived intangibles. This test indicated that goodwill and indefinite-lived intangibles were not impaired as of such date.

        The aircraft leases at net market rates in excess of rental rates of $2.8 million are being amortized on a straight-line basis over a weighted average of 31 months, which was the average remaining life of the aircraft leases at the date of the North American acquisition. World Air Holdings expensed $0.9 million and $0.7 million in 2006 and 2005, respectively. For the years ending December 31, 2007, 2008, and 2009, the annual amortization expense is estimated to be $0.6 million, $0.5 million, and $0.1 million, respectively.

Allowance for Doubtful Accounts and Bad Debt Expense.