                                               FORM 10-K

                                     SECURITIES AND EXCHANGE COMMISSION
                                           Washington, D.C.  20549

[X]      ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT
         OF 1934
         For the fiscal year ended March 31, 2003

[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT OF
         1934

Commission file number:  0-24126

                                         FRONTIER AIRLINES, INC.
                           (Exact name of registrant as specified in its charter)

                     Colorado                                                   84-1256945
 (State or other jurisdiction of incorporated or organization)      (I.R.S. Employer Identification No.)

               7001 Tower Road, Denver, CO                                       80249
         (Address of principal executive offices)                              (Zip Code)

Registrant's telephone number including area code:  (720) 374-4200

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

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

                                        Common Stock, No Par Value
                                              Title of Class

Indicate by check mark  whether  the  Registrant  (1) filed all  reports  required to be
filed by Section 13 or 15(d) of the  Exchange  Act  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 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.

Indicate by checkmark  whether the  registrant  is an  accelerated  filer (as defined in
Exchange Act Rule 12b-2). Yes  X   No __

The  aggregate  market  value of common  stock  held by  non-affiliates  of the  Company
computed by  reference  to the last  quoted  price at which such stock sold on such date
as reported by the Nasdaq National Market as of June 30, 2002 was $240,376,304.

The number of shares of the Company's  common stock  outstanding  as of June 23, 2003 is
30,022,018.

Documents  incorporated by reference - Certain  information  required by Part II and III
is incorporated by reference to the Company's 2003 Proxy Statement.






                                             TABLE OF CONTENTS


                                                                                      Page

PART I

         Item 1:      Business..........................................................3
         Item 2:      Properties ......................................................16
         Item 3:      Legal Proceedings................................................17
         Item 4:      Submission of Matters to a Vote of Security Holders..............17

PART II

         Item 5:      Market for Common Equity and Related Stockholder Matters.........17
         Item 6:      Selected Financial Data..........................................19
         Item 7:      Management's Discussion and Analysis of Financial Condition and
                      Results of Operations............................................21
         Item 7A:     Quantitative and Qualitative Disclosures About Market Risk.......39
         Item 8:      Financial Statements.............................................40
         Item 9:      Changes in and  Disagreements  with Accountants on Accounting
                      and Financial Disclosure.........................................40

PART III

         Item 10:     Directors and Executive Officers of the Registrant...............40
         Item 11:     Executive Compensation...........................................40
         Item 12:     Security Ownership of Certain Beneficial Owners and Management...40
         Item 13:     Certain Relationships and Related Transactions...................41
         Item 14:     Controls and Procedures..........................................41
         Item 15      Principal Accountant Fees and Services...........................41

PART IV

         Item 16(a):  Exhibits, Financial Statement Schedules and Reports on Form 8-K..41









                                         PART I

This report  contains  forward-looking  statements  within the meaning of Section 21E of
the  Securities  Exchange  Act of 1934 that  describe  the  business  and  prospects  of
Frontier  Airlines,  Inc.  ("Frontier"  or the "Company")  and the  expectations  of our
Company and  management.  All  statements,  other than  statements of historical  facts,
included  in this  report  that  address  activities,  events  or  developments  that we
expect,   believe,   intend  or  anticipate  will  or  may  occur  in  the  future,  are
forward-looking   statements.   When  used  in  this  document,  the  words  "estimate,"
"anticipate,"   "project"   and   similar   expressions   are   intended   to   identify
forward-looking  statements.  Forward-looking statements are inherently subject to risks
and  uncertainties,  many of which cannot be predicted  with  accuracy and some of which
might not even be  anticipated.  These  risks  and  uncertainties  include,  but are not
limited to: the timing of, and expense  associated  with,  expansion and modification of
our  operations in accordance  with our business  strategy or in response to competitive
pressures or other factors;  general  economic  factors and behavior of the  fare-paying
public and its potential impact on our liquidity;  terrorist  attacks or other incidents
that could  cause the public to question  the safety  and/or  efficiency  of air travel;
operational  disruptions,  including  weather;  industry  consolidation;  the  impact of
labor disputes;  enhanced  security  requirements;  changes in the  government's  policy
regarding  relief or assistance to the airline  industry;  the economic  environment  of
the  airline  industry  generally;  increased  federal  scrutiny  of  low-fare  carriers
generally  that may  increase our  operating  costs or  otherwise  adversely  affect us;
actions of  competing  airlines,  such as  increasing  capacity  and pricing  actions of
United  Airlines and other  competitor and other actions taken by United Airlines either
in or out of bankruptcy  protection;  the availability of suitable  aircraft,  which may
inhibit  our  ability  to  achieve  operating   economies  and  implement  our  business
strategy;  the  unavailability  of,  or  inability  to  secure  upon  acceptable  terms,
financing  necessary to purchase aircraft which we have ordered;  issues relating to our
transition to an Airbus aircraft fleet;  uncertainties  regarding  aviation fuel prices;
and  uncertainties as to when and how fully consumer  confidence in the airline industry
will be  restored,  if ever.  Because our  business,  like that of the airline  industry
generally,   is  characterized   by  high  fixed  costs  relative  to  revenues,   small
fluctuations  in  our  yield  per  RPM or  expense  per  ASM  can  significantly  affect
operating results


Item 1:  Business

General

       We are a  scheduled  passenger  airline  based in  Denver,  Colorado.  We are the
second  largest jet  service  carrier at Denver  International  Airport  ("DIA").  As of
June 23, 2003, we, in conjunction  with Frontier  JetExpress  operated by Mesa Air Group
("Mesa"),  operate routes linking our Denver hub to 38 cities in 22 states  spanning the
nation  from coast to coast and to two cities in Mexico.  We are a low cost,  affordable
fare airline  operating  in a hub and spoke  fashion  connecting  points coast to coast.
We were  organized  in February  1994 and we began flight  operations  in July 1994 with
two leased  Boeing  737-200  jets.  We have since  expanded  our fleet to 28 leased jets
and nine owned Airbus  aircraft;  including  three  Boeing  737-200s,  16 larger  Boeing
737-300s,  and 18  Airbus  A319s.  In May  2001,  we began a fleet  replacement  plan to
replace  our Boeing  aircraft  with new  purchased  and leased  Airbus jet  aircraft,  a
transition  we expect to complete  by  approximately  of the end of calendar  year 2005.
During the years  ended  March 31,  2003 and 2002,  we  increased  capacity by 30.9% and
7.8%,  respectively.  During  the  year  ended  March  31,  2002,  as a  result  of  the
September  11  terrorist  attacks,  we reduced  our  planned  increase  in  capacity  of
approximately 20% as a result of decreased air travel demand.

       We currently use up to 16 gates at DIA, where we operate  approximately 168 daily
system flight  departures  and arrivals and 30 Frontier  JetExpress  daily system flight
departures  and  arrivals.  Prior  to the  September  11,  2001  terrorist  attacks,  we
operated  approximately 126 daily system flight  departures and arrivals.  Following the
terrorist  attacks,  we reduced our service to  approximately  103 daily  system  flight
departures  and  arrivals.  The reduced  service  was  entirely  reinstated  by February
2002. Since that time, we have  re-established  our long-term  business plan of moderate
capacity  increases  by  taking  delivery  of new  Airbus  A319  aircraft.  We intend to
continue  to monitor  passenger  demand  and other  competitive  factors  and adjust the
number of flights we operate  to the extent  possible.  During the year ended  March 31,
2003,  we added  service to  Indianapolis,  Indiana on May 23,  2002;  Boise,  Idaho and
Tampa,  Florida on June 24, 2002; Wichita,  Kansas (operated by Frontier  JetExpress) on
September  18,  2002;  Tucson,  Arizona,  Oakland,   California  (operated  by  Frontier
JetExpress),  San Jose, California,  Fort Myers, Florida and Oklahoma City, Oklahoma and
Cancun and  Mazatlan,  Mexico on  December  20 and 21,  2002,  respectively.  During the
year ended  March 31,  2003,  we  terminated  service to Boston,  Massachusetts  and St.
Louis,  Missouri  (operated by Frontier  JetExpress)  on October 22, 2002.  We intend to
begin service to Orange County,  California and Milwaukee,  Wisconsin on August 31, 2003
with two and three round-trips, respectively.

       In October  2002 we signed a  purchase  and  long-term  services  agreement  with
LiveTV  to bring  DIRECTV  AIRBORNE(TM)satellite  programming  to every  seatback  in our
Airbus fleet.  In February 2003, we completed the  installation  of the LiveTV system on
all  Airbus  aircraft.   The  installed  systems  became  operational  upon  receipt  of
regulatory  approval in  December  2002.  We have  implemented  a $5 per  segment  usage
charge for access to the system to offset  the usage  costs for the  system.  We believe
the  DIRECTV(TM)product  represents a  significant  value to our  customers  and offers a
competitive advantage for our company.

       In September  2001, we entered into a codeshare  agreement  with Mesa.  Under the
terms of the  agreement,  we will market and sell  flights  operated by Mesa as Frontier
JetExpress.  This  codeshare  began  February 17, 2002 with service  between  Denver and
San Jose,  California,  and with  supplemental  flights to our current  service  between
Denver and Houston,  Texas.  Effective  May 4, 2003,  Frontier Jet Express  replaced our
mainline  service to Tucson,  Arizona,  Oklahoma  City,  Oklahoma  and Boise,  Idaho and
terminated  service to  Oakland,  California.  Frontier  JetExpress  currently  provides
service to San Diego,  San Jose,  and Ontario,  California,  and  Wichita,  Kansas using
five  50-passenger  Bombardier  CRJ-200  regional jets. In February 2003, we amended our
codeshare  agreement with Mesa from a  prorate-based  compensation  method to a "revenue
guarantee"  compensation  method  effective  March 1, 2003 through August 31, 2003. This
arrangement  will  allow us to have  more  control  over  scheduling,  pricing  and seat
inventory.  We are in on-going  negotiations  with Mesa and other  regional jet carriers
regarding codeshare arrangements beyond August 31, 2003.

       Effective  July 9,  2001,  we  began  a  codeshare  agreement  with  Great  Lakes
Aviation,  Ltd.  ("Great Lakes") by which Great Lakes  initially  provided daily service
to  seven  regional  markets  from  our  Denver  hub.  We have  expanded  the  codeshare
agreement,  which presently includes Page and Phoenix,  Arizona; Alamosa, Cortez, Pueblo
and  Telluride,   Colorado;   Dodge  City,  Garden  City,  Hays,  and  Liberal,  Kansas;
Farmington and Santa Fe, New Mexico;  Alliance,  Chadron, Grand Island, Kearney, McCook,
Norfolk,  North  Platte,  and  Scottsbluff,  Nebraska;  Dickinson and  Williston,  North
Dakota;  Amarillo,  Texas;  Pierre,  South Dakota;  Moab and Vernal,  Utah;  and Casper,
Cody,  Gillette,  Cheyenne,  Laramie,  Riverton,  Rock Springs,  Sheridan,  and Worland,
Wyoming.

       Our President and Chief Operating  Officer,  Jeff Potter,  assumed the additional
title and  responsibilities  of Chief  Executive  Officer  on April 1,  2002,  replacing
Chairman and former Chief  Executive  Officer Sam Addoms who retired as Chief  Executive
Officer but remains as Chairman of our Board of Directors.

       Our filings with the Securities and Exchange  Commission are available at no cost
on our website,  www.frontierairlines.com,  in the Investor  Relations  folder contained
in the section  titled  "About  Frontier".  These  reports  include our annual report on
Form 10-K, our quarterly  reports on Form 10-Q,  current reports on Form 8-K, Section 16
reports on Forms 3, 4 and 5, and any  related  amendments  or other  documents,  and are
made  available as soon as reasonably  practicable  after we file the materials with the
SEC.

       Our  corporate  headquarters  are  located at 7001 Tower Road,  Denver,  Colorado
80249.   Our   administrative   office   telephone   number  is  720-374-4200   and  our
reservations telephone number is 800-432-1359.

Business Strategy and Markets

     Our business  strategy is to provide air service at affordable fares to high volume
markets from our Denver hub.  Our strategy is based on the following factors:

     o   Stimulate  demand by offering a combination of low fares,  quality  service and
         frequent flyer credits in our frequent flyer program, EarlyReturns.
     o   Expand our Denver  hub  operation  and  increase  connecting  traffic by adding
         additional  high volume markets to our current route system and by code sharing
         agreements  with two commuter  carriers and possible new  alliances  with other
         carriers.
     o   Continue filling gaps in flight  frequencies to current markets from our Denver
         hub.

Route System Strategy

         Our  route  system  strategy  encompasses  connecting  our  Denver  hub  to top
business  and leisure  destinations.  We currently  serve 18 of the top 25  destinations
from  Denver,  as  defined  by  the  U.S.  Department  of  Transportation's  Origin  and
Destination  Market  Survey.  In  addition,  as we bring  additional  aircraft  into our
fleet  and add new  markets  to our route  system,  connection  opportunities  increase.
Connection  opportunities  for our passengers  connecting  through DIA increased from an
average  of 8.9  flights  as of March 31,  2002 to 11.5  flights  as of March 31,  2003,
which includes connecting passengers from our commuter affiliate, Frontier JetExpress.

Marketing and Sales

         Our sales  efforts  are  targeted  to  price-sensitive  passengers  in both the
leisure and  corporate  travel  markets.  In the  leisure  market,  we offer  discounted
fares marketed through the Internet,  newspaper,  radio and television advertising along
with  special   promotions.   We  market  these  activities  in  Denver  and  in  cities
throughout our route system.

         In order to increase  connecting  traffic,  we began two code share agreements,
one with  Great  Lakes in July 2001 and the  other  with Mesa Air  Group,  operating  as
Frontier  JetExpress,  in February 2002. We have also  negotiated  interline  agreements
with  approximately 130 domestic and international  airlines serving cities on our route
system.  Generally,  these  agreements  include joint ticketing and baggage services and
other conveniences designed to expedite the connecting process.

         To balance the seasonal  demand  changes that occur in the leisure  market,  we
have  introduced  programs  over the past  several  years that are designed to capture a
larger share of the corporate  market,  which tends to be less seasonal than the leisure
market.   These  programs  include  negotiated  fares  for  large  companies  that  sign
contracts  committing to a specified  volume of travel,  future travel credits for small
and medium size  businesses  contracting  with us, and special  discounts for members of
various  trade  and  nonprofit  associations.  As  of  June  23,  2003,  we  had  signed
contracts  with over 11,600  companies.  We estimate that business  customers  represent
approximately 60% of our passengers.

         We also pursue sales  opportunities  with meeting and convention  arrangers and
government  travel  offices.  The primary tools we use to attract this business  include
personal sales calls,  direct mail and telemarketing.  In addition,  we offer air/ground
vacation  packages  to many  destinations  on our  route  system  under  contracts  with
various tour operators.

         Our  relationship  with travel  agencies is important to us and other airlines.
In  March  2002,  several  of  the  major  airlines   eliminated  travel  agency  "base"
commissions  but  continued to pay  individually  negotiated  incentive  commissions  to
select  agents.   Effective  June  1,  2002,  we  also  eliminated  travel  agency  base
commissions.   We  have  implemented  marketing  strategies  designed  to  maintain  and
encourage   relationships   with  travel  agencies   throughout  our  route  system.  We
communicate with travel agents through  personal visits by Company  executives and sales
managers,  sales  literature  mailings,  trade shows,  telemarketing  and advertising in
various travel agent trade publications.

         We participate in the four major  computer  reservation  systems used by travel
agents  to  make  airline  reservations:  Amadeus,  Galileo,  Worldspan  and  Sabre.  We
maintain  reservation centers in Denver,  Colorado and Las Cruces, New Mexico,  operated
by our employees.

         In April 1999,  we began  offering  "Spirit of the Web" fares via our Web site,
which  permits  customers to make "close in" bookings  beginning on  Wednesdays  for the
following  weekend.  This is intended to fill seats that might otherwise  remain unused.
As a percentage of total flown revenue,  the percentage of flown revenue  generated from
our own Web site  (www.frontierairlines.com)  increased  from 23%  during  March 2002 to
31% during March 2003.

Customer Loyalty Programs

        Effective  February 1, 2001, we commenced  EarlyReturns,  our own frequent flyer
program.  As of March 31, 2003, there are approximately  533,000  EarlyReturns  members.
We believe that our frequent  flyer program  offers some of the most  generous  benefits
in the  industry,  including  a free round trip after  accumulating  only  15,000  miles
(25,000  miles to our  destinations  in Mexico).  There are no blackout  dates for award
travel.  Additionally,  members  who earn 25,000 or more  annual  credited  EarlyReturns
flight miles attain  Summit Level  status,  which  includes a 25% mileage  bonus on each
paid Frontier flight,  priority check-in and boarding,  complimentary on-board alcoholic
beverages,   extra  allowance  on  checked  baggage  and  priority   baggage   handling,
guaranteed  reservations on any Frontier  flight when  purchasing an unrestricted  coach
class  ticket  at least 72 hours  prior to  departure,  standby  at no  charge on return
flights  the day  before,  the day of,  and the day after,  and  access to an  exclusive
Summit customer  service  toll-free  phone number.  Members earn one mile for every mile
flown on Frontier  plus  additional  mileage  with  program  partners,  which  presently
include Midwest Airlines,  Virgin Atlantic Airways,  Alamo, Hertz,  National and Payless
Car Rentals,  Kimpton  Boutique  Hotels,  Inverness  Hotel & Golf Resort,  Peaks at Vail
Resorts,  The Flower Club and Citicorp Diners Club, Inc.  Effective  September 2002, our
reciprocal  frequent flyer agreement with  Continental  Airlines ended. To apply for the
EarlyReturns  program,  customers  may visit  our Web site at  www.frontierairlines.com,
obtain  an  EarlyReturns  enrollment  form at any of our  airport  counters  or call our
EarlyReturns  Service Center toll-free  hotline at 866-26-EARLY,  or our reservations at
800-4321-FLY.

       In   March   2003   we   entered   into   an   agreement    with   Juniper   Bank
(www.juniperbank.com),  a full-service credit card issuer, to exclusively offer Frontier
MasterCard products to consumers,  customers and Frontier's  EarlyReturns frequent flyer
members.  We believe that the  Frontier/Juniper  Bank  co-branded  MasterCard will offer
one of the most  aggressive  affinity  card  programs  because free travel can be earned
for as little as 15,000 miles.

Product Pricing

         On February 6, 2003, we unveiled a new,  simplified  pricing  structure for all
domestic local and connecting  fares.  As part of the new structure,  our  highest-level
business  fares were  reduced by 25 to 45  percent,  and our  lowest  available  walk-up
fares were reduced by 38 to 77 percent.  The new fare  structure,  which is comprised of
six  fare  categories,  caps  all  fares to and  from  Denver  at $399 or $499  one-way,
excluding  passenger  facility,  security or segment fees,  depending on length of haul.
Unlike other  airlines,  these fares can be booked each way,  allowing  customers to get
the best price on both the  inbound  and  outbound  portion of their  itinerary  with no
round-trip  purchase  required.  Our new fare  structure  removes the  advance  purchase
requirements  of past  pricing  structures,  and there are no Saturday  night  stayovers
required.

Competition

       The  Airline  Deregulation  Act of 1978  produced  a highly  competitive  airline
industry,  freed of  certain  government  regulations  that  for 40  years  prior to the
Deregulation  Act had  dictated  where  domestic  airlines  could  fly and how much they
could  charge  for their  services.  Since  then,  we and other  smaller  carriers  have
entered   markets  long  dominated  by  larger  airlines  with   substantially   greater
resources,  such as United Airlines,  American  Airlines,  Northwest  Airlines and Delta
Air Lines.

       We  compete  principally  with  United  Airlines,  the  dominant  carrier at DIA.
During the month of March 2003,  United and its commuter  affiliates  had a total market
share  at DIA of  approximately  63.5%.  This  gives  United a  significant  competitive
advantage  compared to us and other  carriers  serving DIA. We believe our market share,
including  our  codeshare  affiliates,  at DIA for the month of March 2003  approximated
13.1%.  We compete with United  primarily on the basis of fares,  fare  flexibility  and
the quality of our customer service.

       At the present time, three domestic airports,  including New York's LaGuardia and
John F. Kennedy International  Airports and Washington,  D.C.'s Ronald Reagan Washington
National  Airport,  are  regulated  by  means of  "slot"  allocations,  which  represent
government  authorization  to  take  off  or  land  at a  particular  airport  within  a
specified time period.  Federal Aviation  Administration ("FAA") regulations require the
use of each  slot at least  80% of the  time  and  provide  for  forfeiture  of slots in
certain  circumstances.  We were originally awarded six high-density  exemption slots at
LaGuardia,  and at the  present  time,  we utilize  four of those  slots to operate  two
daily   round-trip   flights   between  Denver  and  LaGuardia.   In  addition  to  slot
restrictions,  Washington  National is limited by a perimeter rule, which limits flights
to and from  Washington  National to 1,250  miles.  In April  2000,  the Wendell H. Ford
Aviation  Investment  and Reform Act for the 21st Century,  or AIR 21, was enacted.  AIR
21  authorizes  the  Department  of  Transportation  ("DOT")  to  grant  up to  12  slot
exemptions  beyond  the  1,250-mile  Washington  National  perimeter,  provided  certain
specifications  are met. We are  presently  authorized  to operate one daily  round-trip
flight  between Denver and  Washington  National.  During the year ended March 31, 2003,
we  requested  authority to operate a second  round-trip  flight in this market but were
denied.  Currently,  draft  legislation  exists  in both the U.S.  Senate  and  House of
Representatives  that may provide for additional  beyond  perimeter  flights at National
Airport.  If  additional  beyond  perimeter  slots at  Washington  National  Airport are
authorized,  we expect to file an application  requesting use of at least two additional
beyond  perimeter   slots.   Until  there  are  additional   beyond  perimeter   flights
authorized,  or another carrier  currently  authorized to operate beyond perimeter slots
rejects  those  slots,  we will  not be able to add  frequency  at  Washington  National
Airport.

       Other airports around the country,  such as John Wayne  International  Airport in
Santa Ana,  California  (SNA) are also slot controlled at the local level as mandated by
a federal  court order.  We have filed an  application  for, and received  approval for,
six arrival and  departure  slots at SNA. We plan to begin  operating  service  with two
daily  flights at SNA on August 31,  2003.  Because  there is  limited  availability  of
overnight  facilities at SNA, we  anticipate  adding a third daily flight at SNA when an
overnight  parking  position  becomes  available,  which we anticipate will occur during
our fiscal fourth quarter 2004.

Maintenance and Repairs

       All of our aircraft  maintenance and repairs are  accomplished in accordance with
our  maintenance  program  approved by the FAA. We maintain spare or  replacement  parts
primarily  in Denver,  Colorado.  Spare parts  vendors  supply us with  certain of these
parts, and we purchase or lease others from other airline or vendor sources.

       Since mid-1996, we have trained,  staffed and supervised our own maintenance work
force at Denver,  Colorado.  We sublease a portion of  Continental  Airlines'  hangar at
DIA where we currently  perform our own maintenance  through the "D" check level.  Other
major  maintenance,  such as major engine repairs,  is performed by outside FAA approved
contractors.  We also  maintain  line  maintenance  facilities  at El  Paso,  Texas  and
Phoenix,  Arizona.  We have announced our plans to close the El Paso, Texas  maintenance
facility  effective  August 30, 2003 and transfer the  functions  to the  Facilities  in
Denver and Phoenix.

       Under  our  aircraft  lease  agreements,  we pay  all  expenses  relating  to the
maintenance  and  operation of our  aircraft,  and we are  required to pay  supplemental
monthly  rent  payments to the lessors  based on usage.  Supplemental  rents are applied
against  the cost of  scheduled  major  maintenance.  To the  extent  not used for major
maintenance during the lease terms,  excess  supplemental rents remain with the aircraft
lessors after termination of the lease.

       Our monthly  completion  factors for the years ending March 31, 2003,  2002,  and
2001  ranged  from  98.2%  to  99.7%,  from  97.3 to  99.8%,  and  from  98.6 to  99.8%,
respectively.  The  completion  factor is the  percentage of our scheduled  flights that
were  operated by us (i.e.,  not  canceled).  Canceled  flights  were  principally  as a
result of mechanical  problems,  and, to a lesser extent,  weather.  We believe that our
new Airbus aircraft are improving our aircraft reliability.

      In December 2002, we entered into an engine  maintenance  agreement with GE Engine
Services,  Inc. (GE) for the servicing,  repair,  maintenance and functional  testing of
our  aircraft  engines  used on our Airbus  aircraft  effective  January  1,  2003.  The
agreement  is for a 12-year  period from the  effective  date for our owned  aircraft or
December  31,  2014,  whichever  comes  first,  and for each leased  aircraft,  the term
coincides  with the initial  lease term of 12 years.  This  agreement  precludes us from
using another third party for such services  during the term.  This  agreement  requires
monthly  payments  at a  specified  rate times the number of flight  hours  flown on the
aircraft during that month.

       In calendar  years ended  December 31, 1999 through  2002,  our  maintenance  and
engineering  department  received the Federal Aviation  Administration's  highest award,
the  Diamond   Certificate  of  Excellence,   in  recognition  of  100  percent  of  our
maintenance  and  engineering   employees   completing  advanced  aircraft   maintenance
training  programs.   The  Diamond  Award  recognizes  advanced  training  for  aircraft
maintenance  professionals  throughout the airline  industry.  We are the first Part 121
domestic air carrier to achieve 100 percent  participation  in this training  program by
our maintenance employees.

Fuel

       During the years ending March 31, 2003,  2002,  and 2001,  jet fuel accounted for
17.2%,   14.3%,  and  18.1%,   respectively,   of  our  operating   expenses.   We  have
arrangements   with  major  fuel  suppliers  for   substantial   portions  of  our  fuel
requirements,  and we believe that these arrangements  assure an adequate supply of fuel
for  current  and  anticipated  future  operations.  Jet fuel costs are  subject to wide
fluctuations  as  a  result  of  sudden   disruptions  in  supply  beyond  our  control.
Therefore,  we cannot  predict  the  future  availability  and cost of jet fuel with any
degree of certainty.  Fuel prices  increased  significantly  in fiscal 2003. Our average
fuel price per gallon including taxes and into-plane fees was 96(cent)for the year ended
March 31,  2003,  with the  monthly  average  price per gallon  during  the same  period
ranging from a low of 82(cent)to a high of  $1.26. Our average  fuel  price  per  gallon
including taxes and into-plane fees was 87(cent)for the year ended March 31,  2002, with
the monthly average price per gallon during the same period ranging from a low of 72(cent)
to a high of $1.01.  As of June 23, 2003, the price per gallon was 95(cent)excluding the
impact of fuel hedges.  We  implemented a fuel hedging  program in 2003,  under which we
enter  into Gulf  Coast jet fuel  option  contracts  to  partially  protect  us  against
significant  increases  in fuel  prices.  Our fuel  hedging  program  is limited in fuel
volume and  duration.  As of June 23,  2003,  we had hedged  approximately  15.7% of our
projected  fiscal  2004 fuel  requirements  with 26.2% in the  quarter  ending  June 30,
2003,  18.5% in the quarter  ending  September  30,  2003,  18.3% in the quarter  ending
December 31, 2003, and none in the quarter ending March 31, 2004.

       Increases  in fuel prices or a shortage of supply  could have a material  adverse
effect on our  operations and financial  results.  Our ability to pass on increased fuel
costs  to  passengers  through  price  increases  or  fuel  surcharges  may be  limited,
particularly given our affordable fare strategy.

Insurance

       We carry  insurance  limits  of $800  million  per  aircraft  per  occurrence  in
property damage and passenger and  third-party  liability  insurance,  and insurance for
aircraft  loss or damage  with  deductible  amounts as required  by our  aircraft  lease
agreements,  and  customary  coverage  for other  business  insurance.  While we believe
such  insurance  is  adequate,  there  can  be no  assurance  that  such  coverage  will
adequately  protect us against  all losses  that we might  sustain.  Our next  scheduled
aircraft hull and liability coverage renewal date is June 7, 2004.

       In December 2002,  through  authority  granted under the Homeland Security Act of
2002, the U.S.  government  expanded its insurance  program to enable  airlines to elect
either the  government's  excess  third-party war risk coverage or for the government to
become the  primary  insurer  for all war risks  coverage.  We  elected to take  primary
government  coverage in February  2003 and dropped the  commercially  available war risk
coverage.  While the  Appropriations  Act of 2002  authorized  the  government  to offer
both policies  through August 31, 2004, the current  policies are in effect until August
12, 2003. We cannot assure you that any extension  will occur,  or if it does,  how long
the  extension  will last.  We expect that if the  government  stops  providing war risk
coverage to the airline  industry,  the premiums  charged by aviation  insurers for this
coverage  will be  substantially  higher  than the  premiums  currently  charged  by the
government.

Employees

       As of June 23, 2003, we had 3,380  employees,  including  2,651 full-time and 729
part-time  personnel.  Our employees  included 422 pilots,  561 flight  attendants,  728
customer  service  agents,  534  ramp  service  agents,  272  reservations  agents,  340
mechanics  and  related  personnel,   and  523  general  management  and  administrative
personnel.  We consider our relations with our employees to be good.

       We have established a compensation  philosophy that we will pay competitive wages
compared to other  airlines of similar  size and other  employers  with which we compete
for our  labor  supply.  Employees  have the  opportunity  to earn  above  market  rates
through the payment of performance bonuses.

       Three of our  employee  groups  have voted for union  representation:  our pilots
voted in November 1998 to be represented by an independent  union,  the Frontier Airline
Pilots  Association,  our  dispatchers  voted in September 1999 to be represented by the
Transport  Workers Union,  and our mechanics voted in July 2001 to be represented by the
International   Brotherhood  of  Teamsters.  The  first  bargaining  agreement  for  the
pilots,  which has a five-year  term,  was  ratified  and became  effective in May 2000.
The first  bargaining  agreement for the  dispatchers,  which has a three-year term, was
ratified and became  effective in September  2000.  The first  bargaining  agreement for
the mechanics,  which has a three-year  term, was ratified and became  effective in July
2002.  Since 1997,  we have had other union  organizing  attempts  that were defeated by
our flight attendants, ramp service agents, and stock clerks.

