Edgar Filing: ATLAS AIR WORLDWIDE HOLDINGS INC

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 0-25732

ATLAS AIR WORLDWIDE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 13-4146982
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2000 WESTCHESTER AVE., PURCHASE, NY 10577
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (914) 701-8000

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR
VALUE $.01 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

As of March 15, 2002, there were 38,250,583 shares of common stock
outstanding. The aggregate market value of such shares held by non-affiliates of
the registrant was approximately $294,873,551.
DOCUMENTS INCORPORATED BY REFERENCE

DESCRIPTION OF DOCUMENT PART OF THE FORM 10-K
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Portions of the Definitive Proxy Statement to Part III (Item 10 through Item 13)
be used in connection with the registrant's
2002 Annual Meeting of Stockholders

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PART I

ITEM 1. BUSINESS

GENERAL

Atlas Air Worldwide Holdings, Inc., a Delaware corporation, is the parent
company of Atlas Air, Inc., a Delaware corporation ("Atlas Air"), and Polar Air
Cargo, Inc., a California corporation ("Polar Air Cargo"). References to
"Company," "we," "us," or "our" refer to Atlas Air Worldwide Holdings, Inc. and
its subsidiaries. Our principal executive offices are located at 2000
Westchester Avenue, Purchase, New York 10577 and our telephone number is (914)
701-8000. We are the world's largest air cargo outsourcer, operating the largest
fleet of Boeing 747 freighter aircraft in the world.

Founded in 1992, Atlas Air began service with one Boeing 747-200 contracted
to China Airlines. First publicly traded on NASDAQ in 1995 under the symbol
ATLS, Atlas Air transferred its listing to the New York Stock Exchange on
November 11, 1997, trading under the symbol CGO. We adopted our holding company
structure in February 2001 whereby Atlas Air Worldwide Holdings, Inc. became the
parent holding company of Atlas Air. Atlas Air's principal business has been the
provision of aircraft, crew, maintenance and insurance (ACMI) services for a
number of the world's leading airlines. Under an ACMI contract, clients receive
a dedicated aircraft in exchange for a guaranteed minimum monthly level of
operation. This model allows clients to utilize Atlas Air efficiencies in order
to maintain or expand their presence in the world's cargo markets without
committing to aircraft ownership.

In 2001, Atlas Air announced an expansion of its product line to include a
broader array of products and services. These new services are based on the ACMI
model and include fractional ACMI, or the contractual provision of a portion of
the capacity of one or more aircraft to multiple customers; partial ACMI, or the
provision of an aircraft on less than a full time basis; dry leases for aircraft
(with maintenance and insurance if requested); and charters, among other
possibilities. These products typically require our customers to commit to
certain utilization levels under seasonal contracts, and in many instances the
revenue and cost structure vary from an ACMI Contract as the operations may
include arrangements for the provision of fuel, and ground handling and flight
related expenses. We anticipate that airline customers will find these products
to be desirable and complementary to their own business strategy, because risks
that would otherwise be borne by a single customer, such as contract term, load
factor, fuel and ground handling, are shared among several parties. To help
facilitate the delivery of these expanded product lines, Atlas Air has
established hubs in Liege, Belgium and Miami, Florida.

Polar Air Cargo specializes in scheduled service to international markets
with a fleet of Boeing 747 freighter aircraft, and offers important access to
Japan, through route and airport operating rights at Tokyo's Narita Airport.
Polar Air Cargo, which was founded in 1993, was acquired by Atlas Air Worldwide
Holdings, Inc. in November 2001.

The Company's strategy is to provide the highest level of service under
both of our operating brands while remaining a low-cost provider. To accomplish
these goals, we maintain a fleet of Stage III compliant Boeing 747 freighter
aircraft that are considered to be the most efficient and cost-effective for the
market segments served.

INDUSTRY BACKGROUND

We believe that growth in demand for air cargo services, combined with the
lower rate of growth in passenger airline cargo capacity and the continuing
pressure on the airline industry to reduce operating costs, will provide air
cargo companies such as ours with opportunities to expand their air cargo
outsourcing services. The primary business focus of most airlines is on the
transportation of passengers, not air cargo. Nevertheless, most passenger
airlines have air cargo customers that require quick and dependable air cargo
service. Airlines traditionally service such demand through the use of cargo
capacity on their scheduled flights. Scheduled flights are generally managed for
the convenience of passengers rather than for the needs of air cargo customers.
As a consequence, these airlines must either limit their ability to handle the
potential cargo

demand or acquire dedicated cargo lift. Many airlines have found that
outsourcing to meet their additional cargo transportation needs, rather than
allocating significant resources and expanding their fleet of freighter aircraft
to effectively service their air cargo customers, provides a cost-effective
alternative for them to maintain and expand that portion of their business.

The world air cargo market is expected to show substantial growth over the
next 20 years, according to industry sources such as Boeing and Airbus, the two
largest aircraft manufacturers. We believe this growth will be generated by
several factors, including:

- global economic growth;

- continued breakdown of international trade barriers;

- expanded use of just-in-time inventory practices;

- growth in export driven economies, particularly those of the countries in
the Pacific Rim;

- growth of e-commerce; and

- increased movement of manufacturing to economies with low labor costs.

On September 11, 2001, four commercial passenger aircraft were hijacked,
and two crashed into the World Trade Center in New York, one into the Pentagon
building in Virginia and one into a field in Pennsylvania. These terrorist
attacks resulted in mass destruction to human life and property damage. In
response to the attacks, the Federal Aviation Administration (FAA) issued a
federal ground stop on September 11, 2001 prohibiting all flights to and from
and within the United States. Most airports did not reopen until September 13,
2001. Since that time, we have deployed a portion of our available fleet to the
U.S. military Airlift Mobility Command (AMC). Our future schedule and the demand
for cargo lift will vary as we react to continuing changes in our customer's
freight demand and requirements.

On September 22, 2001, President Bush signed into law the Air Transport
Safety and System Stabilization Act, which, among other things, provides to all
U.S. airlines: $5 billion in compensation for direct losses incurred as a result
of the federal ground stop and incremental losses incurred through December 31,
2001 as a direct result of the attacks, of which we have received $21.5 million
and expect to receive at least $3.2 million in 2002; up to $10 billion in
federal government loan guarantees; $100 million limit on the liability of any
one carrier to third parties; and, compensation to individual claimants who were
injured.

COMPETITIVE STRENGTHS

We believe that our leading market position and our continued opportunities
for growth are directly attributable to the following competitive strengths:

Fleet economies of scale

Our combined fleet currently includes 51 Boeing freighter aircraft. Our
utilization of Boeing 747 aircraft provides significant marketing advantages
because these aircraft, relative to most other cargo aircraft that are
commercially available, have higher maximum payload and cubic capacities, and
longer range. The uniformity of our current Boeing 747 aircraft fleet allows for
standardization in maintenance and crew training, resulting in substantial cost
savings in these areas. The new Boeing 747-400 aircraft have greater operational
capabilities than the Boeing 747-200 aircraft and allow us to maintain our low
cost structure despite their higher acquisition cost. The new aircraft's lower
maintenance requirements provide a higher level of operational reliability with
lower maintenance costs during the early years of operation, typically for at
least five years. In addition, our 16 Boeing 747-400 freighter aircraft plus the
five additional Boeing 747-400 freighter aircraft that are scheduled for
delivery between 2002 and 2003, make us one of the largest operators of this
aircraft type to date and will enable us to capitalize on economies of scale
from the standardization in maintenance and crew training.

Fixed-term customer contracts

Our ACMI Contracts typically require our customers to guarantee monthly
minimum aircraft utilization levels at fixed hourly rates and are typically in
force for periods of one to five years, subject in certain limited cases to
early termination provisions. These contracts typically require us to supply
aircraft, crew, maintenance and insurance, while our customers generally bear
all other operating expenses, including:

- fuel and fuel servicing;

- marketing costs associated with obtaining cargo;

- airport cargo handling;

- landing fees;

- ground handling, aircraft push-back and de-icing services; and

- specific cargo and mail insurance.

Under these contracts, our customers also bear the risk for demand and
yields while utilizing the contracted aircraft. Therefore, our ACMI Contracts
minimize the risk traditionally associated with the air transport business and
provide a minimum annual revenue and cost base and more predictable profit
margins. All of our revenues, and most of our costs, under ACMI Contracts are in
U.S. dollars, thus avoiding currency risks normally associated with
international business.

While our ACMI Contracts represented approximately 80% of our total
operating revenues in 2001, we expect such percentage to decrease in the future
as the proportion of our business operated under expanded product lines or as
Scheduled Service and Other Flight Operation arrangements has increased, and we
expect will continue to increase. We expect this trend to continue as the
operating results of Polar Air Cargo, primarily a scheduled cargo service
provider, are included on a full year basis.

Low cost structure

We have maintained ourselves as a low cost, efficient and reliable provider
of air cargo transportation. This is primarily due to our lower labor costs, the
outsourcing of many of our required services, the advantageous economies
realized from the operation of a standardized fleet of long-haul Boeing 747
aircraft, and our productive work force. The uniformity of the Boeing 747
aircraft fleet allows for standardization in maintenance and crew training,
resulting in substantial cost savings in these areas. In particular, we have
advantageous, long-term contracts on a fixed cost per flight hour basis with
leading maintenance providers such as GE, Lufthansa Technik and MTU Maintenance
Hanover for a significant portion of our on-going aircraft and engine
maintenance requirements. As a result of these efficiencies, our high service
standards and increased airline industry pressure to reduce costs, our airline
customers have determined that outsourcing portions of their air cargo business
to us can be significantly less costly and offer greater operational flexibility
than expanding their cargo operations by purchasing additional aircraft and
adding other resources such as personnel and systems.

Revenue Diversification

We participate in both the retail and wholesale sectors of the long range,
heavy cargo market. Atlas Air is primarily concerned with the wholesale market,
focusing on providing air cargo services to some of the world's leading
airlines. Polar Air Cargo participates in the retail sector by providing
scheduled service and charter cargo service, and is principally focused on
serving freight forwarders operating within the Japan-U.S. market, as well as
Pacific, Europe and South America markets.

STRATEGY

Our strategy is designed to make us the world's largest and most profitable
provider of short and long term independent air cargo capacity. The key elements
of this strategy are as follows:

Exploit ACMI market leadership.

Atlas Air is the world's leading ACMI cargo carrier. This position has been
earned as a result of our ability to provide high-quality, cost-effective
service using our fleet of Boeing 747-400 and Boeing 747-200 aircraft. Our state
of the art equipment provides our customers both operational and financial
flexibility. Our relatively dominant position means that Atlas Air is a credible
solution to any airline that wishes to outsource heavy lift requirements.

Provide additional unique products to our existing customer base and prospects.

We have made available a series of unique products such as fractional and
partial ACMI products. These products allow us to meet our customers' varying
needs by delivering more flexible products that are aligned with their needs and
serve to differentiate Atlas Air from its competitors. We believe that the
combination of our traditional product offerings and our new product line will
enable us to better service existing customers and to compete for new customers.

Use fleet size as a competitive advantage.

As the world's largest operator of Boeing 747 freighter aircraft, we are
uniquely positioned to service cargo aircraft demand from the widest range of
potential customers. Our fleet size allows us to pursue with confidence both
long and short term opportunities. For example, our combined fleet is one of the
largest providers of heavy lift for the U.S. military's Air Mobility Command
since the September 11, 2001 terrorist attacks.

Utilize the acquisition of Polar Air Cargo to both grow revenues and reduce
costs.

Our acquisition of Polar Air Cargo enables us to participate in the large
air cargo scheduled service retail sector, a market previously unavailable to
Atlas Air. The addition of Polar Air Cargo to our operation provides a
significant and diversified new source of revenue. We also believe that
substantial operational synergies exist between Atlas Air and Polar Air Cargo,
given the comparable fleet and compatibility of many operating areas. We
anticipate that these synergies will enable us to operate both entities more
efficiently and will result in overall operational cost savings, and are taking
steps to capitalize on these synergies.

ACMI PRODUCTS

ACMI Contracts

At December 31, 2001, we had ACMI Contracts with 12 full-time customers.
China Airlines Ltd. accounted for approximately 13%, and no other customer
accounted for 10% or more, of our total revenues for the year ended December 31,
2001. In addition, we have also operated short-term, seasonal ACMI Contracts
with companies such as UPS, FedEx and Emery Air Freight, among others, and
anticipate doing so in the future.

Some of our ACMI Contracts allow customers to cancel up to a maximum of
approximately 5% of the guaranteed hours of aircraft utilization over the course
of a year. Our customers most often exercise such cancellation options early in
the first quarter or late in the fourth quarter of the year, when the demand for
air cargo capacity has been historically lower. We have found that such
cancellations provide a timely opportunity for the scheduling of maintenance on
our aircraft, to the extent possible.

All of the ACMI Contracts provide that each of our aircraft be deemed to be
at all times under our exclusive operating control, possession and direction.
They also provide that, in order to service the routes designated by the
contract, we obtain the authority from the governments having jurisdiction over
the route. If we are required to use the customer's "call sign" in identifying
ourselves throughout our route, the customer must also have obtained underlying
authority from the governments having jurisdiction over the route. Therefore,
our route structure is limited to areas in which we can gain access from the
appropriate governments. Additionally, in many instances ACMI Contracts are
subject to prior and/or periodic approvals of foreign governments.

Expanded Product Lines

In 2001, Atlas Air also announced an expansion of its product line to
include a broader array of products and services. These new services are based
on the ACMI Contract model and include fractional ACMI, or the provision of a
portion of the capacity of one or more aircraft; partial ACMI, or the provision
of an aircraft on less than a full time basis; and dry leases for aircraft
(which may include maintenance and insurance if requested). These products
typically require our customers to commit to certain utilization levels under
seasonal contracts, and in many instances the revenue and cost structure vary
from an ACMI Contract, as the operations may include arrangements for the
provision of fuel, and ground handling and flight related expenses. We
anticipate that airline customers will find these products to be desirable and
complementary to their own business strategy, because risks that would otherwise
be borne by a single customer, such as contract term, load factor, fuel and
ground handling, are shared among several parties. To help facilitate the
delivery of these expanded product lines, Atlas Air has established hubs in
Liege, Belgium and Miami, Florida.

SCHEDULED SERVICE

Polar Air Cargo specializes in the provision of scheduled cargo or retail
services. The scheduled all-cargo network of Polar Air Cargo serves five
principal economic regions: North America, South America, Asia, the South
Pacific and Europe. The service is scheduled to provide prime time arrivals and
departures on key days of consolidation for freight forwarders and shippers; the
combination of points necessary to offset directional imbalances of traffic;
and, connecting or through-service between economic regions to achieve higher
overall yields.

OTHER FLIGHT OPERATIONS

In order to optimize utilization of our fleet, we regularly participate in
the ad hoc charter market where demand is relatively available. These operations
complement our ACMI Product and Scheduled Service business by increasing
aircraft utilization during low seasons, positioning flights for scheduled
operations in directionally weak markets, enabling the performance of extra
sections to respond to peak season demand, and diversifying our revenue streams.
We participate in the Department of Defense Civil Reserve Air Fleet (CRAF)
Program under contracts with the Airlift Mobility Command (AMC), where we have
made available nearly half of our aircraft to be utilized by the U.S. military
in support of their operations, and operate such flights on competitively bid,
full-cost contracts. Our participation in the U.S. military response to
September 11, 2001 terrorist attacks has provided our business with significant
additional revenues, and we expect to continue to operate for the AMC in 2002.

SALES AND MARKETING

Our sales and marketing efforts are led from Purchase, New York for Atlas
Air, and Long Beach, California for Polar Air Cargo. Atlas Air's marketing staff
focuses on marketing our ACMI Contract and other products principally to
international airlines. Polar Air Cargo's marketing staff, supplemented in
certain foreign locations by general sales agents, principally focuses on the
freight forwarder market that can avail itself of Polar Air Cargo's scheduled
network. Our staff actively pursues ad hoc charter activity to seek additional
revenue.

MAINTENANCE

Due to the average age of our Boeing 747-200 fleet, it is likely that the
aircraft will require greater maintenance than newer aircraft such as the Boeing
747-400 aircraft. See "Properties -- Aircraft." Aircraft maintenance includes,
among other things, routine daily maintenance, maintenance every 750 flight
hours, (an "A Check"), maintenance on Boeing B747-200 aircraft every 1,100 hours
(a "B check"), significant maintenance work every 18 to 24 months, (a "C Check")
and major maintenance events every five years or 25,000 flight hours, whichever
comes later if the aircraft is over the age of 18 years, or every six years or
25,000 flight hours, whichever comes later for aircraft with an age of 18 years
or less, with a maximum interval in either case of nine years (a "D Check"). We
attempt to schedule major maintenance on our aircraft in the first quarter of
the calendar year, when the demand for air cargo capacity has historically been
lower, taking advantage of cancellations of flights by our customers that
generally occur most frequently during this period.

In June 1996, we entered into a ten-year engine maintenance agreement with
General Electric Company (GE) for the engine maintenance of up to 15 aircraft
powered by CF6-50E2 engines at a fixed rate per flight hour, subject to an
annual formula increase. In December 1999, we entered into a ten-year engine
maintenance agreement with MTU Maintenance Hanover, a subsidiary of Daimler
Chrysler Aerospace, to provide regular maintenance at a fixed rate per flight
hour for 43 engines.

During the initial 36 month operating period, the Boeing 747-400 aircraft's
airframe will be covered under manufacturer's warranties. As a result, we do not
expect to incur significant maintenance expense in connection with the Boeing
747-400 airframe during the warranty period. In addition, the Boeing 747-400
airframe limited maintenance requirements will provide a higher operational
reliability with lower maintenance costs during the early years of operation,
typically for at least the first five years. We will incur expenses associated
with routine daily maintenance of both the airframe and the engines. In July
1998, we entered into an agreement with Lufthansa Technik pursuant to which
Lufthansa Technik provides all required maintenance for our initial order of 12
Boeing 747-400 aircraft, plus any additional Boeing 747-400 aircraft that we
purchase pursuant to our option in the Boeing Purchase Agreement, on a fixed
cost per flight hour basis for ten years, subject to an annual escalation
adjustment. We may terminate the agreement in June 2003. In connection with an
engine purchase agreement with GE, we have also entered into two agreements with
GE to provide ongoing maintenance on the CF6-50E2 aircraft engines at a rate per
flight hour, subject to an annual escalation adjustment.

Polar Air Cargo has A, B and C maintenance checks performed on its aircraft
at a facility in Prestwick, Scotland. The Prestwick facility opened in August
2000. Since August 2000 and for all of 2001, Polar Air Cargo performed 16
A-checks and 34 B-checks on their fleet of Boeing 747-100 and 200 aircraft. In
addition, starting in July 2001, Polar Air Cargo performed 15 A-checks on Atlas
Air aircraft.

We believe that fixed cost contracts provide the most efficient means of
ensuring the continued service of our aircraft fleet and the most reliable way
by which to predict our maintenance costs. Certain other low-level routine
maintenance is performed on a time and material basis.

During periods where we anticipate decreased demand, such as that
experienced during 2001 and into the future, scheduled major maintenance may be
deferred in compliance with approved maintenance practices and regulatory
requirements, which would limit the utilization of any effected aircraft.
Scheduling and the performing of major maintenance activity requires extended
lead time and planning, and could cause a delay in the accomplishment of
required maintenance. At December 31, 2001, we have deferred major maintenance
of five Boeing 747 aircraft, which limits the utilization of these aircraft.

GOVERNMENTAL REGULATION

Under the Aviation Act, the Department of Transportation (DOT) and the FAA,
exercise regulatory authority over freight transportation and other air
carriers. The DOT's jurisdiction extends primarily to economic issues related to
the air transportation industry, including, among other things:

- air carrier certification and fitness;

- insurance;

- certain leasing arrangements;

- international route authorities;

- the authorization of proposed schedule and charter operations;

- tariffs;

- consumer protection;

- unfair methods of competition;

- unjust discrimination; and

- deceptive practices.

The FAA's regulatory authority relates primarily to air safety, including
aircraft certification and operations, crew and maintenance personnel
licensing/training and maintenance standards. As part of this oversight, the FAA
has implemented a number of requirements that we are incorporating into our
maintenance programs.

To provide air cargo transportation services under long-term contracts with
major international airlines, we rely primarily on our worldwide authorities.
FAA approval is required for each of our long-term ACMI Products and DOT
approval is required for each of our long-term ACMI Products with foreign air
carriers. In addition, FAA approval is required for each of our short-term,
seasonal ACMI Products.

In order to engage in the air transportation business, we are required to
maintain a Certificate of Public Convenience and Necessity (CPCN) from the DOT.
Prior to issuing a CPCN, the DOT examines a company's managerial competence,
financial resources and plans and compliance disposition in order to determine
whether a carrier is fit, willing and able to engage in the transportation
services it has proposed to undertake. The DOT also examines whether a carrier
conforms with the Aviation Act requirement that the transportation services
proposed are consistent with the public convenience and necessity. Among other
things, a company holding a CPCN must qualify as a United States citizen, which
requires that it be organized under the laws of the United States or a State,
Territory or Possession thereof; that its Chief Executive Officer and at least
two-thirds of its Board of Directors and other managing officers be United
States citizens; that not more than 25% of its voting stock be owned or
controlled, directly or indirectly, by foreign nationals; and that it not
otherwise be subject to foreign control. The DOT may impose conditions or
restrictions on such a CPCN.

The DOT has issued Atlas Air a CPCN to engage in interstate and overseas
air transportation of property and mail, and a CPCN to engage in foreign air
transportation of property and mail between the United States and Taiwan. Both
CPCNs are subject to standard terms, conditions and limitations. By virtue of
holding those CPCNs, we possess worldwide charter authority and scheduled
all-cargo rights to more than 150 countries. We also hold limited-term DOT
exemption authority to engage in scheduled air transportation of property and
mail between certain points in the United States, on the one hand, and Hong
Kong, Colombia, Brazil and The Netherlands, on the other hand.

International air services are generally governed by a network of bilateral
civil air transport agreements in which rights are exchanged between
governments, which then select and designate air carriers authorized to exercise
such rights. These bilateral agreements may:

- be open skies agreements which contain no restrictions or limitations, or
they may specify the city-pair markets that may be served;

- restrict the number of carriers that may be designated;

- provide for prior approval by one or both governments of the prices the
carriers may charge;

- limit frequencies or the amount of capacity to be offered in the market;
and

- in various other ways, impose limitations on the operations of air
carriers.

International air transportation is subject to extensive government
regulation. In some cases, our operating authority in various markets are
subject to aviation agreements between the U.S. and the respective country.
Because international air transport is governed by bilateral or other agreements
between the U.S. and foreign countries involved, changes in U.S. or foreign
aviation policies could result in the alteration or termination of such
agreements and diminish the value of such route authorities or otherwise
adversely affect our international operations.

To obtain authority under a restrictive bilateral agreement, it is often
necessary to compete against other carriers in a DOT proceeding. At the
conclusion of the proceeding, the DOT awards all route authorizations. The
provisions of bilateral agreements pertaining to charter services vary
considerably from country to country. Some agreements limit the number of
charter flights that carriers of each country may operate. We are subject to
various international bilateral air services agreements between the United
States and the countries to which we provide service. We also operate on behalf
of foreign flag air carriers between various foreign points without serving the
United States. These services are subject to the bilateral agreements of the
respective governments. Furthermore, these services require FAA approval but not
DOT approval.

We must obtain permission from the applicable foreign governments to
provide service to foreign points. Moreover, in some instances, ACMI Contracts
are subject to prior and/or periodic approvals of foreign governments, whose
decisions may be affected by ongoing negotiations and relations with the United
States. For example, a ruling by an aviation agency of the British government
concluded that our long-term wet-leases of Boeing 747-400 freighter aircraft to
British Airways no longer meet the "exceptional circumstances" exception
necessary for their operating approval due to changed market conditions in the
United Kingdom. Should other countries adopt similar rules and/or begin
enforcement of similar rules for political purposes, our business could be
adversely affected.

We have obtained an operating certificate issued by the FAA pursuant to
Part 121 of the Federal Aviation Regulations. The FAA has jurisdiction over the
regulation of flight operations generally, including:

- the licensing of pilots and maintenance personnel;

- the establishment of minimum standards for training and retraining;

- maintenance of technical standards for flight, communications and ground
equipment;

- security programs; and

- other matters affecting air safety.

In addition, the FAA mandates certain record keeping procedures. We must
obtain and maintain FAA certificates of airworthiness for all of our aircraft.
Our aircraft, flight personnel and flight and emergency procedures are subject
to periodic inspections and tests by the FAA. All air carriers operating to,
from or within the United States are subject to the strict scrutiny of the FAA
to ensure proper compliance with FAA regulations.

The DOT and the FAA have authority under the Aviation Safety and Noise
Abatement Act of 1979, as amended and recodified, and under the Airport Noise
and Capacity Act of 1990, to monitor and regulate
9

aircraft engine noise. Our existing fleet of aircraft, with the exception of the
Boeing 747-100, comply with Stage III Standards -- the highest standard
currently required by the FAA.

Under the FAA's Directives issued under its "Aging Aircraft" program, we
are subject to extensive aircraft examinations and will be required to undertake
structural modifications to our fleet to address the problem of corrosion and
structural fatigue. As part of the FAA's overall Aging Aircraft program, it has
issued Directives requiring certain additional aircraft modifications to be
accomplished. We estimate that the modification costs per aircraft will range
between $2 million and $3 million. Fifteen aircraft in our fleet have already
undergone the major portion of such modifications. The remaining aircraft in
service will require modification prior to the year 2009. Other Directives have
been issued that require inspections and minor modifications to Boeing 747-200
aircraft. The newly manufactured Boeing 747-400 freighter aircraft were
delivered in compliance with all existing FAA Directives at their respective
delivery dates. It is possible that additional Directives applicable to the
types of aircraft or engines included in our fleet could be issued in the
future, the cost of which could be substantial.

We are also subject to the regulations of the Environmental Protection
Agency regarding air quality in the United States. The aircraft that we operate
meet the fuel venting requirements and smoke emissions standards established by
the Environmental Protection Agency.

COMPETITION

Due to our size, we dominate the market for ACMI service provided to other
airlines. There are few comparable companies that operate a Boeing 747 fleet
focused on the ACMI market. As such, the most important competitive threat tends
not to come from competitors but rather from the decision by airlines to acquire
their own dedicated Boeing 747 freighter lift. Within the scheduled and ad hoc
charter market, competition is more vigorous, with a number of operators, such
as Evergreen International, Northwest Cargo, and other passenger airlines
providing competition. We believe that the most important elements for
competition in the air cargo business are the range, payload and cubic
capacities of the aircraft and the price, flexibility, quality and reliability
of the cargo transportation service. With our scale, common fleet and low cost
orientation, we believe we are well suited to compete with other providers.

FUEL

Although fuel costs are typically the largest operating expense for
airlines, we have historically had limited exposure to the fluctuation of fuel
costs and disruptions in supply as a result of our ACMI Contracts, which require
the customers to provide fuel for the aircraft. However, with the acquisition of
Polar Air Cargo and the increased significance to our operations of Scheduled
Service, ad hoc charter flying, and aircraft positioning flights, fuel costs are
becoming more substantial. In 2001, fuel expense was approximately 6% of our
operating expenses. We expect that percentage to grow larger in 2002, in large
part due to the inclusion of Polar Air Cargo for a full fiscal year and
expansion of our Scheduled Service business.

EMPLOYEES

The airline business is labor intensive. Salaries, wages and benefits
accounted for approximately 15% of our consolidated operating expenses for 2001.
As of December 31, 2001, we had 1,931 employees, 1,049 of whom were air crew
members. We maintain a comprehensive training program for our pilots in
compliance with FAA requirements in which each pilot regularly attends recurrent
training programs. Of our employees, 629 of Atlas Air and 309 of Polar Air Cargo
are represented by the Air Line Pilots Association (ALPA). Our relations with
ALPA are governed by the Railway Labor Act. We also have 111 employees of Atlas
Air Crew Services (a U.K. subsidiary of Atlas Air), which are excluded from the
Railway Labor Act.

We believe that our employees' participation in the growth and
profitability of our business is essential to maintain our productivity and low
cost structure, and we have therefore established programs for that purpose such
as a profit sharing plan, a stock purchase plan, and a matching contribution of
the employees' contribution to a retirement plan (Internal Revenue Code of 1986,
as amended, Section 401(k) plan). Such

programs are designed to allow employees to share financially in our success and
to augment base salary levels and retirement income.

In April 1999, we received notification from the National Mediation Board
(NMB) that our Atlas Air crew members voted for representation by ALPA. On
January 25, 2002 Atlas Air reached a tentative collective bargaining agreement
on an initial contract with its crew members who are represented by ALPA. The
tentative agreement which was subject to ratification by the crew members was
not subsequently ratified. As a result, Atlas Air and ALPA have reconvened in an
effort to reach a revised tentative agreement under the direction of a mediator
appointed by the NMB. We expect our labor costs to increase after approval by
the crew members of a multi-year contract, but also anticipate realizing certain
improvements in efficiencies due to work rule changes.

In April 2001, we settled certain litigation with our Atlas Air crew
members restoring profit sharing payments to crew members retroactive to April
1999.

During the second quarter of 2001, we announced measures designed to
respond to the current global economic environment and the corresponding decline
in air cargo demand. Accordingly, Atlas Air announced it would furlough 105 crew
members and reduce its ground staff workforce by 200 employees. Under the
restructuring plan finalized by Atlas Air in the second quarter of 2001, the
affected employees received severance and termination benefits.

We continue to review future staffing levels, which could impact the number
of employees and our operating results in the future. In March 2002, Atlas Air
announced a further furlough of crew members that could ultimately include up to
170 crew members, depending upon market conditions. In order to provide
sufficient time to retrain crew members who will be reassigned to a different
equipment type, the furlough will be phased in over a period of thirteen months.

INSURANCE

We are required by the DOT to carry liability insurance on each of our
aircraft, and each of our aircraft leases and ACMI Contracts also require us to
carry such insurance. We currently maintain public liability and property damage
insurance and aircraft hull and liability insurance for each of the aircraft in
the fleet in amounts consistent with industry standards. We maintain baggage and
cargo liability insurance if not provided by our customers under ACMI Contracts.

Following the terrorist attack of September 11, 2001, we and other airlines
faced a cancellation of war risk insurance. The U.S. Government provided war
risk insurance to U.S. airlines as there was no market provider of war risk
coverage. It is expected that the government program will be replaced by
commercial sources in 2002, at substantially higher rates. Although we believe
that our insurance coverage is adequate, there can be no assurance that the
amount of such coverage will not be changed upon renewal or that we will not be
forced to bear substantial losses from accidents. Substantial claims resulting
from an accident could have a material adverse effect on our financial condition
and could affect our ability to obtain insurance in the future. We believe that
we have good relations with our insurance providers.

SAFETY AND SECURITY

We are dedicated to ensuring the safety of our employees, property and
cargo. We have taken numerous measures, voluntarily and as required by
regulatory authorities, to increase both the safety and security of our
operations in the wake of the terrorist attacks of September 11, 2001. As a
result, we have implemented security enhancements, including enhanced aircraft
search procedures and aircraft guarding, more thorough cargo inspection and
search procedures, and facility security improvements that have increased our
operating costs. In addition to these measures, we have complied with all other
new FAA security requirements designed to enhance security and will continue to
abide by all future security enhancement requirements.

RISK FACTORS

Investors and prospective investors should consider the following risk
factors in conjunction with other information provided in this Form 10-K:

ABILITY TO SERVICE DEBT AND LEASE PAYMENTS -- We have substantial indebtedness
and lease payment obligations that we may not be able to service.

We are highly leveraged. As of December 31, 2001, our total long-term debt
outstanding, net of current portion, was approximately $1.0 billion, and our
long-term lease obligations, net of current portion, were approximately $3.0
billion. Our high degree of leverage could have important consequences to
prospective investors, including the following:

- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be
diminished in the future;

- a substantial portion of our cash flow from operations will be required
for the payment of principal and interest on our indebtedness and lease
payments, thereby reducing the funds available for our operations and
other purposes;

- we may be substantially more leveraged than some of our competitors,
which may place us at a competitive disadvantage; and

- our substantial degree of leverage may hinder our ability to adjust
rapidly to changing market conditions and could make us more vulnerable
in the event of a downturn in our business or general economic
conditions.

Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance, our indebtedness and to make scheduled payments
under our lease obligations depends on our future performance, which is subject
to economic, financial, competitive and other factors beyond our control. There
can be no assurance, however, particularly in light of the depressed cargo
market that our business will continue to generate sufficient cash flow from
operations in the future to service our debt and meet our lease obligations. If
unable to do so, we may be required to refinance all or a portion of our
existing debt and leases, to sell assets or to obtain additional financing.
There can be no assurance that any such refinancing or that any such sale of
assets or additional financing would be possible on favorable terms.

NEW AIRCRAFT FINANCING -- If we are unable to secure financing for our new
aircraft deliveries, it may have a material adverse effect on our financial
position and results of operations.

Under the terms of the Boeing Purchase Agreement, in October 2000 Atlas Air
exercised options for four Boeing 747-400 freighter aircraft to be delivered in
2002. During 2001, Atlas Air reached an agreement with Boeing to amend the
delivery dates of the aircraft, whereby three of the aircraft are scheduled to
be delivered in 2002 and one aircraft in 2003. Atlas Air does not currently have
firm financing in place for the four Boeing 747-400 aircraft scheduled for
delivery in 2002 and 2003. However, Atlas Air is currently in discussions with
several sources for financing these aircraft. The inability to secure financing
for the Boeing 747-400 deliveries could result in a default under the Boeing
Purchase Agreement, which would permit Boeing to accelerate payments due under
the Boeing Purchase Agreement. Such acceleration would cause a default in
covenants of certain of the Company's indebtedness which would permit the
lenders to accelerate payment of a significant portion of all indebtedness,
which event would have a material adverse effect on the Company's financial
position and results of operations. However, Boeing has made an offer to finance
by sale-leaseback, each of the aircraft to be delivered in 2002, under terms
which are more favorable to Boeing. If Atlas Air is unable to secure other
financing more favorable to the Company, management believes it has the option
to utilize the proposed Boeing financing.

RESTRICTIONS IMPOSED BY TERMS OF OUR INDEBTEDNESS AND LEASE
OBLIGATIONS -- Restrictive covenants contained in our debt and lease
instruments limit our ability to incur additional indebtedness and expand our
operations.

Certain of our debt instruments and lease agreements limit our ability to
undertake certain transactions. These instruments and agreements restrict our
ability to:

- incur additional indebtedness;

- incur liens, pay dividends or make other restricted payments;

- consummate asset sales;

- enter into transactions with affiliates;

- impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to us;

- merge or consolidate with any other person; or

- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets.

Currently, under the terms of Atlas Air's Senior Notes, we do not meet the
financial ratios required in order to permit additional borrowing or
investments. Our failure or inability to obtain covenant relief on the Senior
Notes or our other debt instruments, if necessary, will restrict our ability to
borrow money or make investments which could have a material adverse effect on
our business.

In addition, certain of our other debt instruments contain other more
restrictive financial and operating covenants. Our ability to meet such
financial ratios and tests may be affected by events beyond our control. We
cannot give assurances that we will continue to meet such tests. A breach of any
of these covenants could result in a default under certain debt or lease
instruments which would permit the lenders or lessors, as the case may be, to
elect to declare all amounts outstanding under such debt or leases, together
with accrued interest, to be immediately due and payable. If we are unable to
repay those amounts, such lenders or lessors, as the case may be, could proceed
against the collateral granted to them to secure that indebtedness, or the
lessors could repossess the collateral. If our lenders accelerate the payment of
indebtedness, our assets may not be sufficient to repay in full such
indebtedness and our other indebtedness.

EXPANSION OF PRODUCT LINE AND SERVICES -- Failure to successfully execute
our new expanded product service initiatives may have a material adverse effect
on our financial position and results of operations.

In 2001, we announced an expansion of our product line to include a broader
array of products and services. These new services are based on the ACMI
Contract model and include fractional ACMI, or the provision of a portion of the
capacity of one or more aircraft; partial ACMI, or the provision of an aircraft
on less than a full time basis; and dry leases for aircraft (which may include
maintenance and insurance if requested). These products typically require
customers to commit to certain utilization levels under seasonal contracts, and
in many instances the revenue and cost structure vary from an ACMI Contract, as
the operations may include arrangements for the provision of fuel, and ground
handling and flight related expenses. We believe that airline customers will
find these products to be desirable and complementary to their own business
strategy, because risks that would otherwise be borne by a single customer, such
as contract term, load factor, fuel and ground handling, are shared among
several parties. To help facilitate the delivery of these expanded product
lines, we have established hubs in Liege, Belgium and Miami, Florida. Failure to
successfully execute on the expanded product line plan, in the absence of
compensating improvements in other parts of the business, could have a material
adverse effect on our financial position and results of operations.

LABOR STRIKE -- Any labor disruption or labor strikes would adversely affect
our ability to conduct our business.

subject to risks of work interruption or stoppage and/or may incur additional
administrative expenses associated with union representation of our employees.
Polar Air Cargo's collective bargaining agreement with ALPA expires in May 2003,
subject to ratification, and we cannot accurately predict the outcome of any
negotiations. If Polar Air Cargo is unable to reach agreement with its crew
members on the terms of their collective bargaining agreements, or if Atlas Air
is unable to negotiate a contract with its crew members, we may be subject to
work interruptions and/or stoppages. Any sustained work stoppages could
adversely affect our ability to fulfill our obligations under ACMI contracts and
other agreements and could have a material adverse effect on our financial
condition and results of operations.

DEPENDENCE ON SIGNIFICANT CUSTOMERS; GEOGRAPHIC CONCENTRATION -- The loss of a
significant customer, or political and economic instability in the markets we
serve, may adversely affect our business.

In 2001, China Airlines Ltd. accounted for approximately 13% of our total
operating revenues, and no other customer accounted for 10% or more of our total
operating revenues. We believe that our relationships with our customers are
mutually satisfactory, as evidenced by the fact that we have renewed and, in
certain cases, added a number of ACMI Contracts with our existing customers.
However, there can be no assurance that any of our ACMI Contracts will be
renewed upon their expiration. The scheduled termination dates for the current
long-term ACMI Contracts range from 2002 to 2004. The failure to renew any of
our ACMI Contracts, or the renewal of any of our ACMI Contracts on less
favorable terms, could have a material adverse effect on our results of
operation. Additionally, we have concentrated a significant percentage of our
resources in routes between the United States and Asia and the Pacific Rim and
between Europe and Asia and the Pacific Rim. Any economic decline or any
military or political disturbance in these areas of the world might prevent or
interfere with our ability to provide service to our Asian and Pacific Rim
destinations and could have a material adverse effect on our results of
operation. Continuation of the current economic downturn in Europe, Asia and the
United States could adversely impact the cargo business of our customers which
could eventually affect our ability to obtain new ACMI contracts or to obtain
renewals of existing ACMI contracts on attractive economic terms.

COMPETITION -- The market for air cargo services is highly competitive. If we
do not successfully compete, our profits will suffer.

A number of airlines currently provide services for themselves and for
others, similar to the services we offer and new airlines may be formed that
would also compete with us. Such airlines may have substantially greater
financial resources than we do. In addition, certain retail air freight
companies, such as Evergreen International and Northwest Cargo, compete with us
on a limited, indirect basis, generally outside of the ACMI Contract operating
structure. We believe that the most important elements for competition in the
air cargo business are the range, payload and cubic capacities of the aircraft
and the price, flexibility, quality and reliability of the cargo transportation
service. Our ability to achieve our strategic plan depends upon our success in
convincing major international airlines that outsourcing some portion of their
air cargo business remains more cost-effective than undertaking cargo operations
with their own incremental capacity and resources and upon our ability to
continue to obtain higher ACMI Contract rates in connection with the Boeing
747-400 aircraft compared to those currently obtained in connection with
existing Boeing 747-200 aircraft.

AGING AIRCRAFT -- The maintenance and governmental compliance costs associated
with older aircraft may adversely affect our profitability. The costs of
complying with Directives and Service Bulletins for our Boeing
747-100/-200/-300 aircraft could be substantial.

Our fleet currently includes 36 Boeing 747-100/-200/-300 ("Classics")
aircraft in service, all of which were manufactured between 1969 and 1990.
Manufacturer Service Bulletins and the Federal Aviation Administration
Airworthiness Directives issued under its "Aging Aircraft" program cause Boeing
Classics aircraft operators to be subject to extensive aircraft examinations and
require Boeing Classics aircraft to undergo structural inspections and
modifications to address problems of corrosion and structural fatigue at
specified times. Directives have been issued that require inspections and minor
modifications to Boeing

Classics aircraft. It is possible that additional Service Bulletins or
Directives applicable to the types of aircraft or engines included in our fleet
could be issued in the future. The cost of compliance with Directives and of
following Service Bulletins cannot currently be estimated, but could be
substantial.

UTILIZATION OF FUTURE AIRCRAFT -- If we fail to contract for the use of
additional aircraft as they become available our profitability will be harmed.

We do not have long-term ACMI Contracts for aircraft scheduled for delivery
during 2002. The failure to generate adequate revenue from new aircraft pending
the commencement of and service under ACMI Contracts, or the failure to secure
ACMI Contracts for such aircraft or to employ such aircraft in Scheduled Service
or ad hoc charter service, as well as the aircraft currently in service in our
fleet which may be returned to us pursuant to the terms of the ACMI Contracts,
could have a material adverse effect on our results of operations.

REGULATORY MATTERS -- We are subject to continued compliance with governmental
regulations and authorities. Failure to comply with relevant rules and
regulations would adversely affect our business.

Under the Federal Aviation Act of 1958, as amended and recodified at 49
U.S.C. Subtitle VII (the "Aviation Act"), the DOT and the FAA exercise
regulatory authority over us. We have obtained the necessary authority to
conduct flight operations, including a CPCN from the DOT and an Air Carrier
Operating Certificate from the FAA; however, the continuation of such authority
is subject to our continued compliance with applicable statutes, rules and
regulations pertaining to the airline industry, including any new rules and
regulations that may be adopted in the future. All air carriers are subject to
strict scrutiny and inspection by FAA officials and to the imposition of new
regulatory requirements that can negatively affect their operations. We have
been considered to be a high-growth carrier by the FAA and, therefore, have
received heightened attention by the FAA and DOT. FAA approval is required for
each of our long-term ACMI Contracts and DOT approval is required for each of
our long-term ACMI Contracts with foreign air carriers. In addition, FAA
approval is required for each of our short-term seasonal ACMI Contracts. In
order to provide service to foreign points, we must also obtain permission for
such operations from the applicable foreign governments and certain airport
authorities. See "Business -- Governmental Regulation."

In addition, the DOT regulates the transportation of hazardous materials by
air cargo carriers. Although customers are required to label shipments that
contain hazardous materials, customers may not inform us when their cargo
includes hazardous materials. Although we have never had such an incident, the
transportation of unmanifested hazardous materials could result in fines,
penalties, banning hazardous materials from our aircraft for a period of time,
possible damage to our aircraft or other liability.

We are subject to various international bilateral air services agreements
between the United States and the countries to which we provide service. We also
operate on behalf of foreign flag carriers between various foreign points
without serving the United States. These services are subject to the bilateral
agreements of the respective governments. Furthermore, these services require
FAA approval but not DOT approval. We must generally obtain permission from the
applicable foreign governments to provide service to foreign points. Moreover,
in some instances, ACMI Contracts are subject to prior and/or periodic approvals
of foreign governments, whose decisions may be affected by ongoing negotiations
and relations with the United States. For example, a ruling last year by an
aviation agency of the British government concluded that our long-term
wet-leases of Boeing 747-400 freight aircraft to British Airways no longer meets
the "exceptional circumstances" exception necessary for their operating
approval, due to changed market conditions in the United Kingdom. Should other
countries adopt similar rules and/or begin enforcement of similar rules for
political purposes, our business could be adversely affected.

CONTROL BY PRINCIPAL SHAREHOLDER -- We have a single shareholder with
controlling interest in our company, who can determine the outcome of all
matters to be voted upon by the shareholders.

As of March 15, 2002, Linda Chowdry, a member of our Board of Directors and
widow of Michael A. Chowdry, our founder, beneficially owned approximately 44.3%
of our common stock. As a result,

Ms. Chowdry may be able to direct and control our policies, including the
election of directors, mergers, sales of assets and other such transactions.

DEPENDENCE UPON KEY MANAGEMENT PERSONNEL -- Our executive officers and key
employees are critical to our business. These officers and key personnel may
not remain with us, and their loss may harm our operations.

We believe that our success in acquiring ACMI Contracts, expanding our
product line to include a broader array of products and services, providing
scheduled service to international markets, and managing our operations will
depend substantially upon the continued services of many of our present
executive officers. The loss of the services of any of such persons could have a
material adverse effect on our business. We have employment agreements with such
officers, which are generally terminable at any time by either party.

SEASONALITY OF CUSTOMERS' CARGO OPERATIONS -- Seasonal fluctuations in revenue
may result in a reduction of available working capital.

The cargo operations of our airline customers are seasonal in nature, with
peak activity traditionally in the second half of the year, and with a
significant decline occurring in the first quarter. As a result, our revenues
typically decline in the first quarter of the year as our minimum contractual
aircraft utilization level temporarily decreases. Our ACMI Contracts typically
allow our customers to cancel a maximum of 5% of the guaranteed hours of
aircraft utilization over the course of a year. Our customers most often
exercise such cancellation options early in the first quarter of the year, when
the demand for air cargo capacity has been historically low or following the
seasonal holiday peak in the latter part of the fourth quarter.

AVAILABILITY OF INSURANCE COVERAGE -- Increased insurance costs will affect
our profitability.

INDEPENDENT AUDITORS -- There is uncertainty concerning our continued use of
Arthur Andersen LLP as our independent auditors.

The Company's independent certified public accountant, Arthur Andersen LLP,
has informed the Company that on March 14, 2002, it was indicted on Federal
obstruction of justice charges arising from the U.S. government's investigation
of Enron Corporation. Arthur Andersen has indicated that it intends to contest
vigorously the indictment. The Company's Audit Committee has been carefully
monitoring this situation. As a public company, the Company is required to file
with the Securities and Exchange Commission (the SEC) annual audited financial
statements and quarterly financial statements reviewed by an independent
certified public accountant. The SEC has announced that it will continue
accepting financial statements audited by Arthur Andersen, and interim financial
statements reviewed by it, so long as Arthur Andersen is able to make certain
representations to its clients. The Company's access to the capital markets and
its ability to make timely SEC filings could be impaired if the SEC ceases
accepting financial statements audited by Arthur Andersen, if Arthur Andersen
becomes unable to make the required representations to the Company

or if for any other reason Arthur Andersen is unable to perform required
audit-related services for the Company. In such a case, the Company would
promptly seek to engage new independent certified public accountants or take
such other actions as may be necessary to enable the Company to maintain access
to the capital markets and produce timely financial reporting.

ITEM 2. PROPERTIES

AIRCRAFT

As of December 31, 2001, our fleet of fifty-one aircraft includes six
Boeing 747-100s, twenty-six Boeing 747-200s, three Boeing 747-300s, and sixteen
Boeing 747-400s, as follows:

FLEET PROFILE

AVERAGE AGE
COMPANY AIRCRAFT TYPE NO. OF AIRCRAFT OWNED LEASED (IN YEARS)
------- -------------- --------------- ----- ------ -----------

Atlas Air......................... Boeing 747-200 21(A) 16 5 21.8
Boeing 747-300 3 2 1(B) 14.3
Boeing 747-400 12 2 10(C) 2.2
-- -- --
Total 36 20 16
To be delivered................... Boeing 747-400 4(D)
Polar Air Cargo................... Boeing 747-100 6 4 2(E) 31.3
Boeing 747-200 5 1 4(F) 21.2
Boeing 747-400 4 0 4(G) 0.9
-- -- --
Total 15 5 10
To be delivered................... Boeing 747-400 1(H)

---------------

(A) Six of these aircraft were designated in May 2001 as available for sale.
The five leased aircraft are leased from third parties under three leases
expiring in 2007 and one lease each expiring in 2009 and 2010.

(B) The aircraft is leased from a third party under a lease expiring in 2005.

(C) These aircraft are leased from third parties under three leases expiring in
2019, three leases expiring in 2021, and two leases each expiring in 2020
and 2024.

(D) Atlas Air acquired 12 new Boeing 747-400 freighter aircraft and exercised
options for four additional aircraft. The four option aircraft are
scheduled for delivery in 2002/2003.

(E) These aircraft are leased from third parties under two leases expiring in
2003.

(F) These aircraft are leased from third parties with one lease each expiring
in 2004, 2006, 2007 and 2008.

(G) These aircraft are leased from third parties under leases expiring in 2025.

(H) Polar Air Cargo operates four Boeing 747-400 freighter aircraft under
leases with third parties, and anticipates delivery of one additional
freighter aircraft during 2002.

In the past, we have been successful in obtaining new customers, or
establishing additional arrangements with existing customers, coincident with
the delivery of aircraft into the fleet or soon thereafter. However, from time
to time, we accept delivery of aircraft that have not been committed to a
particular product line, including ACMI Contracts. These aircraft have been
utilized temporarily as replacement aircraft during scheduled and unscheduled
maintenance of other aircraft, as well as for ad hoc charter arrangements.
Although we seek to identify a particular product line including new ACMI
Contracts, there can be no assurance that such arrangements will have been made
prior to the delivery of the four Boeing 747-400 aircraft scheduled to be
delivered during 2002 and 2003. Our inability to secure ACMI Contracts for these
aircraft or for existing aircraft upon termination of ACMI Contracts, or to
employ such aircraft in Scheduled Service, ad hoc charter service, or other ACMI
Products could have a material adverse effect on our business.

From time to time, we engage in discussions with third parties regarding
possible acquisitions of aircraft that could expand our operations, and engage
in discussions with third parties regarding possible sales of
17

aircraft to improve the mix and age of our fleet. We are in discussions with
third parties for the possible acquisition and sale of aircraft for 2002 and
beyond.

FACILITIES

Our principal offices are at 2000 Westchester Avenue, Purchase, New York
where we lease 120,000 square feet under a twelve year lease which expires in
May 2012. Polar Air Cargo leases 40,400 square feet of office space in Long
Beach, California, under a five year lease which expires in June 2005. These
offices include both operational and administrative support functions, including
flight and crew operations, maintenance and engineering, material management,
human resources, legal, finance and information technology.

In addition, Atlas Air leases warehouse space at Miami International
Airport (Dade County, Florida) on a month-to-month basis. The leased warehouse
space is used to store aviation equipment and aircraft components used to
maintain aircraft operated by us. Atlas Air also maintains 2,000 square feet of
warehouse space at JFK Airport in New York City, New York. Polar Air Cargo rents
170,000 square feet in Prestwick, Scotland under a ten year lease which expires
in July 2010 for its maintenance activities.

ITEM 3. LEGAL PROCEEDINGS

During April 2001, Atlas Air reached an agreement with ALPA, to settle a
law suit filed in May 1999 over the eligibility of the crew members to
participate in Atlas Air's profit sharing plan, pursuant to the certification by
NMB that crew members had voted for representation by ALPA. The agreement
reinstated the crew members to the profit sharing plan, subject to future
contract negotiation, and provided for the distribution of withheld past profit
sharing to all eligible crew members. Atlas Air and ALPA also agreed to dismiss
legal proceedings with prejudice and to bar any future legal claims as to crew
members exclusion from the profit sharing plan.

On May 24, 2000, ALPA filed suit against Atlas Air in the Southern District
of Florida seeking to enjoin, as a violation of the Railway Labor Act, the
establishment of an Atlas Air subsidiary in the United Kingdom to conduct
overseas operations from London Stansted Airport. We believe the suit is without
merit and intend to vigorously defend the action. This action is currently in
the discovery phase.

During November 2001, Malaysian Airlines returned a leased aircraft to
Atlas Air with one year remaining on the lease claiming a contractual right to
do so. Atlas Air vigorously disputes this interpretation of the contract. In
January of 2002, Atlas Air requested arbitration to settle the matter.
Arbitration will take place in London during the second quarter of 2002. Atlas
Air is claiming damages of approximately $26.5 million plus interest, and
Malaysian Airlines has counterclaimed for $22.0 million plus interest claiming
they were misled as to their ability to cancel the agreement. We believe the
counterclaim is without merit. The arbitrator is likely to decide this matter in
the fourth quarter of 2002 or the first quarter of 2003.

Pursuant to the terms of the collective bargaining agreement between Polar
Air Cargo and ALPA, which represents Polar Air Cargo's crew members, disputes
over contract interpretation can be filed as grievances and, if not
satisfactorily resolved between the parties, are subject to arbitration. On
January 30, 2002, ALPA filed a grievance claiming a pay raise was due in
December of 2001 to Polar Air Cargo crew members. Polar Air Cargo has disputed
this claim alleging that certain conditions precedent had not been met. The
total amount at issue as to all Polar Air Cargo crew members is approximately
$324,000. This matter will likely be decided by an arbitrator during the second
or third quarter of 2002.