       Effective May 2000, we enhanced our 401(k) Retirement  Savings Plan by announcing
an  increased  matching  contribution  by the  Company.  Participants  may receive a 50%
Company match for  contributions up to 10% of salary.  This match is  discretionary  and
is approved on an annual basis by our Board of  Directors.  The Board of  Directors  has
approved the  continuation  of the match through the plan year ended  December 31, 2003.
We believe  that the match and related  vesting  schedule of 20% per year may reduce our
employee turnover rates.

       All new employees are subject to  pre-employment  drug testing.  Those  employees
who  perform  safety  sensitive  functions  are also  subject to random drug and alcohol
testing, and testing in the event of an accident.

       Training,  both initial and recurring,  is required for many employees.  We train
our pilots,  flight  attendants,  ground service personnel,  reservations  personnel and
mechanics.  FAA  regulations  require pilots to be licensed as commercial  pilots,  with
specific  ratings for  aircraft to be flown,  to be medically  certified  or  physically
fit, and have recent  flying  experience.  Mechanics,  quality  control  inspectors  and
flight  dispatchers  must be  licensed  and  qualified  for  specific  aircraft.  Flight
attendants   must  have  initial  and   periodic   competency,   fitness   training  and
certification.   The  FAA  approves  and  monitors  our  training  programs.  Management
personnel  directly  involved  in  the  supervision  of  flight  operations,   training,
maintenance and aircraft  inspection must meet  experience  standards  prescribed by FAA
regulations.

Government Regulation

       General.  All  interstate  air carriers are subject to regulation by the DOT, the
FAA and  other  state  and  federal  government  agencies.  In  general,  the  amount of
regulation  over  domestic air  carriers in terms of market entry and exit,  pricing and
inter-carrier   agreements  has  been  greatly   reduced  since  the  enactment  of  the
Deregulation Act.

       U.S.  Department of Transportation.  The DOT's jurisdiction  extends primarily to
the  economic  aspects  of  air  transportation,  such  as  certification  and  fitness,
insurance,  advertising,  computer reservation systems, deceptive and unfair competitive
practices,  and  consumer  protection  matters  such  as  on-time  performance,   denied
boarding  and baggage  liability.  The DOT also is  authorized  to require  reports from
air  carriers  and to  investigate  and  institute  proceedings  to enforce its economic
regulations  and  may,  in  certain  circumstances,   assess  civil  penalties,   revoke
operating  authority  and seek  criminal  sanctions.  We hold a  Certificate  of  Public
Convenience  and  Necessity  issued  by  the  DOT  that  allows  us  to  engage  in  air
transportation.

       Transportation  Security  Administration.  On November 19,  2001,  in response to
the  terrorist  acts of September  11, 2001,  the  President of the United States signed
into law the Aviation and  Transportation  Security Act  ("ATSA").  The ATSA created the
Transportation  Security  Administration  ("TSA"), an agency within the DOT, to oversee,
among  other  things,   aviation  and  airport  security.  The  ATSA  provided  for  the
federalization  of airport  passenger,  baggage,  cargo,  mail and  employee  and vendor
screening  processes.  The ATSA also enhanced  background  checks,  provided federal air
marshals  aboard  flights,  improved  flight deck  security,  and enhanced  security for
airport  perimeter  access.  The ATSA also required that all checked baggage be screened
by explosive detection systems by December 31, 2002.

       U.S. Federal Aviation  Administration.  The FAA's  regulatory  authority  relates
primarily to flight  operations and air safety,  including  aircraft  certification  and
operations,   crew  licensing  and  training,   maintenance   standards,   and  aircraft
standards.  The  FAA  also  oversees  aircraft  noise  regulation,   ground  facilities,
dispatch,  communications,  weather  observation,  and  flight  and duty  time.  It also
controls  access  to  certain  airports  through  slot   allocations,   which  represent
government  authorization  for  airlines  to take  off and land at  controlled  airports
during  specified  time  periods.  The FAA has the authority to suspend  temporarily  or
revoke  permanently  the  authority of an airline or its licensed  personnel for failure
to comply with FAA  regulations  and to assess  civil and  criminal  penalties  for such
failures.  We hold an  operating  certificate  issued by the FAA pursuant to Part 121 of
the Federal  Aviation  Regulations.  We must have and we maintain  FAA  certificates  of
airworthiness  for all of our  aircraft.  Our flight  personnel,  flight  and  emergency
procedures,  aircraft and maintenance  facilities and station  operations are subject to
periodic inspections and tests by the FAA.

       As a result of the events of September 11, 2001,  the FAA developed  requirements
to increase the security of aircraft  flight decks.  A variety of security  enhancements
were  introduced,  ultimately  requiring  all  airlines to install the highest  level of
secure  flight  deck  doors.  As of April 9, 2003 all of our Boeing and Airbus  aircraft
have FAA-approved flight deck doors installed and operational.

       Environmental  Matters.  The Aviation Safety and Noise Abatement Act of 1979, the
Airport  Noise and  Capacity  Act of 1990 and Clean Air Act of 1963 oversee and regulate
airlines with respect to aircraft  engine noise and exhaust  emissions.  We are required
to comply with all applicable  FAA noise control  regulations  and with current  exhaust
emissions  standards.  Our fleet is in  compliance  with the FAA's  Stage 3 noise  level
requirements.  In addition,  various  elements of our operation and  maintenance  of our
aircraft  are  subject  to  monitoring   and  control  by  federal  and  state  agencies
overseeing  the use and disposal of hazardous  materials and storm water  discharge.  We
believe we are currently in substantial  compliance  with all material  requirements  of
such agencies.

       Railway Labor  Act/National  Mediation  Board.  Three of our employee groups have
voted for  union  representation:  our are  represented  by an  independent  union,  the
Frontier  Airline Pilots  Association,  our dispatchers are represented by the Transport
Workers Union,  and our mechanics are  represented by the  International  Brotherhood of
Teamsters.  Our labor  relations  with  respect to the these  unions are  covered  under
Title II of the Railway  Labor Act and are subject to the  jurisdiction  of the National
Mediation Board.

       Foreign  Operations.  The availability of international  routes to U.S.  carriers
is regulated by treaties and related  agreements  between the United  States and foreign
governments.  The United States  typically  follows the practice of encouraging  foreign
governments  to  enter  into  "open  skies"   agreements  that  allow multiple  carrier
designation  on  foreign  routes.  In some  cases, countries  have  sought to limit the
number of carriers  allowed to fly these  routes.  Certain  foreign  governments  impose
limitations  on the ability of air  carriers to serve a particular  city and/or  airport
within  their   country  from  the  U.S.  For  a  U.S.   carrier  to  fly  to  any  such
international  destination,  it must first  obtain  approval  from both the U.S. and the
"foreign country authority".  For those  international  routes where there is a limit to
the number of carriers or  frequency  of flights,  studies  have shown these routes have
more  value  than  those  without  restrictions.  In the  past,  U.S.  government  route
authorities have been sold between carriers.

       Foreign Ownership.  Pursuant to law and DOT regulation, each United States air carrier
must qualify as a United States citizen, which requires that its President and at least
two-thirds of its Board of Directors and other managing officers be comprised of United
States citizens, that not more than 25% of its voting stock may be owned by foreign
nationals, and that the carrier not be otherwise subject to foreign control.

       Miscellaneous.  We are also subject to  regulation  or oversight by other federal
and state  agencies.  Antitrust laws are enforced by the U.S.  Department of Justice and
the Federal  Trade  Commission.  All air carriers are subject to certain  provisions  of
the  Communications  Act of 1934  because  of their  extensive  use of radio  and  other
communication  facilities,  and are  required to obtain an  aeronautical  radio  license
from  the  Federal  Communications   Commission.   The  Immigration  and  Naturalization
Service,  the U.S.  Customs Service and the Animal and Plant Health  Inspection  Service
of the U.S.  Department of Agriculture  each have  jurisdiction  over certain aspects of
our aircraft, passengers, cargo and operations.

Risk Factors

       In addition to the other  information  contained in this Form 10-K, the following
risk factors should be considered carefully in evaluating our business and us.

We may be subject to  terrorist  attacks  or other  acts of war and  increased  costs or
reductions  in demand  for air  travel due to  hostilities  in the Middle  East or other
parts of the world.

       On September 11, 2001, four  commercial  aircraft were hijacked by terrorists and
crashed  into The  World  Trade  Center  in New York  City,  the  Pentagon  in  Northern
Virginia  and  a  field  in  Pennsylvania.  These  terrorists  attacks  resulted  in  an
overwhelming  loss  of  life  and  extensive  property  damage.  Immediately  after  the
attacks,  the FAA closed U.S. airspace,  prohibiting all flights to, from and within the
United  States  of  America.  Airports  reopened  on  September  13,  2001,  except  for
Washington D.C.'s Ronald Reagan Washington  National Airport,  which partially  reopened
on October 4, 2001.

       The  September 11 terrorist  attacks,  and more  recently the war in Iraq created
fear among  consumers  and  resulted in  significant  negative  economic  impacts on the
airline  industry.   Primary  effects  were  substantial  loss  of  revenue  and  flight
disruption costs,  increased security and insurance costs,  increased concerns about the
potential for future terrorist attacks,  airport shutdowns and flight  cancellations and
delays due to additional  screening of  passengers  and baggage,  security  breaches and
perceived safety threats,  and  significantly  reduced  passenger traffic and yields due
to the subsequent drop in demand for air travel.

       Given the magnitude  and  unprecedented  nature of the September 11 attacks,  the
uncertainty  and fear of consumers  resulting from the war in Iraq, or the potential for
other  hostilities in other parts of the world,  it is uncertain  what long-term  impact
these  events  will or  could  have on the  airline  industry  in  general  and on us in
particular.  These factors could affect our  operating  results and financial  condition
by  creating  weakness  in demand for air travel,  increased  costs due to new  security
measures  and the  potential  for new or  additional  government  mandates  for security
related measures,  increased insurance  premiums,  increased fuel costs, and uncertainty
about the continued availability of war risk coverage or other insurances.

       In addition,  although the entire industry is  substantially  enhancing  security
equipment  and  procedures,  it is  impossible to guarantee  that  additional  terrorist
attacks or other acts of war will not occur.  Given the  weakened  state of the  airline
industry,  if additional  terrorist  attacks or acts of war occur,  particularly  in the
near  future,  it can be expected  that the impact of those  attacks on the industry may
be  similar  in  nature to but  substantially  greater  than  those  resulting  from the
September 11 terrorist attacks.

Our insurance  costs have  increased  substantially  as a result of the  September  11th
terrorist attacks, and further increases in insurance costs would harm our business.

       Following  the September 11 terrorist  attacks,  aviation  insurers  dramatically
increased  airline insurance  premiums and  significantly  reduced the maximum amount of
insurance   coverage   available  to  airlines  for  liability  to  persons  other  than
passengers  for claims  resulting  from acts of terrorism,  war or similar events to $50
million  per event and in the  aggregate.  In light of this  development,  under the Air
Transportation  Safety and Stabilization Act  ("Stabilization  Act"), the government has
provided  domestic  airlines  with excess war risk  coverage  above $50 million up to an
estimated $1.6 billion per event for us.

       In December 2002, via authority  granted under the Homeland Security Act of 2002,
the U.S.  government  expanded its insurance  program to enable airlines to elect either
the  government's  excess  third-party  coverage  or for the  government  to become  the
primary  insurer  for all war risk  coverage.  We  elected  to take  primary  government
coverage  in  February  2003  and  discontinued  the  commercially  available  war  risk
coverage.  While  the  Appropriations  Act  authorized  the  government  to  offer  both
policies  through August 31, 2004,  the current  policies are in effect until August 12,
2003. We cannot assure you that any extension  will occur,  or if it does,  how long the
extension  will  last.  We  expect  that if the  government  stops  providing  war  risk
coverage to the airline  industry,  the premiums  charged by aviation  insurers for this
coverage  will be  substantially  higher  than the  premiums  currently  charged  by the
government.  Significant  increases  in  insurance  premiums  would  harm our  financial
condition and results of operations.

We may not be able to obtain or secure new aircraft financing.

         We  have  agreed  to  purchase  six   additional   new  Airbus  A319  and  A318
aircraft.  We have secured firm  financing  commitments  for 4 of the six  aircraft.  To
complete the purchase of the  remaining  aircraft,  we must secure  aircraft  financing,
which we may not be able to obtain on terms  acceptable  to us,  if at all.  The  amount
of financing  required  will depend on the required  down payment on mortgaged  financed
aircraft  and the  extent  of  leasing  compared  to  purchasing  the  aircraft.  We are
exploring various financing  alternatives,  including,  but not limited to, domestic and
foreign bank financing,  leveraged lease arrangements or  sales/leaseback  transactions.
There can be no guaranty that  additional  financing  will be available when required or
on  acceptable  terms.  The  inability  to secure  the  financing  could have a material
adverse  effect on our cash  balances  or result in delays in or our  inability  to take
delivery of Airbus aircraft that we have agreed to purchase,  further  impairing the our
strategies for long-term growth.

The airline  industry is seasonal and  cyclical,  resulting in  unpredictable  liquidity
and earnings.

         Because  the airline  industry is seasonal  and  cyclical,  our  liquidity  and
earnings  will  fluctuate  and be  unpredictable.  Our  operations  primarily  depend on
passenger  travel  demand and  seasonal  variations.  Our  weakest  travel  periods  are
generally  during the  quarters  ending in June and  December.  The airline  industry is
also a  highly  cyclical  business  with  substantial  volatility.  Airlines  frequently
experience  short-term  cash  requirements.  These  requirements  are caused by seasonal
fluctuations in traffic,  which often reduce cash during off-peak  periods,  and various
other  factors,   including  price   competition  from  other  airlines,   national  and
international   events,   fuel  prices,  and  general  economic   conditions   including
inflation.  Our  operating and  financial  results are likely to be negatively  impacted
by the continued  stagnation in national or regional  economic  conditions in the United
States,  and  particularly  in  Colorado.  Airlines  require  substantial  liquidity  to
continue  operating under most  conditions.  The airline industry also has low operating
profit  margins and revenues  that vary to a  substantially  greater  degree than do the
related costs.  Therefore,  a significant  shortfall from expected  revenue levels could
have a material adverse effect on us.

         We,  like many in the  industry,  are  seeing a  negative  impact to  passenger
traffic  caused  by the war with  Iraq,  the  slowing  economy,  as well as  threats  of
further  terrorist  activities.  The impact has been more  prevalent  with our  business
traffic,  which is higher  yield  traffic  that books  closer to the date of  departure,
than with our leisure  customers.  Even though the slowing  economy has  impacted us, we
believe  that the larger,  more  established  carriers  are being  impacted to a greater
extent as the  discretionary  business  travelers who  typically fly these  carriers are
looking  for  affordable  alternatives  similar to the  service we  provide.  The larger
carriers have reduced their "close-in" fare structure to more  aggressively  compete for
this traffic.  Aggressive  pricing  tactics by our major  competitors  has had and could
also have an impact in the future on the leisure component.

We are in a high fixed cost  business,  and any  unexpected  decrease in revenues  would
harm us.

         The airline  industry  is  characterized  by low profit  margins and high fixed
costs  primarily for personnel,  fuel,  aircraft  ownership  costs and other rents.  The
expenses of an aircraft flight do not vary  significantly  with the number of passengers
carried and, as a result,  a relatively  small change in the number of  passengers or in
pricing would have a  disproportionate  effect on the airline's  operating and financial
results.  Accordingly,  a shortfall  from  expected  revenue  levels can have a material
adverse effect on our profitability and liquidity.

We have a significant amount of fixed obligations and we will incur significantly more
fixed obligations, which could increase the risk of failing to meet payment
obligations.

         As of March 31, 2003,  maturities of our  long-term  debt were  $20,473,000  in
2004,  $16,864,000  in 2005,  $22,139,000 in 2006,  $22,725,000 in 2007,  $45,776,000 in
2008  and an  aggregate  of  $154,235,000  for the  years  thereafter.  In  addition  to
long-term  debt,  we  have  a  significant  amount  of  other  fixed  obligations  under
operating  leases  related  to our  aircraft,  airport  terminal  space,  other  airport
facilities  and office  space.  As of March 31,  2003,  future  minimum  lease  payments
under   noncancelable   operating  leases  were   approximately   $83,326,000  in  2004,
$76,791,000 in 2005,  $61,478,000 in 2006,  $56,340,000 in 2007, $55,420,000 in 2008 and
an aggregate of  $328,518,000  for the years  thereafter.  As of March 31, 2003,  we had
commitments of approximately  $142,375,000 to purchase six additional  aircraft over the
next 13 months,  including  estimated amounts for contractual price  escalations,  spare
parts to support  these  aircraft and to equip the aircraft  with LiveTV.  We will incur
additional debt or long-term  lease  obligations as we take delivery of new aircraft and
other equipment and continue to expand into new markets.

If we fail to comply with financial  covenants,  some of our financing agreements may be
terminated.

         Under our commercial loan facility "Government Guaranteed Loan",  guaranteed in
part by the federal  government,  we are required to comply with specified financial and
other  covenants.  We  cannot  assure  you  that we will be able to  comply  with  these
covenants  or  provisions  or that  these  requirements  will not limit our  ability  to
finance  our future  operations  or capital  needs.  Our  inability  to comply  with the
required  financial  covenants  or  provisions  could  result  in a default  under  this
financing  agreement.  In the event of any such  default and our  inability  to obtain a
waiver of the default,  all amounts  outstanding  under the agreements could be declared
to be  immediately  due and payable.  In addition,  other  financial  arrangements  that
contain  cross-default  provisions  could also be  declared  in default  and all amounts
outstanding  could  be  declared  immediately  due  and  payable.  If we  did  not  have
sufficient  available  cash to pay all  amounts  that become due and  payable,  we would
have  to seek  additional  debt or  equity  financing,  which  may not be  available  on
acceptable  terms,  or at all. If such financing  were not  available,  we would have to
sell assets in order to obtain the funds required to make accelerated payments.

Increases in fuel costs affect our operating costs and competitiveness.

         We cannot predict our future cost and  availability of fuel,  which affects our
ability to  compete.  Fuel is a major  component  of our  operating  expenses.  Both the
cost and  availability  of fuel are  influenced by many  economic and political  factors
and events  occurring in oil producing  countries  throughout the world,  and fuel costs
fluctuate  widely.  Fuel  accounted  for 17.2% of our total  operating  expenses for the
year ended March 31, 2003.  The  unavailability  of adequate fuel supplies  could have a
material  adverse  effect on our  operations  and  profitability.  In  addition,  larger
airlines may have a  competitive  advantage  because they pay lower prices for fuel.  We
generally  follow  industry  trends by raising  fares in  response to  significant  fuel
price  increases.  However,  our ability to pass on  increased  fuel costs  through fare
increases  may  be  limited  by  economic  and  competitive  conditions.   In  addition,
although we implemented a fuel hedging  program in 2003,  under which we enter into Gulf
Coast jet fuel option contracts to partially  protect against  significant  increases in
fuel  prices,  our fuel  hedging  program is limited in fuel  volume and  duration.  Our
fuel hedging  program is not  sufficient to protect us against the majority of increases
in the price of fuel.

We are subject to strict federal  regulations,  and compliance with federal  regulations
increases our costs and decreases our revenues.

         Airlines  are  subject to  extensive  regulatory  and legal  requirements  that
involve  significant  compliance  costs. In the last several years,  Congress has passed
laws and the DOT and FAA have issued  regulations  relating to the operation of airlines
that have required  significant  expenditures.  For example,  the President  signed into
law the ATSA in  November  2001.  This law  federalizes  substantially  all  aspects  of
civil  aviation  security  and  requires,  among other  things,  the  implementation  of
certain  security  measures by airlines and airports,  including a requirement  that all
passenger  baggage be screened.  Funding for airline and airport  security under the law
is primarily  provided by a new $2.50 per enplanement  ticket tax effective  February 1,
2002,  with authority  granted to the TSA to impose  additional  fees on air carriers if
necessary.    Under   the   Emergency   Wartime    Supplemental    Appropriations    Act
(Appropriations  Act)  enacted  on  April  16,  2003,  the  $2.50  enplanement  tax  was
temporarily  suspended  on ticket sales from June 1, 2003  through  August 31, 2003.  In
addition,   the  acquisition,   installation  and  operation  of  the  required  baggage
screening  systems  by  airports  will  result in  capital  expenses  and costs by those
airports  that  will  likely  be passed on to the  airlines  through  increased  use and
landing  fees.  It is  impossible to determine at this time exactly what the cost impact
will be of the increased  security  measures  imposed by the ATSA. On February 17, 2002,
the ATSA  imposed a base  security  infrastructure  fee on  commercial  operators  in an
amount equal to the calendar year 2000 airport  security  expenses.  The  infrastructure
fee for us is $1,625,000 annually.

         In addition,  although we have  obtained the necessary  authority  from the DOT
and the FAA to conduct  flight  operations  and are currently  obtaining  such authority
from the FAA with respect to Airbus  aircraft  that we are adding to our fleet,  we must
maintain this authority by 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.  We  believe  that  the FAA  strictly
scrutinizes  smaller  airlines  like ours,  which  makes us  susceptible  to  regulatory
demands that can  negatively  impact our  operations.  We may not be able to continue to
comply  with all  present  and future  rules and  regulations.  In  addition,  we cannot
predict the costs of compliance  with these  regulations and the effect of compliance on
our  profitability,  although  these costs may be material.  We also expect  substantial
FAA  scrutiny  as we  transition  from our  Boeing  fleet  to an all  Airbus  fleet.  An
accident or major  incident  involving one of our aircraft  would likely have a material
adverse effect on our business and results of operations.

We experience high costs at DIA, which may impact our results of operations.

         We  operate  our hub of flight  operations  from DIA where we  experience  high
costs.  Financed  through  revenue  bonds,  DIA depends on landing  fees,  gate rentals,
income  from  airlines,  the  traveling  public,  and other fees to  generate  income to
service  its debt and to support  its  operations.  Our cost of  operations  at DIA will
vary  as  traffic  increases  or  diminishes  at  that  airport.  We  believe  that  our
operating  costs at DIA  substantially  exceed those that other  airlines  incur at most
hub  airports  in other  cities,  which  decreases  our  ability to  compete  with other
airlines  with  lower  costs  at their  hub  airports.  In  addition,  United  Airlines,
currently  operating  under  the  protection  of  Chapter  11 of  the  Bankruptcy  Code,
represents  a  significant   tenant  at  DIA.  If  United   Airlines  fails  to  meet  a
significant  portion of its payment  obligations  relating to its  operations at DIA, or
significantly  reduces its operations,  the resulting  decrease in revenues available to
DIA  may  result  in a  proportionate  increase  in the  operating  costs  of all  other
airlines continuing to operate at DIA.

We face intense  competition  and market  dominance by United  Airlines and  uncertainty
with  respect to their  ability to emerge  from  Chapter 11  successfully;  we also face
competition from other airlines at DIA.

         The airline  industry is highly  competitive,  primarily  due to the effects of
the Deregulation Act, which substantially  eliminated  government  authority to regulate
domestic  routes and fares and  increased  the  ability  of  airlines  to  compete  with
respect to flight  frequencies  and fares.  We compete  with United  Airlines in our hub
in Denver,  and we anticipate that we will compete  principally  with United Airlines in
our  future  market  entries.  United  Airlines  and  its  commuter  affiliates  are the
dominant  carriers  out of DIA,  accounting  for  approximately  63.5% of all  passenger
boardings  for the  month  of March  2003.  Fare  wars,  "capacity  dumping"  in which a
competitor  places  additional  aircraft on selected routes,  and other activities could
adversely  affect us. The future  activities of United  Airlines and other  carriers may
have a material  adverse effect on our revenues and results of  operations.  Most of our
current and  potential  competitors  have  significantly  greater  financial  resources,
larger route networks,  and superior market  identity.  In addition,  United Airlines is
currently  operating  under the protection of Chapter 11 of the  Bankruptcy  Code. As it
seeks to develop a plan or  reorganization,  United  Airlines has  expressed an interest
in  creating  a low-cost  operation  in order to compete  more  effectively  with us and
other low-cost  carriers.  The uncertainty  regarding  United  Airlines'  business plan,
its ability to  restructure  under  Chapter 11, and its  potential  for placing to place
downward  pressure  on air fares  charged in the Denver  market are risks on our ability
to maintain yields required for profitable  operations.

Our operating results may suffer from other low-fare carriers entering DIA and other
markets we serve.

         The airline industry, in general, and the low-fare sector in particular, is highly
competitive and is served by numerous companies.  More recently, Delta Airlines recently
formed a subsidiary named “Song Airlines” to compete in the low-fare sector.  In
addition, a number of other airlines have commenced service at DIA.  These airlines have
offered low introductory fares and compete on several of our routes.  We may also face
greater competition in the future.  Competition from these airlines could adversely affect
us.

We could lose airport and gate access thereby decreasing our competitiveness.

         We could  encounter  barriers to airport slot or airport gate access that would
deny or limit our access to the airports  that we currently  use or intend to use in the
future.  A slot is an  authorization  to schedule a takeoff or landing at the designated
airport  within a specific  time window.  The FAA must be advised of all slot  transfers
and can disallow any such transfer.  In the United States,  the FAA currently  regulates
slot  allocations  at  O'Hare  International  Airport  in  Chicago,  JFK  and  LaGuardia
Airports in New York City,  and Ronald Reagan  National  Airport in  Washington  D.C. We
use LaGuardia  Airport and Ronald  Reagan  National  Airport in our current  operations.
The  FAA's  slot  regulations  require  the use of each  slot at least  80% of the time,
measured on a monthly basis.  Failure to comply with these  regulations  may result in a
recall of the slot by the FAA.  In  addition,  the slot  regulations  permit  the FAA to
withdraw  the  slots at any time  without  compensation  to meet the  DOT's  operational
needs.  Our  ability to  increase  slots at the  regulated  airports  is affected by the
number of slots available for takeoffs and landings.

         In  addition,   the  number  of  gates   available  to  us  at  some  airports,
particularly  at DIA,  may be  limited  to the  restricted  capacity  or by  disruptions
caused  by major  renovation  projects.  Available  gates may not  provide  for the best
overall  service to our  customers,  and may  prevent  us from  scheduling  our  flights
during peak or  opportune  times.  Any  failure to obtain  gate  access at the  airports
that we  serve  could  adversely  affect  our  operations.  These  barriers  may in turn
materially adversely affect our business and competitiveness.

Our transition to an Airbus fleet creates risks.

         We currently  operate 19 Boeing aircraft and 18 Airbus aircraft.  Our long-term
strategy is to  transition  our fleet so that we are operating  only Airbus  aircraft by
the end of calendar  year 2005.  One of the key elements of this  strategy is to produce
cost  savings  because  crew  training is  standardized  for  aircraft of a common type,
maintenance issues are simplified,  spare parts inventory is reduced,  and scheduling is
more efficient.  However,  during our transition period we will be incurring  additional
costs  associated  with  retraining our Boeing crews in the Airbus  aircraft.  We may be
faced with  retiring the Boeing  aircraft in advance of the end of the lease  agreements
for these  aircraft,  thus  resulting in  recognizing  remaining  lease  obligations  as
expense in the current period.

         Once  we  operate  only  Airbus  aircraft,  we will be  dependent  on a  single
manufacturer  for future aircraft  acquisitions  or deliveries,  spare parts or warranty
service.  If Airbus is  unable  to  perform  its  obligations  under  existing  purchase
agreements,  or is unable to  provide  future  aircraft  or  services,  whether by fire,
strike or other  events that affect its ability to fulfill  contractual  obligations  or
manufacture  aircraft or spare  parts,  we would have to find  another  supplier for our
aircraft.  Currently,  Boeing  is the  only  other  manufacturer  from  which  we  could
purchase or lease  alternate  aircraft.  If we were forced to acquire  Boeing  aircraft,
we  would  need  to  address  fleet  transition  issues,   including  substantial  costs
associated with retraining our employees,  acquiring new spare parts,  and replacing our
manuals.  Also,  the  fleet  efficiency  benefits  described  above  would no  longer be
available.

         In  addition,  once we operate  only Airbus  aircraft  we will be  particularly
vulnerable to any problems that might be associated  with these  aircraft.  Our business
would be significantly  disrupted if an FAA airworthiness  directive or service bulletin
were issued,  resulting in the  grounding of all Airbus  aircraft of the type we operate
while the defect is being  corrected.  Our  business  could also be harmed if the public
avoids flying Airbus aircraft due to an adverse  perception about the aircraft's  safety
or  dependability,  whether  real or  perceived,  in the event of an  accident  or other
incident involving an Airbus aircraft of the type we fly.

Our maintenance expenses may be higher than we anticipate.

         We may incur higher than  anticipated  maintenance  expenses.  We bear the cost
of all routine and major  maintenance on our owned  aircraft.  Under our leased aircraft
lease agreements,  we are required to bear all routine and major  maintenance  expenses.
Maintenance  expenses  comprise a  significant  portion of our  operating  expenses.  In
addition,  we are  required  periodically  to take  aircraft  out of  service  for heavy
maintenance  checks,  which can adversely  increase  costs and reduce  revenue.  We also
may be  required  to  comply  with  regulations  and  airworthiness  directives  the FAA
issues,  the cost of which our  aircraft  lessors may only  partially  assume  depending
upon the  magnitude of the expense.  Although we believe that our  purchased  and leased
aircraft  are  currently in  compliance  with all FAA issued  airworthiness  directives,
there is a high  probability that additional  airworthiness  directives will be required
in the future necessitating additional expense.

Our landing fees may increase because of local noise abatement procedures.

         Compliance with local noise abatement  procedures may lead to increased landing
fees.  As a result of  litigation  and pressure  from airport  area  residents,  airport
operators  have taken  local  actions  over the years to reduce  aircraft  noise.  These
actions have included  regulations  requiring aircraft to meet prescribed decibel limits
by  designated  dates,  curfews  during night time hours,  restrictions  on frequency of
aircraft  operations,  and  various  operational  procedures  for noise  abatement.  The
Airport Noise and Capacity Act of 1990  recognized  the right of airport  operators with
special  noise  problems to implement  local noise  abatement  procedures as long as the
procedures do not interfere  unreasonably  with the interstate  and foreign  commerce of
the national air transportation system.