While we are, from time to time, involved in litigation in the ordinary
course of our business, there are no other material legal proceedings pending
against us or to which any of our property is subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the
fourth quarter of 2001.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

In November 1997, our common stock commenced trading on the New York Stock
Exchange, or "NYSE", under the symbol "CGO." Prior to that, our common stock
traded on the Nasdaq National Market ("Nasdaq/NM") under the trading symbol
"ATLS." The approximate number of shareholders of record at January 31, 2002 was
339.

The following table sets forth for the periods indicated the high and low
sales prices, as quoted by the NYSE for each full quarterly period within the
two most recent fiscal years.

2001 2000
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------

QUARTER ENDED
March 31......................................... $37.75 $26.91 $30.06 $22.81
June 30.......................................... 29.39 14.16 36.63 25.63
September 30..................................... 15.51 8.78 45.69 35.75
December 31...................................... 16.90 9.79 42.94 29.00

We have not declared any cash dividends and do not plan to do so in the
foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data presented below have been derived from our
consolidated financial statements. For comparability of results, this
information should be read in conjunction with the consolidated financial
statements and related notes, and Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this report.

YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
2001(A) 2000 1999 1998 1997
-------- ----------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Operating revenues...................... $763,831 $790,468 $637,081 $422,238 $401,041
Operating (loss)/income................. (28,512) 232,704 187,489 135,849 56,002
(Loss)/income before extraordinary items
and cumulative effect of a change in
accounting principle.................. (61,258) 85,259 61,279 46,217 6,689
Net (loss)/income....................... (62,847) 85,259 53,270 46,217 23,429
Basic EPS:
(Loss)/income before extraordinary
items and cumulative effect of a
change in accounting principle per
common share....................... $ (1.61) $ 2.33 $ 1.79 $ 1.37 $ .20
Net (loss)/income per common share.... $ (1.65) $ 2.33 $ 1.56 $ 1.37 $ .70
Weighted average common shares
outstanding during the period
(B)................................ 38,148 36,555 34,245 33,675 33,675
Diluted EPS:
(Loss)/income before extraordinary
items and cumulative effect of a
change in accounting principle per
common share....................... $ (1.61) $ 2.31 $ 1.77 $ 1.37 $ .20
Net (loss)/income per common share.... $ (1.65) $ 2.31 $ 1.54 $ 1.37 $ .69
Weighted average common shares
outstanding during the period
(B)................................ 38,148 36,947 34,500 33,841 33,803

---------------

(A) Includes Polar Air Cargo results from acquisition date of November 1, 2001.
See Note 19 to the Consolidated Financial Statements.

(B) As adjusted to reflect the 3-for-2 stock split for shareholders of record
as of January 25, 1999.

AT DECEMBER 31,
--------------------------------------------------------------
2001(A) 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and short-term
investments.................... $ 351,327 $ 558,992 $ 473,160 $ 471,814 $ 152,969
Working capital.................. 333,419 483,265 330,281 294,511 80,363
Total assets..................... 2,084,752 2,174,057 2,142,370 1,988,869 1,297,415
Long-term debt, net of current
portion........................ 959,052 1,037,789 1,253,084 1,166,460 736,026
Other liabilities................ 344,762 286,120 228,075 235,308 163,167
Stockholders' equity............. 489,908 552,206 357,700 283,890 238,829

---------------

(A) Includes Polar Air Cargo results from acquisition date of November 1, 2001.
See Note 19 to the consolidated financial statements.

REVENUE STATISTICS

[BAR CHART]
$ IN THOUSANDS

TOTAL OPERATING PRETAX
REVENUE INCOME INCOME
-------- --------- --------

2001 Pro forma(A).................................... $763,831 $ 85,815 $ 15,215
2000................................................. 790,468 232,704 137,527
1999................................................. 637,081 187,489 98,835
1998................................................. 422,238 135,849 73,551
1997 Pro forma(B).................................... 401,041 83,102 37,633

---------------

(A) 2001 Operating and Pretax Income are presented above on a pro-forma basis
and have been adjusted to exclude the "Profit sharing settlement expense"
in the first quarter of 2001, the "Restructuring and impairment" charges
taken in the second and fourth quarters of 2001, and the "Federal
Stabilization Act claims" recorded in the fourth quarter of 2001.

(B) 1997 Operating and Pretax Income are presented above on a pro-forma basis
and have been adjusted to exclude the "Write-off of capital investment and
other" in the second quarter of 1997.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

Atlas Air Worldwide Holdings, Inc., whose primary subsidiary is Atlas Air,
purchased all of the assets of Polar Air Cargo effective November 1, 2001.
Accordingly, the operating results of Polar Air Cargo since the acquisition's
closing date of November 1, 2001 are included in the accompanying consolidated
financial statements for the year ended December 31, 2001.

The tables below set forth selected financial and operating data for the
four quarters of the years ended December 31, 2001, 2000 and 1999 (dollars in
thousands).

2001
-----------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE(A) QUARTER(A) QUARTER QUARTER QUARTER
------------- ---------- -------- -------- --------

Total operating revenues............. $763,831 $283,771 $150,713 $149,035 $180,312
Operating expenses................... 792,343 265,072 141,377 220,947 164,947
Operating (loss) income.............. (28,512) 18,699 9,336 (71,912) 15,365
Other expense........................ (70,601) (18,750) (19,195) (15,715) (16,941)
Net loss (B)......................... (62,847) (8,032) (4,211) (49,022) (1,582)
Block hours.......................... 117,864 37,448 25,208 25,432 29,776
Average aircraft..................... 37.8 46.0 35.8 35.0 34.2
Operating margin..................... (3.7)% 6.6% 6.2% (48.3)% 8.5%
Pre-tax operating margin............. (13.0)% (0.1)% (6.5)% (58.8)% (0.9)%

2000
------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- --------

Total operating revenues................ $790,468 $223,662 $208,611 $191,783 $166,412
Operating expenses...................... 557,764 154,504 146,641 133,383 123,236
Operating income........................ 232,704 69,158 61,970 58,400 43,176
Other income (expense).................. (95,177) (18,907) (24,757) (27,734) (23,779)
Net income.............................. 85,259 31,155 23,072 19,013 12,019
Block hours............................. 134,079 36,739 35,007 33,140 29,193
Average aircraft........................ 32.5 34.0 33.0 32.6 30.5
Operating margin........................ 29.4% 30.9% 29.7% 30.5% 25.9%
Pre-tax operating margin................ 17.4% 22.5% 17.8% 16.0% 11.7%

1999
------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- --------

Total operating revenues................ $637,081 $198,778 $161,896 $138,568 $137,839
Operating expenses...................... 449,592 137,272 113,727 97,461 101,132
Operating income........................ 187,489 61,506 48,169 41,107 36,707
Other income (expense).................. (88,654) (22,845) (25,620) (19,875) (20,314)
Net income (C).......................... 53,270 23,670 14,093 13,270 2,237
Block hours............................. 109,608 34,166 27,650 23,861 23,931
Average aircraft........................ 29.0 30.3 30.0 28.4 27.0
Operating margin........................ 29.4% 30.9% 29.8% 29.7% 26.6%
Pre-tax operating margin................ 15.5% 19.4% 13.9% 15.3% 11.9%

---------------

(A) Includes results of Polar Air Cargo from acquisition date of November 1,
2001.

(B) Net loss is after cumulative effect of a change in accounting principle for
the 2001 Cumulative and 1st Quarter 2001 columns.

(C) Net income is after extraordinary item and cumulative effect of a change in
accounting principle for the 1999 Cumulative and 1st Quarter 1999 columns.

The cargo industry is generally seasonal in nature, with peak activity
typically occurring in the second half of the year, and with a significant
decline occurring in the first quarter. This decline in cargo activity is
largely due to the decrease in shipping that occurs following the December and
January holiday seasons associated with the celebration of Christmas and the
Chinese New Year. In our ACMI business, certain customers have, in the past,
elected to use that period of the year to exercise their contractual options to
cancel a limited number (generally not more than 5% per year) of guaranteed
hours with us, and are expected to continue to do so in the future. As a result,
our revenues typically decline in the first quarter of the year as our
contractual aircraft utilization level temporarily decreases. We seek to
schedule, to the extent possible, our major aircraft maintenance activities
during this period to take advantage of any unutilized aircraft time.

The aircraft acquisitions and lease arrangements are described in Note 7 of
our consolidated financial statements. The timing of when an aircraft enters our
fleet can affect not only annual performance, but can make quarterly results
vary, thereby affecting the comparability of operations from period to period.
In addition, the number of aircraft utilized from period to period as spare or
maintenance back-up aircraft may also cause quarterly results to vary.

ACMI PRODUCTS

ACMI Contracts

Expanded Product Lines

In 2001, Atlas Air announced an expansion of its product line to include a
broader array of products and services. These new services are based on the ACMI
Contract model and include fractional ACMI, or the provision of a portion of the
capacity of one or more aircraft; partial ACMI, or the provision of an aircraft
on less than a full time basis; and dry leases for aircraft (which may include
maintenance and insurance if requested). These products typically require our
customers to commit to certain utilization levels under seasonal contracts, and
in many instances the revenue and cost structure vary from an ACMI Contract, as
the operations may include arrangements for the provision of fuel, and ground
handling and flight related expenses. We anticipate that airline customers will
find these products to be desirable and complementary to their own business
strategy, because risks that would otherwise be borne by a single customer, such
as contract term, load factor, fuel and ground handling, are shared among
several parties. To help facilitate the delivery of these expanded product
lines, Atlas Air has established hubs in Leige, Belgium and Miami, Florida.

SCHEDULED SERVICE

OTHER FLIGHT OPERATIONS

the September 11, 2001 terrorist attack has provided our business with
significant additional revenues, and we expect to continue to operate for the
AMC in 2002.

2001 COMPARED TO 2000

Results of Operations. The operating loss for the year 2001 totaled $28.5
million versus an operating profit of $232.7 million in 2000. Included in the
operating loss was $116.2 million in restructuring and impairment charges, $22.8
million relating to a settlement of a profit sharing dispute with our pilots,
and $24.7 million of benefit pursuant to Federal Stabilization Act claims.
Excluding these items operating profits would have been $85.8 million.

Our loss before a cumulative effect of a change in accounting principle was
$61.3 million in 2001, compared to income of $85.3 million in 2000, a decrease
of $146.6 million. In the first quarter of 2001, we recorded a charge of $1.6
million (net of tax) associated with a cumulative change in accounting principle
related to the fair-market valuation adjustment of an interest rate swap, as
required by SFAS 133 (as defined). Including this cumulative change, net income
of $85.3 million for 2000 decreased to a net loss of $62.8 million for 2001, or
approximately 174%. This decline in profitability was primarily due to the
unique, one time charges noted above, the general decline in demand from our
customer base, and increased operating expenses.

Starting early in 2001, cargo industry participants felt the effects of a
worldwide recession particularly evident in the U.S. market. During the second
and third quarters of 2001, block hour production fell by 23% and 28%,
respectively, compared to the same periods of 2000. During the fourth quarter
2001, block hour production increased by approximately 2%, compared to the same
period of 2000 due to the inclusion of block hours at newly acquired Polar Air
Cargo. Excluding Polar Air Cargo block hour production from the fourth quarter
of 2001, block hour production decreased by approximately 18% as strong seasonal
charter activity, combined with charter demand from the U.S. Military Air
Mobility Command somewhat offset ACMI Contract block hour declines.

During the second quarter 2001, we announced measures designed to respond
to the current global economic environment and the corresponding decline in air
cargo demand. Accordingly, Atlas Air announced it would furlough 105 crew
members and reduce its groundstaff workforce by 200 employees. Under the
restructuring plan finalized by Atlas Air in the second quarter of 2001, the
affected employees received severance and termination benefits.

In accordance with Emerging Issues Task Force (EITF) No. 94-03, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)" and Staff
Accounting Bulletin (SAB) No. 100, "Restructuring and Impairment Charges",
during the second quarter we recognized a liability for the cost of termination
benefits to be provided to involuntarily terminated employees and also recorded
other liabilities associated with the restructuring. This restructuring charge
of $3.9 million is recorded in the 2001 income statement and is included under
the caption "Restructuring and impairment". This liability has been reduced by
$3.3 million representing primarily employee severance payments made since June
2001, and the resulting liability at December 31, 2001 was $0.6 million. The
total number of Atlas Air ground staff employees terminated through December 31,
2001 under the restructuring plan was 192.

The Atlas Air crew member furlough, which commenced in May 2001, was
completed in the second quarter. The ground staff layoffs and other associated
restructuring activities, which commenced in June 2001, were substantially
complete by the end of the third quarter. There were no revisions to the initial
restructuring cost estimates that were recorded in the second quarter. These
restructuring activities are expected to have no adverse material impact on our
ongoing operations.

At the time of the employee furloughs and reductions, Atlas Air
restructured its operating business plan and took six aircraft out of service
and made them available for sale. These aircraft have been isolated from the
rest of the fleet and the Company is marketing the aircraft, although post
September 11, 2001, aircraft sale transactions have been significantly
curtailed. We account for our aircraft in accordance with SFAS No. 121,

"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". Accordingly, the aggregate carrying amount of the aircraft of
$246.2 million was reduced to the expected net realizable value of $147.2
million, resulting in an impairment charge of $99.0 million. This charge was
recorded in two quarters, prior to and post September 11, 2001. In the second
quarter of 2001, the impairment charge was $54.1 million and during the fourth
quarter of 2001, an additional impairment charge of $44.9 million was recorded
related to these six aircraft. The net realizable values of these aircraft were
based on a market assessment of the value of the aircraft. The impairment
charges are recorded in the 2001 income statement under the caption
"Restructuring and impairment". Subsequent to September 11, 2001, we experienced
an increase in demand for charter services, both commercial and military. To
respond to this demand, Atlas Air restored to operations four of the six parked
aircraft, and retained the flexibility to take the aircraft back out of service
should a buyer be found or charter demand soften.

In conjunction with the closure of some of our locations and employee
layoffs, we recorded an impairment charge of approximately $0.7 million related
to computer hardware and software and leasehold improvements at the closed
locations. The charge represents the entire carrying value of these assets, as
we believe that these assets have no resale value.

The changed business environment described above resulted in a review of
our strategy related to the construction of our maintenance hangar at Miami
International Airport. We recorded an impairment charge of $12.5 million in the
second quarter to write off $8.6 million of costs currently capitalized and
accrue for $3.9 million of costs related to site restoration and lease
termination costs to discontinue the project. The reserve balance as of December
31, 2001 was $3.6 million. The total impairment charge of $13.2 million is
recorded in the 2001 income statement under the caption "Restructuring and
impairment".

Immediately following the terrorist attacks on September 11, 2001, the FAA
closed U.S. airspace. We resumed operations on September 14, 2001, after the FAA
order was rescinded. During the period in which the flight operations were
suspended, we experienced contract revenue losses and incurred incremental
expenses associated with crew and aircraft repositioning and added security
measures.

In January 2002, Atlas Air filed an amended claim for $29.0 million under
the Air Transportation Safety and Stabilization Act, which provides direct
compensation to the U.S. airlines for direct and incremental losses that
resulted from the terrorist attacks for the September 11, 2001 through December
31, 2001 period. During the fourth quarter of 2001, Atlas Air recognized $24.7
million as a reduction to the operating expenses for the fourth quarter,
representing 85% of the total claim. In October 2001, the Federal government
paid Atlas Air $10.1 million as an initial payment of our claim under the
Federal Air Transportation Safety and Stabilization Act, and in February 2002,
Atlas Air received an additional $11.4 million. Payment of the balance of the
claim is dependent upon finalization of the DOT rules and guidelines related to
the audit of the claims that have been filed by the airlines. Since payment of
claims under this Act are subject to a DOT audit, there can be no assurances
that the balance will be paid by the DOT or that upon the audit of the claim the
DOT will not seek to recover amounts already paid to Atlas Air.

Operating Revenues. Total operating revenues for the year ended December
31, 2001 decreased to $763.8 million compared to $790.5 million for 2000. This
decline is largely attributable to a decline in overall block hour production.

REVENUES REVENUE/BLOCK
($ MILLIONS) BLOCK HOURS HOUR
--------------- ---------------- ---------------
2001 2000 2001 2000 2001 2000
------ ------ ------ ------- ------ ------

Contract services................ $609.0 $766.9 99,517 130,615 $6,120 $5,872
Charters, scheduled service and
other.......................... 154.8 23.6 18,347 3,464 8,438 6,818

Contract service revenue, which includes revenues from our ACMI Contracts,
decreased to $609.0 million in 2001 compared to $766.9 million in 2000. This 21%
decline year over year was due to a 24% decline in contract service block hours,
somewhat offset by higher contract service unit revenues per block hour. The
block hour decline was due to reduced demand from customers as well as aircraft
returns due in one instance to the impending bankruptcy of a customer. The
increase in unit revenue was due to the change in relative

utilization of Boeing 747-400 aircraft that are priced at a higher unit revenue
rate, versus Boeing 747-200 aircraft.

Charters, scheduled service and other revenue grew to $154.8 million in
2001 versus $23.6 million in 2000. This increase was due principally to
unusually high levels of ad hoc charter activity in the second half of 2001,
particularly from the U.S. military. Additionally, the inclusion of Polar Air
Cargo after the November 2001 acquisition, added approximately $37.0 million in
scheduled service revenue.

Operating Expenses. Our principal operating expenses include salaries and
benefits; aircraft maintenance; aircraft and engine rentals; fuel costs for
non-ACMI contract services; ground handling and flight related expenses;
depreciation and amortization; and other expenses.

Salaries, wages and benefits include all such expenses for our pilot and
ground staff work force. Salaries increased to $119.8 million in 2001 compared
to $108.3 million in 2000, or approximately 11%, principally reflecting the
reinstatement of profit sharing to Atlas Air crew members, and the inclusion of
Polar Air Cargo, effective November 1, 2001. On a block hour basis, expenses
increased by approximately 26% to $1,016 per block hour for 2001 from $808 per
block hour for 2000. This increase in the block hour rate was primarily due to
less efficient use of crews caused by the decline in block hours, salary
adjustments based on seniority and ground staff salaries. The reduced crew
staffing and ground staff staffing announced in May 2001 and June 2001,
respectively, favorably impacted salary expenses. Final resolution of the labor
contract of Atlas Air crew members and results of the ALPA litigation will cause
labor expense to increase. The Company continues to review future staffing
levels, which could impact this category in the future. In March 2002, Atlas Air
announced a further furlough of crew members that will be phased in over a
period of thirteen months, depending upon market conditions.

Maintenance expense decreased to $139.1 million in 2001 from $148.1 million
in 2000, or approximately 6%, due to the overall decline in aircraft block hour
production, offset by requirements to perform specified maintenance activity
regardless of flight activity. On a block hour basis, maintenance expense
increased year over year by approximately 7% to $1,180 per block hour for 2001
compared to $1,105 for 2000. Maintenance expenses include all expenses related
to the upkeep of the aircraft, including maintenance, labor, parts, supplies and
maintenance reserves. The costs of C Checks, D Checks and engine overhauls not
otherwise covered by maintenance reserves are capitalized as they are incurred
and amortized over the life of the maintenance event or expensed. We contract
for a significant part of our regular maintenance operations and support on a
fixed cost per flight hour basis.

Aircraft and engine rentals were $134.5 million in 2001 compared to $79.1
million in 2000, or an increase of approximately 70%. This increase was
primarily due to the impact of a full year of rental expense in 2001 for
aircraft leases and sale-leasebacks during 2000, which reduced depreciation and
interest expense, and the addition of Polar Air Cargo leased aircraft beginning
November 1, 2001. There were no new leases entered into during 2001, and the
Polar Air Cargo leases assumed commencing November 1, 2001 were renegotiated
with favorable terms. From time to time, we engage in discussions with third
parties regarding possible lease financing of aircraft currently in or new to
our fleet.

Because of the nature of our ACMI Contracts, our ACMI customers generally
bear all other operating expenses. As a result, we incur fuel and ground
handling expenses when we operate on our own behalf either in scheduled
services, for ad hoc charters or for ferry flights. Fuel expenses for our
non-ACMI Contract services, charters and scheduled service include both the
direct costs of aircraft fuel as well as the cost of delivering fuel into the
aircraft. Fuel expense increased to $51.3 million for 2001 compared to $13.0
million for 2000, or by $38.3 million. This was primarily due to increased
charter and scheduled service activity, despite lower fuel prices year over
year. On a per block hour basis, fuel costs increased to $435 per block hour in
2001 from $97 per block hour in 2000, reflecting the increase in block hours
where we provided the fuel. We expect this trend to continue in the future.

Ground handling expenses for non-ACMI Contract services, charters and
scheduled service include the costs associated with servicing our aircraft at
the various airports to which we operate. Other flight-related expenses include
hull and liability insurance, crew travel and meal expenses, initial, upgrade
and recurrent

crew training costs and other expenses necessary to conduct our flight
operations, such as communication and navigation fees. Ground handling and
flight related expenses decreased to $70.6 million in 2001 compared to $74.1
million in 2000, or approximately 5%. On a block hour basis, ground handling and
flight related expenses increased approximately 8% to $599 per block hour for
2001 compared to $553 per block hour for 2000. The increase in expense on a per
block hour basis is primarily due to an increase in charter and scheduled
service block hours requiring ground handling services, partially offset by
continued improvements in crew travel and crew basing strategies.

Depreciation and amortization expense decreased to $83.4 million in 2001
from $94.0 million in 2000, or approximately 11%. This decrease primarily
reflects the full-year impact of aircraft refinanced pursuant to sale-leaseback
transactions during the previous year, the cessation of depreciation expense
since May 2001 for six aircraft currently held for sale, partially offset by
additions to property and equipment, computers and leasehold improvements.

Other operating expenses include travel related expenses for non-crew
members and other miscellaneous operating costs. Other operating expenses
increased to $79.2 million in 2001 from $41.1 million in 2000, or approximately
93%. On a block hour basis, these expenses increased to $672 per block hour in
2001 from $306 per block hour in 2000. The increase in cost from the prior year
was due primarily to allowance for account reserves, costs associated with the
completion of the relocation of our headquarters to Purchase, New York, the
inclusion of Polar Air Cargo since November 2001, and other costs associated
with the operation of our fleet and facilities.

Other Income (Expense). Other income (expense) consists of interest
income, interest expense and fair value changes in derivative instruments.
Interest income decreased to $19.8 million in 2001 from $28.6 million in 2000,
primarily due to reductions in average interest rates and reduced investment
balances. Interest expense decreased to $86.4 million for 2001 from $123.8
million for 2000, or approximately 30%. This decrease reflects the effect of
principal payments during 2000 and 2001 and repayment of debt on sale-leaseback
aircraft, resulting in a shift from interest expense to aircraft rental expense.
The change in fair value of the interest rate swap during 2001 was recorded in
accordance with the provisions of SFAS No. 133.

Income Taxes. Pursuant to the provisions of SFAS No. 109 "Accounting for
Income Taxes," we have recorded a tax provision based on tax rates in effect
during the period. Accordingly, we accrued for taxes at the rate of 38.2% in
2001 and 38.0% in 2000.

2000 COMPARED TO 1999

Results of Operations. Operating profit during 2000 of $232.7 million
reflected a 24% improvement over the operating profit during 1999 of $187.5
million. The operating results were favorably impacted by the increase in Boeing
747-400 freighter aircraft in our fleet and a more productive fleet, partially
offset by the increase in leased aircraft compared to owned aircraft. Income
before extraordinary item and cumulative effect of a change in accounting
principle was $85.3 million in 2000, compared to $61.3 million in 1999, an
increase of approximately 39%. In the first quarter of 1999, we recorded an
extraordinary charge associated with the write-off of start-up costs related to
the introduction of new Boeing 747-400 freighter aircraft into our fleet, as
required by SOP 98-5 (as defined). Net income of $85.3 million for 2000
reflected a 60% increase over the net income of $53.3 million for 1999.

Operating levels increased during 2000 with the delivery of three
additional new Boeing 747-400 freighter aircraft and two cargo configured Boeing
747-300 freighter aircraft. Block hours increased from 29,193 in the first
quarter of 2000 to 36,739 in the fourth quarter of 2000, reflecting the growth
in the average fleet size from 30.5 aircraft to 34.0 aircraft for the two
periods. Total operating revenue increased from $166.4 million in the first
quarter to $223.7 million in the fourth quarter, representing slightly higher
block hour rates for the fourth quarter compared to those of the first quarter
of 2000, primarily due to the seasonality of the business of our customers. We
earned $69.2 million operating income and $31.2 million net income in the fourth
quarter of 2000, compared to $43.2 million operating income and $12.0 million
net income in the first quarter of 2000.

Operating Revenues. Total operating revenues for the year ended December
31, 2000 increased to $790.5 million compared to $637.1 million for 1999, an
increase of approximately 24%. The average number of aircraft in our fleet
during 2000 was 32.5 compared to 29.0 during 1999. Total block hours for 2000
were 134,079 compared to 109,608 for 1999, an increase of approximately 22%,
reflecting the 12% increase in the average number of aircraft in our fleet
during 2000 and an increase in average daily aircraft block hour production of
9%. Revenue per block hour increased by approximately 1% to $5,896 for 2000
compared to $5,812 for 1999, due to the increase in the number of Boeing 747-400
freighter aircraft in our fleet and the increase in the volume of charter
operations year over year, for which the rate per block hour is higher in order
to offset additional operating costs borne by us under such arrangements.
Charter operations are performed on an ad hoc basis and are dependent upon
surplus availability of our aircraft and customer demand.

Salaries, wages and benefits include all expenses for our pilot and ground
staff work force. Salaries increased to $108.3 million in 2000 compared to $80.7
million in 1999. The increase is primarily the result of an increase in the size
of our fleet year over year. In addition, during the second quarter of 1999, the
flight crew voted to be represented by ALPA (as defined), which resulted in the
exclusion of the flight crew from eligibility of participation in our profit
sharing plan. On a block hour basis, expenses increased by approximately 10% to
$808 per block hour from $737 per block hour. This increase in the block hour
rate was primarily due to seniority based salary adjustments for flight crew
members and salary increase for our ground staff.

Maintenance expense increased to $148.1 million in 2000 from $131.2 million
in 1999, or approximately 13%, primarily due to the increased size of our fleet.
On a block hour basis, maintenance expense decreased year over year by
approximately 8% to $1,105 per block hour for 2000 compared to $1,197 for 1999,
principally as a result of increased efficiencies gained in the operation of our
standardized fleet. Maintenance expenses include all expenses related to the
upkeep of the aircraft, including maintenance, labor, parts, supplies and
maintenance reserves. The costs of C Checks, D Checks and engine overhauls not
otherwise covered by maintenance reserves are capitalized as they are incurred
and amortized over the life of the maintenance event or expensed as incurred. We
contract for a significant part of our regular maintenance operations and
support on a fixed cost per flight hour basis.

Aircraft and engine rentals were $79.1 million in 2000 compared to $51.2
million in 1999, or an increase of approximately 55%, primarily due to an
increase in the number of leased aircraft included in our fleet in 2000.

Because of the nature of our ACMI Contracts, our ACMI customers generally
bear all other operating expenses. As a result, we incur fuel and ground
handling expenses except when we operate on our own behalf either in scheduled
services, for ad hoc charters or for ferry flights. Fuel expenses for our
non-ACMI Contract services include both the direct costs of aircraft fuel as
well as the cost of delivering fuel into the aircraft. Ground handling expenses
for non-ACMI Contract service include the costs associated with servicing our
aircraft at the various airports to which we operate.

Fuel expense increased to $13.0 million for 2000 compared to $7.7 million
for 1999, or by 69%. This was primarily due to increased charter and scheduled
service activity and higher fuel prices year over year. On a per block hour
basis, fuel costs increased to $97 per block hour in 2000 from $70 per block
hour in 1999 or by approximately 39%, reflecting the increase in the price of
fuel.

Ground handling and flight related expenses increased to $74.1 million in
2000 compared to $64.4 million in 1999, or approximately 15%. On a block hour
basis, ground handling and flight related expenses decreased approximately 6% to
$553 per block hour for 2000 compared to $587 per block hour for 1999. The
decrease in expense on a per block hour basis is primarily due to continued
improvements in crew travel and crew basing strategies.

Depreciation and amortization expense increased to $94.0 million in 2000
from $78.4 million in 1999, or approximately 20%. This increase primarily
reflected increases in owned aircraft, engines and spare parts relating to the
increase in our fleet size, and other capital additions, partially offset by
aircraft refinanced pursuant to sale-leaseback transactions during the year.

Other operating expenses include travel related expenses for non-crew
members and other miscellaneous operating costs. Other operating expenses
increased to $41.1 million in 2000 from $36.1 million in 1999, or approximately
14%. On a block hour basis, these expenses decreased to $306 per block hour in
2000 from $329 per block hour in 1999, or approximately 7%.

Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income for 2000 was $28.6 million compared to
$20.0 million for 1999, primarily due to increases in the amount of funds
available for investing as well as an overall increase in the rates of return on
investments. Interest expense increased to $123.8 million for 2000 from $108.7
million for 1999, or approximately 14%. This increase reflects the financing
costs associated with the purchase of additional aircraft in the second half of
2000 and the issuance of $217.3 million under the 2000 EETCs.

LIQUIDITY AND CAPITAL RESOURCES

Our balance sheet reflected cash and cash equivalents and short-term
investments of $351.3 million and $559.0 million at December 31, 2001 and 2000,
respectively. At December 31, 2001 we had working capital of $333.4 million
compared to $483.3 million at December 31, 2000. The decrease in our working
capital is largely a result of capital expenditures for aircraft deposits, debt
payments and the purchase of Polar Air Cargo effective November 1, 2001.

Historically, our business has been largely contractual ACMI flying. This
business has not been working-capital intensive. As such, we have not maintained
a working capital borrowing facility. With the acquisition of Polar Air Cargo
and the nature of its non-ACMI business, we expect to become more
working-capital intensive as the expansion of our Scheduled Service and ad hoc
charter service business includes the provision of fuel, ground and cargo
handling (see Note 1 -- Organization). We maintain a reasonably high level of
liquidity relative to operating costs.

Cash provided by operations for the year ended December 31, 2001 was $19.2
million, compared to $165.0 million and $190.4 million for 2000 and 1999,
respectively. Cash provided by operations for the year ended December 31, 2001
was primarily attributable to our net loss for the year, adjusted for major
non-cash charges (including the restructuring and impairment charges), and
decreases in our deferred tax liability, accounts receivable and other, accrued
expenses and income taxes payable. Cash provided by operations for the year
ended December 31, 2000 was primarily attributable to our net income for the
year adjusted for non-cash charges, and increases in our deferred tax liability,
accrued expenses, and income taxes payable. Cash provided by operations for the
year ended December 31, 1999 was attributable to our net income for the year
adjusted for non-cash charges, and increases in our deferred tax liability,
accrued expenses, and income taxes payable.

Cash used in investing activities for the year ended December 31, 2001 was
$204.2 million, compared to $413.4 million and $453.9 million for 2000 and 1999,
respectively. For the year ended December 31, 2001 cash used in investing
activities comprised primarily of pre-delivery deposits on our Boeing 747-400
aircraft scheduled for delivery in 2002 and 2003 and other capital improvements
including aircraft modifications and maintenance, net of proceeds from sales of
property and equipment of $129.1 million and acquisition of Polar Air Cargo of
$76.1 million. Our investment purchases primarily consist of commercial paper,
market auction preferreds, corporate notes, corporate bonds, and US government
securities, and are all classified as available-for-sale. For the year ended
December 31, 2000, cash used in investing activities was comprised of purchases
of property and equipment, net of proceeds from the sale of equipment, of $401.5
million and

purchases of short-term and long-term investments, net of maturities, of $11.9
million. Property and equipment purchases in 2000 were comprised primarily of
final payments associated with the delivery of three new Boeing 747-400s in the
first and second quarters of the year, costs associated with the three Boeing
747-300s converted from combi to full freighter configuration and placed into
service in October and December 2000, and January 2001, initial costs associated
with the four new Boeing 747-400s expected to be delivered in 2002, and other
capital improvement costs including those associated with our headquarters in
Purchase, NY, and a new training facility in Miami, FL. Cash used in investing
activities for the year ended December 31, 1999 consisted of purchases of
property and equipment, net of proceeds from the sale of equipment, of $334.5
million and purchases of short-term investments, net of maturities, of $119.4
million. Property and equipment purchases in 1999 were comprised primarily of
costs associated with the new Boeing 747-400 aircraft, four of which were
delivered in 1999, purchases of spare airframe and engine parts associated with
the new aircraft in our fleet, purchases of spare engines for the Boeing
747-400s, and other capital improvements including leasehold improvements to our
various offices and upgrades and improvements to our accounting and inventory
computer systems.

Cash used by financing activities for the year ended December 31, 2001 was
$70.1 million, compared to cash provided by financing activities of $410.5
million and $145.5 million for 2000 and 1999, respectively. For the year ended
December 31, 2001, cash used by financing activities consisted primarily of
$119.3 million of principal payments on notes payable, partially offset by $51.5
million of net proceeds from debt financing. The increase in debt was
principally cash borrowed for the acquisition of Polar Air Cargo. For the year
ended December 31, 2000, cash provided by financing activities consisted
primarily of proceeds from the offering of 3,465,000 shares of our common stock
and exercises of common stock options of $107.1 million, proceeds from the
issuance of treasury stock under our employee stock purchase plan of $1.2
million, and proceeds from debt issuance and lease financing, net of principal
payments and debt issuance and deferred lease costs of $302.2 million. In 2000
we received funding under the 1999 and 2000 EETCs associated with the delivery
of the three new Boeing 747-400s in the first and second quarters. We also
arranged beneficial lease financing for four of our Boeing 747-400s and four of
our Boeing 747-200s that were previously owned aircraft during the year. The net
book values were removed and associated debt was repaid for each aircraft. Debt
financing was also arranged for the two Boeing 747-300s placed into service in
December 2000 and January 2001. Cash provided by financing activities for the
year ended December 31, 1999 consisted of proceeds from the exercise of common
stock options of $15.7 million, proceeds from the issuance of treasury stock
under our employee stock purchase plan, net of purchases of $0.3 million, and
proceeds from debt issuance and lease financing, net of principal payments and
debt issuance and deferred lease costs of $129.6 million. In 1999, we received
funding under the 1998 and 1999 EETCs associated with the delivery of four new
Boeing 747-400s.

Atlas Air is in discussions with Boeing in an effort to defer delivery of
some or all of the aircraft scheduled for 2002. As noted above, Atlas Air has
successfully deferred one of the aircraft to later 2003. However, Atlas Air is
currently in discussions with Boeing to have the 2002 aircraft delivered as late
in the year as possible. Atlas Air does not currently have firm financing in
place for any of the four Boeing 747-400 aircraft scheduled for delivery in 2002
and 2003. However, Atlas Air is currently in discussions with several sources
for financing these aircraft. The inability to secure financing for the Boeing
747-400 deliveries could result in a default under the Boeing Purchase
Agreement, which would permit Boeing to accelerate payments due under the Boeing
Purchase Agreement. Such acceleration would cause a default in covenants of
certain of the

Company's indebtedness which would permit the lenders to accelerate payment of a
significant portion of all indebtedness, which event would have a material
adverse effect on the Company's financial position and results of operations.
However, Boeing has made an offer to finance by sale-leaseback, each of the
aircraft to be delivered in 2002, under terms which are more favorable to
Boeing. If Atlas Air is unable to secure other financing more favorable to the
Company, management believes it has the option to utilize the proposed Boeing
financing.

The following table summarizes our financial obligations for principal
payments under existing debt agreements and our lease obligations to be paid,
beginning in 2002 and thereafter (in thousands):

NEXT YEARS 2 YEARS 4
YEAR AND 3 AND 5 THEREAFTER
-------- -------- -------- ----------

EETC's........................................... $ 13,743 $ 22,284 $ 16,702 $ 137,362
AFL III Term Loan................................ 18,255 108,182 86,712 --
Aircraft Credit Facility......................... -- 47,675 20,432 --
Senior Notes..................................... -- -- 284,475 152,853
Other............................................ 33,936 49,683 23,291 9,401
Operating lease payments......................... 241,994 417,829 374,397 2,174,381
Capital lease payments........................... 1,768 3,197 1,460 --

Excluded from the above table are aircraft pre-delivery deposits for the
four Boeing 747-400 aircraft, which at December 31, 2001 totaled $214.2 million,
of which $78.2 million has been in cash and $136.0 million has been in the form
of deferred payments. We expect to finance the deferred obligation at the time
we take delivery of the Boeing 747-400 aircraft (See Note 5 to the Consolidated
Financial Statements.)

As part of our initiatives launched in 2001 to adjust to the more uncertain
economic environment, we have severely reduced our non-aircraft capital
spending. For the foreseeable future, such spending will be largely confined to
mandatory aircraft related expenditures.

Along with the financing associated with the Boeing 747-400s noted above,
we regularly review financing opportunities and alternatives. Given our current
levels of liquidity and financing, combined with the existence of certain
restrictive financial ratio covenants in certain of our credit facilities, we
are unlikely to add to our liability structure, other than with respect to the
Boeing deliveries noted above, in the near future. See "-- Debt Covenants." We
have and will continue to evaluate equity capital alternatives.

We believe that our liquidity on hand, which totaled $351.3 million in cash
and cash equivalents and short term investments at December 31, 2001, will be
sufficient to meet our ongoing liquidity needs for the next twelve months and
beyond. We expect to fund our future capital commitments through internally
generated funds together with general Company financings and aircraft financing
transactions, should they become available to us. However, there can be no
assurance that sufficient financings will be available for all aircraft and
other capital expenditures not covered by firm financing commitments.

Under FAA Directives issued under its "Aging Aircraft" program, we are
subject to extensive aircraft examinations and will be required to undertake
structural modifications to our fleet to address the problem of corrosion and
structural fatigue. As part of the FAA's overall Aging Aircraft program, it has
issued Directives requiring certain additional aircraft modifications to be
accomplished. We estimate that the modification costs per Classics aircraft will
range between $2 million and $3 million. Fifteen aircraft in our Classics fleet
have already undergone the major portion of such modifications. The remaining
Classics aircraft will require modification prior to the year 2013. Other
Directives have been issued that require inspections and minor modifications to
Boeing Classics aircraft. The newly manufactured Boeing 747-400 freighter
aircraft were delivered to us in compliance with all existing FAA Directives at
their respective delivery dates. It is possible that additional Directives
applicable to the types of aircraft or engines included in our fleet could be
issued in the future, the cost of which could be substantial.

From time to time we engage in discussions with third parties regarding
possible acquisition or sale of aircraft in our fleet. We are in discussions
with third parties for the possible acquisition and sale of aircraft for 2002
and beyond.

Debt Covenants

AIRCRAFT CREDIT FACILITY

In May 1996, Atlas Air entered into a revolving credit facility (the
"Aircraft Credit Facility") with Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company ("BTCo"), as Administrative Agent.
This revolving loan facility provides for the acquisition and conversion of
flight equipment. In April 2000, Atlas Air amended its Aircraft Credit Facility
with Deutsche Bank as successor to BTCo. to provide for a $175 million revolving
credit facility with a three-year revolving period and a subsequent two-year
term loan period. With respect to the aircraft currently financed under the
Aircraft Credit Facility, the term loan period will be from April 25, 2003 to
April 25, 2005 in the event that permanent financing has not been obtained for
such flight equipment financed under the facility. Each borrowing is secured by
a first priority security interest in the collateral flight equipment of that
borrowing. At the time of each borrowing, Atlas Air must select either a Base
Rate Loan (prime rate plus a spread), or a Eurodollar Rate Loan (Eurodollar rate
plus a spread). Atlas Air selected the Eurodollar Rate Loan for substantially
all borrowings in 1999, 2000 and 2001.

In 2001, Atlas Air amended this Aircraft Credit Facility to include, among
other items, a revision of its financial covenants, including the minimum
interest coverage and maximum leverage ratios, and the addition of certain
liquidity requirements. The ratio requirements were eased through 2002, to what
Atlas Air believes are achievable levels. Covenant tests are conducted
quarterly, and further amendments may be necessary if financial performance
falls short of expected levels. There can be no assurance that Atlas Air could
successfully negotiate waivers or amendments to the Aircraft Credit Facility in
the event that the financial covenants are not met. Failure to obtain such
waivers or amendments would permit the lenders to accelerate payment of a
substantial portion of our long term indebtedness, which would have a material
adverse effect on Atlas Air. As part of the amendment, a new liquidity covenant
was added that requires Atlas Air to maintain $200 million in cash and
short-term investments. The amendment also included the requirement to prepay
$7.6 million in outstanding debt and reduced the available amount to $140
million from $175 million. As of December 31, 2001, Atlas Air had $68.1 million
outstanding under the Aircraft Credit Facility.

Additional covenants with respect to the Aircraft Credit Facility require
specific levels of insurance, as well as contain requirements regarding
possession, maintenance, and lease or transfer of the flight equipment. Certain
covenants applicable to Atlas Air include, among other restrictions, limitations
on: indebtedness, liens, investments, contingent obligations, restricted junior
payments, capital expenditures, amendments of material agreements, leases,
transactions with shareholders and affiliates and the conduct of business. Atlas
Air is in compliance with all covenants.

AFL III TERM LOAN FACILITY

In April 2000, Atlas Air formed a wholly-owned subsidiary, Atlas Freighter
Leasing III, Inc. (AFL III) for the purpose of entering into a $300 million term
loan facility (the "AFL III Term Loan Facility") to refinance all of the
aircraft and spare engines previously financed under the AFL Term Loan Facility
and the AFL II Term Loan Facility, plus one aircraft previously financed under
the Aircraft Credit Facility and three Boeing 747-400 spare engines owned by
Atlas Air. As a result of this refinancing, Atlas Air has and will continue to
experience lower interest rates and extended repayment terms as compared to the
previous financings. The AFL III Term Loan Facility consists of Term Loan A in
the amount of $165 million and Term Loan B in the amount of $135 million, for
which interest is based on the Eurodollar rate plus a spread. Quarterly
scheduled principal payments of $5.0 million and $1.7 million, respectively,
commenced in July 2000 and increase over time to $9.1 million and $6.2 million,
respectively, such that Term Loan A is to be fully paid in April 2005 and Term
Loan B is to be fully paid in April 2006, with a final payment of $37.3 million.
In September 2000, AFL III sold one aircraft financed under the AFL III Term
Loan Facility,

which released the lien on the aircraft and reduced the aggregate amount
outstanding under the facility by $22.9 million.

The AFL III Term Loan Facility is secured by a first priority interest in
the ten subject aircraft, plus 12 spare engines, and is restrictive with respect
to limitations on: indebtedness, liens, investments, contingent obligations,
restricted junior payments, capital expenditures, amendments of material
agreements, leases, transactions with shareholders and affiliates, and the
conduct of business, among other restrictions.

In 2001, the AFL III Term Loan Facility financial covenants were amended in
the same manner as the Aircraft Credit Facility amendments. There can be no
assurance that Atlas Air could successfully negotiate waivers or amendments to
the AFL III Term Loan Facility in the event that the financial covenants are not
met. Failure to obtain such waivers or amendments would permit the lenders to
accelerate payment of a substantial portion of Atlas Air's long term
indebtedness, which would have a material adverse effect on Atlas Air. The
amendment also included a $23.7 million prepayment. This prepayment effectively
prepaid amounts otherwise due in 2002, reducing scheduled 2002 payments from
$42.0 million to $18.3 million. As of December 31, 2001, Atlas Air had
approximately $213.1 million outstanding under the AFL III Term Loan Facility.

The subsidiary structure of AFL III was designed for the purposes of
providing additional credit protection to the lenders of AFL III. Atlas Air has
intercompany lease agreements with AFL III for the use of the ten aircraft and
twelve spare engine assets. As of March 2002, Atlas Air became aware of an
administrative error which had caused certain intercompany rental payments which
were payable between Atlas Air and the wholly owned AFL III subsidiary to go
unpaid. The failure to make these intercompany transfers constituted a technical
Event of Lease Default under the lease agreements between AFL III (the lessor)
and Atlas Air (the lessee) and a related Event of Default under the AFL III term
loan facility. These unpaid amounts were subsequently transferred to the AFL III
subsidiary in March 2002 at which point the events of default were remedied and
Atlas Air became compliant with all covenants. At no time were either Atlas Air
or AFL III in arrears with regards to any amounts of principal or interest due
to external lenders.

SENIOR NOTES

In August 1997, Atlas Air consummated the offering of $150 million of
unsecured 10 3/4% Senior Notes due 2005 (the "10 3/4% Senior Notes"). The
proceeds from the offering of the 10 3/4% Senior Notes were used to, among other
things, repay short-term indebtedness incurred to make pre-delivery deposits to
Boeing for the purchase of 10 new freighter aircraft and for additional
pre-delivery deposits as they become due.

In April 1998, Atlas Air consummated the offering of $175 million of
unsecured 9 1/4% Senior Notes due 2008 (the "9 1/4% Senior Notes") at 99.867%.
The proceeds of the offering of 9 1/4% Senior Notes were used for general
corporate purposes.

In November 1998, Atlas Air consummated the offering of $150 million of
unsecured 9 3/8% Senior Notes due 2006 (the "9 3/8% Senior Notes"). The proceeds
of the offering of 9 3/8% Senior Notes were used for general corporate purposes,
which included the redemption of the 12 1/4% Equipment Notes due 2002. In June
2000, the Atlas Air completed a common stock offering for net cash proceeds of
$104 million, a portion of which was used to repurchase $12.5 million of the
10 3/4% Senior Notes, $22.0 million of the 9 1/4% Senior Notes and $3.0 million
of the 9 3/8% Senior Notes.

The Senior Notes are general unsecured obligations of Atlas Air, which rank
pari passu in right of payment to any of Atlas Air's existing and future
unsecured senior indebtedness. The Senior Notes are effectively subordinated,
however, to all Atlas Air's secured indebtedness and to all indebtedness of its
subsidiaries.

convey or otherwise dispose of all or substantially all of their assets. Atlas
Air is in compliance with all such covenants as of December 31, 2001. Atlas Air
is restricted by covenants in its ability to incur any additional indebtedness
and pay dividends.

Interest on the Senior Notes accrue from their date of original issuance,
and is payable semi-annually in arrears. The Senior Notes are redeemable, in
whole or in part, at Atlas Air's option, at any time, on or after August 1, 2001
for the 10 3/4% Senior Notes, on or after April 15, 2003 for the 9 1/4% Senior
Notes, and on or after November 15, 2002 for the 9 3/8% Senior Notes, initially
at a premium of their principal amount, plus accrued interest, declining ratably
to 100% of their principal amounts, plus accrued interest.

1998 EETCS

In February 1998, Atlas Air completed an offering of $538.9 million of
pass-through certificates, also known as Enhanced Equipment Trust Certificates
(the "1998 EETCs"). The 1998 EETCs are not direct obligations of, or guaranteed
by, Atlas Air and are not included in its consolidated financial statements
until such time that it draws upon the proceeds to take delivery and ownership
of an aircraft. The cash proceeds from the transaction were used to finance
(through four leveraged leases and one secured debt financing) the first five
new Boeing 747-400 freighter aircraft delivered to Atlas Air during the period
July 1998 through December 1998. In connection with the secured debt financing,
Atlas Air took ownership of the aircraft and executed equipment notes in the
aggregate amount of $107.9 million with a weighted average interest rate of
7.6%. As of December 31, 2001, Atlas Air had $92.9 million outstanding under the
1998 EETCs.

In November and December 1997, Atlas Air entered into three Treasury Note
hedges, approximating $300 million of principal, for the purpose of minimizing
the risk associated with fluctuations in the interest rates which were the basis
for the pricing of the 1998 EETCs in January 1998. The effect of the hedge
resulted in a deferred cost of $6.3 million, which is amortized over the
approximate 20 year life associated with this financing.

1999 EETCS

In April 1999, Atlas Air completed an offering of $543.6 million of
Enhanced Equipment Trust Certificates ("1999 EETCs"). The 1999 EETCs are not
direct obligations of, or guaranteed by, Atlas Air and therefore are not
included in its consolidated financial statements until such time that it draws
upon the proceeds to take delivery and ownership of an aircraft. The cash
proceeds from the 1999 EETCs transaction were deposited with an escrow agent and
were used to finance, (through one leveraged lease and four secured debt
financings), five new Boeing 747-400 freighter aircraft delivered to Atlas Air.
In connection with these secured debt financings, Atlas Air executed equipment
notes in the aggregate amount of $325.1 million and $109.9 million in 1999 and
2000, respectively, with weighted average interest rates of 7.6%. Subsequently,
Atlas Air entered into sale-leaseback transactions with respect to three of
these aircraft, which reduced the aggregate amount of the equipment notes to
$102.6 million. As of December 31, 2001, Atlas Air had $97.2 million outstanding
under the 1999 EETCs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties and potentially result in materially
different results under different assumptions and conditions. The Company has
prepared the accompanying financial statements in conformity with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates under
different assumptions or conditions. The Company has identified the following
critical accounting policies utilized in the preparation of these financial
statements.

Revenue Recognition

Under our ACMI contracts, revenue is recognized in the financial statements
for the actual block hours operated on behalf of a customer during a calendar
month, unless the actual block hours are less than the
34

minimum guaranteed hours under the contract, in which case revenue is recognized
for minimum guaranteed hours. Some contracts have a provision that allow
customers to make up the shortfall in the minimum guaranteed hours over
specified future months (measurement period). Under those contracts, revenue is
recognized for the actual block hours flown and recognition of the shortfall in
minimum guaranteed hours is deferred until either the shortfall has not been
made up at the end of the measurement period or there is a fair degree of
certainty during the measurement period that the cumulative shortfall will not
be made up.

Under scheduled service and charter operations revenue is recognized upon
completion of the particular flight segment.

Property and Equipment

The Company has approximately $1.4 billion in net property and equipment at
December 31, 2001. The recorded values of the assets are affected by a number of
policy elections made by the Company, including estimation of useful lives,
salvage values, timing of aircraft maintenance and nature of maintenance
agreements and in 2001 Impairment charges.

Owned aircraft are stated at cost. Expenditures for major additions,
improvements, flight equipment modifications and certain overhaul and
maintenance costs are capitalized. A significant portion of scheduled and
unscheduled maintenance is contracted with three maintenance providers under
long-term agreements pursuant to which monthly reserve payments are made to the
providers based on flight-hours and such amounts are charged to expense
currently. Other maintenance and repairs are charged to expense as incurred,
except for significant engine overhaul maintenance which is capitalized and
charged to expense on a flight-hour basis and certain C and D checks which are
capitalized and amortized over the corresponding life. Owned aircraft are
depreciated over their estimated useful lives of 20 to 30 years, using the
straight-line method and estimated salvage values of 10% of cost. The cost and
accumulated depreciation of property and equipment disposed of are removed from
the related accounts and any gain or loss is reflected in the results of
operations. Substantially all property and equipment is specifically pledged as
collateral for indebtedness of the Company. Whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, management evaluates the recorded asset balances, net of
accumulated depreciation, for impairment based on the undiscounted future cash
flows associated with the asset or based on a market assessment of the value of
the aircraft.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets". These standards revise the rules related to the accounting
for business combinations, goodwill and other intangible assets. SFAS No. 141
requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase accounting method. SFAS No. 142 states that
goodwill is no longer subject to amortization over its useful life. Rather,
goodwill is subject to at least annual assessment for impairment and is to be
written down to its fair value only if the carrying amount is greater than the
fair value. In addition, intangible assets should be separately recognized if
the benefit of the intangible asset is obtained through contractual or other
legal rights, or if the intangible asset can be sold, transferred, licensed,
rented or exchanged, regardless of the acquirer's intent to do so. SFAS No. 141
is not expected to have a material effect on the Company's financial position or
results of operations. The impact of SFAS No. 142 on the financial statements of
Atlas Air Worldwide Holdings, Inc. as it relates to any goodwill or intangible
assets acquired in the acquisition of Polar Air Cargo is described in Note 19.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This standard addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The standard requires
recognition of the fair value of a liability for an asset retirement obligation
in the period in which it is incurred and is effective for financial statements
issued for fiscal years beginning after June 15, 2002. This standard is not
expected to have a material effect on the Company's financial position or
results of operations.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets". This standard addresses financial accounting
and reporting for the impairment of long-lived assets and for long-lived assets
to be disposed of. This Statement supercedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of",
and the accounting and reporting provisions of APB Opinion No. 30 "Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business (as previously
defined in that Opinion). This standard is effective for financial statements
issued for fiscal years beginning after December 15, 2001, and interim periods
within those fiscal years. Management is reviewing the provisions of this
statement and does not expect them to have a material effect on the Company's
financial position or results of operations.

FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this Form 10-K
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 2lE of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, levels of activity,
performance or achievements or industry results, to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. Forward-looking statements represent
the Company's expectations and beliefs concerning future events, based on
information available to the Company at the date of this report. Some factors
that could significantly impact net income, revenues, expenses, and block hours
include, without limitation, the adverse impact of the September 11, 2001,
terrorist attacks on the economy in general; the demand for air cargo; the
ability to reduce operating costs and conserve financial resources, taking into
account increased costs incurred or to be incurred as a consequence of the
attacks; the higher costs associated with new airline security directives and
any other increased regulation of air carriers; the significantly higher costs
of aircraft insurance coverage for future claims caused by acts of war,
terrorism, sabotage, hijacking and other similar perils, and the extent to which
such insurance will continue to be available; the ability to raise financing in
light of the September 11, 2001, events; the price of jet fuel; actions of the
U.S., foreign and local governments; the economic environment of the airline
industry and the economic environment in general. In addition, forward-looking
statements generally can be identified by the use of forward-looking terminology
such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe",
"confident", or "continue" or the negative thereof or variations thereon or
similar terminology. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from our expectations are disclosed under
"Risk Factors" and elsewhere in this Form 10-K.

To the extent that any of the statements contained herein relating to our
expectations, assumptions and other Company matters are forward-looking, they
are made in reliance upon the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are based on current expectations
that involve a number of uncertainties and risks that could cause actual results
to differ materially from those projected in the forward-looking statements,
including, but not limited to, risks associated with:

- worldwide business and economic conditions;

- product demand and the rate of growth in the air cargo industry;

- the impact of competitors and competitive aircraft and aircraft financing
availability;

- the ability to attract and retain new and existing customers;

- normalized aircraft operating costs and reliability;

- management of growth and complying with FAA policies;

- the continued productivity of our workforce;

- dependence on key personnel; and

- other regulatory requirements.

As a result of the foregoing and other factors, no assurance can be given
as to our future results and achievements. Neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk associated with changes in interest rates
relates primarily to our short-term investments in our investment portfolio and
to our debt obligations. Our policy is to manage interest rate risk through a
combination of fixed and floating rate debt and by selectively entering into
swap agreements, depending upon market conditions.

FAIR
EXPECTED MATURITY DATES: 2002 2003 2004 2005 2006 THEREAFTER TOTAL VALUE
------------------------ -------- ------- ------- -------- -------- ---------- -------- --------
($ IN THOUSANDS)

Assets
Cash equivalents
Fixed rate.................. $ 40,483 $ -- $ -- $ -- $ -- $ -- $ 40,483 $ 40,491
Avg. interest rate.......... 2.1% --% --% --% --% --% 2.1%
Short-term investments
Fixed rate.................. $105,955 $44,332 $ -- $ -- $ -- $ -- $150,287 $151,062
Avg. interest rate.......... 4.6% 6.2% --% --% --% --% 5.1%
Long-term investments
Fixed rate.................. $ -- $ -- $ -- $ -- $ -- $ 41,100 $ 41,100 $ 41,100
Avg. interest rate.......... --% --% --% --% --% 6.0% 6.0%
Long-term debt
Fixed rate.................... $ 21,107 $21,426 $17,444 $155,474 $165,128 $299,617 $680,196 $589,689
Avg. interest rate............ 9.1% 9.1% 9.1% 8.9% 10.4% 7.7% 9.1%
Floating rate................. $ 44,827 $96,815 $92,138 $ 67,447 $ 43,563 $ -- $344,790 $344,790
Avg. interest rate............ 6.0% 5.9% 5.9% 5.4% 5.3% -- 5.7%
Swap (notional amount).......... $ 25,654 $25,654 $ 6,414 $ -- $ -- $ -- $ 57,722 $ 6,519
Avg. interest rate
Floating rate payee......... 6.5% 6.5% 6.5% -- -- -- 6.5%
Fixed rate payer............ 2.5% 2.5% 2.5% -- -- -- 2.5%

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and schedules that constitute Item 8
follow the text of this report. An index to the Consolidated Financial
Statements appears in Item 14(a) of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information concerning our executive officers and directors required by
this Item is incorporated by reference from our Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference from our
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is incorporated by reference from our
Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is incorporated by reference from our
Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) FINANCIAL STATEMENTS

Index to Consolidated Financial Statements.................. F-1
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations....................... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Cash Flows....................... F-5
Consolidated Statements of Stockholders' Equity............. F-6
Notes to Consolidated Financial Statements.................. F-7

(a)(2) FINANCIAL STATEMENT SCHEDULES

None required.

(a)(3) LIST OF EXHIBITS.

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++++4.13 -- Escrow and Paying Agent Agreement (Class A) dated as of
January 28, 2000 among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., as Placement Agents, Wilmington Trust
Company, as Trustee, and Wilmington Trust Company as
Paying Agent
++++4.14 -- Escrow and Paying Agent Agreement (Class B) dated as of
January 28, 2000 among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., as Placement Agents, Wilmington Trust
Company, as Trustee, and Wilmington Trust Company as
Paying Agent
++++4.15 -- Escrow and Paying Agent Agreement (Class C) dated as of
January 28, 2000 among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., as Placement Agents, Wilmington Trust
Company, as Trustee, and Wilmington Trust Company as
Paying Agent
++++4.16 -- Deposit Agreement (Class A), dated as of January 28,
2000, between First Security Bank, National Association
as Escrow Agent, and Westdeutsche Landesbank
Gironzentrale, as Depositary
++++4.17 -- Deposit Agreement (Class B), dated as of January 28,
2000, between First Security Bank, National Association
as Escrow Agent, and Westdeutsche Landesbank
Gironzentrale, as Depositary
++++4.18 -- Deposit Agreement (Class C), dated as of January 28,
2000, between First Security Bank, National Association
as Escrow Agent, and Westdeutsche Landesbank
Gironzentrale, as Depositary
++++4.19 -- Registration Rights Agreement dated January 28, 2000
among Atlas Air, Inc., Wilmington Trust Company, as
Trustee, and Morgan Stanley & Co. Incorporated, Deutsche
Bank Securities Inc. and Salomon Smith Barney Inc., as
Placement Agents
++++4.20 -- Intercreditor Agreement, dated as of January 28, 2000,
among Wilmington Trust Company, as Trustee, Westdeutsche
Landesbank Gironzentrale, as Class A Liquidity Provider,
Morgan Stanley Capital Services, Inc., as Class B
Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company, as Subordination Agent and
Trustee
++++4.21 -- Note Purchase Agreement, dated as of January 28, 2000,
among Atlas Air, Inc., Wilmington Trust Company, as
Trustee, Wilmington Trust Company, as Subordination
Agent, First Security Bank, National Association, as
Escrow Agent, and Wilmington Trust Company, as Paying
Agent
++++4.22 -- Form of Leased Aircraft Participation Agreement
(Participation Agreement among Atlas Air, Inc., Lessee,
First Security Bank, National Association, Owner Trustee,
and Wilmington Trust Company, Mortgagee and Loan
Participant) (Exhibit A-1 to Note Purchase Agreement)
++++4.23 -- Form of Lease (Lease Agreement between First Security
Bank, National Association, Lessor, and Atlas Air, Inc.,
Lessee) (Exhibit A-2 to Note Purchase Agreement)
++++4.24 -- Form of Leased Aircraft Indenture (Trust Indenture and
Mortgage between First Security Bank, National
Association, Owner Trustee, and Wilmington Trust Company,
Mortgagee) (Exhibit A-3 to Note Purchase Agreement)

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++++4.25 -- Form of Leased Aircraft Trust Agreement (Exhibit A-5 to
Note Purchase Agreement)
++++4.26 -- Form of Owned Aircraft Participation Agreement
(Participation Agreement between Atlas Air, Inc., Owner,
and Wilmington Trust Company, as Mortgagee, Subordination
Agent and Trustee) (Exhibit C-1 to Note Purchase
Agreement)
++++4.27 -- Form of Owned Aircraft Indenture (Trust Indenture and
Mortgage between Atlas Air, Inc., Owner, and Wilmington
Trust Company, as Mortgagee) (Exhibit C-2 to Note
Purchase Agreement)
+10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995,
between Atlas Air, Inc. and KLM Royal Dutch Airlines, as
amended.
#10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award
Plan (including Amendments One through Seven
#10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan (including
First Amendment)
+10.17 -- Atlas Air, Inc. Profit Sharing Plan.
+10.18 -- Atlas Air, Inc. Retirement Plan.
++10.19 -- Employment Agreement between Atlas Air, Inc. and Michael
A. Chowdry.
++10.20 -- Employment Agreement between Atlas Air, Inc. and Richard
H. Shuyler.
++10.23 -- Employment Agreement between Atlas Air, Inc. and James T.
Matheny.
+10.26 -- Maintenance Agreement between Atlas Air, Inc. and Hong
Kong Aircraft Engineering Company Limited dated April 12,
1995, for the performance of certain maintenance events.
***10.53 -- Secured Loan Agreement by and between Atlas Air, Inc. and
Finova Capital Corporation dated April 11, 1996.
***/****10.55 -- Engine Maintenance Agreement between Atlas Air, Inc. and
General Electric Company dated June 6, 1996.
**10.56 -- Employment Agreement dated as of May 1, 1997 between
Atlas Air, Inc. and Stanley G. Wraight.
+++++10.58 -- Fourth Amended and Restated Credit Agreement among Atlas
Air, Inc., the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as Syndication Agent) and Bankers
Trust Company (as Administrative Agent) dated April 25,
2000
10.59 -- Amendments One through Four of the Amended and Restated
Credit Agreement among Atlas Air, Inc., the Lenders
listed therein, Goldman Sachs Credit Partners L.P. (as
Syndication Agent) and Bankers Trust Company (as
Administrative Agent) dated April 25, 2001
**10.72 -- Form of Indenture, dated August 13, 1997, between Atlas
Air, Inc. and State Street Bank and Trust Company, as
Trustee, relating to the 10 3/4% Senior Notes (with form
of Note attached as exhibit thereto)
**/****10.86 -- Purchase Agreement Number 2021 between The Boeing Company
and Atlas Air, Inc. dated June 6, 1997.
**10.87 -- Aircraft General Terms Agreement between The Boeing
Company and Atlas Air, Inc. dated June 6, 1997.
++10.90 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1A-0.

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++10.91 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1A-S.
++10.92 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1B-0.
++10.93 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1B-S.
++10.94 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1C-0.
++10.95 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1C-S.
++10.96 -- Deposit Agreement (Class A), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.97 -- Deposit Agreement (Class B), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.98 -- Deposit Agreement (Class C), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.99 -- Indemnity Agreement, dated as of February 9, 1998,
between ABN AMRO Bank N.V., acting through its Chicago
Branch, as Depositary, and the Company.
++10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.103 -- Revolving Credit Agreement (1998-1A), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and ABN AMRO Bank N.V., acting
through its Chicago Branch as Liquidity Provider.

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++10.104 -- Revolving Credit Agreement (1998-1B), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.105 -- Revolving Credit Agreement (1998-1C), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.106 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-B relating to Class B Liquidity
Facility.
++10.107 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-C relating to Class C Liquidity
Facility.
++10.108 -- Intercreditor Agreement, dated as of February 9, 1998,
among Wilmington Trust Company, not in its individual
capacity but solely as Trustee, ABN AMRO Bank N.V.,
acting through its Chicago Branch, as Class A Liquidity
Provider, Morgan Stanley Capital Services, Inc., as Class
B Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company.
++10.109 -- Note Purchase Agreement, dated as of February 9, 1998,
among the Company, Wilmington Trust Company and First
Security Bank, National Association.
*****10.111 -- Form of Indenture, dated April 9, 1998, between the
Company and State Street Bank and Trust company, as
Trustee, relating to the 9 1/4% Senior Notes (with form
of Note attached as exhibit thereto).
****/*****10.114 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.115 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.116 -- General Terms Agreement between the Company and General
Electric Company dated June 6, 1997.
******10.117 -- Form of Indenture, dated November 18, 1998, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 9 3/8% Senior Notes (with form
of Note attached as exhibit thereto).
+++10.118 -- Employment Agreement dated June 22, 1998, between the
Company and Thomas G. Scott.
##10.120 -- Revolving Credit Agreement (1999-1A-1), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider
##10.121 -- Revolving Credit Agreement (1999-1A-2), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider
##10.122 -- Revolving Credit Agreement (1999-1B), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider
##10.123 -- Revolving Credit Agreement (1999-1C), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider

EXHIBIT
NUMBER DESCRIPTION
------- -----------

##10.124 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1B)
##10.125 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1C)
##10.126 -- Pass Through Trust Agreement, dated as of April 1, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc.
##10.127 -- Trust Supplement No. 1999-1A-1, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.128 -- Trust Supplement No. 1999-1A-2, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.129 -- Trust Supplement No. 1999-1B, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.130 -- Trust Supplement No. 1999-1C, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.131 -- Intercreditor agreement, dated as of April 13, 1999,
among Wilmington Trust Company, as Trustee, ABN AMRO Bank
N.V. Chicago Branch, as Class A-1 Liquidity Provider and
Class A-2 Liquidity Provider, Morgan Stanley Capital
Services, Inc., as Class B Liquidity Provider and Class C
Liquidity Provider, and Wilmington Trust Company, as
Subordination Agent and Trustee
##10.132 -- Deposit Agreement (Class A-1), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.133 -- Deposit Agreement (Class A-2), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.134 -- Deposit Agreement (Class B), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.135 -- Deposit Agreement (Class C), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.136 -- Escrow and Paying Agent Agreement (Class A-1), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.137 -- Escrow and Paying Agent Agreement (Class A-2), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent

EXHIBIT
NUMBER DESCRIPTION
------- -----------

##10.138 -- Escrow and Paying Agent Agreement (Class B), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.139 -- Escrow and Paying Agent Agreement (Class C), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.140 -- Note Purchase Agreement, dated as of April 13, 1999,
among Atlas Air, Inc., Wilmington Trust Company, as
Trustee, Wilmington Trust Company, as Subordination
Agent, First Security Bank, National Association, as
Escrow Agent, and Wilmington Trust Company, as Paying
Agent
##10.141 -- Form of Leased Aircraft Participation
Agreement(Participation Agreement among Atlas Air, Inc.,
Lessee, First Security Bank, National Association, Owner
Trustee, and Wilmington Trust Company, Mortgagee and Loan
Participant) (Exhibit A-1 to Note Purchase Agreement)
##10.142 -- Form of Lease (Lease Agreement between First Security
Bank, National Association, Lessor, and Atlas Air, Inc.,
Lessee) (Exhibit A-2 to Note Purchase Agreement)
##10.143 -- Form of Leased Aircraft Indenture (Trust Indenture and
Mortgage between First Security Bank, National
Association, Owner Trustee, and Wilmington Trust Company,
Mortgagee) (Exhibit A-3 to Note Purchase Agreement)
##10.144 -- Form of Leased Aircraft Trust Agreement (Exhibit A-5 to
Note Purchase Agreement)
##10.145 -- Form of Owned Aircraft Participation
Agreement(Participation Agreement between Atlas Air,
Inc., Owner, and Wilmington Trust Company, as Mortgagee,
Subordination Agent and Trustee) (Exhibit C-1 to Note
Purchase Agreement)
##10.146 -- Form of Owned Aircraft Indenture (Trust Indenture and
Mortgage between Atlas Air, Inc., Owner, and Wilmington
Trust Company, as Mortgagee) (Exhibit C-2 to Note
Purchase Agreement)
##10.147 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-1
##10.148 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-2
##10.149 -- 6.88% Atlas Air Pass Through Certificate 1999-1A-2,
Certificate No. A-2-1
##10.150 -- 7.63% Atlas Air Pass Through Certificate 1999-1B-1,
Certificate No. B-1
##10.151 -- 8.77% Atlas Air Pass Through Certificate 1999-1C-1,
Certificate No. C-1
@10.152 -- Agreement of Lease between Texaco, Inc., Landlord, and
the Company, Tenant, 2000 Westchester Avenue, White
Plains, New York 10650 dated November 9, 1999
@10.153 -- Atlas Air, Inc. Annual Incentive Compensation Plan
@10.154 -- Atlas Air, Inc. Long-Term Incentive Plan
@10.155 -- Amendments to the Atlas Air, Inc. 1995 Long-Term
Incentive and Stock Award Plan. (The Atlas Air, Inc. 1995
Long-Term Incentive and Stock Award Plan is filed as
Exhibit 10.15, which is incorporated by reference in this
Report)

EXHIBIT
NUMBER DESCRIPTION
------- -----------

+++++10.157 -- Credit Agreement among Atlas Freighter Leasing III, Inc.,
the Lenders listed therein, and Bankers Trust Company, as
administrative agent, dated as of April 25, 2000
+++++10.158 -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N527MC
10.159 -- Credit Agreement dated as of October 31, 2001 between
Atlas Air Worldwide Holdings, Inc and General Electric
Capital Corporation
10.160 -- Holdings Guaranty dated as of October 31, 2001 by Atlas
Air Worldwide Holdings, Inc in favor of Bankers Trust
Company, as agent for and representative of, the Lenders
represented therein
10.161 -- Parent Guaranty dated as of November 19, 2001 by Atlas
Air Worldwide Holdings, Inc. in favor of General Electric
Capital Corporation relating to B747-400 aircraft, U.S.
Registration No N450PA (Parent Guaranties relating to
B747-400 aircraft with U.S. Registration Nos. N451PA,
N452PA and N453PA are identical except with respect to
date and aircraft information).
10.162 -- Parent Guaranty dated as of November 9, 2001 by Atlas Air
Worldwide Holdings, Inc. in favor of Polaris Holding
Company relating to B747-200 aircraft, U.S. Registration
No. N920FT
10.163 -- Employment Agreement between Atlas Air, Inc. and William
Allen
10.164 -- Employment Agreement between Atlas Air, Inc. and Douglas
Carty
+++24 -- Powers of Attorney (set forth on the signature page of
the Report).
99.1 -- Letter from the Company to the Securities and Exchange
Commission pursuant to Temporary Note 3T of Regulation
S-X
99.2 -- Letter from Atlas Air, Inc to the Securities and Exchange
Commission pursuant to Temporary Note 3T of Regulation
S-X.

---------------

+++++ Incorporated by reference to the exhibits to Atlas Air's Current Report
on Form 8-K dated May 25, 2000

++++ Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-4 (No. 333-36268)

+++ Previously filed.

++ Incorporated by reference to the exhibits to Atlas Air's Annual Report
for 1997 on Form 10-K.

+ Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-1 (No. 33-90304).

## Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-3 (No. 333-71833).

# Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-8 (No. 333-49002)

@ Incorporated by reference to the exhibits to Atlas Air's Annual Report
for 1999 on Form 10-K

@@ Incorporated by reference to the exhibits to the Company's Current Report
on Form 8-K dated February 16, 2001.

++ Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-1 (No. 33-97892).

++++ Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-4 (No. 333-51819).

* Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-1 (No. 333-2810).

** Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-4 (No. 333-36305).

*** Incorporated by reference to the exhibits to Atlas Air's Annual Report
for 1996 on Form 10-K.

**** Portions of this document, for which Atlas Air has been granted
confidential treatment, have been redacted and filed separately with the
Securities and Exchange Commission.

***** Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-4 (No. 333-56391).

****** Incorporated by reference to the exhibits to Atlas Air's Registration
Statement on Form S-4 (No. 333-72211)

(b) REPORTS ON FORM 8-K

Report on Form 8-K dated November 9, 2001 regarding the acquisition of
Polar Air Cargo from an affiliate of GE Capital Aviation Services as of November
1, 2001.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 1st day of
April, 2002.

ATLAS AIR WORLDWIDE HOLDINGS, INC.

By: /s/ DOUGLAS A. CARTY
----------------------------------

Douglas A. Carty
Senior Vice President and Chief
Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature appears below hereby constitutes
Douglas A. Carty and Richard H. Shuyler, and each of them singly, such person's
true and lawful attorneys, each with full power of substitution to sign for such
person and in such person's name and capacity indicated below, and any and all
amendments to this Report, and to file the same with the Securities and Exchange
Commission, hereby ratifying and confirming such person's signature as it may be
signed by said attorneys to any and all amendments.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ RICHARD H. SHUYLER Chief Executive Officer, and April 1, 2002
----------------------------------------------------- Director
Richard H. Shuyler

/s/ JAMES T. MATHENY President, Chief Operating April 1, 2002
----------------------------------------------------- Officer, and Director
James T. Matheny

/s/ BRIAN ROWE Chairman of the Board of April 1, 2002
----------------------------------------------------- Directors
Brian Rowe

/s/ BERL BERNHARD Director April 1, 2002
-----------------------------------------------------
Berl Bernhard

/s/ LINDA CHOWDRY Director April 1, 2002
-----------------------------------------------------
Linda Chowdry

/s/ LAWRENCE W. CLARKSON Director April 1, 2002
-----------------------------------------------------
Lawrence W. Clarkson

/s/ RICHARD GALBRAITH Director April 1, 2002
-----------------------------------------------------
Richard Galbraith

/s/ STEPHEN A. GREENE Director April 1, 2002
-----------------------------------------------------
Stephen A. Greene

/s/ DAVID K.P. LI Director April 1, 2002
-----------------------------------------------------
David K.P. Li

/s/ RONALD WOODARD Director April 1, 2002
-----------------------------------------------------
Ronald Woodard

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999.......................... F-3
Consolidated Balance Sheets as of December 31, 2001 and
December 31, 2000......................................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.......................... F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2001, 2000 and 1999.............. F-6
Notes to Consolidated Financial Statements.................. F-7

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Atlas Air Worldwide Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Atlas Air
Worldwide Holdings, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 2001. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atlas Air Worldwide Holdings, Inc. and subsidiaries as of December 31, 2001 and
2000, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States.

As discussed in Note 4 to the consolidated financial statements, on January
1, 2001, the Company changed its method of accounting for derivative instruments
and hedging activities.

ARTHUR ANDERSEN LLP

Denver, Colorado,
March 29, 2002

F-2

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
--------------------------------
2001 2000 1999
-------- --------- ---------

Revenues:
Contract services......................................... $609,024 $ 766,851 $ 618,866
Charters, scheduled services and other.................... 154,807 23,617 18,215
-------- --------- ---------
Total operating revenues........................... 763,831 790,468 637,081
Operating expenses:
Salaries, wages and benefits.............................. 119,797 108,344 80,724
Maintenance, materials and repairs........................ 139,123 148,124 131,189
Aircraft fuel............................................. 51,286 12,994 7,690
Aircraft and engine rentals............................... 134,537 79,134 51,173
Ground handling and flight related expenses............... 70,618 74,078 64,376
Depreciation and amortization............................. 83,412 94,006 78,379
Other..................................................... 79,243 41,084 36,061
Federal Stabilization Act claims.......................... (24,650) -- --
Profit sharing settlement expense......................... 22,815 -- --
Restructuring and impairment.............................. 116,162 -- --
-------- --------- ---------
Total operating expenses........................... 792,343 557,764 449,592
Operating (loss)/income..................................... (28,512) 232,704 187,489
Other income (expense):
Interest income........................................... 19,825 28,610 20,006
Interest expense.......................................... (86,427) (123,787) (108,660)
SFAS 133 fair value adjustment of interest rate swap...... (3,999) -- --
-------- --------- ---------
(70,601) (95,177) (88,654)
-------- --------- ---------
(Loss)/income before income taxes........................... (99,113) 137,527 98,835
Income tax benefit/(provision).............................. 37,855 (52,268) (37,556)
-------- --------- ---------
(Loss)/income before extraordinary item and cumulative
effect of a change in accounting principle................ (61,258) 85,259 61,279
Extraordinary item:
Loss from extinguishment of debt, net of applicable tax
benefit of $3,872....................................... -- -- (6,593)
Cumulative effect of a change in accounting principle, net
of applicable tax benefit of $850....................... -- -- (1,416)
Cumulative effect of a change in accounting principle, net
of applicable tax benefit of $933....................... (1,589) -- --
-------- --------- ---------
Net (loss)/income.................................. $(62,847) $ 85,259 $ 53,270
-------- --------- ---------
Other comprehensive income (unrealized gain on securities
net of tax)............................................... 488 -- --
-------- --------- ---------
Total comprehensive (loss)/ income.......................... $(62,359) $ 85,259 $ 53,270
======== ========= =========
Basic earnings per share (Note 1):
(Loss)/income before extraordinary item and cumulative
effect of a change in accounting principle.............. $ (1.61) $ 2.33 $ 1.79
Extraordinary item........................................ -- -- (0.19)
Cumulative effect of a change in accounting principle..... (0.04) -- (0.04)
-------- --------- ---------
Net (loss)/income.................................. $ (1.65) $ 2.33 $ 1.56
======== ========= =========
Weighted average common shares............................ 38,148 36,555 34,245
Diluted earnings per share (Note 1):
(Loss)/income before extraordinary item and cumulative
effect of a change in accounting principle.............. $ (1.61) $ 2.31 $ 1.77
Extraordinary item........................................ -- -- (0.19)
Cumulative effect of a change in accounting principle..... (0.04) -- (0.04)
-------- --------- ---------
Net (loss)/income......................................... $ (1.65) $ 2.31 $ 1.54
======== ========= =========
Weighted average common shares............................ 38,148 36,947 34,500

The accompanying notes are an integral part of these consolidated financial
statements.
F-3

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
-----------------------
2001 2000
---------- ----------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 238,693 $ 493,723
Short-term investments.................................... 112,634 65,269
Accounts receivable, (net of allowance of $22,521 and
$9,171 respectively)................................... 168,502 129,543
Income taxes receivable................................... 20,544 --
Prepaid expenses and other................................ 30,998 16,394
---------- ----------
Total current assets.............................. 571,371 704,929
Property and equipment:
Flight equipment.......................................... 1,627,117 1,537,047
Other..................................................... 51,156 43,815
---------- ----------
1,678,273 1,580,862
Less accumulated depreciation............................. (317,647) (245,976)
---------- ----------
Net property and equipment........................ 1,360,626 1,334,886
Other assets:
Debt issuance costs, (net of accumulated amortization of
$20,373 and $16,255, respectively)..................... 20,616 24,540
Deposits and other........................................ 132,139 109,702
---------- ----------
152,755 134,242
---------- ----------
Total assets...................................... $2,084,752 $2,174,057
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligation............................................. $ 65,934 $ 55,018
Accounts payable and accrued expenses..................... 172,018 135,287
Income tax payable........................................ -- 31,359
---------- ----------
Total current liabilities......................... 237,952 221,664
Long-term debt and capital lease obligation, net of current
portion................................................... 959,052 1,037,789
Other liabilities........................................... 344,762 286,120
Deferred income tax liability............................... 53,078 76,278
Commitments and contingencies (Note 7)
Stockholders' equity: (Note 12)
Preferred Stock, $1 par value; 10,000,000 shares
authorized; no shares issued........................... -- --
Common Stock, $0.01 par value; 50,000,000 shares
authorized; 38,230,757 and 38,227,757 shares issued,
respectively........................................... 382 382
Additional paid-in capital................................ 305,930 305,871
Retained earnings......................................... 185,114 247,763
Deferred Compensation -- Restricted Stock................. (738) (286)
Treasury Stock, at cost; 79,889 and 60,824 shares,
respectively........................................... (1,268) (1,524)
Accumulated other comprehensive income.................... 488 --
---------- ----------
Total stockholders' equity........................ 489,908 552,206
---------- ----------
Total liabilities and stockholders' equity........ $2,084,752 $2,174,057
========== ==========