         An agreement  between the City and County of Denver and another county adjacent
to Denver  specifies  maximum aircraft noise levels at designated  monitoring  points in
the  vicinity of DIA with  significant  payments  payable by Denver to the other  county
for each  substantiated  noise  violation  under the  agreement.  DIA has incurred  such
payment  obligations  and likely will incur such  obligations  in the  future,  which it
will  pass on to us and other air  carriers  serving  DIA by  increasing  landing  fees.
Additionally,  noise  regulations could be enacted in the future that would increase our
expenses and have a material adverse effect on our operations.

We have a limited  number of aircraft,  and any  unexpected  loss of any aircraft  could
disrupt and harm our operations.

       Because  we  have  a  limited  number  of  aircraft,   if  any  of  our  aircraft
unexpectedly  are  taken  out  of  service,  our  operations  may be  disrupted.  We can
schedule all of our aircraft for regular  passenger  service and only  maintain  limited
spare  aircraft  capability  should  one or more  aircraft  be  removed  from  scheduled
service for unplanned  maintenance  repairs or for other reasons.  The unplanned loss of
use of one or more of our  aircraft  for a  significant  period  of  time  could  have a
material  adverse  effect  on  our  operations  and  operating  results.  A  replacement
aircraft  may not be  available  or we may not be able to lease or  purchase  additional
aircraft  on  satisfactory  terms or when  needed.  The market  for leased or  purchased
aircraft fluctuates based on worldwide economic factors that we cannot control.

Unionization affects our costs and may affect our operations.

       Three of our  employee  groups have voted for union  representation:  our pilots,
dispatchers,  and  mechanics.  In  addition,  since  1997 we have had  union  organizing
attempts that were defeated by our flight  attendants,  ramp service  agents,  and stock
clerks.  The  collective  bargaining  agreements  we have  entered into with our pilots,
dispatchers,  and mechanics have  increased our labor and benefit costs,  and additional
unionization  of our employees  could  increase our overall  costs.  If any group of our
currently  non-unionized  employees  were  to  unionize  and we  were  unable  to  reach
agreement  on the  terms  of  their  and  other  currently  unionized  employee  groups'
collective   bargaining   agreements  or  we  were  to  experience  widespread  employee
dissatisfaction,  we could be subject to work  slowdowns or stoppages.  In addition,  we
may be subject to disruptions by organized  labor groups  protesting  certain groups for
their  non-union  status.  Any of these events would be disruptive to our operations and
could harm our business.

Our  reputation  and  financial  results  could be harmed in the event of an accident or
incident involving our aircraft.

         An accident or incident  involving one of our aircraft  could involve repair or
replacement  of a damaged  aircraft and its  consequential  temporary or permanent  loss
from service,  and significant  potential  claims of injured  passengers and others.  We
are  required  by  the  DOT  to  carry  liability  insurance.  Although  we  believe  we
currently maintain liability  insurance in amounts and of the type generally  consistent
with  industry  practice,  the amount of such coverage may not be adequate and we may be
forced to bear substantial  losses from an accident.  Substantial  claims resulting from
an accident in excess of our related  insurance  coverage  would harm our  business  and
financial  results.   Moreover,  any  aircraft  accident  or  incident,  even  if  fully
insured,  could cause a public  perception  that we are less safe or reliable than other
airlines, which would harm our business.


Item 2:  Properties

Aircraft

       As of June 23,  2003,  we operate 19 Boeing 737 and 18 Airbus  A319  aircraft  in
all-coach  seating   configurations.   The  age  of  these  aircraft,   their  passenger
capacities  and  expiration  years for the leased  aircraft  are shown in the  following
table:

                                                                Approximate
                                                                 Number of
Aircraft                No. of              Year of              Passenger               Lease
  Model                Aircraft           Manufacture               Seats             Expiration

B-737-200A                 3               1978-1983                119                2003-2005
B-737-300                 16               1985-1998                136                2003-2006
A319                       9               2001-2003                132                  owned
A319                       9               2001-2003                132                2013-2015

       In March  2000,  we  entered  into an  agreement,  as  subsequently  amended,  to
purchase  up to 31 new  Airbus  aircraft.  We have  agreed  to firm  purchases  of 17 of
these  aircraft,  and have options to purchase up to an additional 14 aircraft.  We have
exercised  options to purchase  five Airbus  aircraft.  As of June 23, 2003,  we did not
exercise   purchase  options  as  they  became  due  on  seven  of  the  remaining  nine
unexercised  options on Airbus  aircraft.  We are currently  discussing  with Airbus the
possibility  of replacing  these options with purchase  rights.  As a complement to this
purchase  order,  in April 2000 we signed an agreement  to lease 15 new Airbus  aircraft
for  delivery  in our fiscal  years 2002  through  2005.  As of March 31,  2003,  we had
taken delivery of 10 purchased  aircraft,  one of which we sold and agreed to lease back
from the purchaser,  and six  additional  leased  aircraft.  During the year ended March
31,  2003,  we  assigned  one of our  purchase  commitments  to an aircraft  lessor.  We
agreed to lease this aircraft for a term of five years.  These  commitments  contemplate
a fleet  replacement  plan by  which we will  phase  out our  Boeing  737  aircraft  and
replace  them with a  combination  of Airbus A319 and A318  aircraft.  The A319 and A318
aircraft are configured with 132 and 114 passenger seats,  respectively,  with a 33-inch
seat pitch.  We believe that  operating new Airbus  aircraft will result in  significant
operating cost savings and an improved product for our customers.

       During  fiscal year 2002,  we advanced  the return of one leased  Boeing  737-300
aircraft to its owner from April 2002 to September  2001,  and two leased Boeing 737-200
aircraft  from   September  and  November  2004  to  November  2002  and  January  2003,
respectively.  The return of the two Boeing  737-200  aircraft  was  extended to January
2003 and February  2003,  respectively.  We have extended the lease of a Boeing  737-300
aircraft  from  February  2003 to November  2003.  During the year ended March 31, 2003,
we took four Boeing  737-200s and one Boeing  737-300 out of service and  completed  the
process of bringing the  aircraft  into  compliance  with return  conditions.  Including
the  anticipated  return  of nine  Boeing  aircraft,  we plan to  operate  a fleet of 10
Boeing  737-300s,  four Airbus 318s and 24 Airbus A319s,  or a total of 38 aircraft,  by
the end of our fiscal year ending March 31, 2004.

       In June 2003, we agreed to lease two  additional  Airbus 318 aircraft,  scheduled
for  delivery  in May 2004 and March  2005,  and one  additional  Airbus  319  aircraft,
scheduled  for delivery in February  2005.  We plan to operate a minimum of 35 purchased
and leased Airbus  aircraft by the fiscal year ended March 31, 2005.  Upon completion of
our  fleet  transition,  we  expect  our  owned  and  leased  fleet to be  comprised  of
approximately 80 percent A319 aircraft and 20 percent A318 aircraft.

Facilities

       In  January  2001,  we moved our  general  and  administrative  offices  to a new
headquarters  facility  near DIA,  where we lease  approximately  70,000  square feet of
space  for a lease  term of 12  years  at an  average  annual  rental  of  approximately
$965,000 plus operating and maintenance expenses.

       The Denver  reservations  facility relocated in July 2001 to a 16,000 square foot
facility,  also in Denver,  which we have leased for a 10-year  lease term at an average
annual rental of  approximately  $140,000 plus operating and  maintenance  expenses.  In
August 2000, we established a second  reservations  center  facility in Las Cruces,  New
Mexico.  This facility is  approximately  12,000 square feet and is leased for a term of
122 months at an average  annual rental of  approximately  $129,000  plus  operating and
maintenance expenses.

       We have entered into an airport lease and facilities  agreement  expiring in 2010
with the City and  County of  Denver  at DIA for  ticket  counter  space,  ten gates and
associated  operations at a current annual rental rate of  approximately  $7,142,000 for
these  facilities.  We also sublease a portion of  Continental  Airlines'  hangar at DIA
until  February  28,  2007 for an annual  rental of  approximately  $2,776,000.  Upon 18
months written notice, either party can terminate the agreement.

       Each  of our  airport  locations  requires  leased  space  associated  with  gate
operations,  ticketing  and baggage  operations.  We either  lease the ticket  counters,
gates  and  airport  office  facilities  at each  of the  airports  we  serve  from  the
appropriate  airport  authority or sublease them from other airlines.  Total annual rent
expense for these  facilities,  excluding  DIA,  is  approximately  $7,860,000  based on
rents paid for the month of March 2003.  Additionally,  we lease maintenance  facilities
in El Paso,  Texas and  Phoenix,  Arizona at a current  annual  rental of  approximately
$201,000 for these facilities.






Item 3:  Legal Proceedings

       From  time to time,  we are  engaged  in  routine  litigation  incidental  to our
business.  We  believe  there are no legal  proceedings  pending in which we are a party
or of which any of our  property  is the  subject  that are not  adequately  covered  by
insurance  maintained  by us or which  have  sufficient  merit to result  in a  material
adverse affect upon our business or financial condition.

Item 4:  Submission of Matters to a Vote of Security Holders

       During the fourth  quarter of the fiscal year covered by this report,  we did not
submit  any  matters to a vote of our  security  holders  through  the  solicitation  of
proxies or otherwise.


                                         PART II

Item 5:  Market for Common Equity and Related Stockholder Matters

Price Range of Common Stock

       The following  table shows the range of high and low bid prices per share for our
common  stock for the  periods  indicated  and as reported  by Nasdaq  through  June 23,
2003.  Market  quotations  listed  here  represent  prices  between  dealers  and do not
reflect  retail  mark-ups,  markdowns or  commissions.  As of June 23, 2003,  there were
1,271 holders of record of our common stock.

                                                 Price Range of
                                                  Common Stock
                     Quarter Ended              High         Low

                     June 30, 2001          $  16.71    $  10.31
                     September 30, 2001        15.78        6.77
                     December 31, 2001         17.40        8.00
                     March 31, 2002            23.75       17.02

                     June 30, 2002             17.95        8.13
                     September 30, 2002         8.60        4.56
                     December 31, 2002          8.00        4.02
                     March 31, 2003             7.10        3.67

                     June 30, 2003              9.87        5.15
                     (through June 23, 2003)

Recent Sales of Securities

During the period April 1, 2002  through  June 23, 2003,  we have not sold any shares of
our common stock.

Dividend Policy

       We have not  declared or paid cash  dividends on our common  stock.  We currently
intend to retain any future  earnings to fund  operations and the continued  development
of our  business,  and,  thus,  do not  expect to pay any cash  dividends  on our common
stock in the foreseeable  future.  Future cash dividends,  if any, will be determined by
our  Board of  Directors  and will be based  upon our  earnings,  capital  requirements,
financial condition and other factors deemed relevant by the Board of Directors.

Securities Authorized for Issuance Under Equity Compensation Plans

       The information  required by this Item is incorporated herein by reference to the
data under the heading  "Securities  Authorized for Issuance  Under Equity  Compensation
Plans"  in the  Proxy  Statement  to be used in  connection  with  the  solicitation  of
proxies for our annual  meeting of  shareholders  to be held on  September  4, 2003.  We
will file the  definitive  Proxy  Statement  with the  Commission  on or before July 29,
2003.




Item 6:  Selected Financial Data

       The following  selected  financial  and operating  data as of and for each of the
years ended March 31,  2003,  2002,  2001,  2000,  and 1999 are derived from our audited
financial  statements.  This  data  should  be read in  conjunction  with  "Management's
Discussion  and  Analysis of Financial  Condition  and Results of  Operations,"  and the
financial statements and the related notes thereto included elsewhere in this report.

                                                              Year Ended March 31,
                                            2003          2002          2001          2000          1999    
                                                (Amounts in thousands except per share amounts)
Statement of Operations Data:
Total operating revenues                $  469,936    $  445,075    $  472,876    $  329,820    $  220,608
Total operating expenses                   500,560       428,689       392,155       290,511       195,928
Operating income (loss)                    (30,624)       16,386        80,721        39,309        24,680
Income (loss) before income tax expense
  (benefit) and cumulative effect of change
  in accounting principle                  (39,509)       24,832        88,332        43,415        25,086
Income tax expense (benefit)               (14,655)        8,282        33,465        16,954        (5,480)
Income (loss) before cumulative effect of
  change in accounting principle           (24,854)       16,550        54,868        26,460        30,566
Cumulative effect of change in
  accounting principle                       2,011           -             -             549           -
Net income (loss)                          (22,843)       16,550        54,868        27,010        30,566
Income (loss) per share before cumulative
  effect   of  a   change   in   accounting
principle:
    Basic                                    (0.84)         0.58          2.02          1.02          1.43
    Diluted                                  (0.84)         0.56          1.90          0.94          1.32
Net income (loss) per share:
    Basic                                    (0.77)         0.58          2.02          1.04          1.43
    Diluted                                  (0.77)         0.56          1.90          0.95          1.32

Pro forma amounts assuming the new
  method of accounting for maintenance
  is applied retroactively:
    Net income                                  -     17,661,307    55,119,366            -             -
      Earnings per share:
          Basic                                 -           0.62          2.03            -             -
          Diluted                               -           0.60          1.91            -             -

Balance Sheet Data:
Cash and cash equivalents               $  102,880     $  87,555    $  109,251     $  67,851     $  47,289
Current assets                             190,838       193,393       199,794       140,361        94,209
Total assets                               587,844       413,685       295,317       187,546       119,620
Current liabilities                        130,047       152,064       136,159        98,475        68,721
Long-term debt                             261,739        66,832           204           329           435
Total liabilities                          428,877       244,552       150,538       106,501        75,230
Stockholders' equity                       158,967       169,133       144,779        81,045        44,391
Working capital                             60,791        41,329        63,635        41,886        25,488


                                                              Year Ended March 31,
                                            2003          2002          2001          2000          1999    
  Selected Operating Data:
  Passenger revenue (000s) (1)             460,188       435,946       462,609       320,850       214,311
  Revenue passengers carried (000s)          3,926         3,069         3,017         2,284         1,664
  Revenue passenger miles(RPMs)(000s)(2) 3,599,553     2,756,965     2,773,833     2,104,460     1,506,597
  Available seat miles (ASMs) (000s) (3) 6,013,261     4,592,298     4,260,461     3,559,595     2,537,503
  Passenger load factor (4)                   59.9%         60.0%         65.1%         59.1%         59.4%
  Break-even load factor (5) (6)              64.7%         57.6%         52.7%         51.1%         52.4%
  Block hours (7)                          120,297        92,418        83,742        71,276        52,789
  Departures                                53,081        41,736        38,556        33,284        25,778
  Average seats per departure                  132           132           132           129           125
  Average stage length                         858           834           837           829           787
  Average length of haul                       917           898           919           921           905
  Average daily block hour utilization (8)     9.8           9.1           9.4           9.9           9.6
  Yield per RPM (cents) (9)                  12.74         15.78         16.66         15.23         14.19
  Total yield per RPM (cents) (10)           13.06         16.14         17.05         15.67         14.64
  Yield per ASM (cents) (11)                  7.63          9.47         10.85          9.00          8.42
  Total yield per ASM (cents) (12)            7.81          9.69         11.10          9.27          8.69
  Cost per ASM (cents)                        8.32          9.33          9.20          8.16          7.72
  Cost per ASM excluding fuel (cents)         6.90          8.00          7.54          6.91          6.82
  Average fare (13)                         $  109        $  132        $  146        $  134        $  123
  Average aircraft in service                 33.8          27.8          24.5          19.7          15.0
  Aircraft in service at end of year          36.0          30.0          25.0          23.0          17.0
  Average age of aircraft at end of year       7.4          10.6          11.4          10.5          14.7

(1)  "Passenger  revenue" includes revenues for non-revenue  passengers,  administrative
     fees,  and revenue  recognized  for unused  tickets  that are greater than one year
     from issuance date.
(2)  "Revenue  passenger  miles," or RPMs, are  determined by multiplying  the number of
     fare-paying passengers carried by the distance flown.
(3)  "Available  seat miles," or ASMs, are determined by multiplying the number of seats
     available for passengers by the number of miles flown.
(4)  "Passenger  load  factor" is  determined  by dividing  revenue  passenger  miles by
     available seat miles.
(5)  "Break-even  load  factor"  is the  passenger  load  factor  that  will  result  in
     operating  revenues being equal to operating  expenses,  assuming  constant revenue
     per passenger mile and expenses.
(6)  The cost  associated  with the  early  extinguishment  of debt  totaling  $1,774,000
     has been excluded from the break-even  load factor  calculation  for the year ended
     March 31, 2003. The write-down of the carrying  values of the Boeing aircraft parts
     totaling  $2,478,000 has been excluded from the  calculation of the break-even load
     factor for the year ended March 31, 2003.  The  write-down  of the carrying  values
     of the Boeing  aircraft parts totaling  $1,512,000  during the year ended March 31,
     2002 has been excluded from the  calculation  of the  break-even  load factor.  The
     Stabilization  Act compensation  totaling  $12,703,000 for the year ended March 31,
     2002,  has been excluded from the calculation of the break-even load factor.
(7)  "Block hours"  represent the time between aircraft gate departure and aircraft gate
     arrival.
(8)   "Average daily block hour utilization" represents the total block hours divided by
     the number of aircraft days in service, divided by the weighted average of aircraft
     in our fleet during that period.  The number of aircraft includes all aircraft on our
     operating certificate, which includes scheduled aircraft, as well as aircraft out
     of service for maintenance and operation spare aircraft.
(9)  "Yield per RPM" is determined by dividing  passenger  revenues  (excluding  charter
     revenue) by revenue passenger miles.
(10) "Total  yield  per RPM" is  determined  by  dividing  total  revenues  by  revenue
     passenger miles.
(11) "Yield per ASM" is determined by dividing  passenger  revenues  (excluding  charter
     revenue) by available seat miles.
(12) "Total yield per ASM" is  determined  by dividing  passenger  revenues by available
         seat miles.
(13) "Average  fare"  excludes  revenue  included in passenger  revenue for  non-revenue
     passengers,  administrative  fees,  and revenue  recognized for unused tickets that
     are greater than one year from issuance date.





Item 7:  Management's Discussion and Analysis of Financial Condition and Results of Operations

Selected Operating Statistics

       The following  table  provides our operating  revenues and expenses  expressed as
cents per total  available  seat miles  ("ASM") and as a percentage  of total  operating
revenues, as rounded, for the years ended March 31, 2003, 2002, and 2001.

                                              2003                   2002                2001      
                                         Per           %        Per          %       Per          %
                                        total         of       total        of      total        of
                                         ASM        Revenue     ASM       Revenue    ASM       Revenue

Revenues:

    Passenger                            7.65        97.9%      9.49       97.9%    10.86       97.8%
    Cargo                                0.09         1.2%      0.14        1.5%     0.18        1.6%
    Other                                0.07         0.9%      0.05        0.6%     0.06        0.6%

Total revenues                           7.81       100.0%      9.68      100.0%    11.10      100.0%
                                    ===================================================================

Operating expenses:
    Flight operations                    2.59        33.2%      2.83       29.2%     2.54       22.9%
    Aircraft fuel expense                1.43        18.3%      1.33       13.7%     1.67       15.0%
    Aircraft and traffic servicing       1.44        18.4%      1.53       15.8%     1.42       12.8%
    Maintenance                          1.26        16.1%      1.53       15.8%     1.54       13.9%
    Promotion and sales                  0.88        11.3%      1.29       13.4%     1.31       11.8%
    General and administrative           0.43         5.5%      0.57        5.9%     0.59        5.3%
    Depreciation and amortization        0.29         3.7%      0.25        2.6%     0.13        1.2%

Total operating expenses                 8.32       106.5%      9.33       96.4%     9.20       82.9%
                                    ===================================================================


Results of Operations - Year Ended March 31, 2003 Compared to Year Ended March 31, 2002

General

       We  are a  scheduled  passenger  airline  based  in  Denver,  Colorado.  We  were
organized in February  1994 and we began flight  operations in July 1994 with two leased
Boeing  737-200  jets.  We have  since  expanded  our fleet to 28  leased  jets and nine
owned Airbus aircraft,  including three Boeing  737-200s,  16 larger Boeing 737-300s and
17 Airbus A319s as of March 31, 2003.  As a result of expansion of our  operations,  the
September  11,  2001  terrorist  attacks,  transition  costs  associated  with our fleet
replacement  plan,  the  slowing  economy  and the war in Iraq,  we do not  believe  our
results of  operations  for the year ended  March 31,  2003 and 2002 are  comparable  to
each other or are indicative of future operating results.

       Small  fluctuations  in our yield per revenue  passenger mile ("RPM") or cost per
available  seat mile ("ASM") can  significantly  affect  operating  results  because we,
like other airlines,  have high fixed costs in relation to revenues.  Airline operations
are highly  sensitive to various  factors,  including the actions of competing  airlines
and general economic factors,  which can adversely affect our liquidity,  cash flows and
results of operations.

Results of Operations

       We had a net loss of  $22,843,000  or 77(cent)per share for the year ended  March 31,
2003 as compared  to net income of  $16,550,000  or 56(cent)per  diluted  share for the year
ended March 31,  2002.  Our net loss for the year ended  March 31, 2003  included a $2.0
million  after-tax credit for the cumulative  effect of a change in accounting for major
aircraft  overhauls from the accrual method to the expense as incurred  method.  The net
loss  before the  cumulative  effect of the change in  accounting  was  $24,854,000,  or
$0.84 per common  share.  During the year  ended  March 31,  2003,  as  compared  to the
prior comparable  period,  we experienced lower average fares as a result of the slowing
economy,  United's  competitive  pricing on discount fares  available  inside 14 days of
travel,  principally in our Denver market,  and low  introductory  fares by new carriers
serving  the Denver  market.  Our  average  fare was $109 for the year  ended  March 31,
2003,  compared  to $132 for the  year  ended  March  31,  2002.  We also  believe  that
passenger  traffic  during the year ended March 31,  2003 was  impacted by the threat of
war with Iraq,  which  began in March  2003.  During  March  2003,  the Denver area also
experienced an unusual  blizzard,  which caused DIA to be closed for  approximately  two
days.   During  the  year  ended  March  31,  2003,   we  completed  a   sales-leaseback
transaction  of  one  of  our  purchased  aircraft  and  paid  off  the  loan  that  was
collateralized  by  this  aircraft.   As  a  result  we  incurred  $1,774,000  in  costs
associated  with the early  extinguishment  of this  debt.  Additionally,  we wrote down
the value of our Boeing spare parts inventory by $2,478,000.

       Our cost per ASM ("CASM") for the year ended  March 31, 2003 and 2002 was 8.32(cent)
and 9.33(cent), respectively, a decrease of 1.01(cent)or 10.8%. CASM excluding fuel for the
year ended March 31, 2003 and 2002 was 6.90(cent)and 8.00(cent), respectively, a decrease of
1.10(cent)or 13.8%. Our CASM decreased during the year ended  March 31, 2003 as a result
of an increase in the average  number of owned  aircraft  from 2.0 to 6.3, a decrease in
the cost per block hour on our Boeing  fleet for rotable  repairs and engine  overhauls,
a decrease in our  distribution  expenses in  relation to the  reduction  in the average
fare and a reduction in travel  agency  commissions  as a result of the  elimination  of
substantially  all travel  agency  commissions  effective  June 1, 2002,  the lack of an
employee  bonus  accrual  as a result of the net loss for the  period,  an  increase  in
aircraft  utilization,  and  economies  of scale  associated  with  lower  increases  in
indirect  costs  compared  to the  30.9%  increase  in ASMs  over the  prior  comparable
period.  These reductions were partially offset by an  increase of .07(cent)per ASM as a
result of an increase in war risk and hull and liability  insurance  premiums  after the
events of September  11. Due to the flight  cancellations  as a result of the  September
11 terrorist  attacks  during the year ended March 31, 2002,  our ASMs were less than we
had  planned,  which  caused  our  fixed  costs to be spread  over  fewer  ASMs and,  we
believe, distorted our CASM for the year ended March 31, 2002.

       During the year ended March 31, 2003,  our average  daily block hour  utilization
increased  to 9.8 from 9.1 for the year ended March 31,  2002.  The  calculation  of our
block hour  utilization  includes all aircraft  that are on our  operating  certificate,
which includes  scheduled  aircraft,  as well as aircraft out of service for maintenance
and operational spare aircraft,  and excludes aircraft removed  permanently from revenue
service or new  aircraft  not yet placed in  revenue  service.  In  September  2001,  we
temporarily  grounded  four  aircraft as a result of the  September  11, 2001  terrorist
attacks, resulting in reduced aircraft utilization during the 2002 period.

       An  airline's  break-even  load  factor is the  passenger  load  factor that will
result in  operating  revenues  being equal to  operating  expenses,  assuming  constant
revenue per  passenger  mile and  expenses.  For the year ended March 31, 2003 and 2002,
our  break-even  load  factors  were  64.7% and  57.6%,  respectively,  compared  to our
achieved  passenger  load  factors  of 59.9%  and  60.0%.  Our  break-even  load  factor
increased  from the prior  comparable  period  largely as a result of a decrease  in our
average  fare to $109  during the year ended  March 31,  2003 from $132  during the year
ended March 31, 2002, partially offset by a decrease in our CASM to 8.32(cent)for the year
ended March 31, 2003 from 9.33(cent)for the year ended March 31, 2002.

Revenues

       Industry  fare  pricing  behavior  has a  significant  impact  on  our  revenues.
Because of the  elasticity of passenger  demand,  we believe that increases in fares may
at certain  levels result in a decrease in passenger  demand in many markets.  We cannot
predict  future  fare  levels,  which  depend  to a  substantial  degree on  actions  of
competitors  and the economy.  When sale prices or other price  changes are initiated by
competitors  in our  markets,  we  believe  that we must,  in most  cases,  match  those
competitive  fares in  order to  maintain  our  market  share.  Passenger  revenues  are
seasonal in leisure travel markets depending on the markets' locations.

       Our  average  fare for the year ended  March 31, 2003 and 2002 was $109 and $132,
respectively,  a decrease of 17.4%.  We believe  that the  decrease in the average  fare
during the year ended March 31, 2003 from the prior  comparable  period was  principally
a result of the  slowing  economy,  the threat of a war with Iraq  which  began in March
2003,  United's  competitive  pricing  on  discount  fares  available  inside 14 days of
travel,  principally in our Denver market,  and low  introductory  fares by new carriers
serving the Denver market.

       Effective  February 17, 2002, the DOT began to provide security  services through
the TSA and assumed many of the  contracts  and  oversight  of security  vendors that we
and other carriers use to provide airport security  services.  Additionally,  the DOT is
to  reimburse  us, as well as all other air  carriers,  for  certain  security  services
provided by our own  personnel.  In order to be able to provide and fund these  security
services,  the DOT has  imposed  a $2.50  security  service  fee per  passenger  segment
flown,  not to exceed  $5.00 for one-way  travel or $10.00 for a round trip,  on tickets
purchased  on and after  February 1, 2002.  We believe that these fees have had downward
pressure on our  average  fare and in some cases we have been unable to pass these costs
along.

       Passenger  Revenues.  Passenger revenues totaled  $460,188,000 for the year ended
March 31,  2003  compared  to  $435,946,000  for the year ended  March 31,  2002,  or an
increase of 5.6%, on increased  capacity of  1,420,963,000  ASMs or 30.9%. The number of
revenue  passengers  carried was 3,926,000 for the year ended March 31, 2003 compared to
3,069,000  for the  year  ended  March  31,  2002 or an  increase  of  27.9%.  We had an
average of 33.8  aircraft in our fleet during the year ended March 31, 2003  compared to
an average  of 27.8  aircraft  during the year ended  March 31,  2002,  an  increase  of
21.6%.  RPMs  for  the  year  ended  March  31,  2003  were  3,599,553,000  compared  to
2,756,965,000  for the year  ended  March 31,  2002,  an  increase  of  30.6%.  Our load
factor  decreased  slightly to 59.9% for the year ended March 31,  2003,  from 60.0% for
the prior year.

       Cargo  revenues,  consisting of revenues  from freight and mail service,  totaled
$5,557,000  and  $6,624,000  for the years ended March 31, 2003 and 2002,  respectively,
representing  1.2% and 1.5% of total  operating  revenues,  respectively,  a decrease of
16.1%.  We believe that our cargo  revenues  have been  impacted by the slowing  economy
as well as the  agreement the United  States  Postal  Service  entered into with Federal
Express,  Inc. which began in August 2001 that  increased  Federal  Express's  volume of
mail  transportation.  This adjunct to the passenger  business is highly competitive and
depends  heavily  on  aircraft  scheduling,  alternate  competitive  means  of same  day
delivery service and schedule reliability.

       Other revenues,  comprised  principally of interline  handling fees, liquor sales
and excess  baggage  fees,  totaled  $4,191,000  and  $2,505,000 or .9% and .6% of total
operating  revenues  for the years ended March 31,  2003 and 2002,  respectively.  Other
revenue  increased  over the  prior  comparable  period as a result  of an  increase  in
interline  handling fees primarily due to the Mesa  codeshare  agreement and an increase
in ground handling for Mesa and other airlines.

Operating Expenses

       Operating  expenses  include  those  related to flight  operations,  aircraft and
traffic  servicing,  maintenance,  promotion and sales,  general and  administrative and
depreciation  and   amortization.   Total  operating   expenses  were  $500,560,000  and
$428,689,000,   respectively,  for  the  years  ended  March  31,  2003  and  2002,  and
represented  106.5%  and  96.4%  of  total  revenue,  respectively.  Operating  expenses
increased  as a percentage  of revenue  during the year ended March 31, 2003 as a result
of the 17.4% decrease in the average fare.

       Flight  Operations.  Flight operations  expenses of $155,914,000 and $129,814,000
were  33.2% and 29.2% of total  revenue  for the years  ended  March 31,  2003 and 2002,
respectively.  Flight  operations  expenses include all expenses related directly to the
operation of the aircraft  excluding  depreciation of owned aircraft and including lease
and insurance  expenses,  pilot and flight attendant  compensation,  in-flight catering,
crew  overnight   expenses,   flight  dispatch  and  flight  operations   administrative
expenses.  Included in flight  operations  expenses during the year ended March 31, 2003
and  2002  are  approximately  $3,330,000  and  $3,086,000,   respectively,  for  Airbus
training and related travel expenses.

       Aircraft  lease  expenses  totaled  $70,239,000  (14.9%  of  total  revenue)  and
$64,990,000  (14.6% of total  revenue)  for the  years  ended  March 31,  2003 and 2002,
respectively,  or an  increase  of 8.1%.  The  increase is largely due to an increase in
the  average  number of leased  aircraft  to 29.0 from 25.8,  or 12.4%,  during the year
ended March 31, 2003 compared to the same period in 2002.

       Aircraft  insurance  expenses totaled  $11,095,000  (2.4% of total revenue) for
the year ended March 31,  2003.  Aircraft  insurance  expenses  for the year ended March
31, 2002 were  $5,324,000  (1.2% of total  revenue).  Aircraft  insurance  expenses were
.31(cent)and .19(cent)per RPM for the years ended  March 31, 2003 and 2002, respectively.
Aircraft  insurance  expenses  during  the year  ended  March  31,  2002  were not fully
impacted by the result of the  terrorist  attacks on  September  11,  2001.  Immediately
following  the events of September  11, our aviation war risk  underwriters  limited war
risk passenger  liability  coverage on third party bodily injury and property  damage to
$50 million per  occurrence.  A special  surcharge  of $1.25 per  passenger  carried was
established  as the premium for this  coverage by our  commercial  underwriters.  At the
same time, the FAA provided us  supplemental  third party war risk coverage from the $50
million  limit to $1.6  billion.  Effective  December  16,  2002,  the FAA amended  this
coverage  to include war risk hull as well as  passenger,  crew and  property  liability
insurance.  In February  2003, we cancelled our  commercial  hull and liability war risk
coverage  after  binding  the FAA  coverages.  The  premium for the revised FAA war risk
coverage is derived  from a formula that takes into account  total  enplanements,  total
revenue  passenger miles, and total revenue  ton-miles flown, and is significantly  less
than  the  original   commercial   coverage  premium.   While  the   Appropriations  Act
authorized  the  government to offer both policies  through August 31, 2004, the current
policies  are in effect until  August 12,  2003.  We do not know whether the  government
will extend the coverage,  and if it does,  how long the extension  will last. We expect
that  if the  government  stops  providing  excess  war  risk  coverage  to the  airline
industry,  the  premiums  charged  by  aviation  insurers  for  this  coverage  will  be
substantially  higher  than the  premiums  currently  charged by the  government  or the
coverage will not be available from reputable underwriters.

       Pilot and flight  attendant  salaries  before payroll taxes and benefits  totaled
$42,982,000  and  $32,042,000  or 9.3% and  7.4% of  passenger  revenue  for each of the
years  ended  March 31,  2003 and  2002,  or an  increase  of  34.1%.  Pilot and  flight
attendant  compensation  increased as a result of an increase of 30.2% in block hours, a
general wage  increase in pilot and flight  attendant  salaries,  and  additional  crews
required  to replace  those  attending  training  on the Airbus  equipment.  In order to
maintain  competitive  pay for pilots,  a revised pilot pay schedule was negotiated with
the Frontier  Airline  Pilots  Association  (FAPA) for an  approximate  2.5% increase in
salaries.  The FAPA  members  accepted  this  proposal,  which was  effective  August 1,
2002. We pay pilot and flight  attendant  salaries for initial  training,  consisting of
approximately  six and  three  weeks,  respectively,  prior to  scheduled  increases  in
service,  which can cause the  compensation  expense  during such periods to appear high
in  relationship  to the average  number of aircraft in service.  We expect  these costs
to continue to increase as we place more aircraft  into  service.  During the year ended
March 31,  2002,  FAPA agreed to an 11%  decrease in salaries  for all pilots in lieu of
furloughs as a result of the  September  11, 2001  terrorist  attacks.  The pilot salary
levels were reinstated effective January 1, 2002.

       Aircraft  fuel expense.  Aircraft  fuel expenses  include both the direct cost of
fuel  including  taxes  as well as the  cost  of  delivering  fuel  into  the  aircraft.
Aircraft fuel costs of  $85,897,000  for  89,236,000  gallons used and  $61,226,000  for
70,530,000 gallons used  resulted in an average fuel cost of 96(cent)and 87(cent)per gallon
for the years ended March 31, 2003 and 2002,  respectively.  Fuel  prices are  subject to
change weekly, as we purchase a very small portion in advance for inventory.

       We initiated a fuel hedging  program in late November  2002,  which allowed us to
reduce fuel  expenses  during the year ended March 31, 2003 by  approximately  $725,000.
Fuel  consumption  for the years  ended  March 31,  2003 and 2002  averaged  742 and 763
gallons per block hour,  respectively.  Fuel  consumption  per block hour decreased 2.8%
during the year ended March 31,  2003 from the prior  comparable  period  because of the
more  fuel-efficient  Airbus  aircraft  added  to our  fleet,  and a  fuel  conservation
program implemented in August 2001.

       Aircraft and Traffic  Servicing.  Aircraft and traffic  servicing  expenses  were
$86,448,000  and  $70,202,000  (an increase of 23.1%) for the years ended March 31, 2003
and 2002,  respectively,  and  represented  18.4% and 15.8% of total  revenue.  Aircraft
and traffic  servicing  expenses  include all expenses  incurred at airports,  including
landing  fees,  facilities  rental,   station  labor,  ground  handling  expenses,   and
interrupted  trip expenses  associated  with delayed or cancelled  flights.  Interrupted
trip  expenses are amounts paid to other  airlines to  reaccommodate  passengers as well
as hotel, meal and other incidental  expenses.  Aircraft and traffic servicing  expenses
increase  with the  addition of new cities and  departures  to our route  system.  As of
March 31,  2003,  we served 38 cities  compared  to 30 during the year  ended  March 31,
2002,  or an increase of 26.7%.  During the year ended March 31,  2003,  our  departures
increased  to 53,081  from 41,736 or 27.2%.  Aircraft  and  traffic  servicing  expenses
were  $1,629 per  departure  for the year ended March 31, 2003 as compared to $1,682 per
departure  for the year  ended  March 31,  2002,  or a  decrease  of $53 per  departure.
Aircraft  and traffic  servicing  expenses  increased as a result of a general wage rate
increase  and an  increase  in  interrupted  trip  expenses as a result of the number of
flight  cancellations  related  to the  aircraft  out of  service  for  repair  of  hail
damage.  The  September 11  terrorist  attacks  caused us to reduce our flight  schedule
and related  capacity from October 2001 through  February  2002,  which caused our fixed
costs to be spread over fewer  departures  and  increased our expenses per departure for
the year ended March 31, 2002.

       Maintenance.  Maintenance  expenses  for the years  ended March 31, 2003 and 2002
of  $75,559,000  and  $68,560,000  (pro  forma  amount  adjusting  for the effect of the
accounting  change),  respectively,  were 16.1% and 15.4% of total revenue,  an increase
of  10.2%.  These  include  all  labor,  parts  and  supplies  expenses  related  to the
maintenance  of  the  aircraft.   Maintenance  is  charged  to  maintenance  expense  as
incurred.  During the year ended March 31, 2002, we had previously  accrued  monthly for
major engine overhauls and heavy  maintenance  checks.  Maintenance costs per block hour
for the  years  ended  March  31,  2003 and 2002  were  $628  and $742 per  block  hour,
respectively,  a  decrease  of 18.2%.  Maintenance  cost per block hour  decreased  as a
result of the  addition of new Airbus  aircraft  that are less  costly to maintain  than
our  older  Boeing  aircraft.  During  the  year  ended  March  31,  2003,  we  incurred
approximately  $21,600, or less than $1 per block hour for Airbus maintenance  training,
compared to $881,000  or $10 per block hour for the year ended  March 31,  2002.  Due to
the flight  cancellations as a result of the September 11 terrorist  attacks,  our block
hours were less than we had  planned,  which  caused our fixed  costs to be spread  over
fewer  block hours and,  we  believe,  distorted  our cost per block hour for year ended
March 31, 2002.

       In July 2001, our mechanics voted to be represented by International  Brotherhood
of  Teamsters.  The first  bargaining  agreement for the  mechanics,  which has a 3-year
term,  was  ratified  and made  effective  in July 2002.  The  effect of this  agreement
increased mechanics' salaries by approximately 12% over the term of the agreement.

       Promotion  and  Sales.  Promotion  and sales  expenses  totaled  $53,032,000  and
$59,459,000  and were 11.3% and 13.4% of total  revenue  for the years  ended  March 31,
2003 and 2002,  respectively.  These include  advertising  expenses,  telecommunications
expenses,  wages and  benefits  for  reservation  agents and  reservations  supervision,
marketing  management and sales personnel,  credit card fees, travel agency  commissions
and computer  reservations  costs.  During the year ended March 31, 2003,  promotion and
sales  expenses per  passenger  decreased to $13.51 from $19.37 for the year ended March
31,  2002.  Promotion  and  sales  expenses  per  passenger  decreased  as a  result  of
variable  expenses  which are based on lower average fares,  the overall  elimination of
substantially  all travel agency  commissions  effective on tickets sold after May
31, 2002 and a decrease in advertising  expenses.  We reduced advertising  expenses from
the prior  comparable  period as efforts were put into identifying who our customers are
and developing our brand in preparation  for a new advertising  campaign.  The campaign,
which was scheduled to begin in our fourth fiscal  quarter,  was postponed  until fiscal
year 2004 as a result of the war in Iraq.  During  the year  ended  March 31,  2002,  we
incurred  costs  associated  with the  start-up  and  promotion  of our  frequent  flyer
program as well as the redesign of our web site.

       General and  Administrative.  General and  administrative  expenses for the years
ended March 31, 2003 and 2002 totaled  $26,061,000  and  $26,174,000,  and were 5.5% and
5.9% of total  revenue,  respectively.  During the year ended  March 31, 2002 we accrued
for employee  performance bonuses totaling  $2,521,000,  which was .6% of total revenue.
Bonuses  are  based on  profitability.  As a  result  of our  pre-tax  loss for the year
ended March 31, 2003, we did not accrue  bonuses.  General and  administrative  expenses
include the wages and benefits for several of our  executive  officers and various other
administrative personnel including legal, accounting,  information technology,  aircraft
procurement,  corporate communications,  training and human resources and other expenses
associated  with these  departments.  Employee  health  benefits,  accrued  vacation and
bonus  expenses  (when  profitable),   general  insurance  expenses  including  worker's
compensation,  and  write-offs  associated  with  credit  card and check  fraud are also
included in general and administrative  expenses.  We experienced increases in our human
resources,  training and information  technology  expenses as a result of an increase in
employees from approximately  2,700 in March 2002 to approximately  3,160 in March 2003,
an  increase  of 17.0%.  Because of the  increase  in  personnel,  our health  insurance
benefit  expenses,   workers  compensation,   and  accrued  vacation  expense  increased
accordingly.  During the year  ended  March 31,  2003,  we  brought  revenue  accounting
in-house.  We previously  had  outsourced  this  function.  We have realized a reduction
in  expenses  totaling  approximately  $1,000,000  associated  with  processing  revenue
accounting transactions.

       Depreciation  and  Amortization.   Depreciation  and  amortization   expenses  of
$17,650,000 and $11,587,000,  an increase of 52.3%, were  approximately 3.8% and 2.6% of
total  revenue  for the  years  ended  March  31,  2003 and  2002,  respectively.  These
expenses include  depreciation of aircraft and aircraft  components,  office  equipment,
ground station  equipment and other fixed assets.  Depreciation  expense  increased over
the prior year due to an  increase  in the  number of Airbus  A319  aircraft  owned from
three at March 31, 2002 to nine at March 31, 2003.

       Nonoperating  Income (Expense).  Net nonoperating expense totaled $8,885,000 for
the year ended March 31, 2003  compared to net  nonoperating  income of  $8,447,000  for
the year ended March 31,  2002.  During the year ended  March 31,  2002,  we  recognized
$12,703,000  of  compensation  as a result of payments  under the  Stabilization  Act to
offset  direct  and  incremental  losses we  experienced  as a result  of the  terrorist
attacks on September  11, 2001.  We received a total of  $17,538,000  as of December 31,
2001.  The  remaining  $4,835,000  represents  amounts  received in excess of  estimated
allowable  direct and  incremental  losses  incurred from September 11, 2001 to December
31, 2001, which we repaid during the year ended March 31, 2003.

       Interest  income  decreased  to  $1,883,000  during the year ended March 31, 2003
from  $4,388,000  for the prior period due to a decrease in cash balances as a result of
cash used for pre-delivery  payments for future purchases of aircraft,  our net loss for
the period and a decrease in interest rates.  Interest  expense  increased to $8,041,000
for the year ended March 31, 2003 from  $3,383,000  for the prior  period as a result of
interest expense  associated with the financing of additional  purchased Airbus aircraft
and a $70,000,000 loan facility obtained to increase our liquidity.

       During the year ended March 31, 2003, we completed a  sale-leaseback  transaction
of one of our purchased  aircraft and paid off the loan that was  collateralized by this
aircraft.  As a result  we  incurred  $1,774,000  in  costs  associated  with the  early
extinguishment of this debt.

       During the year ended March 31, 2002, we negotiated  early lease  terminations on
two of  our  Boeing  737-200  aircraft  resulting  in a  pre-tax  charge  of  $4,914,000
representing a negotiated settlement of future rent amounts due.

       Income Tax Expense.  We accrued an income tax benefit of $14,655,000 during the
year ended  March 31,  2003 at a 37.1%  effective  tax rate,  compared  to an income tax
expense  accrual of $8,282,000  for the year ended March 31, 2002, at a 38.7%  effective
tax rate.  The  expected  benefit for the year ended March 31, 2003 at a federal rate of
35% plus the blended  state rate of 3.7% (net of federal tax  benefit) is reduced by the
tax effect of permanent  differences  of 1%.  During the year ended March 31,  2001,  we
accrued  income  tax  expense  at the rate of 38.7%  which was  greater  than the actual
effective  tax rate of 37.6%  determined  upon  completion  and filing of the income tax
returns in December  2001.  During the year ended March 31,  2002,  we recorded a credit
to income tax  expense  totaling  $1,327,000  for this excess  accrual.  During the year
ended March 31, 2002, we also  recorded a $441,000  reduction to income tax expense as a
result of a review  and  revision  of state  tax  apportionment  factors  used in filing
amended state tax returns for 2000.


Results of Operations - Year Ended March 31, 2002 Compared to Year Ended March 31, 2001

General

       During  the year  ended  March  31,  2002,  we  expanded  our  fleet to 27 leased
aircraft and four purchased  Airbus A319 aircraft,  comprised of seven Boeing  737-200s,
17 Boeing 737-300s, and seven Airbus A319s

       Beginning in May 2001,  we began a fleet  replacement  plan to replace our Boeing
aircraft with new  purchased  and leased Airbus jet aircraft.  We advanced the return of
one leased Boeing  737-300  aircraft to its owner from April 2002 to September  2001 and
two leased Boeing  737-200  aircraft  from  September and November 2004 to November 2002
and January 2003.

       During the fiscal year ended March 31,  2002 we added  Houston,  Texas on May 16,
2001,  Reno/Lake  Tahoe,  Nevada and Austin,  Texas,  on October 1, 2001,  New  Orleans,
Louisiana on February 1, 2002, Sacramento,  California, and Fort Lauderdale,  Florida on
February 26, 2002.

Air Transportation Safety and Stabilization Act

       As a result of the September 11, 2001 terrorist  attacks on the United States, on
September  22,  2001  President  Bush  signed  into  law the  Stabilization  Act,  which
provided,  among other things,  for  compensation  to U.S.  passenger and cargo airlines
for direct and  increment  losses  incurred  from  September  11, 2001 to  December  31,
2002.  We received compensation of $12,703,000 during the year ended March 31, 2002.

Results of Operations

       We had net income of $16,550,000  or 56(cent)per diluted share for the year ended
March 31, 2002 as compared to net income of  $54,868,000  or $1.90 per diluted share for
the year ended March 31,  2001, a decrease of  $38,318,000  or 69.9%.  On September  11,
2001, the FAA  temporarily  suspended all commercial  airline flights as a result of the
terrorist  attacks on the United States.  As a result of this  suspension,  we cancelled
407  scheduled  flights  until we resumed  operations  on September  14, 2001.  After we
resumed  operations,  we cancelled 303 additional  scheduled  flights through  September
30,  2001 as a result of  diminished  consumer  demand.  During the year ended March 31,
2002,  our daily  average  aircraft  block hour  utilization  decreased  to 9.1 from 9.4
during the prior  comparable  period ended March 31, 2001,  as we reduced  approximately
18.2% of departures  originally  scheduled during that period.  Due to high fixed costs,
we continued to incur a  significant  portion of our normal  operating  expenses  during
the period from  September  11, 2001 through  December  31, 2001 and incurred  operating
losses.

       As a result, we recognized  $12,703,000 of the compensation we received under the
Act, which  compensated for direct and incremental  losses incurred by air carriers from
September  11, 2001 through  December 31, 2001.  Our fiscal year net income  included an
after-tax  gain of $7,749,000  from the Federal grant  program;  a $922,000  write-down,
net of taxes,  for the carrying  value of spare parts that  support our Boeing  737-200A
aircraft  and an unusual  charge of  $2,998,000,  net of taxes,  for the early return of
two Boeing 737-200  aircraft.  Without these unusual  items,  we would have reported net
income of $12,721,000, or $0.43 per diluted common share.

       During the year ended March 31,  2002,  we took  delivery of our first six Airbus
aircraft.  Because this was a new aircraft  type for us, we were  required by the FAA to
demonstrate  that our crews were  proficient in flying Airbus  aircraft and that we were
capable of properly  maintaining the aircraft and related  maintenance records before we
placed these aircraft in scheduled  passenger service.  This process took longer than we
originally  had  anticipated  and, as a result,  we were  required  to cancel  scheduled
flights  that the first  aircraft was  scheduled to perform.  We believe that this delay
in receiving  necessary FAA approval  adversely  affected our passenger revenues and our
cost per ASM during the year ended March 31, 2002.

       Our CASM for the year ended March 31, 2002 was 9.33(cent)and for the year ended
March 31, 2001 was 9.20(cent), or an increase of .13(cent)or 1.4%. CASM excluding fuel
for the years ended March 31, 2002 and 2001 were 8.00(cent)and 7.54(cent), respectively,
or an increase of .46(cent)or 6.1%.  Our CASM increased during the year ended March 31,
2002 over the prior comparable year principally  because of the decreased aircraft
utilization and shorter stage lengths during that period. These expenses were impacted
by  the terrorist attacks and the hail damage to five of our aircraft, or approximately
20% of our fleet, during the year ended  March 31, 2002.  During the year ended  March 31,
2002,  we wrote down the carrying  value of spare parts that support the Boeing  737-200
aircraft  by  $1,512,000  as a result  of  diminished  demand  for that  aircraft  type,
resulting in an increase of .03(cent)per ASM for the period.  We incurred short-term lease
expenses for substitute  aircraft to minimize the number of flight  cancellations  while
the hail damage to our  aircraft was being  repaired,  additional  maintenance  expenses
for the repair of the hail  damage,  and  interrupted  trip  expenses as a result of the
number of flight  cancellations  related  to the  aircraft  out of service  for  repair.
During April 2001, the Denver area also  experienced an unusual  blizzard,  which caused
flight cancellations  as well as expenses  associated  with  deicing our  aircraft.  We
estimate that the  total  adverse  impact on our CASM  associated  with  these  unusual
weather conditions was .04(cent), or approximately  $1,893,000, for the year ended March 31,
2002.  During the year ended March 31, 2002,  we incurred  approximately  $4,511,000  in
transition expenses  associated with the induction of the Airbus aircraft,  which had an
adverse  effect  on  our  CASM  of  approximately  .10(cent)per  ASM. These include crew
salaries;  travel,  training and induction team expenses;  and depreciation  expense. An
increase in pilots'  salaries  effective in May 2001 also contributed to the increase in
CASM  during  the  year  ended  March  31,  2002.   Additionally,   due  to  the  flight
cancellations  as a result of the  September  11  terrorist  attacks  and these  weather
conditions,  our ASMs were less than we had planned,  which caused our fixed costs to be
spread over fewer ASMs and, we believe, distorted our CASM for the period.

       For the year ended March 31, 2002, our break-even  load factor was 57.6% compared
to our  achieved  passenger  load factor of 60.0%.  For the year ended  March 31,  2001,
our break-even  load factor was 52.7% compared to the passenger load factor  achieved of
65.1%.  Our  break-even  load  factor  increased  for the year ended March 31, 2002 from
the prior  comparable  period  largely as a result of a decrease in our average  fare to
$132  during the year ended  March 31,  2002 from $146  during the year ended  March 31,
2001, compounded by an increase in our expense  per ASM to 9.33(cent)for the year ended
March 31, 2002 from 9.20(cent)for the year ended March 31, 2001.

Revenues

       Our  average  fare for the year  ended  March 31,  2002 was $132 and for the year
ended March 31, 2001 was $146.  We believe  that the decrease in the average fare during
the year ended March 31, 2002 from the prior  comparable  year was  principally a result
of the  slowing  economy.  During the year  ended  March 31,  2001,  we  experienced  an
increase  in the number of  passengers  that United  Airlines  directed to us because of
delays and  cancellations  that airline  experienced.  We estimate  that the  additional
passenger  traffic  received  from that  airline had the effect of  increasing  our load
factor and  average  fare for the year ended  March 31,  2001 by  approximately  .6 load
factor points and .9%, respectively.

       Passenger  Revenues.  Passenger revenues totaled  $435,946,000 for the year ended
March 31,  2002  compared  to  $462,609,000  for the year  ended  March 31,  2001,  or a
decrease of 5.8%,  on  increased  capacity of  331,837,000  ASMs or 7.8%.  The number of
revenue  passengers  carried was 3,069,000 for the year ended March 31, 2002 compared to
3,017,000  for the year ended March 31,  2001 or an increase of 1.7%.  We had an average
of 27.8  aircraft  in our fleet  during the year ended  March 31,  2002  compared  to an
average of 24.5  aircraft  during the year ended March 31,  2001,  an increase of 13.5%.
RPMs for the year ended March 31,  2002 were  2,756,965,000  compared  to  2,773,833,000
for the year ended March 31,  2001,  a decrease of .6%.  We believe  that our  cancelled
flights due to the  terrorist  attacks and weather had an adverse  effect on our revenue
during the period.

       Cargo  revenues,  consisting of revenues  from freight and mail service,  totaled
$6,624,000  and  $7,517,000  for the years ended March 31, 2002 and 2001,  respectively,
representing  1.5% and 1.6% of total  operating  revenues,  respectively,  a decrease of
11.9%.  We believe  that our cargo  revenues  were  impacted by the  slowing  economy as
well  as the  flight  cancellations  as a  result  of the  terrorist  attacks,  and  the
resulting  limitations  placed on cargo  service as a result of the  terrorist  attacks.
This adjunct to the  passenger  business is highly  competitive  and depends  heavily on
aircraft  scheduling,  alternate  competitive  means of same day  delivery  service  and
schedule reliability.

       Other revenues,  comprised  principally of interline  handling fees, liquor sales
and excess baggage fees,  totaled  $2,505,000  and $2,751,000 or .6% of total  operating
revenues for each of the years ended March 31, 2002 and 2001, respectively.

Operating Expenses

       Total operating  expenses were $428,689,000 and $392,155,000,  respectively,  for
the years  ended  March  31,  2002 and 2001,  and  represented  96.4% and 82.9% of total
revenue,  respectively.  Operating  expenses increased as a percentage of revenue during
the year ended March 31, 2002 as a result of the 5.8%  decrease in  passenger  revenues,
associated with the slowing economy and the September 11 terrorist attacks.

       Flight  Operations.  Flight operations  expenses of $129,814,000 and $108,370,000
were  29.2% and 22.9% of total  revenue  for the years  ended  March 31,  2002 and 2001,
respectively.  Included in flight  operations  expenses  during the year ended March 31,
2002  is   approximately   $3,086,000   for   Airbus   training   and   related   travel
expenses.

       Aircraft  lease  expenses  totaled  $64,990,000  (14.6%  of  total  revenue)  and
$61,194,000  (13% of total  revenue)  for the  years  ended  March  31,  2002 and  2001,
respectively,  or an  increase  of 6.2%.  The  increase is largely due to an increase in
the  average  number of leased  aircraft  to 25.8 from  24.5,  or 5.3%,  during the year
ended March 31, 2002 compared to the same period in 2001.

       Aircraft  insurance  expenses totaled  $5,324,000 (1.2% of total revenue) for the
year ended March 31,  2002.  Aircraft  insurance  expenses  for the year ended March 31,
2001 were  $3,241,000  (.7% of total  revenue).  Aircraft  insurance  expenses were .19(cent)
and .12(cent)per RPM for the years  ended March 31,  2002 and 2001,  respectively.  Aircraft
insurance  expenses  during the year ended March 31, 2002 were not fully impacted by the
result of the  terrorist  attacks on  September  11,  2001.  Immediately  following  the
events of September 11, Our aviation war risk  underwriters  issued seven days notice of
cancellation  to us. On  September  24, 2001,  these  underwriters  reinstated  war risk
passenger  liability  coverage but limited third party bodily injury and property damage
to $50 million per occurrence.  A special  surcharge of $1.25 per passenger  carried was
established  as the premium for this  coverage.  At the same time,  the FAA  provided us
supplemental  third  party  war  risk  coverage  from  the  $50  million  limit  to $1.6
billion.  The premium for this supplemental coverage was $7.50 per flight departure.

       Pilot and flight  attendant  salaries  before payroll taxes and benefits  totaled
$32,042,000  and  $22,475,000  or 7.4% and  4.9% of  passenger  revenue  for each of the
years  ended March 31, 2002 and 2001,  or an  increase  of 42.6%.  The first  bargaining
agreement for the pilots,  which has a five-year  term,  was ratified and made effective
in May 2000.  In May 2001,  we agreed to  reconsider  the current rates of pay under our
collective  bargaining  agreement  with our pilots in part because  several pilot unions
at other air carriers  received wage  increases,  which caused our pilot  salaries to be
substantially  below those paid by certain of our  competitors.  We  submitted a revised
pilot  pay  proposal  to FAPA,  and its  members  accepted  this  proposal  and was made
effective  May  2001.  Pilot and  flight  attendant  compensation  also  increased  as a
result of a 13.5%  increase  in the average  number of aircraft in service,  an increase
of 10.4% in block  hours,  a general wage  increase in flight  attendant  salaries,  and
additional crews required  replacing those attending  training on the Airbus  equipment.
During the three  months  ended  December  31,  2001,  FAPA agreed to an 11% decrease in
salaries  for all pilots in lieu of  furloughs  as a result of the  September  11,  2001
terrorist attacks.  The pilot salary levels were reinstated effective January 1, 2002.

       Aircraft  fuel  expenses.  Aircraft  fuel  costs of  $61,226,000  for  70,530,000
gallons used and  $71,083,000  for  66,724,000  gallons used resulted in an average fuel
cost of 87(cent)and  $1.07  per  gallon  for the  years  ended  March  31,  2002  and  2001,
respectively.  Fuel  consumption  for the year ended  March 31,  2002 and 2001  averaged
763 and 797 gallons per block hour,  respectively.  Fuel consumption  decreased from the
prior  comparable  periods  because  of  a  decrease  in  our  load  factors,  the  more
fuel-efficient   Airbus  aircraft  added  to  our  fleet  and  a  newly  developed  fuel
conservation  program  implemented  in August  2001.  Fuel  consumption  also  decreased
during the year ended March 31, 2002 from the prior  comparable  period also as a result
of  decreased  use of the Boeing  737-200  aircraft,  which have a higher fuel burn rate
than the Boeing 737-300 and Airbus A319 aircraft.

       Aircraft and Traffic  Servicing.  Aircraft and traffic  servicing  expenses  were
$70,202,000  and  $60,408,000  (an increase of 16.3%) for the years ended March 31, 2002
and 2001,  respectively,  and  represented  15.8% and 12.8% of total  revenue.  Aircraft
and traffic  servicing  expenses increase with the addition of new cities and departures
to our  route  system.  During  the year  ended  March  31,  2002,  we  served 30 cities
compared to 23 during the year ended  March 31,  2001,  or an increase of 30.4%.  During
the year ended  March 31,  2002,  our  departures  increased  to 41,736  from  38,556 or
8.2%.  Aircraft and traffic  servicing  expenses  were $1,682 per departure for the year
ended March 31, 2002 as  compared to $1,567 per  departure  for the year ended March 31,
2001,  or an increase of $115 per  departure.  Aircraft and traffic  servicing  expenses
increased as a result of expenses  associated  with deicing in April 2001 as a result of
an  unusual  spring  blizzard,   a  general  wage  rate  increase  and  an  increase  in
interrupted trip expenses as a result of the number of flight  cancellations  related to
the  aircraft  out of service  for repair of hail  damage.  Additionally,  our  security
expenses  increased  during the year ended March 31, 2002,  from  $1,762,000  during the
year ended March 31, 2001 to  $3,871,000  for the year ended March 31, 2002,  or 119.7%,
as a result of the  September  11,  2001  terrorist  attacks.  Additionally,  due to the
number  of  flight  cancellations  as a result  of  weather  conditions,  as well as the
September  11  terrorist  attacks,  the  number  of  departures  were  less  than we had
planned,  which  caused  our fixed  costs to be spread  over  fewer  departures  thereby
increasing our expenses per departure for the year ended March 31, 2002.