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
---------------------------------
2001 2000 1999
--------- --------- ---------

OPERATING ACTIVITIES:
Net (loss)/income......................................... $ (62,847) $ 85,259 $ 53,270
Adjustments to reconcile net (loss)/income to net cash
provided by operating activities:
Depreciation and amortization........................... 83,412 94,006 78,379
Provision for doubtful accounts......................... 10,235 -- --
Amortization of debt issuance costs and lease financing
gains and losses..................................... (10,103) (2,424) 1,514
Net gain on disposition of property and equipment....... (15,241) (1,594) (3,586)
SFAS 133 fair value adjustment of interest rate swap.... 6,521 -- --
Restructuring, and impairment........................... 108,387 -- --
Extraordinary loss...................................... -- -- 10,465
Write-off of start-up costs............................. -- -- 2,266
Deferred tax (benefit)/provision........................ (23,200) 9,028 32,199
Changes in operating assets and liabilities, net of
effects of acquisition:
Accounts receivable and other........................ (14,259) (47,858) (6,745)
Deposits and other................................... 11,096 (15,673) (377)
Accounts payable and accrued expenses................ (22,871) 12,907 31,020
Income tax receivable/payable........................ (51,903) 31,359 (8,034)
--------- --------- ---------
Net cash provided by operating activities....... 19,227 165,010 190,371
INVESTING ACTIVITIES:
Purchase of property and equipment........................ (181,270) (415,268) (370,521)
Proceeds from sale of property and equipment.............. 52,096 13,808 36,000
Purchase of investments................................... (107,204) (138,286) (139,368)
Maturity of investments................................... 108,269 126,340 20,000
Purchase of Polar Air Cargo, net of cash acquired......... (76,083) -- --
--------- --------- ---------
Net cash used in investing activities........... (204,192) (413,406) (453,889)
FINANCING ACTIVITIES:
Issuance of Common Stock.................................. 59 107,089 15,658
Purchase of Treasury Stock................................ (1,614) -- (776)
Issuance of Treasury Stock................................ 1,616 1,236 1,034
Net proceeds from debt issuance and lease financing....... 51,514 540,814 470,860
Principal payments on notes payable....................... (119,335) (226,026) (339,955)
Debt issuance costs and deferred lease costs.............. (2,305) (12,599) (1,325)
--------- --------- ---------
Net cash (used in)/provided by financing
activities.................................... (70,065) 410,514 145,496
--------- --------- ---------
Net (decrease)/increase in cash and cash
equivalents................................... (255,030) 162,118 (118,022)
Cash and cash equivalents at beginning of period.......... 493,723 331,605 449,627
--------- --------- ---------
Cash and cash equivalents at end of period................ $ 238,693 $ 493,723 $ 331,605
========= ========= =========

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 12)
(IN THOUSANDS)

ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
--------------- PAID-IN RETAINED TREASURY DEFERRED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK COMPENSATION INCOME EQUITY
------ ------ ---------- -------- -------- ------------ ------------- --------------

Balance, December 31, 1998... 33,820 $338 $178,131 $108,892 $(3,471) -- -- $283,890
Exercise of stock options,
including income tax
benefits of $4,220....... 661 7 19,871 -- -- -- -- 19,878
Purchase of Treasury
Stock.................... -- -- -- -- (776) -- -- (776)
Issuance of Treasury
Stock.................... -- -- -- 32 1,810 -- -- 1,842
Deferred
compensation -- Restricted
Stock.................... -- -- -- -- -- (404) -- (404)
Net income................. -- -- -- 53,270 -- -- -- 53,270
------ ---- -------- -------- ------- ------- ------- --------
Balance, December 31, 1999... 34,481 345 198,002 162,194 (2,437) (404) -- 357,700
------ ---- -------- -------- ------- ------- ------- --------
Sale of Common Stock....... 3,465 34 103,447 -- -- -- -- 103,481
Exercise of stock options,
including income tax
benefits of $403......... 282 3 4,008 -- -- -- -- 4,011
Issuance of Treasury
Stock.................... -- -- -- 267 969 -- -- 1,236
Deferred
compensation -- Restricted
Stock.................... -- -- 414 88 102 (85) -- 519
Restricted Stock
Forfeitures.............. -- -- -- (45) (158) 203 -- --
Net income................. -- -- -- 85,259 -- -- -- 85,259
------ ---- -------- -------- ------- ------- ------- --------
Balance, December 31, 2000... 38,228 382 305,871 247,763 (1,524) (286) -- 552,206
------ ---- -------- -------- ------- ------- ------- --------
Exercise of stock options,
including income tax
benefits of $15.......... 3 -- 59 -- -- -- -- 59
Issuance of Treasury
Stock.................... -- -- -- 198 2,254 -- -- 2,452
Purchase of Treasury
Stock.................... -- -- -- -- (1,998) -- -- (1,998)
Deferred
compensation -- Restricted
Stock.................... -- -- -- -- -- (1,182) -- (1,182)
Restricted Stock Vesting... -- -- -- -- -- 730 -- 730
Accumulated other
comprehensive income... -- -- -- -- -- -- 488 488
Net loss................... -- -- -- (62,847) -- -- -- (62,847)
------ ---- -------- -------- ------- ------- ------- --------
Balance, December 31, 2001... 38,231 $382 $305,930 $185,114 $(1,268) $ (738) $ 488 $489,908
====== ==== ======== ======== ======= ======= ======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Atlas Air Worldwide Holdings, Inc. (the "Company") is a holding company.
Through its operating subsidiaries, Atlas Air, Inc. (Atlas Air) and Polar Air
Cargo, Inc. (Polar Air Cargo), the Company provides airport to airport cargo
services throughout the world to major international airlines pursuant to
contractual arrangements with its customers in which the Company provides the
aircraft, crew, maintenance and insurance ("ACMI"), referred to as "contract
services." The Company also provides scheduled services and charter services on
an ad hoc basis. The principal markets served by the Company are Asia and the
Pacific Rim from the United States and Europe, and between South America and the
United States. On November 1, 2001, the Company purchased Polar Air Cargo and,
accordingly, the results of operations since the acquisition date have been
included in the accompanying consolidated financial statements for the year
ended December 31, 2001.

In 2001, Atlas Air announced an expansion of its product line to include a
broader array of products and services. These new services are based on the ACMI
Contract model and include fractional ACMI, or the provision of a portion of the
capacity of one or more aircraft; partial ACMI, or the provision of an aircraft
on less than a full time basis; and dry leases for aircraft (which may include
maintenance and insurance if requested). These products typically require
customers to commit to certain utilization levels under seasonal contracts, and
in many instances the revenue and cost structure vary from an ACMI Contract, as
the operations may include arrangements for the provision of fuel and ground
handling and flight related expenses. Atlas Air believes that airline customers
will find these products to be desirable and complementary to their own business
strategy, because risks that would otherwise be borne by a single customer, such
as contract term, load factor, fuel and ground handling, are shared among
several parties. To help facilitate the delivery of these expanded product
lines, Atlas Air has established hubs in Liege, Belgium and Miami, Florida.
Failure to successfully execute on the expanded product line plan, in the
absence of compensating improvements in other parts of the business, could have
a material adverse effect on Atlas Air's financial position and results of
operations.

Aircraft Purchase Commitments

Under the terms of the Boeing Purchase Agreement, in October 2000 Atlas Air
exercised options for four Boeing 747-400 freighter aircraft to be delivered in
2002. During 2001, Atlas Air reached an agreement with Boeing to amend the
delivery dates of the aircraft, whereby three of the aircraft are scheduled to
be delivered in 2002 and one aircraft in 2003. However, Atlas Air is currently
in discussions with Boeing to have the 2002 aircraft delivered as late in the
year as possible. Atlas Air does not currently have firm financing in place for
any of the four Boeing 747-400 aircraft scheduled for delivery in 2002 and 2003.
However, Atlas Air is currently in discussions with several sources for
financing these aircraft. The inability to secure financing for the Boeing
747-400 deliveries could result in a default under the Boeing Purchase
Agreement, which would permit Boeing to accelerate payments due under the Boeing
Purchase Agreement. Such acceleration would cause a default in covenants of
certain of the Company's indebtedness which would permit the lenders to
accelerate payment of a significant portion of all indebtedness, which event
would have a material adverse effect on the Company's financial position and
results of operations. However, Boeing has made an offer to finance by
sale-leaseback, each of the aircraft to be delivered in 2002, under terms which
are more favorable to Boeing. If Atlas Air is unable to secure other financing
more favorable to the Company, management believes it has the option to utilize
the proposed Boeing financing.

F-7

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Property and Equipment

Owned aircraft are stated at cost. Expenditures for major additions,
improvements, flight equipment modifications and certain overhaul and
maintenance costs are capitalized. A significant portion of scheduled and
unscheduled maintenance is contracted with three maintenance providers under
long-term agreements pursuant to which monthly reserve payments are made to the
providers based on flight-hours and such amounts are charged to expense
currently. Other maintenance and repairs are charged to expense as incurred,
except for significant engine overhaul maintenance which is capitalized and
charged to expense on a flight-hour basis and certain C and D checks which are
capitalized and amortized over the corresponding life. Owned aircraft are
depreciated over their estimated useful lives of 20 to 30 years, using the
straight-line method and estimated salvage values of 10% of cost. The cost and
accumulated depreciation of property and equipment disposed of are removed from
the related accounts and any gain or loss is reflected in the results of
operations. Substantially all property and equipment is specifically pledged as
collateral for indebtedness of the Company. Whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, management evaluates the recorded asset balances, net of
accumulated depreciation, for impairment based on the undiscounted future cash
flows associated with the asset. See Note 17 for discussion of impairment
charges related to aircraft held for sale.

Capitalized Interest

Interest attributable to funds used to finance the acquisition and
modification of aircraft is capitalized as an additional cost of the related
aircraft. Interest is capitalized at the Company's weighted average interest
rate on long-term debt, or where applicable, the interest rate related to
specific borrowings. Capitalization of interest ceases when the aircraft is
placed in service. Capitalized interest was $12,754,000, $7,641,000 and
$21,036,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

Debt Issuance Costs

Costs associated with the issuance of debt are capitalized and amortized
over the life of the respective debt obligation, using the effective interest
method for amortization. In January 1999, $2,491,000 of unamortized debt
issuance costs were written off as an extraordinary loss recognized upon
extinguishment of the 12 1/4% Equipment Notes due 2002. Amortization of debt
issuance costs was $4,124,000, $5,154,000 and $5,231,000 for the years ended
December 31, 2001, 2000 and 1999, respectively.

Cash Equivalents

All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents.

F-8

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investments

The Company invests excess cash in various available-for-sale securities,
as defined in SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". SFAS No. 115 requires investments in debt and equity
securities classified as available for sale be measured at fair market value and
unrealized gains and losses recorded in other comprehensive income (see Note 2).

Earnings per Share

Basic earnings per share were computed by dividing net (loss)/income before
cumulative effect by the weighted average number of shares of common stock
outstanding during the period. In addition, diluted earnings per share amounts
include potential common shares including restricted stock and options granted
under the Company's annual and long-term incentive plans. The number of diluted
shares is calculated using the treasury stock method, which excludes
anti-dilutive shares from the calculation. Basic and diluted (loss)/earnings per
share were calculated as follows (amounts in thousands):

FISCAL YEAR ENDED DECEMBER 31
-------------------------------
2001 2000 1999
--------- -------- --------

EARNINGS ATTRIBUTABLE TO COMMON STOCKHOLDERS (BASIC AND
DILUTED)
Net (loss)/income before extraordinary item and
cumulative effect of an accounting change......... $(61,258) $85,259 $61,279
Extraordinary item................................... -- -- (6,593)
Cumulative effect of an accounting change............ (1,589) -- (1,416)
-------- ------- -------
Net (loss)/income.................................... $(62,847) $85,259 $53,270
======== ======= =======
SHARES
Weighted average shares outstanding for
Basic EPS......................................... 38,148 36,555 34,245
Employee options and restricted shares............... -- 392 255
-------- ------- -------
Weighted average shares outstanding for
Diluted EPS....................................... 38,148 36,947 34,500
======== ======= =======

For the twelve months ended December 31, 2001, 2000 and 1999, approximately
3,993,000, 249,000 and 561,000 employee stock options, respectively, were not
considered in calculating diluted earnings per share, because inclusion of such
shares would have had an anti-dilutive effect.

Income Taxes

The Company provides for income taxes using the asset and liability method.
Under this method deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. The effect on deferred taxes
of a change in tax laws or tax rates is recognized in income in the period that
includes the enactment date.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash, certificates of
deposit, short-term and long-term investments, short-term trade receivables and
payables, long-term debt and deferred aircraft obligations. The carrying values
of cash and cash equivalents and short-term trade receivables and payables
approximate fair value. The fair value of long-term debt is estimated based on
current rates available for similar debt with similar maturities and security
(see Note 3).

F-9

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Significant Customers and Concentration of Credit Risk

For the year ended December 31, 2001, China Airlines Ltd., accounted for
approximately 13%, and no other customer accounted for 10% or more of the
Company's total revenues. For the year ended December 31, 2000, China Airlines
Ltd. and Korean Airlines accounted for approximately 22% and 18%, respectively,
and no other customer accounted for 10% or more of the Company's total revenues.
For the year ended December 31, 1999, China Airlines Ltd. accounted for
approximately 26%, and no other customer accounted for 10% or more of the
Company's total revenues. Accounts receivable from these principal customers
were $8,269,000 and $38,454,000 in the aggregate at December 31, 2001 and 2000,
respectively.

Reclassifications

Certain prior year amounts have been reclassified to conform to current
year presentation.

Supplemental Cash Flow Information

The aggregate interest payments made by the Company were $104,891,000,
$141,155,000 and $115,521,000 for the years ended December 31, 2001, 2000 and
1999, respectively.

The Company made federal and state income tax payments (net of refunds) of
approximately $31,018,000, $12,494,000 and $12,620,000 in the years ended
December 31, 2001, 2000 and 1999, respectively.

Recent Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets". These standards revise the rules related to the accounting
for business combinations, goodwill and other intangible assets. SFAS No. 141
requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase accounting method. SFAS No. 142 states that
goodwill is no longer subject to amortization over its useful life. Rather,
goodwill is subject to at least annual assessment for impairment and is to be
written down to its fair value only if the carrying amount is greater than the
fair value. In addition, intangible assets should be separately recognized if
the benefit of the intangible asset is obtained through contractual or other
legal rights, or if the intangible asset can be sold, transferred, licensed,
rented or exchanged, regardless of the acquirer's intent to do so. The
provisions of SFAS No. 141 did not have a material effect on the Company's
financial position or results of operations. The impact of SFAS No. 142 on the
financial statements of Atlas Air Worldwide Holdings, Inc., as it relates to any
goodwill or intangible assets acquired in the acquisition of Polar Air Cargo is
described in Note 19.

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

standard is effective for financial statements issued for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years.
Management is reviewing the provisions of this statement and does not expect
them to have a material effect on the Company's financial position or results of
operations.

2. INVESTMENTS

The Company invests excess cash in various available-for-sale securities as
defined in SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". SFAS No. 115 requires investments in debt and equity securities
classified as available for sale be measured at fair market value and unrealized
gains and losses recorded as a component of other comprehensive income. These
securities were classified as held to maturity as of December 31, 2000. The
following table sets forth the aggregate fair market value, book value
(amortized/accreted cost) and unrealized gains/losses by major security type as
of December 31, 2001 and 2000 (in thousands):

FAIR UNREALIZED
SECURITY TYPE MARKET VALUE BOOK VALUE GAIN (LOSS)
------------- ------------ ---------- -----------

DECEMBER 31, 2001:
CASH AND SHORT TERM INVESTMENTS:
Asset backed securities......................... $ 2,266 $ 2,248 $ 18
Money market funds.............................. 15,032 15,027 5
Corporate bonds................................. 43,303 43,153 150
Certificates of deposit......................... 4,490 4,490 --
Commercial paper................................ 35,275 34,982 293
Euro bonds...................................... 14,982 14,888 94
Market auction preferreds....................... 15,513 15,513 --
Municipal bonds................................. 22,025 22,025 --
Corporate notes................................. 18,557 18,398 159
Taxable auction securities...................... 3,005 3,005 --
US Government agencies.......................... 17,105 17,042 63
Cash and overnight investments.................. 159,774 159,774 --
-------- -------- ----
Total cash and short term investments... $351,327 $350,545 $782
======== ======== ====
OTHER INVESTMENTS:
Guaranteed investment contracts.............. $ 41,100 $ 41,100 $ --
-------- -------- ----
Total other investments (included in
Deposits and other.................... $ 41,100 $ 41,100 $ --
======== ======== ====
DECEMBER 31, 2000:
CASH AND SHORT TERM INVESTMENTS:
Corporate bonds................................. $ 29,284 $ 29,260 $ 24
Commercial paper................................ 128,376 128,406 (30)
Taxable auction securities...................... 7,500 7,500 --
Municipal bonds................................. 8,850 8,850 --
Market auction preferreds....................... 127,825 127,825 --
US Government agencies.......................... 6,999 7,000 (1)
Corporate notes................................. 15,117 15,054 63
Euro bonds...................................... 2,233 2,230 3
Cash and overnight investments.................. 232,808 232,808 --
-------- -------- ----
Total cash and short term investments... $558,992 $558,933 $ 59
======== ======== ====
OTHER INVESTMENTS:
Guaranteed investment contracts................. $ 41,100 $ 41,100 $ --
US Government agencies.......................... 6,002 6,000 2
Corporate notes................................. 10,207 10,199 8
Corporate bonds................................. 17,254 17,325 (71)
Euro bonds...................................... 14,316 14,286 30
-------- -------- ----
Total other investments (included in
Deposits and other)................... $ 88,879 $ 88,910 $(31)
======== ======== ====

F-11

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accrued interest on investments held at December 31, 2001 was approximately
$1.9 million. Accrued interest on investments held at December 31, 2000 was
approximately $3.0 million. Interest earned on these investments and related
maturities are reinvested in similar securities.

3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations and current maturities are as
follows (in thousands):

DECEMBER 31,
-----------------------
2001 2000
---------- ----------

AFL III Term Loan Facility.................................. $ 213,149 $ 264,353
Aircraft Credit Facility.................................... 68,107 97,852
10 3/4% Senior Notes due 2005............................... 137,475 137,475
9 1/4% Senior Notes due 2008................................ 152,853 152,837
9 3/8% Senior Notes due 2006................................ 147,000 147,000
1998 EETCs.................................................. 92,892 101,536
1999 EETCs.................................................. 97,199 102,613
Other....................................................... 116,311 89,141
---------- ----------
1,024,986 1,092,807
Current maturities.......................................... (65,934) (55,018)
---------- ----------
Long-term debt, net......................................... $ 959,052 $1,037,789
========== ==========

Aircraft Credit Facility

In 2001, Atlas Air amended this Aircraft Credit Facility to include, among
other items, a revision of its financial covenants, including the minimum
interest coverage and maximum leverage ratios, and the addition of certain
liquidity requirements. The ratio requirements were eased through 2002, to what
management believes are achievable levels. Covenant tests are conducted
quarterly, and further amendments may be necessary if financial performance
falls short of expected levels. There can be no assurance that Atlas Air could
successfully negotiate waivers or amendments to the Aircraft Credit Facility in
the event that the financial covenants are not met. Failure to obtain such
waivers or amendments would permit the lenders to accelerate payment of a
substantial portion of Atlas Air's long term indebtedness, which would have a
material adverse effect on Atlas Air. As part of the amendment, a new liquidity
covenant was added that requires Atlas Air to maintain $200 million in cash and
short-term investments. The amendment also included the requirement to prepay
$7.6 million in outstanding debt and reduced the available amount to $140
million from $175 million. As of December 31, 2001, Atlas Air had $68.1 million
outstanding under the Aircraft Credit Facility.

F-12

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Additional covenants with respect to the Aircraft Credit Facility require
specific levels of insurance, as well as contain requirements regarding
possession, maintenance, and lease or transfer of the flight equipment. Certain
covenants applicable to Atlas Air include, among other restrictions, limitations
on indebtedness, liens, investments, contingent obligations, restricted junior
payments, capital expenditures, amendments of material agreements, leases,
transactions with shareholders and affiliates and the conduct of business. Atlas
Air is in compliance with all covenants.

AFL III Term Loan Facility

In April 2000, Atlas Air formed a wholly-owned subsidiary, Atlas Freighter
Leasing III, Inc. (AFL III, Inc.) for the purpose of entering into a $300
million term loan facility (the "AFL III Term Loan Facility") to refinance all
of the aircraft and spare engines previously financed under the AFL Term Loan
Facility and the AFL II Term Loan Facility, plus one aircraft previously
financed under the Aircraft Credit Facility and three Boeing 747-400 spare
engines owned by Atlas Air. As a result of this refinancing, Atlas Air has and
will continue to experience lower interest rates and extended repayment terms as
compared to the previous financings. The AFL III Term Loan Facility consists of
Term Loan A in the amount of $165 million and Term Loan B in the amount of $135
million, for which interest is based on the Eurodollar rate plus a spread.
Quarterly scheduled principal payments of $5.0 million and $1.7 million,
respectively, commenced in July 2000 and increase over time to $9.1 million and
$6.2 million, respectively, such that Term Loan A is to be fully paid in April
2005 and Term Loan B is to be fully paid in April 2006, with a final payment of
$37.3 million. In September 2000, AFL III sold one aircraft financed under the
AFL III Term Loan Facility, which released the lien on the aircraft and reduced
the aggregate amount outstanding under the facility by $22.9 million.

The AFL III Term Loan Facility is secured by a first priority interest in
the ten subject aircraft, plus twelve spare engines, and is restrictive with
respect to limitations on: indebtedness, liens, investments, contingent
obligations, restricted junior payments, capital expenditures, amendments of
material agreements, leases, transactions with shareholders and affiliates, and
the conduct of business, among other restrictions.

The subsidiary structure of AFL III was designed for the purposes of
providing additional credit protection to the lenders of AFL III. Atlas Air has
intercompany lease agreements with AFL III for the use of the ten aircraft and
twelve spare engines. As of March 2002, Atlas Air became aware of an
administrative error which had caused certain intercompany rental payments which
were payable between Atlas Air and the wholly owned AFL III subsidiary to go
unpaid. The failure to make these intercompany transfers constituted a technical
Event of Lease Default under the lease agreements between AFL III (the lessor)
and Atlas Air, Inc. (the lessee) and a related Event of Default under the AFL
III credit agreement. These unpaid amounts were subsequently transferred to the
AFL III subsidiary in March 2002 at which point the events of default were
remedied and Atlas Air became compliant with all covenants. At no time were
either Atlas Air or AFL III in arrears with regards to any amounts of principal
or interest due to external lenders.

F-13

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Senior Notes

In June 2000, Atlas Air completed a common stock offering for net cash
proceeds of $104 million, a portion of which was used to repurchase $12.5
million of the 10 3/4% Senior Notes, $22.0 million of the 9 1/4% Senior Notes
and $3.0 million of 9 3/8% Senior Notes.

Covenants with respect to the Senior Notes contain certain limitations on
Atlas Air and its subsidiaries' ability to, among other things: incur additional
indebtedness, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur liens, create restrictions on the ability of a subsidiary to pay dividends
or make certain payments, sell or issue preferred stock of subsidiaries to third
parties, merge or consolidate with any other person, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of their assets.
Atlas Air is in compliance with all such covenants as of December 31, 2001.
Atlas Air is restricted by covenants in its ability to incur any additional
indebtedness and pay dividends.

1998 EETCs

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in a deferred cost of $6.3 million, which is amortized over the approximate
twenty-year life associated with this financing.

1999 EETCs

Other Debt

Other debt primarily consists of a two year amortizing term loan of $40
million from GE Capital Aviation Services received by the Company and, separate
financings by Atlas Air of two of Atlas Air's 747-200 freighter aircraft, one
747-300 freighter aircraft, and capital leases on flight simulators. The
weighted average interest rate for all other debt at December 31, 2001 was
6.52%, with terms ranging from one to seven years.

Fair Value of Long-Term Debt

Based on current rates available for similar debt with similar maturities
and security, the fair values of the Aircraft Credit Facility, AFL III Term Loan
Facility and Other Debt at December 31, 2001, are estimated to be their carrying
values. All of the Senior Notes and the EETCs are publicly traded. Based on
published trading prices at December 31, 2001, the fair values of the Senior
Notes and the EETCs are estimated to be as follows (in thousands):

FAIR VALUE
----------

10 3/4% Senior Notes..................................... $125,102
9 1/4% Senior Notes...................................... 130,050
9 3/8% Senior Notes...................................... 122,010
1998 EETCs............................................... 77,962
1999 EETCs............................................... 81,935

Five Year Debt Maturities

At December 31, 2001 principal repayments on long-term debt for the next
five years were as follows (in thousands):

2002..................................................... $ 65,934
2003..................................................... 118,241
2004..................................................... 109,581
2005..................................................... 222,921
2006..................................................... 208,691
Thereafter............................................... 299,617

F-15

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. HEDGING ACTIVITY

In September 1997, Atlas Air entered into an interest rate swap for the
purpose of hedging its floating rate debt. The notional amount of the interest
rate swap at inception was $210 million, decreasing over a term of eight years.
The Company pays a fixed interest rate of 5.72%, increasing .25% annually, and
receives a floating interest rate based on 3-month LIBOR, whereby the net
interest settles quarterly. For the quarterly interest period which included
December 31, 2001, the notional amount was $114.5 million, the fixed interest
rate was 6.5% and the 3-month LIBOR rate was 2.5%. While it is not the intention
of the Company to terminate the interest rate swap, it is estimated that the
Company would have had to pay approximately $6.5 million, based on published
trading prices, to settle the interest rate swap at December 31, 2001.

In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS
No. 137 and SFAS No. 138, is effective for fiscal quarters of fiscal years
beginning after June 15, 2000. Upon adoption of SFAS 133 on January 1, 2001, the
Company recognized the fair value of the interest rate swap, net of tax, of $1.6
million as a charge to the income statement. This amount is reflected as a
cumulative effect of a change in accounting principle. Subsequent changes in the
fair value of the swap are recognized in Other income/(expense) under the
heading "SFAS 133 fair value adjustment of interest rate swap". The fair value
of the interest rate swap at December 31, 2001 was $6.5 million in favor of the
counter party.