       Maintenance.  Maintenance  expenses  for the years  ended March 31, 2002 and 2001
of $70,227,000  and  $65,529,000,  respectively,  were 15.8% and 13.9% of total revenue,
an increase of 7.2%.  These include all labor,  parts and supplies  expenses  related to
the maintenance of the aircraft.  Routine  maintenance is charged to maintenance expense
as incurred  while major engine  overhauls  and heavy  maintenance  checks  expense were
accrued  monthly.  During  the year  ended  March 31,  2003,  we  changed  our method of
accounting for  maintenance to the direct expense method for major engine  overhauls and
heavy  maintenance  checks.  Maintenance  costs per block hour for the years ended March
31,  2002 and 2001 were $760 and $783 per block  hour,  respectively.  Maintenance  cost
per  block  hour  decreased  during  the year  ended  March  31,  2002  from  the  prior
comparable  year as a result of decreased  utilization  of our Boeing  737-200  aircraft
which are older and more costly to maintain than our other  aircraft.  Additionally,  we
added six new Airbus  aircraft  that are less costly to maintain  than our older  Boeing
aircraft.  These  maintenance  savings  were  offset or  distorted  by several  factors.
During the year ended March 31,  2002,  we incurred  approximately  $881,000  for Airbus
training  or $10 per  block  hour.  Also,  during  the year  ended  March 31,  2002,  we
decreased  the number of our  departures  as a result of decreased  consumer  demand for
air travel and reduced the  utilization of our Boeing 737-200  aircraft,  which are more
costly  to  maintain.  We also  incurred  increased  costs in  personnel,  training  and
information  technology  expenses for  implementation of new maintenance and engineering
software  and  in  preparation  for  the  Airbus  transition.  Additionally,  due to the
flight  cancellations as a result of the September 11 terrorist  attacks and the adverse
spring weather conditions,  our block hours were less than we had planned,  which caused
our fixed costs to be spread over fewer  block  hours and,  we  believe,  distorted  our
cost per block hour for the year ended March 31, 2002.

       Promotion  and  Sales.  Promotion  and sales  expenses  totaled  $59,459,000  and
$55,881,000  and were 13.4% and 11.8% of total  revenue  for the years  ended  March 31,
2002 and 2001,  respectively.  These include  advertising  expenses,  telecommunications
expenses,  wages  and  benefits  for  reservation  agents  and  supervision,   marketing
management  and sales  personnel,  credit  card  fees,  travel  agency  commissions  and
computer reservations costs.

       During the year ended March 31, 2002,  promotion and sales expenses per passenger
increased  to $19.37  from  $18.52  for the year ended  March 31,  2001.  Promotion  and
sales  increased per  passenger  over the prior  comparable  year largely as a result of
increased  advertising  for  additional  fare sales  offered  during the year as well as
advertising  in the new  cities we entered  this year.  Travel  agency  commissions  and
interline  service  charges and handling  fees,  as a percentage  of passenger  revenue,
before non-revenue  passengers,  administrative  fees and breakage (revenue from expired
tickets),  decreased to 3% for the year ended March 31,  2002,  compared to 3.5% for the
year  ended  March  31,  2001 as a  result  of the cap we put on  commissions  effective
September  2001.  With increased  activity on our web site, our calls per passenger have
decreased.  Because of the  increase  in web site  activity,  as well as a  decrease  in
long distance  rates,  we  experienced  a decrease in  communications  expense.  In July
2000,  we opened an  additional  reservations  facility  in Las  Cruces,  New Mexico and
simultaneously   terminated  an  outsourcing  agreement,   which  reduced  our  cost  of
reservations.

       General and  Administrative.  General and  administrative  expenses for the years
ended March 31, 2002 and 2001 totaled  $26,174,000  and  $25,429,000,  and were 5.9% and
5.3% of total revenue,  respectively.  During the years,  ended March 31, 2002 and 2001,
we  accrued  for  employee  performance  bonuses  totaling  $2,521,000  and  $7,009,000,
respectively,  which  were  .6%  and  1.5% of  total  revenue,  a  decrease  of 64%.  We
experienced  increases  in our human  resources,  training  and  information  technology
expenses as a result of an  increase  in  employees  from  approximately  2,360 in March
2001 to  approximately  2,700 in March 2002,  an increase  of 14.4%.  Also,  the cost of
health insurance  premiums  increased to $4,239,000 during the year ended March 31, 2002
from $2,166,000  during the prior comparable  period,  an increase of 95.7%.  Because of
the increase in personnel,  our health insurance  benefits expenses and accrued vacation
expense  increased  accordingly.  During the year ended March 31, 2002, we also incurred
start-up costs associated with the  implementation  of our in-house  revenue  accounting
department which began processing effective with April 2002 sales and revenue.

       Depreciation  and  Amortization.   Depreciation  and  amortization   expenses  of
$11,587,000 and $5,455,000,  an increase of 112.4%,  were approximately 2.6% and 1.2% of
total  revenue  for the  years  ended  March  31,  2002 and  2001,  respectively.  These
expenses include  depreciation of aircraft and aircraft  components,  office  equipment,
ground station  equipment and other fixed assets.  Depreciation  expense  increased over
the prior  year as a result of  depreciation  expense  associated  with our first  three
purchased  aircraft,  an increase in our spare parts  inventory  including spare engines
and parts for the Airbus  fleet,  ground  handling  equipment,  and computers to support
new employees as well as replacement computers for those with outdated technology.

       Nonoperating  Income (Expense).  Net nonoperating  income totaled  $8,447,000 for
the year ended  March 31,  2002  compared  to  $7,611,000  for the year ended  March 31,
2001.  During the year ended March 31, 2002, we recognized  $12,703,000 of  compensation
as a result of payments  under the  Stabilization  Act to offset direct and  incremental
losses we  experienced  as a result of the  terrorist  attacks on September 11, 2001. We
received a total of  $17,538,000  as of December  31,  2001;  the  remaining  $4,835,000
represents  amounts  received in excess of estimated  allowable  direct and  incremental
losses  incurred  from  September  11,  2001 to  December  31, 2001 and is included as a
deferred liability on our balance sheet.

       Interest income  decreased to $4,388,000  from  $7,897,000  during the year ended
March 31,  2002 from the prior year due to a decrease  in cash  balances  as a result of
cash used for  pre-delivery  payments  for future  purchases  of  aircraft,  spare parts
inventories  largely  for the  new  Airbus  fleet  and a  decrease  in  interest  rates.
Interest  expense  increased  to  $3,383,000  for the year  ended  March  31,  2002 from
$94,000 as a result of  interest  expense  associated  with the  financing  of the first
three purchased Airbus aircraft received in May, August and September 2001.

       During the year ended March 31, 2002, we negotiated  early lease  terminations on
two of  our  Boeing  737-200  aircraft  resulting  in a  pre-tax  charge  of  $4,914,000
representing a negotiated settlement of future rent amounts due.

       Income Tax Expense.  We accrued  income taxes of $8,282,000  and  $33,465,000  at
38.7%  of  taxable  income  for  each of the  years  ended  March  31,  2002  and  2001,
respectively.  During  the year ended  March 31,  2002,  we  recorded a credit to income
tax  expense  totaling  $1,327,000.  During the year ended  March 31,  2001,  we accrued
income tax  expense at the rate of 38.7%  which was  greater  than the actual  effective
tax rate of 37.6%  determined  upon  completion  and filing of the income tax returns in
December  2001.  During  the year  ended  March 31,  2002,  we also  recorded a $441,000
reduction  to income  tax  expense  as a result of a review  and  revision  of state tax
apportionment factors used in filing amended state tax returns for 2000.


Liquidity and Capital Resources

       Our liquidity  depends to a large extent on the number of passengers who fly with
us, the fares we charge,  our  operating  and capital  expenditures,  and our  financing
activities.  We depend on lease or mortgage  financing  to acquire all of our  aircraft,
including  six  additional  Airbus  aircraft as of May 31, 2003  scheduled  for delivery
through April 2004.

       We had cash and cash  equivalents and short-term  investments of $104,880,000 and
$89,555,000  at March  31,  2003  and  2002,  respectively.  At March  31,  2003,  total
current  assets  were   $190,838,000  as  compared  to  $130,047,000  of  total  current
liabilities,  resulting in working  capital of  $60,791,000.  At March 31,  2002,  total
current  assets  were   $193,393,000  as  compared  to  $152,064,000  of  total  current
liabilities,  resulting  in working  capital of  $41,329,000.  The  increase in our cash
and  working  capital  from March 31, 2002 is largely a result of the  $70,000,000  loan
obtained  in  February  2003  as a  result  of  participating  in  the  government  loan
guarantee   program  provided  for  under  the   Stabilization   Act  coupled  with  the
sale-leaseback  of one of our  purchased  aircraft.  This was  offset  by cash  used for
investing  activities,  principally as a result of the purchase of six additional Airbus
A319  aircraft,  partially  offset by cash  provided by financing  activities to finance
the aircraft  purchases.  Pre-delivery  payments  previously made for purchased aircraft
that were  delivered  to us during the year ended  March 31,  2003 were  applied as down
payments toward the purchase of these aircraft.

       Cash  provided  by  operating  activities  for the year ended  March 31, 2003 was
$388,000.  This is attributable to a $39,000,000  decrease in net income,  a decrease in
receivables  and  prepaid  expenses,  an  increase  in  accounts  payable  and  deferred
liabilities,  an  increase  in  deferred  expenses  and  inventories,  decreases  in air
traffic  liability,   and  the  repayment  of  excess   Stabilization  Act  compensation
received.  Included in cash provided by operating  activities was a $10,000,000  advance
payment on the new  affinity  card  program we  launched in May 2003.  Cash  provided by
operating  activities  for the  year  ended  March  31,  2002 was  $40,294,000.  This is
attributable  to our net income for the period,  increase in deferred tax  expense,  and
increases  in  air  traffic  liability,  other  accrued  expenses,  accrued  maintenance
expenses,  and deferred rent, offset by increases in restricted  investments,  security,
maintenance  and other deposits,  and  inventories,  and decreases in accounts  payable.
Also,  included in cash  provided by operating  activities  for the year ended March 31,
2002 is $4,835,000  of amounts  received in excess of allowable  direct and  incremental
losses  reimbursable  under the  Stabilization  Act incurred from  September 11, 2001 to
December  31, 2001.  This amount is included as a liability  on our balance  sheet as of
March 31, 2002.

       Cash  used in  investing  activities  for the  year  ended  March  31,  2003  was
$194,849,000.   We  used   $239,308,000  for  the  purchase  of  six  additional  Airbus
aircraft,  rotable  aircraft  components,  LiveTV  for the  Airbus  aircraft,  leasehold
improvements  and other general  equipment  purchases.  Net aircraft  lease and purchase
deposits  and  restricted   investments   decreased  by  $12,892,000   and   $1,177,000,
respectively,  during  this  period.  During  the year  ended  March 31,  2003,  we took
delivery of six  purchased  Airbus  aircraft and applied their  respective  pre-delivery
payments   to  the   purchase  of  those   aircraft.   Additionally,   we   completed  a
sale-leaseback  transaction  on one of our  purchased  aircraft  and assigned a purchase
commitment  on  another   Airbus  A319  to  a  lessor,   generating   cash  proceeds  of
approximately  $12,306,000  from  the  sale  of  one  aircraft  and  the  return  of the
pre-delivery  payments  relating  to the  purchase  commitment  assigned.  We  agreed to
lease both of these aircraft over a five-year  term.  Cash used by investing  activities
for the year ended March 31, 2002 was  $134,529,000.  Net  aircraft  lease and  purchase
deposits  increased by  $17,483,000.  During the year ended March 31, 2002, we exercised
purchase  options for three Airbus A319  aircraft,  and advanced  their  delivery  dates
from  the  third  and  fourth  calendar  quarters  of 2004 to May and June  2002,  which
required  deposits of  $9,603,000.  Additionally,  we amended the purchase  agreement to
add two additional  Airbus A319 aircraft,  for delivery in December 2002, which required
additional  deposits  in March 2002 of  $3,602,000.  We also used  $118,183,000  for the
purchase  of  our  first  three  Airbus  aircraft  and  to  purchase   rotable  aircraft
components  to  support  the  Airbus  fleet,  as well as a spare  engine  for the Boeing
fleet,  leasehold  improvements for our new reservations  center,  computer software for
the new maintenance and accounting systems and other general equipment purchases.

       Cash  provided  by  financing  activities  for the years ended March 31, 2003 and
2002 were  $209,787,000  and  $72,538,000,  respectively.  In February 2003, we received
$70,000,000 from the Government  Guaranteed Loan, of which  $63,000,000 is guaranteed by
the  federal  government  as  a  result  of  a  loan  program  provided  for  under  the
Stabilization  Act.  During  the years  ended  March 31,  2003 and  March 31,  2002,  we
borrowed  $171,000,000  and  $72,000,000,  respectively,  to finance  the  purchases  of
Airbus aircraft,  of which  $28,946,000 and $1,942,000 were repaid during the respective
periods.  In December  2002, we entered into a sales  leaseback  transaction  for one of
our purchased  aircraft.  We received net proceeds of approximately  $5,300,000 from the
sale of this  aircraft,  net of  repayment  of debt that  collateralized  this  aircraft
totaling  $22,772,000 and payment of fees associated with the early  extinguishments  of
the debt.  During the years ended March 31, 2003 and 2002,  we received  $1,275,000  and
$3,184,000, respectively, from the exercise of common stock options.

       DIA,  our primary  hub for  operations,  has  developed  preliminary  plans for a
significant  expansion  of  Concourse  A,  where our  aircraft  gates are  located.  The
expansion  will  add as many as 10 gates  for  full-size  commercial  jet  aircraft  and
several more gates for smaller  regional  jets. We have expressed  preliminary  interest
in entering into a long-term lease  arrangement  with the airport  authority for the use
of  additional  aircraft  gates in  connection  with our overall  expansion  plans.  The
amount we would be charged  under this lease  will  depend on the  ultimate  cost of the
project,  the amount of space to which we commit,  the financing  structure and interest
cost and the final  method by which the airport  authority  allocates  the  construction
costs  among  the  airlines.  The  current  state  of  the  industry  and  uncertainties
involving United  Airlines,  DIA's dominant  carrier,  have placed these expansion plans
on hold.

       We have been assessing our liquidity  position in light of our aircraft  purchase
commitments  and other  capital  needs,  the  economy,  our  competition,  the events of
September  11,  the war with  Iraq,  and other  uncertainties  surrounding  the  airline
industry.  Prior to applying for a government  guaranteed  loan under the  Stabilization
Act, we filed a shelf  registration  with the  Securities  and  Exchange  Commission  in
April 2002 that would  allow us to sell equity or debt  securities  from time to time as
market conditions permit.  Subsequent to this shelf  registration  filing, our financial
performance  along with  bankruptcies  and the threat of  bankruptcies of other airlines
has had a  significant  adverse  effect on our access to the capital  markets.  Although
the Government  Guaranteed  Loan has improved our liquidity,  we may need to continue to
explore  avenues  to  sustain  our  liquidity  in the  current  economic  and  operating
environment.  We intend to  continue  to examine  the  propriety  of domestic or foreign
bank aircraft  financing,  bank lines of credit and aircraft  sale-leasebacks  and other
transactions as necessary to support our capital and operating needs.

Emergency Wartime Supplemental Appropriations Act

       The Emergency Wartime Supplemental  Wartime Supplemental  Appropriations Act (the
"Appropriations  Act"),  enacted on April 16, 2003,  made available  approximately  $2.3
billion  to U.S.  flag air  carriers  for  expenses  and  revenue  foregone  related  to
aviation  security.  In order to have been  eligible  to receive a portion of this fund,
air carriers must have paid one or both of the TSA security  fees,  the  September  11th
Security  Fee  and/or  the  Aviation  Security  Infrastructure  Fee  as of the  date  of
enactment  of the  Appropriations  Act.  According  to the  Appropriations  Act,  an air
carrier may use the amount received as the air carrier determines.

       Additionally,  the Appropriations  Act provided for additional  reimbursements to
be made to U.S.  flag air carriers for costs  incurred  related to the FAA  requirements
for enhanced  flight deck door  security  measures that were mandated as a result of the
September  11  terrorist  attacks.  We are  unable  to  determine  how much of the costs
incurred will be reimbursed.

Contractual Obligations

       The following table summarizes our contractual obligations as of March 31, 2003:

                                        Less than            1-3         4-5         After
                                         1 year             years       years       5 years        Total      
Long-term debt (1)                   $  20,473,000   $  39,003,000  $ 68,501,000  $ 154,235,000  $  282,212,000
Capital lease obligations                   66,000                                                       66,000
Operating leases (2)                    83,326,000     138,269,000   111,760,000    328,517,000     661,872,000
Unconditional purchase obligations(3)  107,870,000      37,749,000                                  145,619,000

Total contractual cash obligations   $ 211,735,000   $ 215,021,000  $180,261,000  $ 482,752,000  $1,089,769,000
                                    =============================================================================

(1)  In February  2003, we obtained a  $70,000,000  Government  Guaranteed  Loan of which
     $69,300,000 was guaranteed by the Air Transportation  Stabilization  Board ("ATSB")
     and two  other  parties.  The loan has three  tranches;  Tranche  A,  Tranche B and
     Tranche   C,  in   amounts   totaling   $63,000,000,   $6,300,000   and   $700,000,
     respectively.  At March 31, 2003, the interest rates were 2.09%,  2.44%, and 3.89%,
     respectively.  The  interest  rates on each  tranche of the loan  adjust  quarterly
     based on LIBOR rates.  The loan requires  quarterly  installments of  approximately
     $2,642,000  beginning in December 2003 with a final balloon  payment of $33,000,000
     due in June 2007.  Upon  receipt of our  income  tax  receivable,  which is pledged
     under this loan  agreement,  we are required to make a pre-payment of  $10,000,000,
     which is  applied  against  the  next  successive  installments  due.  Interest  is
     payable  quarterly,  in  arrears.  Guarantee  fees of  4.5%  annually  are  payable
     quarterly in advance to the  guarantors  of the Tranche A and Tranche B loans.  The
     loan facility is secured by substantially  all of the assets of ours not previously
     encumbered.  In connection  with this  transaction,  we issued warrants to purchase
     of  3,833,946  shares of our common stock at $6.00 per share to the ATSB and to two
     other  guarantors.  The  warrants had an estimated  fair value of  $9,282,538  when
     issued and expire seven years after issuance.  The fair value for these options was
     estimated at the date of grant using a  Black-Scholes  option pricing  model.  This
     amount is being  amortized  to  interest  expense  over the life of the  loan.  The
     effective  interest rate on the notes is  approximately  10.26% including the value
     of the warrants and other costs  associated with obtaining the loan,  assuming that
     the  variable  interest  rates  payable on the notes at March 31,  2003.  The notes
     contain certain  covenants  including  liquidity tests. We are not required to meet
     certain  liquidity  tests until the quarter  ending  March 31,  2004.  Unrestricted
     cash balances  cannot be less than  $25,000,000  at any time through  September 30,
     2004 or $75,000,000  thereafter.  We are in compliance  with these  requirements at
     March 31, 2003.

     During the year ended March 31, 2002, we entered into a credit  agreement to borrow
     up to  $72,000,000  for the  purchase  of  three  Airbus  aircraft  with a  maximum
     borrowing of  $24,000,000  per  aircraft.  During the year ended March 31, 2003, we
     entered into a sale-leaseback  transaction for one of these purchased  aircraft and
     repaid the remaining loan with the proceeds of the sale.  Each  remaining  aircraft
     loan  has a term  of 10  years  and  is  payable  in  equal  monthly  installments,
     including  interest,  payable in arrears.  The aircraft  secure the loans.  Each of
     the remaining  loans require  monthly  principal and interest  payments of $215,000
     and $218,110,  bears interest with rates of 6.71% and 6.54%, with maturities in May
     and August 2011, at which time a balloon payment  totaling  $10,200,000 is due with
     respect to each loan.

     During the year ended March 31, 2003, we entered into  additional  loans to finance
     seven  additional  Airbus  aircraft with interest rates based on LIBOR plus margins
     that adjust  quarterly  or  semi-annually.  At March 31, 2003,  interest  rates for
     these loans  ranged from 2.56% to 3.01%,  each loan has a term of 12 years and each
     loan has balloon  payments  ranging from $4,800,000 to $7,770,000 at the end of the
     term.  The loans are secured by a aircraft.

(2)  As of March 31,  2003,  we lease eight  Airbus 319 type  aircraft and 19 Boeing 737
     type aircraft under  operating  leases with  expiration  dates ranging from 2003 to
     2014.  Under these  leases,  we have made cash  security  deposits or arranged  for
     letters  of credit  representing  approximately  two months of lease  payments  per
     aircraft.  At March 31, 2003, we had made cash security  deposits of $6,321,000 and
     had arranged for letters of credit of $6,959,000  collateralized by restricted cash
     balances.  Additionally,  we are  required to make  supplemental  rent  payments to
     cover the cost of major scheduled  maintenance  overhauls of these aircraft.  These
     supplemental  rent  payments  are based on the number of flight  hours flown and/or
     flight  departures  and are not  included  as an  obligation  in the  table  above.
     During the year ended March 31, 2003,  we returned  five leased Boeing 737 aircraft
     to the aircraft lessor.

     As a  complement  to our  Airbus  purchase  agreement,  in April  2000 we signed an
     agreement,  as subsequently  amended, to lease 15 new Airbus aircraft for a term of
     12  years.  As of  March  31,  2003,  we had made  cash  security  deposits  on the
     remaining  nine  aircraft we agreed to lease and have made cash  security  deposits
     and arranged for issuance of letters of credit totaling  $2,471,000 and $1,853,000,
     respectively,  to  secure  these  leases.  Our  restricted  cash  balance  includes
     $1,853,000 that collateralizes the outstanding letters of credit.

     We also lease office and hangar space,  spare engines and office  equipment for our
     headquarters  and airport  facilities,  and certain other equipment with expiration
     dates  ranging  from 2003 to 2014.  In  addition,  we lease  certain  airport  gate
     facilities  on  a  month-to-month   basis.   Amounts  for  leases  that  are  on  a
     month-to-month basis are not included as an obligation in the table above.

(3)  We have adopted a fleet  replacement  plan to phase out our Boeing 737 aircraft and
     replace them with a combination  of Airbus A319 and A318  aircraft.  In March 2000,
     we entered into an agreement,  as  subsequently  amended,  to purchase up to 31 new
     Airbus  aircraft.  Included  in the  purchase  commitment  are  amounts  for  spare
     aircraft  components  to support  the  aircraft.  We are not under any  contractual
     obligations  with  respect  to spare  parts.  As of March  31,  2003,  we had taken
     delivery  of 11 of  these  aircraft,  one of  which  we sold in  December  2002 and
     assigned one purchase  commitment to a lessor in February  2003. We agreed to lease
     each of these  aircraft  over a  five-year  term.  As of March  31,  2003,  we have
     remaining  firm  purchase   commitments  for  six  additional  aircraft  which  are
     scheduled to be delivered in calendar  years 2003 through 2005.  Under the terms of
     the purchase  agreement,  we are required to make scheduled  pre-delivery  payments
     for these aircraft.  These payments are non-refundable with certain exceptions.  As
     of March 31, 2003, we had made pre-delivery  payments on future deliveries totaling
     $30,532,000 to secure these aircraft and option aircraft.

     In June 2003, we agreed to lease two additional Airbus 318 aircraft,  scheduled for
     delivery  in May 2004 and March  2005,  and one  additional  Airbus  319  aircraft,
     scheduled  for  delivery  in  February  2005.  We plan to  operate a minimum  of 35
     purchased and leased Airbus aircraft by the fiscal year ended March 31, 2005.

     We have  recently  signed a term  sheet with a European  financial  institution  to
     provide debt  financing for four of our five A318  aircraft  scheduled for delivery
     from Airbus in fiscal year 2004.  The terms  permit us to borrow up to  $25,500,000
     per aircraft  over a period of either 120 or 144 months at floating  interest  rate
     with either a  $7,650,000  balloon  payment due at maturity if we elect a 120 month
     term or $3,060,000 if we elect a 144 month term.  We are also in  discussions  with
     a leasing company for a sale-leaseback of the A319 aircraft  delivery  scheduled in
     fiscal  year  2003.  There are no other  purchased  aircraft  due for  delivery  in
     fiscal year 2003.  The  inability  to close on the A318  financing  could result in
     delays in or our  inability to take  delivery of Airbus  aircraft we have agreed to
     purchase, which would have a material adverse effect on us.

     In October 2002 we entered into a purchase and long-term  services  agreement  with
     LiveTV to bring DIRECTV  AIRBORNE(TM)satellite  programming to every seatback in our
     Airbus  fleet.  We completed  the  installation  of the LiveTV system on all Airbus
     aircraft  in our fleet in  February  2003.  We have  agreed to the  purchase  of 46
     units of the  hardware;  however,  we have the option to cancel up to a total of 11
     units by providing  written notice of cancellation at least 12 months in advance of
     installation.  The table  above  includes  the  purchase  commitment  amount for 35
     units.

Commercial Commitments

       As we enter new  markets,  increase  the  amount of space  leased,  or add leased
aircraft,  we are often  required to provide  the lessor with a letter of credit,  bond,
or cash security  deposits.  These  generally  approximate  two months of rent and fees.
As of March 31, 2003, we had  outstanding  letters of credit,  bonds,  and cash security
deposits totaling $11,698,000,  $4,146,000,  and $7,500,000,  respectively.  In order to
meet these  requirements,  we have a credit  agreement with a financial  institution for
up to $1,500,000,  which expires  August 31, 2003,  and another credit  agreement with a
second  financial  institution for up to $20,000,000,  which expires  December 31, 2003.
These  credit  lines can be used solely for the  issuance of standby  letters of credit.
Any amounts drawn under the credit  agreements are fully  collateralized by certificates
of deposit,  which are carried as restricted  investments  on our balance  sheet.  As of
March 31, 2003,  we have drawn  $11,698,000  under these credit  agreements  for standby
letters of credit that  collateralize  certain  leases.  In the event that these  credit
agreements are not renewed beyond their present  expiration  dates,  the certificates of
deposit would be redeemed and paid to the various  lessors as cash security  deposits in
lieu of  standby  letters  of  credit.  As a  result  there  would be no  impact  on our
liquidity  if  these  agreements  were  not  renewed.  In  the  event  that  the  surety
companies  determined  that issuing  bonds on our behalf were a risk they were no longer
willing to  underwrite,  we would be  required to  collateralize  certain of these lease
obligations  with either cash  security  deposits  or standby  letters of credit,  which
would decrease our liquidity.

       We use  Airlines  Reporting  Corporation  to  provide  reporting  and  settlement
services for travel  agency sales and other related  transactions.  In order to maintain
the minimum bond (or irrevocable  letter of credit)  coverage of $100,000,  ARC requires
participating  carriers to meet, on a quarterly basis,  certain financial tests such as,
but not limited to, net profit margin  percentage,  working  capital ratio,  and percent
of debt to debt plus equity.  As of March 31,  2003,  we met these  financial  tests and
presently  are only  obligated to provide the minimum  amount of $100,000 in coverage to
ARC.  If we were to fail the  minimum  testing  requirements,  we would be  required  to
increase  our  bonding  coverage to four times the weekly  agency net cash sales  (sales
net of refunds  and agency  commissions).  Based on net cash  sales  remitted  to us for
the week ended June 20, 2003,  the  coverage  would be  increased  to  $9,122,000  if we
failed the  tests.  If we were  unable to  increase  the bond  amount as a result of our
then  financial  condition,  we could be  required  to provide a letter of credit  which
would restrict cash in an amount equal to the letter of credit.

      Our  agreement  with our Visa and  MasterCard  processor  requires  us to  provide
collateral for Visa and MasterCard  sales  transactions  equal to 50% of our air traffic
liability   associated  with  these   transactions.   As  of  March  31,  2003,  we  had
established  collateral  for  these  transactions  totaling  $12,909,000.  As of June 6,
2003,  we are required to increase the  collateral to  $15,932,000.  If we are unable to
meet the  collateral  requirements  or if it is  determined  that we have  experienced a
material  adverse  change  in  our  financial  position,  we may  be  subject  to a 100%
holdback of cash from Visa and  MasterCard  transactions  until the  passenger is flown,
or potentially, termination of the contract.

       Immediately  following  the  events  of  September  11,  our  aviation  war  risk
underwriters  limited  war risk  passenger  liability  coverage  on third  party  bodily
injury and  property  damage to $50  million  per  occurrence.  A special  surcharge  of
$1.25 per  passenger  carried was  established  as the premium for this  coverage by our
commercial  underwriters.  At the same time,  the FAA  provided  us  supplemental  third
party  war  risk  coverage  from  the  $50  million  limit  to $1.6  billion.  Effective
December  16, 2002,  the FAA amended  this  coverage to include war risk hull as well as
passenger,  crew and property  liability  insurance.  In February 2003, we cancelled our
commercial  hull and  liability war risk  coverage  after binding the FAA coverage.  The
premium  for the  revised FAA war risk  coverage  is derived  from a formula  that takes
into account total  enplanements,  total revenue  passenger miles, and total revenue ton
miles flown, and is significantly  less than the original  commercial  coverage premium.
While the  Appropriations  Act authorized the government to offer both policies  through
August 31, 2004,  the current  policies  are in effect until August 12, 2003.  We do not
know  whether the  government  will extend the  coverage,  and if it does,  how long the
extension will last. We expect that if the government  stops  providing  excess war risk
coverage to the airline  industry,  the premiums  charged by aviation  insurers for this
coverage  will be  substantially  higher  than the  premiums  currently  charged  by the
government or the coverage will simply not be available from reputable underwriters.

       In November  2002,  we  initiated a fuel  hedging  program  comprised of swap and
collar  agreements.  Under a swap agreement,  we receive the difference  between a fixed
swap price and a price based on an agreed  upon  published  spot price for jet fuel.  If
the index price is higher than the fixed price,  we receive the  difference  between the
fixed price and the spot  price.  If the index  price is lower,  we pay the  difference.
A collar  agreement  has a cap price,  a primary  floor  price,  and a  secondary  floor
price.  When the U.S.  Gulf Coast  Pipeline Jet index price is above the cap, we receive
the  difference  between  the  index  and the cap.  When the  index  price is below  the
primary floor but above the secondary  floor,  we pay the  difference  between the index
and the primary  floor.  However,  when the price is below the secondary  floor,  we are
only obligated to pay the difference between the primary and secondary floor prices.

       In November  2002,  we entered into a swap  agreement  with a notional  volume of
770,000  gallons per month of jet fuel for the period  from  December 1, 2002 to May 31,
2003.  The fixed price  under this  agreement  is 72.25  cents per  gallon.  The volumes
were  estimated  to represent  10% of our fuel  purchases  for that  period.  We entered
into a second  contract a three-way  collar in November  2002 with a notional  volume of
385,000  gallons per month for the period  December 1, 2002 to November  30,  2003.  The
cap prices for this  agreement  is 82 cents per gallon,  and the  primary and  secondary
floor  prices  are at 72 and 64.5  cents per  gallon  respectively.  The  volume of fuel
covered by this  contract is estimated to  represent 5% of our fuel  purchases  for that
period.  In March 2003, we entered into a second swap agreement  with a notional  volume
of  1,260,000  gallons  per month for the period  from  April 1, 2003 to June 30,  2003.
The fixed price of the swap is 79.25  cents per gallon and the  agreement  is  estimated
to  represent  15% of our fuel  purchases  for that  period.  In April 2003,  we entered
into a third swap  agreement with a notional  volume of 1,260,000  gallons per month for
the  period  from July 1, 2003 to  December  31,  2003.  The fixed  price of the swap is
71.53 cents per gallon and the  agreement  is  estimated  to  represent  15% of our fuel
purchases  for that  period.  The  results of  operations  for the year ended  March 31,
2003  include  an  unrealized   derivative   loss  of  $167,046  which  is  included  in
nonoperating  income  (expense)  and a realized gain of  approximately  $726,000 in cash
settlements  from a counter-party  recorded as a reduction of fuel expense.  We were not
a party to any derivative contracts during the years ended March 31, 2002 or 2001.

       In March 2003,  we entered into an interest rate swap  agreement  with a notional
amount of  $27,000,000 to a portion of the  $70,000,000  Government  Guaranteed  Loan as
discussed  above.  Under the interest  rate swap  agreement,  we are paying a fixed rate
of 2.45% and  receive a  variable  rate  based on the three  month  LIBOR.  At March 31,
2003,  our interest  rate swap  agreement had an estimated  unrealized  loss of $132,282
which was recorded as an unrealized  loss and is included in  non-operating  expenses in
the  statement  of  operations.  We did not  have  any  interest  rate  swap  agreements
outstanding during the years ended March 31, 2002 or 2001.

      Effective  January 1, 2003, we entered into an engine  maintenance  agreement with
GE Engine Services,  Inc. ("GE") for the servicing,  repair,  maintenance and functional
testing of our aircraft  engines  used on our Airbus  aircraft.  The  agreement is for a
12-year  period from the  effective  date for our owned  aircraft or December  31, 2014,
whichever  comes  first,  and for each  leased  aircraft,  the term  coincides  with the
initial  lease term of 12 years.  This  agreement  precludes us from using another third
party for such services during the term.  This agreement  requires  monthly  payments at
a specified rate  multiplied by the number of flight hours flown on the aircraft  during
that month.  The amounts due based on useage are not included in table above.


Critical Accounting Policies

       The preparation of financial statements in conformity with accounting  principles
generally  accepted  in the  United  States  of  America  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.

       Critical  accounting policies are defined as those that are both important to the
portrayal of our  financial  condition and results,  and require  management to exercise
significant  judgments.  Our most critical  accounting  policies are  described  briefly
below.  For  additional  information  about these and our other  significant  accounting
policies, see Note 1 of the Notes to the Financial Statements.

Revenue Recognition

         Passenger,  cargo, and other revenues are recognized when the transportation is
provided or after the tickets  expire,  one year after date of issuance,  and are net of
excise taxes,  passenger  facility  charges and security  fees.  Revenues that have been
deferred are included in the accompanying balance sheet as air traffic liability.

Impairment of Long-Lived Assets

       We record impairment losses on long-lived assets used in operations when indicators
of impairment are present and the undiscounted future cash flows estimated to be generated
by those assets are less than the carrying amount of the assets.  If an impairment occurs,
the loss is measured by comparing the fair value of the asset to its carrying amount. During
the year ended March 31, 2002, we wrote down the carrying value of rotable parts that
support the Boeing 737-200 aircraft by $1,512,000, as a result of dimished demand for
that aircraft type.  The write downs are charged to maintenance expenses.  The amount
of the wirte down was based on prevailing market values at that time.


 Aircraft Maintenance

       We operate under an FAA-approved  continuous  inspection and maintenance program.
We  account  for  maintenance  activities  on the  direct  expense  method.  Under  this
method,  major  overhaul  maintenance  costs are  recognized  as expense as  maintenance
services  are  performed,  as  flight  hours are  flown  for  nonrefundable  maintenance
payments  required by lease  agreements,  and as the obligation is incurred for payments
made  under  service  agreements.  Routine  maintenance  and  repairs  are  charged  to
operations as incurred.  Prior to fiscal 2003 we accrued for major  overhaul  costs on a
per-flight-hour basis in advance of performing the maintenance services.

       Effective  January  1,  2003,  we and  GE  executed  a  12-year  engine  services
agreement (the "Services  Agreement")  covering the scheduled and unscheduled  repair of
Airbus  engines.  Under  the  terms of the  Services  Agreement,  we  agreed to pay GE a
fixed rate  per-engine-hour,  payable  monthly,  and GE assumed  the  responsibility  to
overhaul  our engines on Airbus  aircraft as  required  during the term of the  Services
Agreement,  subject to certain  exclusions.  We believe the fixed rate  per-engine  hour
approximates  the  periodic  cost we would  have  incurred  to  service  those  engines.
Accordingly, these payments are expensed as the obligation is incurred.


Derivative Instruments

       We have  entered  into  derivative  instruments  which are intended to reduce our
exposure to changes in fuel prices and  interest  rates.  We account for the  derivative
instruments   entered  into  as  trading  instruments  under  FASB  Statement  No.  133,
"Accounting  for  Derivative  instruments  and Hedging  Activities"  and record the fair
value of the  derivatives  as an asset or liability as of each  balance  sheet date.  We
record  any  settlements  received  or  paid  as an  adjustment  to the  cost of fuel or
interest expense.

Customer Loyalty Programs

       In February  2001,  we  established  EarlyReturns,  a frequent  flyer  program to
encourage  travel on its airline and customer  loyalty.  We account for the EarlyReturns
program  under the  incremental  cost  method  whereby  travel  awards are valued at the
incremental  cost of  carrying  one  passenger  based  on  expected  redemptions.  Those
incremental  costs  are  based on  expectations  of  expenses  to be  incurred  on a per
passenger  basis  and  include  food  and  beverages,  fuel,  liability  insurance,  and
ticketing  costs.  The  incremental  costs do not include a  contribution  to  overhead,
aircraft  cost  or  profit.  We  do  not  record  a  liability  for  mileage  earned  by
participants  who have not  reached  the  level to  become  eligible  for a free  travel
award.   We  believe  this  is   appropriate   because  the  large   majority  of  these
participants  are  not  expected  to  earn a free  flight  award.  We do  not  record  a
liability for the expected  redemption of miles for non-travel  awards since the cost of
these awards to us is negligible.

       As of March 31, 2003 and 2002, we estimated that  approximately  14,615 and 4,600
round-trip  flight awards,  respectively,  were eligible for redemption by  EarlyReturns
members who have mileage  credits  exceeding the 15,000-mile  free  round-trip  domestic
ticket  award  threshold.  Of these  earned  awards,  we expect that  approximately  84%
would be redeemed.  The difference  between the round-trip  awards  outstanding  and the
awards  expected  to be  redeemed  is the  estimate  of awards  which  will (1) never be
redeemed,  or (2) be  redeemed  for  something  other than a free trip.  As of March 31,
2003 and 2002,  we had  recorded a liability  of  approximately  $283,000  and  $65,000,
respectively, for these rewards.


New Accounting Standards

       In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB  Statements No.
4, 44, and 64,  Amendment of FASB  Statement  No. 13, and Technical  Corrections".  This
Statement  rescinds  SFAS No. 4,  "Reporting  Gains and Losses  from  Extinguishment  of
Debt",  SFAS No. 44,  "Accounting for Intangible  Assets of Motor Carriers" and SFAS No.
64,  "Extinguishments  of  Debt  Made  to  Satisfy  Sinking-Fund   Requirements".   This
Statement  amends SFAS No. 13,  "Accounting for Leases",  to eliminate an  inconsistency
between  the  required  accounting  for  sale-leaseback  transactions  and the  required
accounting for certain lease  modifications  that have economic effects that are similar
to sale-leaseback  transactions.  We early adopted SFAS No. 145 in our fiscal year 2003.
We classified our loss on early  extinguishment  of debt as a  non-operating  expense in
our  statement of  operations  rather than as an  extraordinary  item as was  previously
required before the issuance of SFAS No. 145.

       In July 2002,  the FASB  issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities".  The Statement  addresses  financial  accounting and
reporting for costs  associated  with exit or disposal  activities  and  nullifies  EITF
Issue No. 94-3,  "Liability  Recognition for Certain Employee  Termination  Benefits and
Other   Costs  to  Exit  an   Activity   (including   Certain   Costs   Incurred   in  a
Restructuring)."  In  May  2003,  we  ceased  using  one of our  leased  Boeing  737-200
aircraft  prior to the lease  expiration  date and plan to cease  using  two  additional
Boeing  737-200  aircraft in July 2003.  We will record a liability and an expense equal
to the fair value of the remaining  payments  required  under the leases in the quarters
ending June 30, 2003 and September 30, 2003.

       In November 2002, the FASB issued Interpretation No. 45, "Guarantor's  Accounting
and  Disclosure   Requirements  for  Guarantees,   Including   Indirect   Guarantees  of
Indebtedness  to others,  an  interpretation  of FASB Statements No. 5, 57 and 107 and a
rescission  of FASB  Interpretation  No.  34."  This  Interpretation  elaborates  on the
disclosures  to be made by a guarantor  in its interim  and annual  financial  statement
about its obligations under guarantees issued.  The  Interpretation  also clarifies that
a guarantor is required to recognize,  at inception of a guarantee,  a liability for the
fair  value of the  obligation  undertaken.  The  initial  recognition  and  measurement
provisions of the  Interpretation  are applicable to guarantees issued or modified after
December 31, 2002. The disclosure  requirements  are effective for financial  statements
of interim or annual  periods  ending after  December 15,  2002.  We have not  currently
guaranteed  any   indebtedness   of  others,   and   therefore,   the  adoption  of  the
interpretation  did not  have an  impact  on our  results  of  operations  or  financial
position.

       In December  2002,  the FASB issued SFAS No.  148,  "Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure".  This  Statement  amends FASB  Statement  No.
123,  "Accounting  for  Stock-Based  Compensation",  to provide  alternative  methods of
transition  for a voluntary  change to the fair value  based  method of  accounting  for
stock-based  employee  compensation.  In addition,  this Statement amends the disclosure
requirements  of  Statement  123 to require  prominent  disclosures  in both  annual and
interim  financial  statements  about the method of accounting  for stock based employee
compensation  and the  effect  of the  method  used on  reported  results.  We have  not
adopted the fair value  method of  accounting  for stock  options,  and  therefore,  the
adoption  of SFAS  No.  148 did not  have an  effect  on our  results  of  operation  or
financial position.

       In  January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities,  and  Interpretation  of ARB No. 51." This  Interpretation
addresses the  consolidation by business  enterprises of variable  interest  entities as
defined in the  Interpretation.  The  Interpretation  applies  immediately  to  variable
interest in variable  interest  entities  created after January 31, 2003.  For nonpublic
enterprises,  such  as us,  with a  variable  interest  in a  variable  interest  entity
created  before  February 1, 2003,  the  Interpretation  is applied to the enterprise no
later  than the end of the  first  annual  reporting  period  beginning  after  June 15,
2003. The  Interpretation  requires certain  disclosures in financial  statements issued
after  January  31,  2003 if it is  reasonably  possible  that we  will  consolidate  or
disclose  information about variable interest entities when the  Interpretation  becomes
effective.  The  application of this  Interpretation  is not expected to have a material
effect on our financial statements.

        In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and Hedging  Activities".  This Statement  amends and clarifies
financial  accounting  and  reporting  for  derivative  instruments,  including  certain
derivative  instruments  embedded  in  other  contracts  (collectively  referred  to  as
derivatives) and for hedging  activities  under FASB Statement No. 133,  "Accounting for
Derivative  instruments  and  Hedging  Activities".  This  Statement  is  effective  for
contracts  entered  into or modified  after June 30,  2003 and for hedging  relationships
designated  after June 30, 2003.  The  application  of this Statement is not expected to
have a material effect on our financial statements.

        In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of Both  Liabilities  and  Equity".  This  Statement
establishes  standards  for how an issuer  classifies  and  measures  certain  financial
instruments with  characteristics  of both  liabilities and equity.  It requires that an
issuer  classify a financial  instrument  that is within its scope as a liability (or an
asset in some  circumstances).  This  Statement is effective for  financial  instruments
entered  into or modified  after May 31, 2003 and for  hedging  relationships  designated
after June 30,  2003.  The  application  of this  Statement  is not  expected  to have a
material effect on our financial statements.


Item 7A:  Quantitative and Qualitative Disclosures About Market Risk

Aircraft fuel

       Our earnings are  affected by changes in the price and  availability  of aircraft
fuel.  Market  risk is  estimated  as a  hypothetical  10 percent  change in the average
cost per gallon of fuel for the year ended  March 31,  2003.  Based on fiscal  year 2003
actual fuel usage,  such a change would have the effect of increasing or decreasing  our
aircraft fuel expense by  approximately  $8,590,000 in fiscal year 2003.  Comparatively,
based on projected  fiscal year 2004 fuel usage,  such a change would have the effect of
increasing  or  decreasing  our aircraft fuel expense by  approximately  $10,089,000  in
fiscal year 2004  excluding the effects of our fuel hedging  arrangements.  The increase
in exposure  to fuel price  fluctuations  in fiscal year 2004 is due to the  increase of
our  average  aircraft  fleet  size  during  the year ended  March 31,  2003,  projected
increases  to our fleet  during  the year  ended  March  31,  2004 and  related  gallons
purchased.

       As of March 31, 2003, we had hedged  approximately  8.3% of our projected  fiscal
2004  fuel  requirements.  In  November  2002,  we  initiated  a  fuel  hedging  program
comprised  of swap  and  collar  agreements.  Under a swap  agreement,  we  receive  the
difference  between a fixed swap  price and a price  based on an agreed  upon  published
spot  price  for jet fuel.  If the  index  price is  higher  than the  fixed  price,  we
receive the  difference  between the fixed price and the spot price.  If the index price
is lower,  we pay the  difference.  A collar  agreement has a cap price, a primary floor
price,  and a secondary  floor price.  When the U.S. Gulf Coast Pipeline Jet index price
is above the cap, we receive  the  difference  between  the index and the cap.  When the
index  price is below  the  primary  floor but above  the  secondary  floor,  we pay the
difference  between the index and the primary  floor.  However,  when the price is below
the secondary  floor,  we are only obligated to pay the  difference  between the primary
and secondary floor prices.

       In November  2002,  we entered into a swap  agreement  with a notional  volume of
770,000  gallons per month of jet fuel for the period  from  December 1, 2002 to May 31,
2003.  The fixed price  under this  agreement  is 72.25  cents per  gallon.  The volumes
were  estimated  to represent  10% of our fuel  purchases  for that  period.  We entered
into a three-way  collar in November  2002,  with a notional  volume of 385,000  gallons
per month for the period  December  1, 2002 to  November  30,  2003.  The cap prices for
this  agreement is 82 cents per gallon,  and the primary and secondary  floor prices are
72 and  64.5  cents  per  gallon,  respectively.  The  volume  of fuel  covered  by this
contract is estimated to represent 5% of our fuel  purchases  for that period.  In March
2003,  we entered  into a second  swap  agreement  with a notional  volume of  1,260,000
gallons  per month for the period from April 1, 2003 to June 30,  2003.  The fixed price
of the swap is 79.25 cents per gallon and the  agreement is  estimated to represent  15%
of our fuel  purchases  for that  period.  In April 2003,  we entered  into a third swap
agreement  with a notional  volume of  1,260,000  gallons  per month for the period from
July 1,  2003 to  December  31,  2003.  The fixed  price of the swap is 71.53  cents per
gallon and the  agreement is estimated to represent  15% of our fuel  purchases for that
period.  The  results  of  operations  for the year  ended  March 31,  2003  include  an
unrealized  derivative  loss of  $167,046  which  is  included  in  nonoperating  income
(expense)  and a realized  gain of  approximately  $726,000 in cash  settlements  from a
counter-party  recorded  as a  reduction  of fuel  expense.  We were  not a party to any
derivative contracts during the years ended March 31, 2002 or 2001.

Interest

       We are  susceptible to market risk  associated  with changes in interest rates on
long-term debt  obligations we incurred to finance the purchases of our Airbus  aircraft
and our  Government  Guaranteed  Loan.  Interest  expense  on seven of our owned  Airbus
A319  aircraft  is  subject  to  interest  rate  adjustments  every  three to six months
depending  upon changes in the  applicable  LIBOR rate.  The interest rate on borrowings
under our  credit  agreement  also is  subject  to  adjustment  based on  changes in the
applicable  LIBOR  rates.  A change  in the base  LIBOR  rate of 100 basis  points  (1.0
percent) would have the effect of increasing or decreasing our annual  interest  expense
by  $2,378,000  assuming  the  loans  outstanding  that are  subject  to  interest  rate
adjustments  at March 31, 2003  totaling  $237,778,000  are  outstanding  for the entire
period.  As of March  31,  2003,  we had  hedged  approximately  11.4%  of our  variable
interest rate loans.

       In March 2003,  we entered into an interest rate swap  agreement  with a notional
amount of  $27,000,000 to a portion of the  $70,000,000  Government  Guaranteed  Loan as
discussed  above.  Under the interest  rate swap  agreement,  we are paying a fixed rate
of 2.45% and  receive a variable  rate based on the three  month  LIBOR over the term of
the swap which expires in March 2007.


Item 8:  Financial Statements

       Our  financial  statements  are  filed  as a  part  of  this  report  immediately
following the signature page.


Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

       Not applicable.


                                    PART III

Item 10:  Directors and Executive Officers of the Registrant.

       The information  required by this Item is incorporated herein by reference to the
data under the heading  "Election  of  Directors"  in the Proxy  Statement to be used in
connection  with the  solicitation  of proxies for our annual meeting of shareholders to
be held on September  4, 2003.  We will file the  definitive  Proxy  Statement  with the
Commission on or before July 29, 2003.

Item 11.   Executive Compensation.

       The information  required by this Item is incorporated herein by reference to the
data under the heading  "Executive  Compensation"  in the Proxy  Statement to be used in
connection  with the  solicitation  of proxies for our annual meeting of shareholders to
be held on September  4, 2003.  We will file the  definitive  Proxy  Statement  with the
Commission on or before July 29, 2003.

Item 12.   Security Ownership of Certain Beneficial Owners and Management.

       The information  required by this Item is incorporated herein by reference to the
data under the heading "Voting  Securities and Principal  Holders  Thereof" in the Proxy
Statement  to be used in  connection  with the  solicitation  of proxies  for our annual
meeting of  shareholders  to be held on September 4, 2003.  We will file the  definitive
Proxy Statement with the Commission on or before July 29, 2003.

Item 13.   Certain Relationships and Related Transactions.

       The information  required by this Item is incorporated herein by reference to the
data under the  heading  "Related  Transactions"  in the Proxy  Statement  to be used in
connection  with the  solicitation  of proxies for our annual meeting of shareholders to
be held on September  4, 2003.  We will file the  definitive  Proxy  Statement  with the
Commission on or before July 29, 2003.

Item 14. Controls and Procedures

       Within the 90 days prior to the filing  date of this  report,  we carried  out an
evaluation,  under  the  supervision  and  with  the  participation  of our  management,
including  our  Chief   Executive   Officer  and  Chief   Financial   Officer,   of  the
effectiveness  of the design and  operation of our  disclosure  controls and  procedures
pursuant to Exchange Act Rule 13a-15.  Based upon that  evaluation,  our Chief Executive
Officer  and  Chief  Financial  Officer  concluded  that  our  disclosure  controls  and
procedures  are  effective.   Disclosure   controls  and  procedures  are  controls  and
procedures  that are  designed to ensure that  information  required to be  disclosed in
our  reports  filed  or  submitted  under  the  Exchange  Act  is  recorded,  processed,
summarized and completely and accurately  reported within the time periods  specified in
the Securities and Exchange Commission's rules and forms.

       There have been no  significant  changes  in our  internal  controls  or in other
factors that could  significantly  affect  internal  controls  subsequent to the date we
carried out this evaluation.

Item 15.   Principal Accountant Fees and Services

       The information  required by this Item is incorporated herein by reference to the
data under the heading  "Principal  Accountant Fees and Services" in the Proxy Statement
to be used in  connection  with the  solicitation  of proxies for our annual  meeting of
shareholders  to be held on  September  4,  2003.  We will  file  the  definitive  Proxy
Statement with the Commission on or before July 29, 2003.

                                    PART IV

Item 16(a):  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

Exhibit
Numbers           Description of Exhibits

Exhibit 3 - Articles of Incorporation and Bylaws:

    3.1           Restated  Articles of  Incorporation  of the Company.  (Exhibit 3.1 to
                  the  Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
                  September 30, 1999)

    3.2           Amended  and  Restated  Bylaws  of the  Company.  (Exhibit  3.2 to the
                  Company's  Quarterly  Report  on  Form  10-Q  for  the  quarter  ended
                  September 30, 1999)

Exhibit 4 - Instruments defining the rights of security holders:

    4.1           Specimen  common stock  certificate  of the  Company.  (Exhibit 4.1 to
                  the Company's  Registration Statement on Form SB-2, declared effective
                  May 20, 1994)

    4.2           Rights  Agreement,  dated as of February  20, 1997,  between  Frontier
                  Airlines,   Inc.  and  American  Securities  Transfer  &  Trust,  Inc,
                  including  the form of Rights  Certificate  and the  Summary of Rights
                  attached  thereto as Exhibits A and B,  respectively  (Exhibit  3.1 to
                  the Company's Registration Statement on Form 8-A filed March 12, 1997)

    4.2(a)        Amendment to Rights  Agreement  dated June 30, 1997.  (Exhibit  4.4(a)
                  to the  Company's  Annual  Report on Form  10-KSB  for the year  ended
                  March 31, 1997; Commission File No. 0-24126)

    4.2(b)        Amendment  to  Rights  Agreement  dated  December  5,  1997.  (Exhibit
                  4.4(b) to the Company's  Annual Report on Form 10-K for the year ended
                  March 31, 1999)

    4.2(c)        Third   Amendment  to  Rights   Agreement  dated  September  9,  1999.
                  (Exhibit  4.4 to the  Company's  Registration  Statement on Form 8-A/A
                  filed October 14, 1999)

    4.2(d)        Fourth  Amendment to Rights  Agreement  dated May 30,  2001.  (Exhibit
                  4.4(d) to the Company's  Annual Report on Form 10-K for the year ended
                  March 31, 2001)

    4.3           Frontier Airlines Inc.  Warrant to Purchase Common Stock, No. 1 - Air
                  Stabilization Board. Two Warrants, dated as of February 14, 2003,
                  substantially identical in all material respect to this Exhibit, have
                  been entered into with each of the Supplemental Guarantors granting
                  each Supplemental Guarantor a warrant to purchase 191,697 shares
                  under the same terms and conditions described in this Exhibit.
                  Portions of this Exhibit have been omitted and filed separately with
                  the Securities and Exchange Commission in a confidential treatment
                  request under Rule 24b-2 of the Securities Exchange Act of 1934, as
                  amended. (Exhibit 4.5 to the Company's Current Report on Form 8-K
                  dated March 25, 2003)

    4.4           Registration Rights Agreement dated as of February 14, 2003 by and
                  Frontier Airlines, Inc. as the Issuer, and the Holders to Herein of
                  Warrants to Purchase Common Stock, No Par Value.  Portions of this
                  Exhibit have been omitted and filed separately with the Securities
                  and Exchange Commission in a confidential treatment request under
                  Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
                  (Exhibit 4.6 to the Company's Current Report on Form 8-K dated March
                  25, 2003)

Exhibit 10 - Material Contracts:

   10.1           1994 Stock Option Plan.  (Exhibit 10.3 to the  Company's  Registration
                  Statement on Form SB-2, declared effective May 20, 1994)

   10.1(a)        Amendment  No.  1 to 1994  Stock  Option  Plan.  (Exhibit  10.4 to the
                  Company's  Annual  Report on Form  10-KSB for the year ended March 31,
                  1995; Commission File No. 0-4877)

   10.1(b)        Amendment  No.  2 to 1994  Stock  Option  Plan.  (Exhibit  10.2 to the
                  Company's  Annual  Report on Form  10-KSB for the year ended March 31,
                  1997; Commission File No. 0-24126)

   10.2           Airport Use and Facilities  Agreement,  Denver  International  Airport
                  (Exhibit  10.7 to the  Company's  Annual Report on Form 10-KSB for the
                  year ended March 31, 1995; Commission File No. 0-4877)

   10.3           Space and Use Agreement  between  Continental  Airlines,  Inc. and the
                  Company.  (Exhibit  10.43 to the Company's  Annual Report on Form 10-K
                  for the year ended March 31, 1999)

   10.3(a)        Second  Amendment  to  Space  and Use  Agreement  between  Continental
                  Airlines,  Inc.  and the  Company.  Portions of this Exhibit have been
                  omitted  and  filed   separately  with  the  Securities  and  Exchange
                  Commission  in a  confidential  treatment  request under Rule 24b-2 of
                  the Securities Exchange Act of 1934, as amended. (filed herewith)

   10.4           Airbus  A318/A319  Purchase  Agreement  dated  as of  March  10,  2000
                  between AVSA,  S.A.R.L.,  Seller, and Frontier Airlines,  Inc., Buyer.
                  Portions  of  this  exhibit  have  been  excluded  from  the  publicly
                  available  document and an order  granting  confidential  treatment of
                  the  excluded  material  has  been  received.  (Exhibit  10.51  to the
                  Company's  Annual  Report  on Form 10-K for the year  ended  March 31,
                  2000)

   10.5           Aircraft  Lease  Common  Terms  Agreement  dated as of April 20,  2000
                  between General  Electric Capital  Corporation and Frontier  Airlines,
                  Inc.  Portions of this  exhibit have been  excluded  from the publicly
                  available  document and an order  granting  confidential  treatment of
                  the  excluded  material  has  been  received.  (Exhibit  10.52  to the
                  Company's  Annual  Report  on Form 10-K for the year  ended  March 31,
                  2000)

   10.6           Aircraft Lease Agreement  dated as of April 20, 2000 between  Aviation
                  Financial  Services,   Inc.,  Lessor,  and  Frontier  Airlines,  Inc.,
                  Lessee,  in respect of 15 Airbus A319 Aircraft.  After 3 aircraft were
                  leased under this Exhibit with Aviation  Financial  Services,  Inc. as
                  Lessor,   related  entities  of  Aviation  Financial  Services,   Inc.
                  replaced it as the Lessor,  but each lease with these related entities
                  is substantially  identical in all material  respects to this Exhibit.
                  Portions  of  this  exhibit  have  been  excluded  from  the  publicly
                  available  document and an order  granting  confidential  treatment of
                  the  excluded  material  has  been  received.  (Exhibit  10.53  to the
                  Company's  Annual  Report  on Form 10-K for the year  ended  March 31,
                  2000)

   10.7           Lease  dated as of May 5,  2000  for  Frontier  Center  One,  LLC,  as
                  landlord,  and Frontier  Airlines,  Inc., as tenant.  Portions of this
                  exhibit have been  excluded from the publicly  available  document and
                  an order granting confidential  treatment of the excluded material has
                  been received.  (Exhibit 10.55 to the Company's  Annual Report on Form
                  10-K for the year ended March 31, 2000)

   10.8           Operating  Agreement of Frontier  Center One, LLC, dated as of May 10,
                  2000  between Shea  Frontier  Center,  LLC,  and 7001 Tower,  LLC, and
                  Frontier  Airlines,  Inc.  Portions of this exhibit have been excluded
                  from  the  publicly   available   document   and  an  order   granting
                  confidential  treatment  of the excluded  material has been  received.
                  (Exhibit  10.56 to the  Company's  Annual  Report on Form 10-K for the
                  year ended March 31, 2000)

   10.9           Standard  Industrial  Lease  dated  April 27,  2000,  between  Mesilla
                  Valley  Business Park, LLC,  landlord,  and Frontier  Airlines,  Inc.,
                  tenant.   Portions  of  this  exhibit  have  been  excluded  from  the
                  publicly  available  document  and  an  order  granting   confidential
                  treatment of the excluded  material has been received.  (Exhibit 10.57
                  to the  Company's  Annual Report on Form 10-K for the year ended March
                  31, 2000)

   10.10          General Terms  Agreement No.  6-13616  between CFM  International  and
                  Frontier  Airlines,  Inc.  Portions of this exhibit have been excluded
                  from  the  publicly   available   document   and  an  order   granting
                  confidential  treatment  of the excluded  material has been  received.
                  (Exhibit 10.60 to the Company's  Quarterly Report on Form 10-Q for the
                  quarter ended September 30, 2000)

   10.11          Lease  Agreement  dated as of December 15, 2000 between Gateway Office
                  Four, LLC,  Lessor,  and Frontier  Airlines,  Inc.,  Lessee.  (Exhibit
                  10.61 to the Company's  Quarterly  Report on Form 10-Q for the quarter
                  ended December 31, 2000)

   10.12          Code  Share  Agreement  dated  as of  May  3,  2001  between  Frontier
                  Airlines,  Inc.  and  Great  Lakes  Aviation,  Ltd.  Portions  of this
                  exhibit have been  excluded from the publicly  available  document and
                  an order granting confidential  treatment of the excluded material has
                  been received.  (Exhibit 10.62 to the Company's  Annual Report on Form
                  10-K for the year ended March 31, 2001)

   10.12(a)       Amendment  No. 1 to the  Codeshare  Agreement  dated as of May 3, 2001
                  between  Frontier  Airlines,  Inc.  and  Great  Lakes  Aviation,  Ltd.
                  Portions  of  the  exhibit  have  been   excluded  from  the  publicly
                  available document andan order granting confidential  treatment of the
                  excluded  material  has  been  received.   (Exhibit  10.62(a)  to  the
                  Company's  Quarterly  Report  on  Form  10-Q  for  the  quarter  ended
                  December 31, 2001)

   10.13          Codeshare   Agreement   between  Mesa  Airlines,   Inc.  and  Frontier
                  Airlines,  Inc.  (Exhibit 10.61 to the Company's  Quarterly  Report on
                  Form 10-Q for the quarter ended September 30, 2001)