Polar Air Cargo entered into a jet fuel option contract to protect against
adverse changes in the price of jet fuel. The option contract which expired on
December 31, 2001 was accounted for as a cash flow hedge in accordance with the
provisions of SFAS 133. As of December 31, 2001, there are no fuel hedging
contracts in place that expire in 2002.

5. DEFERRED AIRCRAFT OBLIGATIONS

In June 1997, Atlas Air entered into the Boeing Purchase Agreement (see
Note 7) to purchase 10 new Boeing 747-400 freighter aircraft, with options to
purchase up to 10 additional Boeing 747-400 aircraft. The Boeing Purchase
Agreement requires Atlas Air to pay pre-delivery deposits in order to secure
delivery of the Boeing 747-400 freighter aircraft and to defray a portion of the
manufacturing costs. In addition, the Boeing Purchase Agreement provides for a
deferral of a portion of the pre-delivery deposits (Deferred Aircraft
Obligations) for which Atlas Air accrues and pays interest quarterly at 6-month
LIBOR, plus 2.00%. Included in other liabilities as of December 31, 2001, was
$136.0 million of Deferred Aircraft Obligations at a combined interest rate of
4.35%. Atlas Air settled its Deferred Aircraft Obligations upon delivery of each
of the first twelve Boeing 747-400 aircraft (including two exercised options),
which were delivered in 1998, 1999 and 2000. Financing for the initial twelve
aircraft was secured through the 1998 EETCs, 1999 EETCs and the 2000 EETCs. In
October 2000, Atlas Air exercised options for four additional Boeing 747-400s to
be delivered in 2002. Atlas Air expects to settle the balance of its Deferred
Aircraft Obligations upon delivery of the four aircraft.

6. INCOME TAXES

The Company has net operating loss carryforwards of approximately
$80,213,000 as of December 31, 2001 which will expire in 2021. The Company has
generated approximately $51,253,000 of alternative minimum tax credit
carryforwards which are available in subsequent years to reduce its regular tax
liability
F-16

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subject to statutory limitations. All tax years of the Company that are
statutorily open are subject to examination by the Internal Revenue Service
("IRS"), as well as state and local tax authorities. Currently, the fiscal year
ended March 31, 1994, the short year ended December 31, 1994 and the calendar
year ended December 31, 1995 are under examination by the IRS. The Company
believes that it has adequately provided for all income tax liabilities and that
final resolution of any IRS examination will not have a material effect on its
financial position or results of operations.

The benefit or provision for income taxes consisted of the following (in
thousands):

YEAR ENDED DECEMBER 31,
----------------------------
2001 2000 1999
-------- ------- -------

Current:
Federal.............................................. $(13,646) $41,496 $ 4,370
State and local...................................... (1,009) 1,744 987
Deferred:
Federal.............................................. (23,209) 8,253 31,363
State and local...................................... 9 775 836
-------- ------- -------
(Benefit)/provision for income taxes.............. $(37,855) $52,268 $37,556
======== ======= =======

The provisions for income taxes were at rates different from the U.S.
federal statutory rate for the following reasons:

YEAR ENDED DECEMBER 31,
------------------------
2001 2000 1999
------ ------ ------

Statutory federal income tax provision rate................. 35.00% 35.00% 35.00%
State and local income taxes, net of federal tax benefit.... 1.00 1.00 1.00
Nondeductible and other items............................... 2.19 2.00 2.00
----- ----- -----
Effective tax provision rate.............................. 38.19% 38.00% 38.00%
===== ===== =====

Deferred income taxes arise from temporary differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. The net deferred income tax liability components are as follows (in
thousands):

AT DECEMBER 31,
-------------------
2001 2000
-------- --------

Deferred tax liabilities:
Tax depreciation in excess of book depreciation........... $260,997 $250,231
Deferred tax assets:
Tax benefit of net operating loss carryforwards........... 29,077 --
Alternative minimum tax credits........................... 51,253 53,364
Deferred lease financing gains and losses................. 112,625 118,479
Other..................................................... 14,964 2,110
-------- --------
Total deferred tax assets......................... 207,919 173,953
-------- --------
Net deferred tax liability........................ $ 53,078 $ 76,278
======== ========

F-17

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

Aircraft/Real Estate Leases

Minimum annual rental commitments under capital leases and noncancelable
aircraft and real estate operating leases with initial or remaining terms of
more than one year are as follows: ($ in thousands).

AIRCRAFT REAL ESTATE
-------------------- -----------
CAPITAL OPERATING OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES LEASES
------------------------- ------- ---------- -----------

2002................................................ $ 1,768 $ 238,637 $ 3,357
2003................................................ 1,599 211,203 3,382
2004................................................ 1,598 199,723 3,521
2005................................................ 1,460 192,532 3,245
2006................................................ -- 175,751 2,869
Thereafter.......................................... -- 2,157,887 16,494
------- ---------- -------
Total minimum lease payments........................ $ 6,425 $3,175,733 $32,868
========== =======
Less amounts representing interest.................. (912)
-------
Present value of future minimum capital lease
payments.......................................... 5,513
Less current obligations under capital lease........ (1,376)
-------
Long-term obligations under capital lease........... $ 4,137
=======

In addition to the above commitments, the Company leases engines under
short-term lease agreements on an as needed basis.

Capital leased assets cost, accumulated amortization, and capital lease
liability balances of $5.8 million, $0.3 million, and $5.5 million,
respectively, are included in flight equipment, accumulated depreciation, and
current and long-term debt balances, respectively, on the Company's consolidated
balance sheet as of December 31, 2001.

Aircraft and engine rental expenses, including short-term rentals, were
$134,537,000, $79,134,000 and $51,173,000 for the years ended December 31, 2001,
2000 and 1999, respectively.

Real estate rental expenses were $5.9 million, $3.5 million and $2.7
million for the years ended December 31, 2001, 2000, and 1999, respectively.

Boeing Purchase Agreement

In June 1997, Atlas Air entered into the Boeing Purchase Agreement to
purchase 10 new Boeing 747-400 freighter aircraft with options for 10 additional
aircraft, all to be powered by GE engines. In February 1999, Atlas Air exercised
options for two additional aircraft that were delivered in 2000, and in October
2000 Atlas Air exercised options for four additional aircraft for delivery in
2002. As a result of Atlas Air being a large purchaser of Boeing 747-400
freighter aircraft, it was able to negotiate from Boeing and GE a significant
discount off the aggregate list price for the 16 Boeing 747-400 freighter
aircraft, four installed engines per aircraft and additional spare engines. In
addition, Atlas Air obtained certain ancillary products and services at
advantageous prices. Due to production problems at Boeing, some of the 1998
delivery positions of the Boeing 747-400 aircraft were delayed. Atlas Air was
compensated for these delays.

During 2001, Atlas Air reached an agreement with Boeing to amend the
delivery dates of the aircraft, whereby three of the aircraft are scheduled for
delivery in 2002 and one aircraft in 2003. Atlas Air has been in discussions
with Boeing for a number of months in an effort to defer delivery of some or all
of the aircraft scheduled for 2002. The Boeing Purchase Agreement requires that
Atlas Air pay pre-delivery deposits to

F-18

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Boeing prior to the delivery date of each Boeing 747-400 freighter aircraft in
order to secure delivery of the Boeing 747-400 freighter aircraft and to defray
a portion of the manufacturing costs. Based on the current expected firm
aircraft delivery schedule, Atlas Air expects the maximum total amount of
pre-delivery deposits at any time outstanding will be approximately $162.4
million for the four aircraft to be delivered in 2002 and 2003. Upon each
delivery, Boeing refunds Atlas Air the pre-delivery deposits associated with the
delivered Boeing 747-400 freighter aircraft. In addition, the Boeing Purchase
Agreement provides for a deferral of a portion of the pre-delivery deposits
(Deferred Aircraft Obligations -- see Note 5) for which Atlas Air accrues and
pays interest quarterly at 6-month LIBOR, plus 2.0%. As of December 31, 2001,
there was $136.0 million of deferred aircraft obligations included in other
liabilities, and the combined interest rate was approximately 4.35%.

Atlas Air is currently in discussions with Boeing to have the 2002 aircraft
delivered as late in the year as possible. Atlas Air does not currently have
firm financing in place for any of the four Boeing 747-400 aircraft scheduled
for delivery in 2002 and 2003. However, Atlas Air is currently in discussions
with several sources for financing these aircraft. The inability to secure
financing for the Boeing 747-400 deliveries could result in a default under the
Boeing Purchase Agreement, which would permit Boeing to accelerate payments due
under the Boeing Purchase Agreement. Such acceleration would cause a default in
covenants of certain of the Company's indebtedness which would permit the
lenders to accelerate payment of a significant portion of all indebtedness,
which event would have a material adverse effect on the Company's financial
position and results of operations. However, Boeing has made an offer to finance
by sale-leaseback, each of the aircraft to be delivered in 2002, under terms
which are more favorable to Boeing. If Atlas Air is unable to secure other
financing more favorable to the Company, management believes it has the option
to utilize the proposed Boeing financing.

Maintenance Agreements

In June 1996, Atlas Air entered into a ten-year engine maintenance
agreement with GE for the engine maintenance of up to 15 aircraft powered by
CF6-50E2 engines at a fixed rate per flight hour, subject to an annual formula
increase. In December 1999, we entered into a ten-year maintenance agreement
with MTU Maintenance Hanover, a subsidiary of Daimler Chrysler Aerospace, to
provide regular maintenance at a fixed rate per flight hour for 43 engines, the
majority of which were previously serviced under an agreement with KLM Royal
Dutch Airlines.

During the initial 36 month operating period, the Boeing 747-400 aircraft's
airframe will be covered under manufacturer's warranties. As a result, Atlas Air
does not expect to incur significant maintenance expense in connection with the
Boeing 747-400 airframe during the warranty period. In addition, the Boeing
747-400 airframe limited maintenance requirements will provide a higher
operational reliability with lower maintenance costs during the early years of
operation, typically for at least the first five years. Atlas Air will incur
expenses associated with routine daily maintenance of both the airframe and the
engines. In July 1998, Atlas Air entered into an agreement with Lufthansa
Technik pursuant to which Lufthansa Technik provides all required maintenance
for the initial order of twelve Boeing 747-400 aircraft, plus any additional
Boeing 747-400 aircraft that are purchased pursuant to the option in the Boeing
Purchase Agreement, on a fixed cost per flight hour basis for ten years, subject
to an annual escalation adjustment. Atlas Air may terminate the agreement in
June 2003. In connection with an engine purchase agreement with GE, we have also
entered into two agreements with GE to provide ongoing maintenance on the Boeing
747-400 aircraft engines at a fixed cost per flight hour, subject to an annual
escalation adjustment.

Employment Agreements

The Company has entered into employment agreements with certain key
employees. Such employment agreements provide for, among other things, base
annual salary, certain bonuses, the grant of options to

F-19

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

purchase common stock of the Company under the 1995 Stock Option Plan (see Note
13), and in certain circumstances severance benefits.

Labor

All of our U.S. crew members are represented by unions. Collectively, these
employees represent approximately 49% of our workforce as of December 31, 2001.
Although we have never had a work interruption or stoppage and believe our
relations with our unionized employees are generally good, we are subject to
risks of work interruption or stoppage and/or may incur additional
administrative expenses associated with union representation of our employees.
Atlas Air and Air Line Pilots Association (ALPA) are currently in negotiations
in an effort to reach a revised tentative agreement under the direction of a
mediator appointed by the National Mediation Board (NMB). Polar Air Cargo's
collective bargaining agreement with ALPA expires in May 2003, subject to
ratification, and we cannot accurately predict the outcome of any negotiations.
If Polar Air Cargo is unable to reach agreement with its crew members on the
terms of their collective bargaining agreements, or if Atlas Air is unable to
negotiate a contract with its crew members, we may be subject to work
interruptions and/or stoppages. Any sustained work stoppages could adversely
affect our ability to fulfill our obligations under ACMI contracts and other
agreements and could have a material adverse effect on our financial condition
and results of operations. (See Note 21).

FAA Airworthiness Directives

Under the Federal Aviation Administration's (the "FAA") Directives issued
under its "Aging Aircraft" program, the Company is subject to extensive aircraft
examinations and will be required to undertake structural modifications to its
fleet to address the problem of corrosion and structural fatigue. As part of the
FAA's overall Aging Aircraft program, it has issued Directives requiring certain
additional aircraft modifications to be accomplished. The Company estimates that
the modification costs per Boeing 747-100, -200, and -300 ("Classics") aircraft
will range between $2 million and $3 million. Fifteen aircraft in the Company's
Classics fleet have already undergone the major portion of such modifications.
The remaining Classics aircraft will require modification prior to the year
2013. Directives have been issued that require inspections and minor
modifications to Boeing Classics aircraft. The newly manufactured Boeing 747-400
freighter aircraft were delivered to the Company in compliance with all existing
FAA Directives at their respective delivery dates. It is possible that
additional Directives applicable to the types of aircraft or engines included in
the Company's fleet could be issued in the future, the cost of which could be
substantial.

Legal Proceedings

During April 2001, Atlas Air reached an agreement with the ALPA, to settle
a lawsuit filed in May 1999 over the eligibility of the crew members to
participate in Atlas Air's profit sharing plan, pursuant to the certification by
the NMB that crew members had voted for representation by ALPA. The agreement
reinstated the crew members to the profit sharing plan, subject to future
contract negotiation, and provided for the distribution of withheld past profit
sharing in an aggregate amount of $22.8 million to all eligible crew members.
Atlas Air and ALPA also agreed to dismiss legal proceedings with prejudice and
to bar any future legal claims as to crew members exclusion from the profit
sharing plan.

In May 2000, ALPA filed suit against the Company in the Southern District
of Florida seeking to enjoin, as a violation of the Railway Labor Act, the
establishment of an Atlas Air subsidiary in the United Kingdom to conduct
overseas operations from London Stansted Airport. Atlas Air believes the suit is
without merit and intend to vigorously defend the action. This action is
currently in the discovery phase.

During November 2001, Malaysian Airlines returned a leased aircraft to
Atlas Air with one year remaining on the lease, claiming a contractual right to
do so. Atlas Air vigorously disputes this interpretation of the contract. In
January 2002, Atlas Air requested arbitration to settle the matter. Arbitration
will take
F-20

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

place in London during the second quarter of 2002. Atlas Air is claiming damages
of approximately $26.5 million plus interest, and Malaysian Airlines has
counterclaimed for $22.0 million plus interest claiming they were misled as to
their ability to cancel the agreement. Atlas Air believes the counterclaim is
without merit. The arbitrator is likely to decide this matter in the fourth
quarter of 2002 or the first quarter of 2003.

Pursuant to the terms of the collective bargaining agreement between Polar
Air Cargo and ALPA, which represents Polar Air Cargo's crew members, disputes
over contract interpretation can be filed as grievances and, if not
satisfactorily resolved between the parties, are subject to arbitration. On
January 30, 2002, ALPA filed a grievance claiming a pay raise was due in
December 2001 to Polar Air Cargo crew members. Polar Air Cargo has disputed this
claim, alleging that certain conditions precedent have not been met. The total
amount at issue as to all Polar Air Cargo crew members is approximately
$324,000. This matter will likely be decided by an arbitrator during the second
or third quarter of 2002.

While the Company is, from time to time, involved in litigation in the
ordinary course of business, there are no other material legal proceedings
pending against it or to which any of its property is subject.

8. RELATED PARTY TRANSACTIONS

A loan of up to $750,000, bearing interest at 5.87%, was extended in June
1996 to one officer for the purpose of constructing a residence. In May 1998,
the Company forgave $500,000 of the principal, plus accrued interest. In June
1998 and March 1999, interest-free loans of $100,000 and $65,500, respectively,
were extended to an officer of the Company, due on demand, subject to certain
conditions and restrictions. In December 1999, the Company extended two
interest-free bridge loans of $150,000 and $25,000 to an officer for the purpose
of relocating that officer's residence from Colorado to New York, and was repaid
in full to the Company in January 2001. As of December 31, 2001, the outstanding
balance of officer demand loans, including accrued interest, was approximately
$417,000.

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The components of consolidated accounts payable and accrued expenses are as
follows (in thousands):

DECEMBER 31,
-------------------
2001 2000
-------- --------

Accounts payable -- trade................................... $ 28,940 $ 11,609
Accrued salaries and wages.................................. 12,924 14,098
Accrued maintenance......................................... 20,713 35,899
Accrued interest............................................ 23,105 25,030
Accrued expenses and other.................................. 86,336 48,651
-------- --------
$172,018 $135,287
======== ========

10. SAVINGS AND RETIREMENT PLAN

Atlas Air implemented a 401(k) Retirement Plan (the "Plan") in June 1994,
under which eligible employees may contribute up to 15% of their total pay. The
Plan covers substantially all employees. Effective May 1, 1996, the Plan was
amended to provide for company contributions equal to 50% of the first 10% of
contributions made by employees, for which Atlas Air incurred an expense of
$2,594,000, $2,881,000 and $2,262,000 for the years ended December 31, 2001,
2000 and 1999, respectively.

11. BUSINESS SEGMENTS

The Company operated in two business segments in 2001, Atlas Air and Polar
Air Cargo, which provide the common carriage of freight over various worldwide
routes. Atlas Air provides primarily ACMI Contract

F-21

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

services to its customers, whereas Polar Air Cargo provides primarily scheduled
services to its customers. Polar Air Cargo was acquired on November 1, 2001, and
its financial results are included in the table below from the November 1, 2001
acquisition date.

The following table provides a reconciliation of reportable segment
revenues, depreciation and amortization, operating income, segment assets and
capital expenditures to consolidated financial statement totals for the year
ended December 31, 2001 ($ in thousands):

CONSOLIDATING CONSOLIDATED
YEAR ENDED DECEMBER 31, 2001 ATLAS AIR POLAR AIR CARGO ADJUSTMENTS TOTAL
---------------------------- ---------- --------------- ------------- ------------

Revenues.......................... $ 687,309 $ 76,522 $ -- $ 763,831
Depreciation & amortization....... 83,154 258 -- 83,412
Operating income/(loss)........... (38,028) 9,516 -- (28,512)
Segment assets.................... 1,940,089 159,413 (14,750) 2,084,752
Capital expenditures.............. 181,170 100 -- 181,270

The assets of both Atlas Air and Polar Air Cargo, principally flight
equipment, support its entire worldwide transportation system and are not
readily identifiable by geographic area. Property and equipment, other than
flight equipment, located in foreign locations is not significant.

Foreign sales accounted for 88%, 99% and 99% of total revenues for the
years ended December 31, 2001, 2000 and 1999, respectively. All of Atlas Air's
foreign sales were U.S. dollar denominated, and a portion of Polar Air Cargo's
foreign sales were in local country currency.

12. STOCKHOLDERS' EQUITY

Common Stock

In January 1999, the Company announced a 3-for-2 stock split in the form of
a stock dividend to stockholders of record at the close of business on January
25, 1999 (the "Stock Split"). The new shares were delivered on February 8, 1999.
The share data and earnings per share data for all periods presented in these
consolidated financial statements have been restated to reflect the Stock Split.

In June 2000, the Company completed an offering of 3,465,000 shares of
common stock for net proceeds of $103 million. Approximately $86 million and $10
million of the proceeds were used for the retirement of debt during the second
and third quarters, respectively of 2000.

Preferred Stock

The Board of Directors is authorized under the restated certificate of
incorporation to issue up to 10,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of preferred
stock with voting and conversion rights may adversely affect the voting power of
the holders of common stock, including the loss of voting control to others. At
present, the Company has no plans to issue any shares of preferred stock.

Other Comprehensive Income

Accumulated other comprehensive income for the twelve months ended December
31, 2001 was $0.5 million (net of tax). Other comprehensive income consisted of
net unrealized gains on securities of $0.8 million for the twelve months ended
December 31, 2001.

F-22

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Shareholder Rights Plan

In June 2001, the Board of Directors declared a Shareholder Rights Plan.
Under the Plan, one Right (as defined in the Shareholder Rights Plan) was
attached to each outstanding share of common stock at the close of business on
July 2, 2001. Each Right entitles holders thereof to purchase one one-thousandth
of a share of junior preferred stock at an exercise price of $115 per share,
subject to adjustment. The Rights become exercisable only if a person or group
acquires common stock and/or other voting capital stock of the Company which has
20% or more of the voting power of all outstanding capital stock of the Company,
or announces a tender or exchange offer that, if consummated, will result in a
person or group beneficially owning any such capital stock of the Company which
has 20% or more of the voting power of all outstanding capital stock of the
Company. In the event that a person or group acquires capital stock of the
Company that has 20% or more of the voting power of all outstanding capital
stock of the Company, each Right will entitle the holder (other than such
acquiring person or group) to purchase the Company's common stock with a value
of $230, subject to adjustment. The Company will generally be entitled to redeem
the Rights at $.001 per Right. If not exercised or redeemed, all Rights will
expire on July 2, 2011.

13. STOCK-BASED COMPENSATION PLANS

Employee Stock Purchase Plan

In 1995, Atlas Air established an Employee Stock Purchase Plan (the "Stock
Purchase Plan") subsequently assumed by the Company. Employees eligible to
participate in the Stock Purchase Plan are those who have completed at least 90
days of employment with the Company, but excluding employees whose customary
employment is not more than five months in any calendar year or 20 hours or less
per week. The Stock Purchase Plan is administered by the Compensation Committee
of the Board of Directors of the Company which determines the terms and
conditions under which shares are offered and corresponding options granted
under the Stock Purchase Plan for any Purchase Period, as defined in the Stock
Purchase Plan. Employees may contribute up to 15% of their gross base
compensation subject to certain limitations. The price per share at which the
common stock is purchased pursuant to the Stock Purchase Plan is the lesser of
85% of the fair market value of the common stock on the first or last day of the
applicable Purchase Period (as defined in the Stock Purchase Plan). The maximum
number of shares of common stock which may be issued on the exercise of options
granted under the Stock Purchase Plan is 1,500,000 shares. During the plan year
ended December 31, 2001, 93,200 shares were issued at a weighted average cost of
$11.04 to 184 employees who participated in the Stock Purchase Plan.

1995 Stock Option Plan

In 1995, Atlas Air adopted the 1995 Stock Option Plan (the "1995 Plan"),
which was subsequently assumed by the Company, whereby employees may be granted
options, incentive stock options, share appreciation rights, and restricted
shares. The portion of the 1995 Plan applicable to employees is administered by
the Compensation Committee of the Board of Directors of the Company which also
establishes the terms of the awards. The 1995 Plan also provides for certain
automatic grants of nonqualified stock options to non-employee directors which
become exercisable on the date of grant and expire on the tenth anniversary of
the date of grant. Originally, an aggregate of 2,700,000 shares were reserved
for issuance in connection with awards and director's options under the 1995
Plan. Following shareholder approval, an additional 450,000 shares were reserved
in 1997, an additional 750,000 shares were reserved in 1998 and an additional
2,800,000 shares were reserved in 2000.

Director Stock Plan

In August 1996, Atlas Air established the Director Stock Plan (the
"Director Plan"), which was subsequently assumed by the Company, which provides
the Company's non-employee directors the option to
F-23

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

receive all or a portion of their quarterly remuneration in common stock instead
of cash. The Director Plan was amended in February 1998 such that the first 25%
of their quarterly remuneration must be received in the form of the Company's
common stock. The number of shares received is determined by dividing the
average price on the date of the first Board meeting of that quarter into the
amount of compensation earned for the quarter which the non-employee director
chooses not to receive in cash. The effective date of the Director Plan was
January 1, 1997. For the year ended December 31, 2001, 14,518 shares were issued
to five directors who have participated in the Director Plan.

Statement of Financial Accounting Standards No. 123

SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value based method of accounting for employee stock options or similar equity
instruments. However, SFAS No. 123 allows the continued measurement of
compensation cost for such plans using the intrinsic value based method
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," provided that pro forma disclosures are made of
net income or loss and net income or loss per share, assuming the fair value
based method of SFAS No. 123 had been applied. The Company has elected to
account for its stock-based compensation plans under APB Opinion No. 25;
accordingly, for purposes of the pro forma disclosures presented below, the
Company has computed the fair value of all options granted during 2001, 2000 and
1999, using the Black-Scholes pricing model and the following weighted average
assumptions:

ASSUMPTIONS -- 1995 PLAN 2001 2000 1999
------------------------ ------- ------- -------

Risk-free interest rates.................................. 4.58% 6.16% 5.84%
Expected dividend yields.................................. -- -- --
Expected lives............................................ 5 years 5 years 5 years
Expected volatility....................................... 60.46% 58.11% 56.80%

If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's pro forma net income/(loss) and pro
forma net income/(loss) per common share would have been reported as follows:

2001 2000 1999
-------- ------- -------

Net (loss)/income (in thousands):......... As Reported $(62,847) $85,259 $53,270
Pro Forma $(69,724) 80,263 49,804
Net (loss)/income per common share (Basic
EPS):................................... As Reported (1.65) 2.33 1.56
Pro Forma (1.83) 2.20 1.45
Net (loss)/income per common share
(Diluted EPS):.......................... As Reported (1.65) 2.31 1.54
Pro Forma (1.83) 2.17 1.44

F-24

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option activity for the years ended December 31, 2001,
2000 and 1999 is presented in the table below:

2001 2000 1999
--------------------------- --------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- -------------- ---------- -------------- ---------- --------------

Outstanding at
beginning of year.... 2,463,132 $27.55 2,023,131 $22.45 2,392,122 $22.07
Granted................ 1,508,434 18.75 920,250 33.68 480,000 26.98
Exercised.............. (3,000) 14.38 (281,811) 12.80 (661,487) 23.70
Forfeited.............. -- -- (198,438) 25.03 (187,504) 24.73
---------- ---------- ----------
Outstanding at end of
year................. 3,968,566 24.21 2,463,132 27.55 2,023,131 22.45
========== ========== ==========
Exercisable at end of
year................. 1,006,692 24.09 996,192 24.03 540,131 16.04
Weighted average fair
value of options
granted.............. $ 9.84 $ 18.91 $ 15.01

The following table summarizes information with regard to the options
outstanding at December 31, 2001:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ----------- -------- ----------- --------

$10.67 -- 16.00..................... 1,084,184 9.7 years $14.56 3,000 $13.34
16.31 -- 24.44..................... 1,032,420 5.8 years 22.50 703,170 21.97
24.78 -- 33.83..................... 1,246,462 8.2 years 28.00 227,772 26.85
34.00 -- 37.58..................... 399,000 8.5 years 34.79 57,750 34.09
38.44 -- 45.22..................... 206,500 8.6 years 40.12 15,000 45.22
--------- ---------
3,968,566 8.0 years 24.21 1,006,692 24.09
========= =========

14. PROFIT SHARING PLAN

Employees who have been employed by Atlas Air or its subsidiaries for at
least twelve months as full-time employees are eligible to participate in the
Profit Sharing Plan, which was adopted in 1994 by Atlas Air. The Profit Sharing
Plan provides for payments to eligible employees in semiannual distributions
based on the Company's pretax profits. Through 2001, the Company was obligated
to make an annual profit sharing contribution of ten percent of the Company's
pretax profits, which is defined as net income before taxes, but excluding (i)
any income or loss related to charges or credits for unusual or infrequently
occurring items or related to intangible assets, and (ii) extraordinary items.
Annual profit sharing contributions may be in the form of cash or common stock
of the Company. For the years 2001, 2000 and 1999, beginning with an employee's
thirteenth month of employment, an employee was entitled to receive a guaranteed
profit sharing payment of at least 10% of salary. The expense for the Profit
Sharing Plan for the years ended December 31, 2001, 2000 and 1999 was
$27,567,000, $5,290,000 and $4,488,000, respectively. The 2001 profit sharing
amount includes $22,815,000 resulting from the profit sharing settlement which
restored profit sharing payments to flight crew members retroactive to April
1999. Beginning in 2002, the Profit Sharing Plan was revised to include, among
other things, that profit sharing would no longer have a guaranteed component,
but will be based upon the actual profits of Atlas Air.