   10.14(a)       Amendment  No. 1 to the Codeshare  Agreement  dated as of September 4,
                  2001  between  Mesa  Airlines,   Inc.  and  Frontier  Airlines,   Inc.
                  Portions  of  this  exhibit  have  been  excluded  from  the  publicly
                  available  document and an order  granting  confidential  treatment of
                  the excluded  material  has been  received.  (Exhibit  10.65(a) to the
                  Company's  Quarterly  Report  on  Form  10-Q  for  the  quarter  ended
                  December 31, 2001)

   10.14(b)       Amendment  No. 2 to  Codeshare  Agreement  dated as of  August 1, 2002
                  between Mesa Airlines,  Inc. and Frontier  Airlines,  Inc. Portions of
                  this  Exhibit  have  been  omitted  and  filed   separately  with  the
                  Securities  and  Exchange  Commission  in  a  confidential   treatment
                  request  under Rule 24b-2 of the  Securities  Exchange Act of 1934, as
                  amended. (filed herewith)

   10.14(c)       Letter  Agreement No. 1 to the Codeshare  Agreement  dated February 1,
                  2003  between  Mesa  Airlines,   Inc.  and  Frontier  Airlines,   Inc.
                  Portions of this Exhibit have been omitted and filed  separately  with
                  the  Securities and Exchange  Commission in a  confidential  treatment
                  request  under Rule 24b-2 of the  Securities  Exchange Act of 1934, as
                  amended. (filed herewith)

   10.15          Employee Stock  Ownership Plan of Frontier  Airlines,  Inc. as amended
                  and  restated,  effective  January 1, 1997 and  executed  February  5,
                  2002.  (Exhibit 10.66 to the Company's  Quarterly  Report on Form 10-Q
                  for the quarter ended December 31, 2001)

   10.15(a)       Amendment of the Employee Stock  Ownership Plan of Frontier  Airlines,
                  Inc. as amended and restated,  effective  January 1, 1997 and executed
                  February  5,  2002 for  EGTRRA.  (Exhibit  10.66(a)  to the  Company's
                  Quarterly  Report  on Form 10-Q for the  quarter  ended  December  31,
                  2001)

   10.16          Director  Compensation  Agreement between Frontier Airlines,  Inc. and
                  Samuel D. Addoms dated  effective  April 1, 2002.  This  agreement was
                  modified  on  April  1,  2003,   to  expressly   describe  the  second
                  installment  exercise period as on or after December 31, 2003, and the
                  third  installment  exercise  period  as on or after  April  1,  2004.
                  (Exhibit  10.67 to the  Company's  Annual  Report on Form 10-K for the
                  year ended March 31, 2002)

   10.17          Secured  Credit  Agreement  dated  as  of  October  10,  2002  between
                  Frontier  Airlines,  Inc. and Credit Agricole Indosuez in respect to 3
                  Airbus 319 aircraft.  Portions of this exhibit have been excluded form
                  the publicly  available  document and an order  granting  confidential
                  treatment of the excluded  material has been received.  (Exhibit 10.75
                  to the  Company's  Quarterly  Report on Form  10-Q/A  for the  quarter
                  ended September 30, 2002)

   10.18          Aircraft Mortgage and Security  Agreement dated as of October 10, 2002
                  between  Frontier  Airlines,  Inc.  and Credit  Agricole  Indosuez  in
                  respect to 3 Airbus 319  aircraft.  Portions of this exhibit have been
                  excluded form the publicly  available  document and an order  granting
                  confidential  treatment  of the excluded  material has been  received.
                  (Exhibit  10.76 to the Company's  Quarterly  Report on Form 10-Q/A for
                  the quarter ended September 30, 2002)

   10.19          $70,000,000 Loan Agreement dated as of February 14, 2003 among
                  Frontier Airlines, Inc. as Borrower, West LB AG, as Tranche A Lender
                  and Tranche C Lender, Wells Fargo Bank, N.A., as Tranche B-1 Lender,
                  Tranche B-2 Lender, and a Tranche C Lender, Bearingpoint, Inc. as
                  Loan Administrator, Wells Fargo Bank Northwest, N.A. as Collateral
                  Agent, LB AG, as Agent, and Air Transportation Stabilization Board.
                  Portions of this Exhibit have been omitted and filed separately with
                  the Securities and Exchange Commission in a confidential treatment
                  request under Rule 24b-2 of the Securities Exchange Act of 1934, as
                  amended. (Exhibit 10.77 to the Company's Current Report on Form 8-K
                  dated March 25, 2003)

   10.20          Mortgage and Security Agreement dated as of February 14, 2003 made by
                  Frontier Airlines, Inc. in favor of Wells Fargo Bank Northwest, N.A.
                  the Collateral Agent.  Portions of this Exhibit have been omitted and
                  filed separately with the Securities and Exchange Commission in a
                  confidential treatment request under Rule 24b-2 of the Securities
                  Exchange Act of 1934, as amended. (Exhibit 10.78 to the Company's
                  Current Report on Form 8-K dated March 25, 2003)

Exhibit 18- Letter re Change in Accounting Principles

   18.1           Letter from KPMG LLP re Change in Accounting Principle (filed
                  herewith)

Exhibit 23 - Consents of Experts:

   23.1           Consent of KPMG LLP (filed herewith)

Exhibit 99 - Additional Exhibits:

   99.1           Section 906 Certification of President and Chief Executive Officer,
                  Jeff S. Potter.  (filed herewith)

   99.2           Section 906 Certification of Chief Financial Officer, Paul H. Tate.
                  (filed herewith)

   99.3           Section 302 Certification of President and Chief Executive Officer,
                  Jeff S. Potter.  (filed herewith)

   99.4           Section 302 Certification of Chief Financial Officer, Paul H. Tate.
                  (filed herewith)

Item 16(b):  Reports on Form 8-K.

       During the quarter ended March 31, 2003, the Company filed the following  reports
on Form 8-K.
                                                 Financial Statements
Date of Reports            Item Numbers        Required to be Filed
  February 19, 2003               5                      None
  March 26, 2003               5 and 7                   None







                                       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.


                                                     FRONTIER AIRLINES, INC.


Date:  June 26, 2003                                 By: /s/ Paul H. Tate
                                                     Paul H. Tate, Vice President and
                                                     Chief Financial Officer


Date:  June 26, 2003                                 By: /s/ Elissa A. Potucek
                                                     Elissa A.Potucek, Vice President,Controller,
                                                     Treasurer and Principal Accounting Officer

       Pursuant to the requirements of the Securities  Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant  and in the
capacities and on the dates indicated.

Date:  June 26, 2003                                 By:  /s/ Jeffery S. Potter
                                                     Jeffery S. Potter, Director

Date:  June 26, 2003                                 By:  /s/ Samuel D. Addoms
                                                     Samuel D. Addoms, Director

Date:  June 26, 2003                                 By:  /s/ William B. McNamara
                                                     William B. McNamara, Director

Date: June 26, 2003                                  By:  /s/ Paul Stephen Dempsey
                                                     Paul Stephen Dempsey, Director

Date: June 26, 2003                                  By:                      
                                                     B. LaRae Orullian, Director

Date: June 26, 2003                                  By:  /s/ D. Dale Browning
                                                     D. Dale Browning, Director

Date: June 26, 2003                                  By:                      
                                                     James B. Upchurch, Director

Date: June 26, 2003                                  By:  /s/  Hank Brown
                                                     Hank Brown, Director




                                                Certification


I, Jeff  S. Potter, certify that:

1.   I have reviewed this annual report on Form 10-K of Frontier Airlines, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
     omit to state a material fact necessary to make the statements made, in light of the circumstances
     under which such statements were made, not misleading with respect to the period covered by this
     quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this
     annual report, fairly present in all material respects the financial condition, results of operations
     and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining
     disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
     registrant and have:

         a.   designed such disclosure controls and procedures to ensure that material information relating
              to the registrant, including its consolidated subsidiaries, is made known to us by others
              within those entities, particularly during the period in which this quarterly report is being
              prepared;

         b.   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a
              date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”);
              and

         c.   presented in this quarterly report our conclusions about the effectiveness of the disclosure
              controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation,
     to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
     performing the equivalent function):

         a.   all significant deficiencies in the design or operation of internal controls which could
              adversely affect the registrant’s ability to record, process, summarize and report financial
              data and have identified for the registrant’s auditors any material weaknesses in internal
              controls; and

         b.   any fraud, whether or not material, that involves management or other employees who have a
              significant role in the registrant’s internal controls; and

6.   The registrant’s other certifying officers and I have indicated in this quarterly report whether or
     not there were significant changes in internal controls or in other factors that could significantly
     affect internal controls subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material weaknesses.

Date:   June 26, 2003


                                                       By:     /s/ Jeff  S. Potter             
                                                             Jeff S. Potter
                                                             President and Chief Executive Officer


                                                Certification


I, Paul Tate, certify that:

1.   I have reviewed this annual report on Form 10-K of Frontier Airlines, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact
     or omit to state a material fact necessary to make the statements made, in light of the circumstances
     under which such statements were made, not misleading with respect to the period covered by this
     quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this
     quarterly report, fairly present in all material respects the financial condition, results of
     operations and cash flows of the registrant as of, and for, the periods presented in this quarterly
     report;

4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining
     disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
     registrant and have:

         a.   designed such disclosure controls and procedures to ensure that material information relating
              to the registrant, including its consolidated subsidiaries, is made known to us by others
              within those entities, particularly during the period in which this quarterly report is being
              prepared;

         b.   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a
              date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”);
              and

         c.   presented in this quarterly report our conclusions about the effectiveness of the disclosure
              controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation,
     to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
     performing the equivalent function):

         a.   all significant deficiencies in the design or operation of internal controls which could
              adversely affect the registrant’s ability to record, process, summarize and report financial
              data and have identified for the registrant’s auditors any material weaknesses in internal
              controls; and

         b.   any fraud, whether or not material, that involves management or other employees who have a
              significant role in the registrant’s internal controls; and

6.   The registrant’s other certifying officers and I have indicated in this quarterly report whether or
     not there were significant changes in internal controls or in other factors that could significantly
     affect internal controls subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material weaknesses.

Date:    June 26, 2003


                                                       By:     /s/ Paul H. Tate         
                                                             Paul H. Tate
                                                             Chief Financial Officer





                                        Independent Auditors' Report



The Board of Directors and Stockholders
Frontier Airlines, Inc.:


We have audited the accompanying  balance sheets of Frontier  Airlines,  Inc. as of March
31,  2003 and 2002, and the related statements of operations,  stockholders'  equity,  and
cash flows for each of the years in the three-year  period ended March 31, 2003. These financial
statements are the  responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards  generally  accepted in the
United States of America.  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 financial statements referred to above present fairly, in all material
respects, the financial position of Frontier  Airlines,  Inc.  as of March 31,  2003 and 2002,
and the results of its operations and its cash flows for each of the years in the three-year
period  ended  March 31,  2003,  in conformity with accounting principles generally accepted
in the United States of America.

As discussed in note 1 to the financial statements, the Company changed its method of
accounting for aircraft maintenance checks from the accrual method of accounting to the
direct expense method in 2003.




                                                            KPMG LLP

Denver, Colorado
May 22, 2003



FRONTIER AIRLINES, INC.
Balance Sheets
March 31, 2003 and 2002


                                                                         2003                   2002       
Assets
Current assets:
    Cash and cash equivalents                                     $ 102,880,404            $  87,555,189
    Short-term investments                                            2,000,000                2,000,000
    Restricted investments                                           14,765,000               12,074,000
    Receivables, net of allowance for doubtful accounts
      of $237,000 and $155,000 at March 31, 2003 and 2002,
      respectively                                                   25,856,692               28,536,313
    Income taxes receivable (note 9)                                 24,625,616                6,855,544
    Security, maintenance and other deposits (note 7)                   912,399               36,891,297
    Prepaid expenses                                                  9,032,084               11,013,602
    Inventories, net of allowance of $2,478,000 at March
      31, 2003                                                        5,958,836                6,604,378
    Deferred tax asset (note 9)                                       4,788,831                1,788,078
    Other current assets                                                 18,587                   74,952   
            Total current assets                                    190,838,449              193,393,353
Property and equipment, net (note 4)                                334,492,983              142,861,771
Security, maintenance and other deposits (note 7)                     6,588,023               20,087,569
Aircraft pre-delivery payments                                       30,531,894               44,658,899
Restricted investments                                                9,324,066               12,160,210
Deferred loan fees and other assets                                  16,068,361                  523,134   
                                                                  $ 587,843,776            $ 413,684,936
                                                             ==============================================

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                              $  26,388,621            $  23,185,266
    Air traffic liability                                            58,875,623               61,090,705
    Other accrued expenses (note 6)                                  22,913,659               22,060,082
    Accrued maintenance expense (note 1)                                 -                    37,527,906
    Refundable stabilization act compensation (note 2)                   -                     4,835,381
    Current portion of long-term debt (note 8)                       20,473,446                3,225,651
    Deferred revenue and other liabilities (note 5)                   1,396,143                  138,604   
            Total current liabilities                               130,047,492              152,063,595
Long-term debt (note 8)                                             261,738,503               66,832,018
Accrued maintenance expense (note 1)                                     -                    15,796,330
Deferred tax liability (note 9)                                      20,017,787                6,716,815
Deferred revenue and other liabilities (note 5)                      17,072,868                3,142,885   
            Total liabilities                                       428,876,650              244,551,643   

Stockholders' equity:
    Preferred stock, no par value, authorized 1,000,000
      shares; none issued
    Common stock, no par value, stated value of $.001 per
      share, authorized 100,000,000 shares; 29,674,050 and
      29,421,331 issued and outstanding at March 31, 2003
      and March 31, 2002, respectively                                   29,674                   29,422
    Additional paid-in capital                                       96,424,525               85,867,486
    Unearned ESOP shares (note 12)                                       -                    (2,119,670)
    Retained earnings                                                62,512,927               85,356,055   
            Total stockholders' equity                              158,967,126              169,133,293   

Commitments and contingencies (notes 3, 7, 12 and 15)
                                                                    587,843,776              413,684,936
                                                             ==============================================
See accompanying notes to financial statements.


FRONTIER AIRLINES, INC.

Statement of Operations

Years Ended March 31, 2003, 2002 and 2001


                                                          2003                    2002                    2001
Revenues:
                                                                                                                                                                         $
    Passenger                                        $ 460,187,753           $ 435,945,581           $ 462,608,847
    Cargo                                                5,557,153               6,623,665               7,516,867
    Other                                                4,191,009               2,505,479               2,750,713    
            Total revenues                             469,935,915             445,074,725             472,876,427    

Operating expenses:
    Flight operations                                  155,913,606             129,814,429             108,370,148
    Aircraft fuel expense                               85,896,535              61,226,385              71,083,152
    Aircraft and traffic servicing                      86,447,925              70,201,825              60,408,236
    Maintenance                                         75,559,243              70,227,020              65,529,428
    Promotion and sales                                 53,031,888              59,458,779              55,880,717
    General and administrative                          26,060,812              26,173,864              25,428,753
    Depreciation and amortization                       17,649,815              11,586,703               5,454,673    

            Total operating expenses                   500,559,824             428,689,005             392,155,107    

            Operating income (loss)                    (30,623,909)             16,385,720              80,721,320    

Nonoperating income (expense):
    Interest income                                      1,882,691               4,388,249               7,897,282
    Interest expense                                    (8,041,412)             (3,382,695)                (94,393)
    Stabilization act compensation                           -                  12,703,007                   -
    Loss on early extinquishment of debt                (1,774,311)                  -                       -
    Aircraft lease termination                               -                  (4,913,650)                  -
    Unrealized derivative loss                            (299,328)                  -                       -
    Other, net                                            (652,897)               (348,329)               (191,771)   

            Total nonoperating income(expense), net     (8,885,257)              8,446,582               7,611,118    

Income (loss) before income tax expense (benefit)
    and cumulative effect of change in method of
    accounting for maintenance                         (39,509,166)             24,832,302              88,332,438

Income tax expense (benefit)                           (14,655,366)              8,282,312              33,464,665    

Income (loss) before cumulative effect of
    change in method of accounting for maintenance     (24,853,800)             16,549,990              54,867,773

Cumulative effect of change in method  of accounting
    for maintenance, net of tax (note 1)                 2,010,672                   -                       -        

Net income (loss)                                    $ (22,843,128)           $ 16,549,990            $ 54,867,773
                                                   ===================================================================

(continued)


FRONTIER AIRLINES, INC.

Statement of Operations, continued

Years Ended March 31, 2003, 2002 and 2001


                                                          2003                    2002                    2001

Earnings (loss)  per share:
  Basic:
    Income (loss) before cumulative effect of a
      change in accounting principle                    ($0.84)                   $0.58                   $2.02
    Cumulative  effect of change in method
      of accounting for maintenance                       0.07                      -                       -      

    Net income (loss)                                   ($0.77)                   $0.58                   $2.02
                                                   ===================================================================

  Diluted:
    Income (loss) before cumulative effect of a
      change in accounting principle                    ($0.84)                   $0.56                   $1.90
    Cumulative  effect of change in method of
      accounting for maintenance                          0.07                     -                        -      

    Net income (loss)                                   ($0.77)                   $0.56                   $1.90
                                                   ===================================================================

  Pro forma amounts assuming the new
    method of accounting for maintenance
    is applied retroactively:
      Net income                                                             17,661,307            $ 55,119,366
        Earnings per share:
            Basic                                                                 $0.62                   $2.03
            Diluted                                                               $0.60                   $1.91

Weighted average shares of
  common stock outstanding
            Basic                                       29,619,742           28,603,861              27,152,099
                                                   ===================================================================
            Diluted                                     29,619,742           29,515,150              28,842,783
                                                   ===================================================================

See accompanying notes to financial statements.






FRONTIER AIRLINES, INC.

Statements of Stockholders' Equity

Years Ended March 31, 2003, 2002 and 2001


                                        Common Stock           Additional     Unearned                       Total
                                                  Stated        paid-in         ESOP      Retained     stockholders'
                                     Shares       value         capital        shares    earnings         equity    

Balances, March 31, 2000             26,598,410   26,599       67,937,363     (857,713)  $13,938,292       81,044,541
Exercise of common stock
    warrants (note 10)                  583,030      583        1,450,570         -             -           1,451,153
Exercise of common stock
    options (note 11)                   879,025      879        1,884,366         -             -           1,885,245
Tax benefit from exercises of
    common stock options and
    warrants                               -          -         4,129,336         -             -           4,129,336
Contribution of common stock to
    employees  stock  ownership  plan
    (note 12)                           135,000      135        2,216,115   (2,216,250)         -                -
Amortization of employee stock
    compensation (note 12)                 -          -              -       1,411,876          -           1,411,876
Adjustment for fractional shares
    from stock dividend                    (863)      (1)         (10,832)        -             -             (10,833)
Net income                                 -          -              -            -       54,867,773       54,867,773 
Balances, March 31, 2001             28,194,602   28,195       77,606,918   (1,662,087)   68,806,065      144,779,091
Exercise of common stock
    warrants (note 10)                  525,000      525        1,311,975         -             -           1,312,500
Exercise  of common  stock  options
    (note 11)                           528,711      529        1,870,516         -             -           1,871,045
Tax benefit from exercises of
    common stock options and
    warrants                               -          -         2,252,023         -             -           2,252,023
Contribution of common stock to
    employees stock ownership plan
    (note 12)                           173,018      173        2,826,054   (2,826,227)         -                -
Amortization of employee stock
    compensation (note 12)                 -          -              -       2,368,644          -           2,368,644
Net income                                 -          -              -            -       16,549,990       16,549,990 
Balances, March 31, 2002             29,421,331   29,422       85,867,486   (2,119,670)   85,356,055      169,133,293
Exercise of common stock options
    (note 11)                           252,719      252          616,695         -             -             616,947
Warrants issued in conjunction
    with debt agreement (note 10)          -          -         9,282,538         -             -           9,282,538
Tax benefit from exercises of
    common stock options and warrants      -          -           657,806         -             -             657,806
Contribution of common stock to
    employees  stock  ownership  plan
    (note 12)                              -          -              -            -             -                -
Amortization of employee stock
    compensation (note 12)                 -          -              -       2,119,670          -           2,119,670
Net loss                                   -          -              -            -      (22,843,128)     (22,843,128)
Balances, March 31, 2003           $29,674,050  $29,674      $96,424,525   $     -      $62,512,927     $158,967,126
                                    =====================================================================================

See accompanying notes to financial statements.




FRONTIER AIRLINES, INC.

Statements of Cash Flows

Years ended March 31, 2003, 2002, and 2001


                                                        2003             2002               2001
Cash flows from operating activities:
    Net income (loss)                             $ (22,843,128)    $ 16,549,990       $ 54,867,773
    Adjustments to reconcile net
     income (loss) to net cash provided
     by operating activities:
       Employee stock ownership plan
         compensation expense                         2,641,624        2,368,644          1,411,876
       Depreciation and amortization                 18,297,444       11,670,818          5,618,200
       Impairment recorded on inventories             2,478,196        1,511,642               -
       Loss on disposal of equipment                    573,075          323,000             56,800
       Unrealized  derivative loss                      299,328             -                  -
       Deferred tax expense                          10,300,219        4,435,402          1,146,015
       Changes in operating assets
         and libilities:
           Restricted investments                    (1,031,556)      (4,588,250)        (5,639,400)
           Receivables                                2,679,621         (758,891)        (6,060,773)
           Income taxes receivable                  (17,770,072)            -                  -
           Security, maintenance and other deposits    (341,365)      (7,885,865)       (16,207,351)
           Prepaid expenses                           1,981,518         (164,522)        (3,462,229)
           Inventories                               (1,832,654)      (2,532,043)        (1,837,152)
           Deferred loan fees and other assets       (3,339,467)            -                  -
           Accounts payable                           3,203,355       (1,470,179)         7,215,154
           Air traffic liability                     (2,215,082)       1,459,846         18,144,400
           Other accrued expenses                        32,295        3,823,603            694,460
           Refundable stabilization act compensation (4,835,381)       4,835,381               -
           Accrued maintenance expense               (2,269,046)       7,638,480         16,578,273
           Deferred revenue and other liabilities    14,378,900        3,077,326               -    
             Net cash provided by operating
               activities                               387,843       40,294,382         72,526,046 


Cash flows from investing activities:
    Decrease in short-term investments, net                -                -            13,760,000
    Decrease (increase) in aircraft
      lease and purchase deposits, net               12,891,605      (17,483,332)       (22,810,967)
    Decrease (increase) in restricted investments     1,176,000        1,137,700         (3,330,500)
    Proceeds from the sale of aircraft               29,750,000             -                  -
    Capital expenditures                           (238,667,511)    (118,182,990)       (21,957,336)
             Net cash used in investing
               activities                          (194,849,206)    (134,528,622)       (34,338,803)

Cash flows from financing activities:
    Net proceeds  from issuance of
      common stock and warrants                       1,274,753        3,183,545          3,325,566
    Proceeds from long-term borrowings              241,100,000       72,000,000               -
    Payment of financing fees                        (3,504,435)        (577,959)              -
    Principal payments on long-term borrowings      (28,945,720)      (1,942,331)              -
    Principal payments on obligations under
      captial leases                                   (138,020)        (125,252)          (112,316)
              Net cash provided by financing
                activities                          209,786,578       72,538,003          3,213,250 
              Net increase (decrease) in cash
                and cash equivalents                 15,325,215      (21,696,237)        41,400,493

Cash and cash equivalents, beginning of period       87,555,189      109,251,426         67,850,933


Cash and cash equivalents, end of period          $ 102,880,404     $ 87,555,189      $ 109,251,426
                                               ================= ================== =================

See accompanying notes to financial statements.




FRONTIER AIRLINES, INC.

Notes to Financial Statements

March 31, 2003


 (1)    Nature of Business and Summary of Significant Accounting Policies

        Nature of Business

        Frontier  Airlines,  Inc.  ("Frontier" or the "Company")  provides air  transportation for passengers
        and freight.  Frontier was  incorporated  in the State of Colorado on February 8, 1994 and  commenced
        operations  on July 5, 1994.  Denver-based  Frontier in  conjunction  with its  regional  jet partner
        Frontier  JetExpress  currently  serves 38 cities coast to coast with a fleet of 19 Boeing 737 and 17
        Airbus A319 jets, from its base in Denver,  and employs  approximately  3,200 aviation  professionals
        as of March 31, 2003.

        Airline  operations  have high fixed costs  relative to revenues and are highly  sensitive to various
        factors  including  the  actions  of  competing   airlines  and  general  economic   factors.   Small
        fluctuations  in  yield  per  revenue   passenger  mile  or  expense  per  available  seat  mile  can
        significantly affect operating results.

        Preparation of Financial Statements and Use of Estimates

        The preparation of financial  statements in conformity with accounting  principles generally accepted
        in the United States of America  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.

        Cash and Cash Equivalents

        For financial  statement  purposes,  the Company  considers cash and short-term  investments  with an
        original  maturity of three months or less to be cash  equivalents.  These  investments are stated at
        cost,  which  approximates  fair value.  Cash  includes  $25,000,000  required to be available and on
        hand  based  on loan  covenants  with  our  loan  guaranteed  principally  by the Air  Transportation
        Stabilization Board ("ATSB") loan (see note 7).

        Short-term Investments

        Short-term  investments  consist of certificates of deposit with maturities  between three months and
        one year.  These  investments  are classified as  held-to-maturity  and are carried at amortized cost
        which  approximates  fair  value.  Held-to-maturity  securities  are  those  securities  in which the
        Company  has the  ability  and  intent  to hold the  security  until  maturity.  Interest  income  is
        recognized when earned.




FRONTIER AIRLINES, INC.

Notes to Financial Statements, continued

        Supplemental Disclosure of Cash Flow Information

        Cash Paid During the Year for:

                                                      2003                  2002              2001

                              Interest     $        6,490,758    $        3,081,370    $      94,393
                                Taxes        $             -       $        8,838,909    $  21,926,000

        Supplemental disclosure of non-cash activities:

        In connection with the commercial loan facility the Company  obtained  during the year ended March 31,
        2003,  the  Company  issued  warrants  to the ATSB and to two other  guarantors  for the  purchase of
        3,833,946  of our common  stock at $6.00 per  share.  The  warrants  had an  estimated  fair value of
        $9,282,538 which increased deferred loan fees and other assets and increased additional paid-in
        captial.  See Note 7.

        Restricted Investments

        Restricted  investments  include  certificates  of deposit  which  secure  certain  letters of credit
        issued  primarily  to  companies  which  process  credit  card  sale  transactions,  certain  airport
        authorities  and aircraft  lessors.  Restricted  investments  are carried at cost,  which  management
        believes  approximates  fair value.  Maturities  are for one year or less and the Company  intends to
        hold restricted investments until maturity.

        Valuation and Qualifying Accounts

        The allowance  for doubtful  accounts was  approximately  $237,000 and $155,000 at March 31, 2003 and
        2002,  respectively.  Provisions  for bad debts net of recoveries  totaled  $477,000,  $450,000,  and
        $1,179,000  for the years ended March 31,  2003,  2002 and 2001,  respectively.  Write-offs  from the
        allowance for doubtful  accounts totaled $395,000,  $663,000,  and $982,000 for the years ended March
        31, 2003, 2002, and 2001, respectively.

        At March 31, 2003 and 2002, we had reserves for our aircraft  rotable parts  totaling  $1,323,000 and
        $1,512,000,  respectively.  Write-offs from the reserve totaled $189,000 for the year ended March 31,
        2003.  Additionally, at March 31, 2003 inventories include a reserve for our aircraft expendable parts
        totaling $2,478,000 and none at March 31, 2002.  The Company recorded a reserve against Boeing spare
        parts inventory totaling $2,478,000 during the year ended March 31, 2003.

        Accrued  maintenance  expense  was  zero and  $53,324,000  at  March  31,  2003 and 2002, respecitvely.
        See "aircraft maintenance" below.  Effective April 1, 2002, the Company changed its method of accounting
        for maintenance checks from the accrue-in-advance method to the direct expensing  method.  Provisions
        for accrued  maintenance  expenses totaled  $22,168,000 and $24,970,000 for the years ended March 31,
        2002 and 2001,  respectively.  Deductions from accrued  maintenance  expense totaled  $14,530,000 and
        $8,391,000 for the years ended March 31, 2002 and 2001, respectively.

        Inventories

        Inventories  consist of expendable  aircraft  spare parts,  supplies and aircraft fuel and are stated
        at the lower of cost or market.  Inventories  are  accounted for on a first-in,  first-out  basis and
        are  charged to expense as they are used.  An  allowance  was  provided  in the year ended  March 31,
        2003 in the amount of  $2,478,000  for Boeing  spare parts that was based on the fair market value of
        the parts and the  estimated  useage of those  parts  throughout  the  remaining  lease  terms of the
        Boeing  aircraft.  The Company will continue to monitor this reserve  throughout  the duration of our
        fleet replacement plan.

        Property and Equipment

        Property  and  equipment  are  carried  at  cost.  Major  additions,  betterments  and  renewals  are
        capitalized.  Depreciation  and  amortization is provided for on a  straight-line  basis to estimated
        residual values over estimated depreciable lives as follows:

                  Aircraft                                    25 years
                  Capitalized software                        3 years
                  Flight equipment                            5-10 years
                  Improvements to leased aircraft             Life of improvements or term of lease,
                                                              whichever is less
                  Ground property, equipment, and
                    leasehold improvements                    3-5 years or term of lease


        Residual  values for aircraft are at 25% of the aircraft cost,  residual  values for engines range in
        amounts up to 48% of the engine's  cost and residual  values for major  rotable  parts are  generally
        10% of the cost of the asset,  except when a guaranteed  residual value or other  agreements exist to
        better  estimate the residual  value.  Assets  utilized  under capital  leases are amortized over the
        lesser of the lease term or the estimated  useful life of the asset using the  straight-line  method.
        Amortization of capital leases is included in depreciation expense.

        Deferred Loan Fees

        Deferred  loan fees,  including  the  estimated  fair value of warrants  issued to the  lenders,  are
        deferred and amortized  over the term of the related debt  obligation  using the  effective  interest
        method.