F-25

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. EFFECT OF THE EVENTS ON SEPTEMBER 11, 2001

Immediately following the terrorist attacks on September 11, 2001, the
Federal Aviation Administration (FAA) closed the U.S. airspace. Atlas Air
resumed operations on September 14, 2001, after the FAA order was rescinded.
During the period in which the flight operations were suspended, Atlas Air
experienced contract revenue losses and incurred incremental expenses associated
with crew and aircraft repositioning and added security measures.

16. RESTRUCTURING CHARGE

During the second quarter of 2001, the Company announced measures designed
to respond to the current global economic environment and the corresponding
decline in air cargo demand. Accordingly, during the second quarter the Company
announced it would furlough 105 crew members and reduce its ground-staff
workforce by 200 employees. Under the restructuring plan finalized by the
Company in the second quarter of 2001, the affected employees received severance
and termination benefits.

In accordance with Emerging Issues Task Force (EITF) No. 94-03, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)" and Staff
Accounting Bulletin (SAB) No. 100, "Restructuring and Impairment Charges",
during the second quarter the Company recognized a liability for cost of
termination benefits to be provided to involuntarily terminated employees and
also recorded other liabilities associated with the restructuring. This
restructuring charge of $3.9 million is recorded in the 2001 income statement
under the caption 'Restructuring and impairment'. This liability has been
reduced by $3.3 million representing primarily employee severance payments made
since June 2001 and the liability of $0.6 million is shown under the caption
"Accounts payable and accrued expenses' on the consolidated balance sheet as at
December 31, 2001. The total number of employees terminated through December 31,
2001 under the restructuring plan were 192.

17. AIRCRAFT HELD FOR SALE

Due to the current and forecast global economic environment and the
corresponding decline in air cargo demand, the Company restructured its
operating business plan and decided to take six aircraft out of service and make
them available for sale. These aircraft have been isolated from the rest of the
fleet and the Company is marketing the aircraft. Subsequent to September 11,
2001 the Company experienced an increase in demand for, both commercial and
military charter services. To respond to this demand, the Company utilized four
of the six aircraft. However, the Company retains the flexibility to take the
aircraft back out of service should a buyer be found or charter demand soften.
The Company accounts for its aircraft in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". Accordingly, the aggregate carrying amount of the aircraft of
$246.2 million was reduced to the expected net realizable value of $147.2
million, resulting in an impairment charge of $99.0 million. This charge was
recorded in two quarters, prior to and post September 11. In the second quarter
of 2001, the impairment
F-26

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

charge was $54.1 million and during the fourth quarter 2001, an additional
impairment charge of $44.9 million was recorded related to these six aircraft.
The net realizable values of these aircraft were based on a market assessment of
the value of the aircraft. The impairment charges are recorded in the 2001
income statement under the caption "Restructuring and impairment".

18. SFAS 121 IMPAIRMENTS AND OTHER EXIT COSTS

In conjunction with the closure of some of the Company's locations and
employee layoffs, the Company recorded an impairment charge of approximately
$0.7 million related to computer hardware and software and leasehold
improvements at the closed locations. The charge represents the entire carrying
value of these assets, as the Company believes that these assets have no resale
value.

The changed business environment resulted in a review of the Company's
strategy related to the construction of its maintenance hangar at Miami
International Airport. The Company recorded an impairment charge of $12.5
million in the second quarter to write off $8.6 million of costs currently
capitalized and accrue for $3.9 million of costs related to site restoration and
lease termination costs to discontinue the project. During the fourth quarter
2001, the reserve balance was reduced by $0.3 million due to site restoration
work and the balance of the reserve of $3.6 million is shown under the caption
"Accounts payable and accrued expenses" on the consolidated balance sheet as at
December 31, 2001. The total impairment charge of $13.2 million is recorded in
the 2001 income statement under the caption "Restructuring and impairment".

19. POLAR AIR CARGO ACQUISITION

On November 1, 2001, following the receipt of exemption authority from the
U.S. Department of Transportation related to the acquisition of Polar Air Cargo,
the Company completed the previously announced acquisition of Polar Air Cargo
from GE Capital Aviation Services, a GE Capital company. The purchase price of
$84 million was partly financed through a two-year amortizing loan of $40
million. The operating results of Polar Air Cargo have been included in the
Company's consolidated results of operations as of November 1, 2001. As per the
provisions of SFAS 142 (as defined) the Company recognized an Intangible Asset
of $58.5 million representing the value of Polar Air Cargo's landing rights and
slots at Narita Airport in Tokyo, Japan. These intangible assets are not subject
to amortization, as a result of the perpetual nature of the landing rights and
slots.

F-27

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The purchase price was assigned to the assets and liabilities of Polar Air
Cargo as of November 1, 2001, and subject to further adjustments, is as follows
($ in thousands):

BALANCE SHEET ACCOUNT AMOUNT
--------------------- --------

Cash and cash equivalents................................... $ 7,917
Accounts receivable......................................... 38,645
Due from GECAS.............................................. 13,175
Inventory................................................... 3,106
Prepaid expenses............................................ 1,911
Flight equipment............................................ 9,363
Other equipment............................................. 3,615
Intangible assets(A)........................................ 58,499
Other assets................................................ 13,044
--------
Total assets...................................... $149,275
Accounts payable............................................ $ 19,779
Accrued liabilities......................................... 45,496
--------
Total liabilities................................. $ 65,275
========
Net assets acquired......................................... $ 84,000
========

---------------

(A) The intangible assets represent the value of Polar Air Cargo's landing
rights and slots at the Narita Airport in Tokyo, Japan, and are not subject
to amortization.

Pro forma information concerning the results of operations including Polar
Air Cargo for the years ended December 31, 2001 and December 31, 2000 are shown
below ($ in thousands),

RESULTS OF OPERATIONS, 12 MONTHS (UNAUDITED)
--------------------------------------------
AS REPORTED PRO-FORMA
------------------- ----------------------
2001 2000 2001 2000
-------- -------- --------- ----------

Total revenues.......................... $763,831 $790,468 $ 998,103 $1,204,466
(Loss)/income before extraordinary items
and cumulative effect of change in
accounting principle.................. (61,258) 85,259 (105,931) 95,414
-------- -------- --------- ----------
Net (loss) income....................... $(62,847) $ 85,259 $(107,520) $ 95,414
(Loss)/earnings per share:
Basic.............................. $ (1.65) $ 2.33 $ (2.82) $ 2.61
Diluted............................ (1.65) 2.31 (2.82) 2.58

F-28

ATLAS AIR WORLDWIDE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. SUPPLEMENTAL QUARTERLY FINANCIAL DATA -- ($ IN THOUSANDS, EXCEPT EPS)
(UNAUDITED)

INCOME/
(LOSS)
BEFORE
EXTRAORDINARY INCOME/(LOSS)
ITEM AND BEFORE EXTRAORDINARY
CUMULATIVE ITEM AND CUMULATIVE
INCOME/ EFFECT OF A EFFECT OF A CHANGE
OPERATING (LOSS) CHANGE IN NET IN ACCOUNTING PRINCIPLE
INCOME/ BEFORE ACCOUNTING INCOME/ -----------------------
REVENUE (LOSS) INCOME TAXES PRINCIPLE (LOSS) BASIC EPS DILUTED EPS
-------- --------- ------------ ------------- -------- --------- -----------

2001
First Quarter....... $180,312 $ 15,365 $ (1,576) $ 7 $ (1,582) $ .00 $ .00
Second Quarter...... 149,035 (71,912) (87,627) (49,022) (49,022) $(1.28) $(1.28)
Third Quarter....... 150,713 9,336 (9,859) (4,211) (4,211) $(0.11) $(0.11)
Fourth Quarter(A)... 283,771 18,699 (51) (8,032) (8,032) $(0.21) $(0.21)
2000
First Quarter....... $166,412 $ 43,176 $ 19,397 $ 12,019 $ 12,019 $ .35 $ .35
Second Quarter...... 191,783 58,400 30,666 19,013 19,013 .53 .53
Third Quarter....... 208,611 61,970 37,213 23,072 23,072 .61 .60
Fourth Quarter...... 223,662 69,158 50,251 31,155 31,155 .82 .81

NET INCOME/(LOSS)
-----------------------
BASIC EPS DILUTED EPS
--------- -----------

2001
First Quarter....... $ (.04) $ (.04)
Second Quarter...... $(1.28) $(1.28)
Third Quarter....... $(0.11) $(0.11)
Fourth Quarter(A)... $(0.21) $(0.21)
2000
First Quarter....... $ .35 $ .35
Second Quarter...... .53 .53
Third Quarter....... .61 .60
Fourth Quarter...... .82 .81

---------------

(A) Includes results of Polar Air Cargo from acquisition date of November 1,
2001.

21. SUBSEQUENT EVENTS

F-29

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
------- -----------

@@3.2 -- Certificate of Incorporation of the Company.
@@3.3 -- By-Laws of the Company.
++++4.3 -- Form of 8.707% Atlas Air Pass Through Certificates,
Series 2000-1A (included in Exhibit 4.7)
++++4.4 -- Form of 9.057% Atlas Air Pass Through Certificates,
Series 2000-1B (included in Exhibit 4.8)
++++4.5 -- Form of 9.702% Atlas Air Pass Through Certificates,
Series 2000-1C (included in Exhibit 4.9)
++++4.6 -- Pass Through Trust Agreement, dated as of January 28,
2000, between Wilmington Trust Company, as Trustee and
Atlas Air, Inc.
++++4.7 -- Trust Supplement No. 2000-1A, dated January 28, 2000,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
January 28, 2000
++++4.8 -- Trust Supplement No. 2000-1B, dated January 28, 2000,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
January 28, 2000
++++4.9 -- Trust Supplement No. 2000-1C, dated January 28, 2000,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
January 28, 2000
++++4.10 -- Revolving Credit Agreement (2000-1A), dated as of January
28, 2000, between Wilmington Trust Company, not in its
individual capacity but solely as Subordination Agent, as
Borrower, and Westdeutshe Landesbank Gironzentrale, as
Liquidity Provider
++++4.11 -- Revolving Credit Agreement (2000-1B), dated as of January
28, 2000, between Wilmington Trust Company, not in its
individual capacity but solely as Subordination Agent, as
Borrower, and Morgan Stanley Capital Services Inc., as
Liquidity Provider
++++4.12 -- Revolving Credit Agreement (2000-1C), dated as of January
28, 2000, between Wilmington Trust Company, not in its
individual capacity but solely as Subordination Agent, as
Borrower, and Morgan Stanley Capital Services Inc., as
Liquidity Provider
++++4.13 -- Escrow and Paying Agent Agreement (Class A) dated as of
January 28, 2000 among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., as Placement Agents, Wilmington Trust
Company, as Trustee, and Wilmington Trust Company as
Paying Agent
++++4.14 -- Escrow and Paying Agent Agreement (Class B) dated as of
January 28, 2000 among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., as Placement Agents, Wilmington Trust
Company, as Trustee, and Wilmington Trust Company as
Paying Agent
++++4.15 -- Escrow and Paying Agent Agreement (Class C) dated as of
January 28, 2000 among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, Deutsche Bank Securities Inc. and Salomon
Smith Barney Inc., as Placement Agents, Wilmington Trust
Company, as Trustee, and Wilmington Trust Company as
Paying Agent

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++++4.16 -- Deposit Agreement (Class A), dated as of January 28,
2000, between First Security Bank, National Association
as Escrow Agent, and Westdeutsche Landesbank
Gironzentrale, as Depositary
++++4.17 -- Deposit Agreement (Class B), dated as of January 28,
2000, between First Security Bank, National Association
as Escrow Agent, and Westdeutsche Landesbank
Gironzentrale, as Depositary
++++4.18 -- Deposit Agreement (Class C), dated as of January 28,
2000, between First Security Bank, National Association
as Escrow Agent, and Westdeutsche Landesbank
Gironzentrale, as Depositary
++++4.19 -- Registration Rights Agreement dated January 28, 2000
among Atlas Air, Inc., Wilmington Trust Company, as
Trustee, and Morgan Stanley & Co. Incorporated, Deutsche
Bank Securities Inc. and Salomon Smith Barney Inc., as
Placement Agents
++++4.20 -- Intercreditor Agreement, dated as of January 28, 2000,
among Wilmington Trust Company, as Trustee, Westdeutsche
Landesbank Gironzentrale, as Class A Liquidity Provider,
Morgan Stanley Capital Services, Inc., as Class B
Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company, as Subordination Agent and
Trustee
++++4.21 -- Note Purchase Agreement, dated as of January 28, 2000,
among Atlas Air, Inc., Wilmington Trust Company, as
Trustee, Wilmington Trust Company, as Subordination
Agent, First Security Bank, National Association, as
Escrow Agent, and Wilmington Trust Company, as Paying
Agent
++++4.22 -- Form of Leased Aircraft Participation Agreement
(Participation Agreement among Atlas Air, Inc., Lessee,
First Security Bank, National Association, Owner Trustee,
and Wilmington Trust Company, Mortgagee and Loan
Participant) (Exhibit A-1 to Note Purchase Agreement)
++++4.23 -- Form of Lease (Lease Agreement between First Security
Bank, National Association, Lessor, and Atlas Air, Inc.,
Lessee) (Exhibit A-2 to Note Purchase Agreement)
++++4.24 -- Form of Leased Aircraft Indenture (Trust Indenture and
Mortgage between First Security Bank, National
Association, Owner Trustee, and Wilmington Trust Company,
Mortgagee) (Exhibit A-3 to Note Purchase Agreement)
++++4.25 -- Form of Leased Aircraft Trust Agreement (Exhibit A-5 to
Note Purchase Agreement)
++++4.26 -- Form of Owned Aircraft Participation Agreement
(Participation Agreement between Atlas Air, Inc., Owner,
and Wilmington Trust Company, as Mortgagee, Subordination
Agent and Trustee) (Exhibit C-1 to Note Purchase
Agreement)
++++4.27 -- Form of Owned Aircraft Indenture (Trust Indenture and
Mortgage between Atlas Air, Inc., Owner, and Wilmington
Trust Company, as Mortgagee) (Exhibit C-2 to Note
Purchase Agreement)
+10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995,
between Atlas Air, Inc. and KLM Royal Dutch Airlines, as
amended.
#10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award
Plan (including Amendments One through Seven
#10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan (including
First Amendment)
+10.17 -- Atlas Air, Inc. Profit Sharing Plan.
+10.18 -- Atlas Air, Inc. Retirement Plan.
++10.19 -- Employment Agreement between Atlas Air, Inc. and Michael
A. Chowdry.

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++10.20 -- Employment Agreement between Atlas Air, Inc. and Richard
H. Shuyler.
++10.23 -- Employment Agreement between Atlas Air, Inc. and James T.
Matheny.
+10.26 -- Maintenance Agreement between Atlas Air, Inc. and Hong
Kong Aircraft Engineering Company Limited dated April 12,
1995, for the performance of certain maintenance events.
***10.53 -- Secured Loan Agreement by and between Atlas Air, Inc. and
Finova Capital Corporation dated April 11, 1996.
***/****10.55 -- Engine Maintenance Agreement between Atlas Air, Inc. and
General Electric Company dated June 6, 1996.
**10.56 -- Employment Agreement dated as of May 1, 1997 between
Atlas Air, Inc. and Stanley G. Wraight.
+++++10.58 -- Fourth Amended and Restated Credit Agreement among Atlas
Air, Inc., the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as Syndication Agent) and Bankers
Trust Company (as Administrative Agent) dated April 25,
2000
10.59 -- Amendments One through Four of the Amended and Restated
Credit Agreement among Atlas Air, Inc., the Lenders
listed therein, Goldman Sachs Credit Partners L.P. (as
Syndication Agent) and Bankers Trust Company (as
Administrative Agent) dated April 25, 2001
**10.72 -- Form of Indenture, dated August 13, 1997, between Atlas
Air, Inc. and State Street Bank and Trust Company, as
Trustee, relating to the 10 3/4% Senior Notes (with form
of Note attached as exhibit thereto)
**/****10.86 -- Purchase Agreement Number 2021 between The Boeing Company
and Atlas Air, Inc. dated June 6, 1997.
**10.87 -- Aircraft General Terms Agreement between The Boeing
Company and Atlas Air, Inc. dated June 6, 1997.
++10.90 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1A-0.
++10.91 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1A-S.
++10.92 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1B-0.
++10.93 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1B-S.
++10.94 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1C-0.
++10.95 -- Pass Through Trust Agreement, dated as of February 9,
1998, between Atlas Air, Inc. and Wilmington Trust
Company, as Trustee, relating to the Atlas Air Pass
Through Trust 1998-1C-S.
++10.96 -- Deposit Agreement (Class A), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++10.97 -- Deposit Agreement (Class B), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.98 -- Deposit Agreement (Class C), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.99 -- Indemnity Agreement, dated as of February 9, 1998,
between ABN AMRO Bank N.V., acting through its Chicago
Branch, as Depositary, and the Company.
++10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.103 -- Revolving Credit Agreement (1998-1A), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and ABN AMRO Bank N.V., acting
through its Chicago Branch as Liquidity Provider.
++10.104 -- Revolving Credit Agreement (1998-1B), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.105 -- Revolving Credit Agreement (1998-1C), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.106 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-B relating to Class B Liquidity
Facility.
++10.107 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-C relating to Class C Liquidity
Facility.
++10.108 -- Intercreditor Agreement, dated as of February 9, 1998,
among Wilmington Trust Company, not in its individual
capacity but solely as Trustee, ABN AMRO Bank N.V.,
acting through its Chicago Branch, as Class A Liquidity
Provider, Morgan Stanley Capital Services, Inc., as Class
B Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company.

EXHIBIT
NUMBER DESCRIPTION
------- -----------

++10.109 -- Note Purchase Agreement, dated as of February 9, 1998,
among the Company, Wilmington Trust Company and First
Security Bank, National Association.
*****10.111 -- Form of Indenture, dated April 9, 1998, between the
Company and State Street Bank and Trust company, as
Trustee, relating to the 9 1/4% Senior Notes (with form
of Note attached as exhibit thereto).
****/*****10.114 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.115 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.116 -- General Terms Agreement between the Company and General
Electric Company dated June 6, 1997.
******10.117 -- Form of Indenture, dated November 18, 1998, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 9 3/8% Senior Notes (with form
of Note attached as exhibit thereto).
+++10.118 -- Employment Agreement dated June 22, 1998, between the
Company and Thomas G. Scott.
##10.120 -- Revolving Credit Agreement (1999-1A-1), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider
##10.121 -- Revolving Credit Agreement (1999-1A-2), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and ABN AMRO Bank N.V., Chicago
Branch, as Liquidity Provider
##10.122 -- Revolving Credit Agreement (1999-1B), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider
##10.123 -- Revolving Credit Agreement (1999-1C), dated as of April
13, 1999, between Wilmington Trust Company, as
Subordination Agent, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider
##10.124 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1B)
##10.125 -- Guarantee, dated April 13, 1999, by Morgan Stanley Dean
Witter & Co. relating to Revolving Credit Agreement
(1999-1C)
##10.126 -- Pass Through Trust Agreement, dated as of April 1, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc.
##10.127 -- Trust Supplement No. 1999-1A-1, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.128 -- Trust Supplement No. 1999-1A-2, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.129 -- Trust Supplement No. 1999-1B, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999
##10.130 -- Trust Supplement No. 1999-1C, dated April 13, 1999,
between Wilmington Trust Company, as Trustee, and Atlas
Air, Inc. to Pass Through Trust Agreement, dated as of
April 1, 1999

EXHIBIT
NUMBER DESCRIPTION
------- -----------

##10.131 -- Intercreditor agreement, dated as of April 13, 1999,
among Wilmington Trust Company, as Trustee, ABN AMRO Bank
N.V. Chicago Branch, as Class A-1 Liquidity Provider and
Class A-2 Liquidity Provider, Morgan Stanley Capital
Services, Inc., as Class B Liquidity Provider and Class C
Liquidity Provider, and Wilmington Trust Company, as
Subordination Agent and Trustee
##10.132 -- Deposit Agreement (Class A-1), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.133 -- Deposit Agreement (Class A-2), dated as of April 13,
1999, between First Security Bank, National Association,
as Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.134 -- Deposit Agreement (Class B), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.135 -- Deposit Agreement (Class C), dated as of April 13, 1999,
between First Security Bank, National Association, as
Escrow Agent, and Credit Suisse First Boston, New York
Branch, as Depositary
##10.136 -- Escrow and Paying Agent Agreement (Class A-1), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.137 -- Escrow and Paying Agent Agreement (Class A-2), dated as
of April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.138 -- Escrow and Paying Agent Agreement (Class B), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.139 -- Escrow and Paying Agent Agreement (Class C), dated as of
April 13, 1999, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, ING Baring
Furman Selz LLC and CIBC Oppenheimer Corp., as
Underwriters, Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Paying Agent
##10.140 -- Note Purchase Agreement, dated as of April 13, 1999,
among Atlas Air, Inc., Wilmington Trust Company, as
Trustee, Wilmington Trust Company, as Subordination
Agent, First Security Bank, National Association, as
Escrow Agent, and Wilmington Trust Company, as Paying
Agent
##10.141 -- Form of Leased Aircraft Participation
Agreement(Participation Agreement among Atlas Air, Inc.,
Lessee, First Security Bank, National Association, Owner
Trustee, and Wilmington Trust Company, Mortgagee and Loan
Participant) (Exhibit A-1 to Note Purchase Agreement)
##10.142 -- Form of Lease (Lease Agreement between First Security
Bank, National Association, Lessor, and Atlas Air, Inc.,
Lessee) (Exhibit A-2 to Note Purchase Agreement)

EXHIBIT
NUMBER DESCRIPTION
------- -----------

##10.143 -- Form of Leased Aircraft Indenture (Trust Indenture and
Mortgage between First Security Bank, National
Association, Owner Trustee, and Wilmington Trust Company,
Mortgagee) (Exhibit A-3 to Note Purchase Agreement)
##10.144 -- Form of Leased Aircraft Trust Agreement (Exhibit A-5 to
Note Purchase Agreement)
##10.145 -- Form of Owned Aircraft Participation
Agreement(Participation Agreement between Atlas Air,
Inc., Owner, and Wilmington Trust Company, as Mortgagee,
Subordination Agent and Trustee) (Exhibit C-1 to Note
Purchase Agreement)
##10.146 -- Form of Owned Aircraft Indenture (Trust Indenture and
Mortgage between Atlas Air, Inc., Owner, and Wilmington
Trust Company, as Mortgagee) (Exhibit C-2 to Note
Purchase Agreement)
##10.147 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-1
##10.148 -- 7.20% Atlas Air Pass Through Certificate 1999-1A-1,
Certificate No. A-1-2
##10.149 -- 6.88% Atlas Air Pass Through Certificate 1999-1A-2,
Certificate No. A-2-1
##10.150 -- 7.63% Atlas Air Pass Through Certificate 1999-1B-1,
Certificate No. B-1
##10.151 -- 8.77% Atlas Air Pass Through Certificate 1999-1C-1,
Certificate No. C-1
@10.152 -- Agreement of Lease between Texaco, Inc., Landlord, and
the Company, Tenant, 2000 Westchester Avenue, White
Plains, New York 10650 dated November 9, 1999
@10.153 -- Atlas Air, Inc. Annual Incentive Compensation Plan
@10.154 -- Atlas Air, Inc. Long-Term Incentive Plan
@10.155 -- Amendments to the Atlas Air, Inc. 1995 Long-Term
Incentive and Stock Award Plan. (The Atlas Air, Inc. 1995
Long-Term Incentive and Stock Award Plan is filed as
Exhibit 10.15, which is incorporated by reference in this
Report)
+++++10.157 -- Credit Agreement among Atlas Freighter Leasing III, Inc.,
the Lenders listed therein, and Bankers Trust Company, as
administrative agent, dated as of April 25, 2000
+++++10.158 -- Lease Agreement dated as of April 25, 2000 between Atlas
Freighter Leasing III, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N527MC
10.159 -- Credit Agreement dated as of October 31, 2001 between
Atlas Air Worldwide Holdings, Inc and General Electric
Capital Corporation
10.160 -- Holdings Guaranty dated as of October 31, 2001 by Atlas
Air Worldwide Holdings, Inc in favor of Bankers Trust
Company, as agent for and representative of, the Lenders
represented therein
10.161 -- Parent Guaranty dated as of November 19, 2001 by Atlas
Air Worldwide Holdings, Inc. in favor of General Electric
Capital Corporation relating to B747-400 aircraft, U.S.
Registration No N450PA (Parent Guaranties relating to
B747-400 aircraft with U.S. Registration Nos. N451PA,
N452PA and N453PA are identical except with respect to
date and aircraft information).
10.162 -- Parent Guaranty dated as of November 9, 2001 by Atlas Air
Worldwide Holdings, Inc. in favor of Polaris Holding
Company relating to B747-200 aircraft, U.S. Registration
No. N920FT
10.163 -- Employment Agreement between Atlas Air, Inc. and William
Allen
10.164 -- Employment Agreement between Atlas Air, Inc. and Douglas
Carty
+++24 -- Powers of Attorney (set forth on the signature page of
the Report).
99.1 -- Letter from the Company to the Securities and Exchange
Commission pursuant to Temporary Note 3T of Regulation
S-X

EXHIBIT
NUMBER DESCRIPTION
------- -----------

99.2 -- Letter from Atlas Air, Inc to the Securities and Exchange
Commission pursuant to Temporary Note 3T of Regulation
S-X.