        Impairment of Long-Lived Assets

        The Company  records  impairment  losses on long-lived  assets used in operations  when indicators of
        impairment  are present and the  undiscounted  future cash flows  estimated  to be generated by those
        assets  are less than the  carrying  amount  of the  assets.  If an  impairment  occurs,  the loss is
        measured  by  comparing  the fair value of the asset to its  carrying  amount.  During the year ended
        March 31, 2002,  the Company  wrote down the carrying  value of rotable parts that support the Boeing
        737-200  aircraft by $1,512,000,  as a result of diminished  demand for that aircraft type. The write
        down was charged to  maintenance  expenses.  The  amount of the write down was based on  prevailing
        market values at that time.

        Manufacturers' Credits

        The Company  receives credits in connection with its purchase of aircraft,  engines,  auxiliary power
        units and other rotable  parts.  These credits are deferred  until the aircraft,  engines,  auxiliary
        power units and other  rotable  parts are  delivered  and then  applied as a reduction of the cost of
        the related equipment.

        Aircraft Maintenance

        The Company  operates under an  FAA-approved  continuous  inspection  and  maintenance  program.  The
        Company accounts for maintenance  activities on the direct expense method.  Under this method,  major
        overhaul  maintenance  costs are  recognized as expense as  maintenance  services are  performed,  as
        flight hours are flown for nonrefundable  maintenance  payments required by lease agreements,  and as
        the  obligation is incurred for payments  made under service  agreements.  Routine  maintenance  and
        repairs are charged to  operations  as incurred.  Prior to fiscal 2003 the Company  accrued for major
        overhaul costs on a per-flight-hour basis in advance of performing the maintenance services.

        Effective  January 1, 2003,  the Company and GE Engine  Services, Inc.  (GE)  executed a  twelve-year
        engine services  agreement (the "Services  Agreement")  covering the scheduled and unscheduled repair
        of Airbus engines.  Under the terms of the Services  Agreement,  the Company agreed to pay GE a fixed
        rate  per-engine-hour,  payable monthly,  and GE assumed the responsibility to overhaul the Company's
        engines  on Airbus  aircraft  as  required  during  the term of the  Services  Agreement,  subject to
        certain  exclusions.  The Company  believes the fixed rate per-engine hour  approximates the periodic
        cost the Company  would have  incurred to service  those  engines.  Accordingly,  these  payments are
        expensed as the obligation is incurred.

        Effective  April 1,  2002,  the  Company  changed  its  method of  accounting  for  certain  aircraft
        maintenance  costs from the accrual method of accounting to the direct expense method.  Under the new
        accounting  method,  maintenance  costs  are  recognized  as  expense  as  maintenance  services  are
        performed  and as flight hours are flown for  nonrefundable  maintenance  payments  required by lease
        agreements.  The Company  believes  the  direct-expense  method is  preferable  in the  circumstances
        because the  maintenance  liability  is not  recorded  until there is an  obligating  event (when the
        maintenance  event is actually  being  performed  or flight  hours are  actually  flown),  the direct
        expense method  eliminates  significant  estimates and judgments  inherent under the accrual  method,
        and it is the  predominant  method  used in the airline  industry.  Accordingly,  effective  April 1,
        2002,  the  Company  reversed  its major  overhaul  accrual  against  the  corresponding  maintenance
        deposits  and  recorded  a  cumulative  effect  of a change in  accounting  principle  of  $3,196,617
        ($2,010,672, net of income taxes).

        Advertising Costs

        The  Company  expenses  the  costs of  advertising  as  promotion  and  sales  in the year  incurred.
        Advertising  expense was $5,717,438,  $9,086,752,  and $6,076,501 for the years ended March 31, 2003,
        2002, and 2001, respectively.

        Development Costs

        Development costs related to the preparation of operations for new routes are expensed as incurred.

        Revenue Recognition

        Passenger,  cargo,  and other revenues are recognized  when the  transportation  is provided or after
        the tickets expire,  and are net of excise taxes.  Unearned  revenues have been deferred and included
        in the accompanying balance sheet as air traffic liability.

        Passenger Traffic Commissions and Related Expenses

        Passenger traffic  commissions and related expenses are expensed when the  transportation is provided
        and the related revenue is recognized.  Passenger  traffic  commissions and related  expenses not yet
        recognized are included as a prepaid expense.

        Customer Loyalty Programs

        In February  2001,  the Company  established  EarlyReturns,  a frequent  flyer  program to  encourage
        travel on its airline and customer loyalty.

        The Company  accounts for the  EarlyReturns  program under the incremental cost method whereby travel
        awards are valued at the incremental  cost of carrying one passenger  based on expected  redemptions.
        Those  incremental  costs are based on  expectations  of expenses  to be incurred on a per  passenger
        basis  and  include  food  and  beverages,  fuel,  liability  insurance,  and  ticketing  costs.  The
        incremental  costs do not include a contribution  to overhead,  aircraft cost or profit.  The Company
        does not record a liability  for  mileage  earned by  participants  who have not reached the level to
        become  eligible  for a free travel  award.  The Company  believes  this is  appropriate  because the
        large  majority of these  participants  are not  expected to earn a free  flight  award.  The Company
        does not record a liability  for the expected  redemption  of miles for  non-travel  awards since the
        cost of these awards to the Company is negligible.

        As of March 31, 2003 and 2002, the Company estimated that  approximately  14,615 and 4,600 round-trip
        flight awards,  respectively,  were eligible for redemption by EarlyReturns  members who have mileage
        credits  exceeding the 15,000-mile free round-trip  domestic ticket award threshold.  Of these earned
        awards,  the Company expected that  approximately 84% would be redeemed.  The difference  between the
        round-trip  awards  outstanding  and the awards  expected to be  redeemed  is the  estimate of awards
        which will (1) never be redeemed,  or (2) be redeemed  for  something  other than a free trip.  As of
        March 31,  2003 and 2002,  the  Company  had  recorded a  liability  of  approximately  $283,000  and
        $65,000, respectively, for these rewards.

        In March 2003 we entered into an agreement with a financial  institution,  a full-service credit card
        issuer,  to exclusively  offer Frontier  MasterCard  products to consumers,  customers and Frontier's
        EarlyReturns  frequent  flyer  members.  The credit card was  launched  in May 2003.  During the year
        ended March 31, 2003, we received a $10,000,000  advance on expected future earnings  associated with
        the program which is included in deferred revenues and other liabilities at March 31, 2003.

        Deferred Revenue

        Deferred revenue represents  advances received under an agreement with a financial  institution which
        is offering the Company a co-branded  MasterCard  product to our customers and other  consumers.  See
        "Customer Loyalty  Programs" above. As EarlyReturns  miles accrue in the members'  accounts,  we earn
        the  revenue  associated  with this  agreement  and amounts are  applied  against  the  advance.  The
        revenue  earned  from the sale of  frequent  flyer  miles  will be  further  deferred  and  amortized
        straight-line over 20 months.

        Earnings (Loss)  Per Common Share

        Basic  earnings  per common share  excludes  the effect of  potentially  dilutive  securities  and is
        computed by dividing  income by the  weighted-average  number of common  shares  outstanding  for the
        period.  Diluted  earnings per common share reflects the potential  dilution of all  securities  that
        could share in earnings.

        Income Taxes

        The Company  accounts  for income  taxes using the asset and  liability  method.  Under that  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 tax bases of existing assets and liabilities.  A valuation
        allowance  for net deferred tax assets is provided  unless  realizability  is judged by management to
        be more likely than not.  The effect on deferred  taxes from a change in tax rates is  recognized  in
        income in the period that includes the enactment date.

        Fair Value of Financial Instruments

        The Company  estimates  the fair value of its monetary  assets and  liabilities  based upon  existing
        interest  rates  related to such assets and  liabilities  compared to current  rates of interest  for
        instruments  with a similar  nature and  degree of risk.  The  Company  estimates  that the  carrying
        value of all of its  monetary  assets and  liabilities  approximates  fair value as of March 31, 2003
        and 2002 with  exception of its fixed rate loans at March 31, 2003.  The Company estimates the fair
        value of its fixed rate loans to be approximately $49,619,955 as compared to the book value of
        $44,434,308 at March 31, 2003.

        Derivative Instruments

        The  Company has entered  into  derivative  instruments  which are  intended to reduce the  Company's
        exposure to changes in fuel  prices and  interest  rates.  The Company  accounts  for the  derivative
        instruments  entered  into as trading  instruments  under Statement  No. 133 of Financial Accounting
        Standards, "Accounting for Derivative instruments and Hedging Activities" and records the fair value
        of the derivatives as an asset or liability as of each  balance sheet date with a corresponding gain
        or loss  recorded in non-operating  income (expense).  The Company records any settlements received
        or  paid  as an adjustment to the cost of fuel or interest expense, as appropriate.

        Stock Based Compensation

        The Company  follows  Accounting  Principles  Board Opinion No. 25,  "Accounting  for Stock Issued to
        Employees"  ("APB 25") and related  Interpretations  in accounting for its employee stock options and
        follows the  disclosure  provisions  of  Statement of Financial  Accounting  Standards  No. 123 (SFAS
        123).  The  Company  applies  APB 25  and  related  Interpretations  in  accounting  for  its  plans.
        Accordingly,  no  compensation  cost is recognized  for options  granted at a price equal to the fair
        market  value of the Common  Stock.  Pro forma  information  regarding  net income and  earnings  per
        share is required by SFAS 123,  which also  requires  that the  information  be  determined as if the
        Company  has  accounted  for  its  employee  stock  options  under  the  fair  value  method  of that
        Statement.  The  fair  value  for  these  options  was  estimated  at  the  date  of  grant  using  a
        Black-Scholes  option pricing model with the following  weighted-average  assumptions  for 2003, 2002
        and 2001,  respectively:  risk-free interest rates of 4.14%, 4.47% and 6.02%,  dividend yields of 0%,
        0% and 0%;  volatility  factors of the expected market price of the Company's common stock of 82.06%,
        83.75% and 56.78%, and a  weighted-average  expected life of the options of 2.5 years, 2.6 years, and
        2.7 years.  Had compensation  cost for the Company's  stock-based  compensation  plan been determined
        using the fair  value of the  options  at the grant  date,  the  Company's  pro forma net  income and
        earnings per share would be as follows:



                                                        2003                  2002                  2001   

Net Income (loss):
            As Reported                            $ (22,843,128)        $  16,549,990         $  54,867,773
            Pro Forma                              $ (26,290,907)        $  14,424,422         $  53,527,821

          Earnings (loss) per share, basic:
            As Reported                            $       (0.77)        $        0.58         $        2.02
            Pro Forma                              $       (0.89)        $        0.50         $        1.97

          Earnings (loss) per share, diluted:

            As Reported                            $       (0.77)        $        0.56         $        1.90
            Pro Forma                              $       (0.89)        $        0.49         $        1.86

        New Accounting Standards

        In April  2002,  the FASB  issued SFAS No. 145,  "Rescission  of FASB  Statements  No. 4, 44, and 64,
        Amendment of FASB Statement No. 13, and Technical  Corrections".  This Statement rescinds SFAS No. 4,
        "Reporting Gains and Losses from  Extinguishment  of Debt",  SFAS No. 44,  "Accounting for Intangible
        Assets of Motor  Carriers"  and SFAS No. 64,  "Extinguishments  of Debt Made to Satisfy  Sinking-Fund
        Requirements".  This  statement  amends  SFAS No.  13,  "Accounting  for  Leases",  to  eliminate  an
        inconsistency  between the  required  accounting  for  sale-leaseback  transactions  and the required
        accounting  for  certain  lease  modifications  that  have  economic  effects  that  are  similar  to
        sale-leaseback  transactions.  The Company  early  adopted SFAS No. 145 in its fiscal year 2003.  The
        Company  classified  our loss on  early  extinguishment  of debt as a  non-operating  expense  in our
        statement of operations  rather than as an extraordinary  item as was previously  required before the
        issuance of SFAS No. 145.

        In July 2002, the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated with Exit or Disposal
        Activities".  The Statement  addresses  financial  accounting and reporting for costs associated with
        exit or disposal  activities and nullifies EITF Issue No. 94-3,  "Liability  Recognition  for Certain
        Employee  Termination  Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
        in a  Restructuring)."  In May 2003,  the  Company  ceased  using  one of its  leased  Boeing  737-200
        aircraft prior to the lease  expiration  date and plans to cease using two additional  Boeing 737-200
        aircraft in July 2003.  The Company  will record a liability  and an expense  equal to the fair value
        of the  remaining  payments  required  under  the  leases in the  quarters  ending  June 30,  2003 and
        September 30, 2003.

        In November  2002,  the FASB issued  Interpretation  No. 45,  "Guarantor's  Accounting and Disclosure
        Requirements  for  Guarantees,   Including   Indirect   Guarantees  of  Indebtedness  to  others,  an
        interpretation  of FASB  Statements  No. 5, 57 and 107 and a rescission  of FASB  Interpretation  No.
        34." This  Interpretation  elaborates on the disclosures to be made by a guarantor in its interim and
        annual financial  statement about its obligations under guarantees issued.  The  Interpretation  also
        clarifies  that a guarantor is required to  recognize,  at inception of a guarantee,  a liability for
        the fair value of the obligation  undertaken.  The initial recognition and measurement  provisions of
        the  Interpretation  are  applicable to guarantees  issued or modified  after  December 31, 2002. The
        disclosure  requirements  are effective for financial  statements of interim or annual periods ending
        after December 15, 2002. The Company has not currently  guaranteed any  indebtedness  of others,  and
        therefore,  the adoption of the  interpretation  did not have an impact on the  Company's  results of
        operations or financial position.

        In December 2002, the FASB issued SFAS No. 148,  "Accounting for Stock-Based  Compensation-Transition
        and  Disclosure".  This  Statement  amends  FASB  Statement  No.  123,  "Accounting  for  Stock-Based
        Compensation",  to provide  alternative  methods of  transition  for a  voluntary  change to the fair
        value  based  method  of  accounting  for  stock-based  employee  compensation.   In  addition,  this
        Statement  amends the disclosure  requirements of Statement 123 to require  prominent  disclosures in
        both  annual  and  interim  financial  statements  about the  method of  accounting  for stock  based
        employee  compensation  and the effect of the method  used on reported  results.  The Company has not
        adopted the fair value method of accounting  for stock options,  and therefore,  the adoption of SFAS
        No. 148 did not have an effect on our results of operation or financial position.

        In  January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of  Variable  Interest
        Entities,  and  Interpretation  of ARB No. 51." This  Interpretation  addresses the  consolidation by
        business   enterprises  of  variable  interest  entities  as  defined  in  the  Interpretation.   The
        Interpretation  applies  immediately to variable interest in variable interest entities created after
        January 31, 2003.  For  nonpublic  enterprises,  such as the Company,  with a variable  interest in a
        variable  interest  entity created  before  February 1, 2003,  the  Interpretation  is applied to the
        enterprise  no later  than the end of the first  annual  reporting  period  beginning  after June 15,
        2003. The Interpretation  requires certain  disclosures in financial  statements issued after January
        31, 2003 if it is  reasonably  possible  that the Company will  consolidate  or disclose  information
        about variable  interest  entities when the  Interpretation  becomes  effective.  The  application of
        this Interpretation is not expected to have a material effect on the Company's financial statements.

        In April 2003,  the FASB issued SFAS No. 149,  "Amendment of Statement 133 on Derivative  Instruments
        and Hedging  Activities".  This  Statement  amends and clarifies  financial  accounting and reporting
        for derivative  instruments,  including certain  derivative  instruments  embedded in other contracts
        (collectively  referred to as derivatives)  and for hedging  activities under FASB Statement No. 133,
        "Accounting  for  Derivative  instruments  and Hedging  Activities".  This Statement is effective for
        contracts  entered  into or  modified  after June 30, 2003 and for  hedging  relationship  designated
        after June 30, 2003. The  application of this Statement is not expected to have a material  effect on
        the Company's financial statements.

        In May 2003,  the FASB issued SFAS No.  150,  "Accounting  for  Certain  Financial  Instruments  with
        Characteristics  of Both  Liabilities and Equity".  This Statement  establishes  standards for how an
        issuer  classifies  and  measures  certain  financial   instruments  with   characteristics  of  both
        liabilities  and equity.  It requires that an issuer  classify a financial  instrument that is within
        its scope as a  liability  (or an asset in some  circumstances).  This  Statement  is  effective  for
        financial  instruments  entered  into or modified  after May 31,  2003 and for  hedging  relationship
        designated  after June 30, 2003.  The  application  of this Statement will not have any impact on the
        Company's financial statements.

        Reclassifications

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

(2)     Government Assistance

        Air Transportation Safety and System Stabilization Act

        As a result of the September 11, 2001 terrorist  attacks on the United States,  on September 22, 2001
        President  Bush  signed  into law the Air  Transportation  Safety and System  Stabilization  Act (the
        "Act").  The Act which provided,  among other things,  for  compensation to U.S.  passenger and cargo
        airlines for direct and increment  losses  incurred from September 11, 2001 to December 31, 2001 as a
        result  of  the  September  11  terrorist  attacks.  The  Company  was  eligible  to  receive  up  to
        approximately  $20,200,000  from the $5  billion in cash  compensation  provided  for in the Act,  of
        which  $17,538,388  was received as of March 2002.  The Company  recognized  $12,703,007 of the grant
        during the year ended  March 31,  2002 which is included in  non-operating  income and  expense.  The
        remaining  $4,835,381  represents  amounts  received  in excess of  estimated  allowable  direct  and
        incremental  losses  incurred  from  September  11,  2001  through  December  31, 2001 and was repaid
        during the year ended March 31, 2003.

        Emergency Wartime Supplemental Wartime Supplement Appropriations Act

        The Emergency Wartime Supplemental  Wartime Supplemental  Appropriations Act (the Appropriations Act)
        enacted  on April 16,  2003,  which  made  available  approximately  $2.3  billion  to U.S.  flag air
        carriers  for  expenses  and revenue  foregone  related to aviation  security.  In order to have been
        eligible  to  receive a portion  of this  fund,  air  carriers  must have paid one or both of the TSA
        security  fees, the September 11th Security Fee and/or the Aviation  Security  Infrastructure  Fee as
        of the date of enactment of the  Appropriations  Act.  According  to the  Appropriations  Act, an air
        carrier may use the amount received as the air carrier  determines.  The  Appropriations Act requires
        air  carriers  who accept  these  funds to limit the  compensation  paid  during the 12 month  period
        beginning  April 1, 2003 to each  executive  officer  to an amount  equal to no more than the  annual
        salary paid to that  officer  with  respect to the air  carrier's  fiscal year 2002.  Pursuant to the
        Appropriations Act, the Company received $15,573,000 in May 2003.

        Additionally,  the Appropriations Act provided for additional  reimbursements to be made to U.S. flag
        air  carriers  for costs  incurred  related to the FAA  requirements  for  enhanced  flight deck door
        security  measures  that were  mandated  as a result  of the  September  11  terrorist  attacks.  The
        Company is unable to determine how much of the costs incurred will be reimbursed.

(3)     Derivative Instruments

        Fuel Hedging

        In  November  2002,  the  Company  initiated  a fuel  hedging  program  comprised  of swap and collar
        agreements.  Under a swap agreement,  the Company receives the difference  between a fixed swap price
        and a price  based on an  agreed  upon  published  spot  price for jet  fuel.  If the index  price is
        higher than the fixed  price,  the Company  receives the  difference  between the fixed price and the
        spot price.  If the index price is lower,  the Company pays the  difference.  A collar  agreement has
        a cap price, a primary floor price,  and a secondary  floor price.  When the U.S. Gulf Coast Pipeline
        Jet index  price is above the cap,  the Company  receives  the  difference  between the index and the
        cap.  When the index  price is below the primary  floor but above the  secondary  floor,  the Company
        pays the  difference  between the index and the primary floor.  However,  when the price is below the
        secondary  floor,  the  Company is only  obligated  to pay the  difference  between  the  primary and
        secondary floor prices.

        In November  2002,  the  Company  entered  into a swap  agreement  with a notional  volume of 770,000
        gallons  per  month of jet fuel for the  period  from  December  1, 2002 to May 31,  2003.  The fixed
        price under this  agreement is 72.25 cents per gallon.  The volumes were  estimated to represent  10%
        of fuel  purchases for that period.  The Company  entered into a second  contract in November 2002, a
        three-way  collar,  with a notional  volume of 385,000  gallons per month for the period  December 1,
        2002 to  November  30,  2003.  The cap  prices for this  agreement  is 82 cents per  gallon,  and the
        primary and secondary  floor prices are at 72 and 64.5 cents per gallon  respectively.  The volume of
        fuel covered by this  contract is estimated to  represent 5% of fuel  purchases  for that period.  In
        March 2003,  the Company  entered into a second swap  agreement  with a notional  volume of 1,260,000
        gallons  per month for the period  from April 1, 2003 to June 30,  2003.  The fixed price of the swap
        is 79.25 cents per gallon and the  agreement  is estimated to  represent  15% of fuel  purchases  for
        that  period.  In April  2003,  we entered  into a third  swap  agreement  with a notional  volume of
        1,260,000  gallons per month for the period from July 1, 2003 to December 31,  2003.  The fixed price
        of the swap is 71.53  cents per  gallon and the  agreement  is  estimated  to  represent  15% of fuel
        purchases  for that period.  The results of  operations  for the year ended March 31, 2003 include an
        unrealized  derivative  loss of $167,046  which is included in  nonoperating  income  (expense) and a
        realized  gain of  approximately  $726,000 in cash  settlements  from a  counter-party  recorded as a
        reduction  of fuel  expense.  The  Company  was not a party to any  derivative  contracts  during the
        years ended March 31, 2002 or 2001.



        Interest Rate Hedging Program

        In March 2003, the Company  entered into an interest rate swap  agreement  with a notional  amount of
        $27,000,000  to a portion  of the  $70,000,000  commercial  loan  facility  as  discussed  in note 7.
        Under the  interest  rate swap  agreement,  the Company is paying a fixed rate of 2.45% and receive a
        variable rate based on the three month LIBOR.  At March 31, 2003,  our interest  rate swap  agreement
        had an  estimated  unrealized  loss of  $132,282  which was  recorded  as an  unrealized  loss and is
        included in  non-operating  expenses in the  statement  of  operations.  The Company did not have any
        interest rate swap agreements outstanding during the years ended March 31, 2002 or 2001.

(4)    Property and Equipment, Net

        As of March 31, 2003 and 2002 property and equipment consisted of the following:

                                                                                    2003                2002
        Aircraft, spare aircraft parts, and
          improvements to leased aircraft                                    $   345,804,415     $   142,590,544
        Ground property, equipment and leasehold
          improvements                                                            24,460,880          20,989,272
        Construction in progress                                                   1,293,135           1,829,400
                                                                                 371,558,430         165,409,216  
        Less accumulated depreciation and amortization
                                                                                 (37,065,447)        (22,547,445) 
        Property and equipment, net                                          $   334,492,983     $   142,861,771
                                                                             ==================  =================

        Property and equipment  includes  certain  office  equipment and software  under capital  leases.  At
        March 31,  2003 and 2002,  office equipment and software  recorded under capital leases were $602,149
        in both years and  accumulated  amortization  was $493,754 and $400,843,  respectively.  At March 31,
        2002,  construction  in progress  includes  capitalized  software  totaling  approximately  $642,000.
        Airbus flight equipment not yet placed in service totalled  approximately  $1,219,000 and $1,187,000,
        at March 31, 2003 and 2002, respectively.

        During the year ended  March 31,  2003,  we  completed  a  sale-leaseback  transaction  on one of our
        purchased  aircraft and  assigned a purchase  commitment  on another  Airbus  A319,  generating  cash
        proceeds of  approximately  $42,056,000,  of which  $22,863,368 was used to repay the loan secured by
        one of these  aircraft  and  $1,774,311  associated  with the early  extinguishment  of the debt.  We
        agreed to lease both of these  aircraft  over a  five-year  term.  The fees paid were  recorded  as a
        loss on  early  extinguishment  of debt  and is  included  in  non-operating  income  (expense).  The
        Company  recognized a gain of  approximately  $1,169,000  on the sale which has been  deferred and is
        being amortized as a reduction of lease expense over the five-year term of the leases.

(5)     Deferred Revenue and Other Liabilities

        At March 31, 2003 and 2002 deferred revenue and other liabilities is comprised of the following:

                                                                              2003                 2002

             Advance received for co-branded credit card
               revenue (note 1)                                             10,000,000              -
             Deferred rent                                                   8,122,500            3,077,326
             Other                                                             346,511              204,163    

             Total deferred revenue and other liabilities                   18,469,011            3,281,489

             Less current portion                                           (1,396,143)            (138,604)    
                                                                         $  17,072,868       $    3,142,885
                                                                       ===================  ===================


(6)     Other Accrued Expenses

        The March 31, 2003 and 2002 other accrued expenses is comprised of the following:

                                                           2003                 2002

Accrued salaries and benefits      $14,103,101          $11,857,466
                    Federal excise taxes payable         3,899,329            6,383,350
                    Other                                4,911,229            3,819,266

                                                       $22,913,659          $22,060,082
                                                   ===================  ===================

(7)     Lease Commitments

        Aircraft Leases

        At March 31, 2003 and 2002, the Company  operated 27 leased  aircraft,  which are accounted for under
        operating  lease  agreements  with initial  terms  ranging from 3 years to 12 years.  Certain  leases
        allow for renewal  options.  Security  deposits related to leased aircraft and future leased aircraft
        deliveries  at March 31, 2003 and 2002  totaled  $6,320,933  and  $5,293,189,  respectively,  and are
        included in security,  maintenance and other deposits.  Letters of credit issued to certain  aircraft
        lessors in lieu of cash  deposits  and related  restricted  investments  to secure  these  letters of
        credit at March 31, 2003 and 2002 totaled $7,959,100 and $9,282,700, respectively.

        During the year ended March 31, 2002, the Company  negotiated early lease  terminations on two of its
        Boeing 737-200  aircraft  resulting in a charge of $4,913,650,  representing  the payment amounts due
        to terminate the lease early.

        In  addition  to  scheduled  future  minimum  lease  payments,   the  Company  is  required  to  make
        supplemental  rent  payments  to cover the cost of major  scheduled  maintenance  overhauls  of these
        aircraft.  These  supplemental  rentals are based on the number of flight hours flown  and/or  flight
        departures.  The lease  agreements  require the  Company to pay taxes,  maintenance,  insurance,  and
        other  operating  expenses  applicable to the leased  property.  Effective  April 1, 2002, we changed
        our method of accounting for maintenance costs.  This change in accounting method resulted in a decrease
        in maintenance deposits and related maintenance accruals totaling $51,055,190 and $59,055,258,
        respectively.

        Other Leases

        The  Company  leases  an  office,   hangar  space,   spare  engines  and  office  equipment  for  its
        headquarters,  airport  facilities,  and certain  other  equipment.  The Company also leases  certain
        airport gate facilities on a month-to-month basis.

        At  March  31,  2003,   commitments  under   noncancelable   operating  leases  (excluding   aircraft
        supplemental rent requirements) with terms in excess of one year were as follows:

                                                                                 Operating
                                                                                  Leases
                               Year ended March 31:
                               2004                                          $  83,325,975
                               2005                                             76,790,940
                               2006                                             61,477,754
                               2007                                             56,339,841
                               2008                                             55,419,581
                               Thereafter                                      328,517,593
                                                                                           

                                     Total minimum lease payments             $661,871,684
                                                                          =================

        Rental expense under operating leases,  including  month-to-month  leases,  for the years ended March
        31, 2003, 2002 and 2001 was $92,337,439, $86,603,234 and $80,781,897, respectively.

(8)    Long-term Debt

        Long-term debt at March 31 consisted of the following:

           Commercial loan facility payable through 2007,
             6.60% weighted average interest rate at
             March 31, 2003, including guarantee fees,
             variable interest rates based on LIBOR plus
             margins ranging from .07% to 2.5%                              $  70,000,000         $         -
           Aircraft notes payable, 6.62% weighted average
             interest rate                                                     44,434,308            70,057,669
           Aircraft notes payable, variable interest rates
             based on LIBOR plus margins ranging from
             1.25% to 1.70%, 2.85% weighted average interest
             rates at March 31, 2003                                          167,777,641                  -   
           Total debt                                                         282,211,949            70,057,669

           Less current maturities                                             20,473,446             3,225,651

                                                                             $261,738,503          $ 66,832,018
                                                                           ====================  =================


        In February 2003, the Company  obtained a $70,000,000  commercial loan facility of which  $69,300,000
        was guaranteed by the ATSB and two other  parties.  The loan has three  tranches;  Tranche A, Tranche
        B and Tranche C, in amounts totaling  $63,000,000,  $6,300,000 and $700,000,  respectively.  At March
        31, 2003 the interest rates were 2.09%,  2.44%, and 3.89%,  respectively.  The interest rates on each
        tranche  of  the  loan  adjust  quarterly  based  on  LIBOR  rates.   The  loan  requires   quarterly
        installments of approximately  $2,642,000  beginning in December 2003 with a final balloon payment of
        $33,000,000  due in June  2007.  Upon  receipt  of the  Company's  income  tax  receivable,  which is
        pledged  under this loan  agreement,  the Company is required to make a pre-payment  of  $10,000,000,
        which is applied against the next successive  installments  due.  Interest is payable  quarterly,  in
        arrears.  Guarantee  fees of 4.5% annually are payable  quarterly in advance to the guarantors of the
        Tranche A and Tranche B loans.  The loan  facility is secured by certain assets of the Company as
        described in the loan agreement, consisting primarily of Boeing rotable fixed assts, all expendable
        inventory and 50% of other property and equipment. In connection with this transaction, the Company
        issued warrants to purchase of 3,833,946 shares of our common stock at $6.00 per share to the ATSB and to
        two other  guarantors.  The warrants had an estimated fair value of $9,282,538 when issued and expire
        seven years after  issuance.  The fair value for these  options  was  estimated  at the date of grant
        using a Black-Scholes  option pricing model.  This amount is being amortized to interest expense over
        the life of the loan.  The effective  interest rate on the notes is  approximately  10.26%  including
        the value of the warrants and other costs  associated  with  obtaining  the loan,  assuming  that the
        variable  interest  rates  payable  on the  notes  at March  31,  2003.  The  notes  contain  certain
        covenants  which  requires the Company to maintain  certain  ratios with respect to  indebtedness  to
        EBITDAR and EBITDAR to fixed  charges  beginning  January 1,  2004..  The Company is not  required to
        meet certain  liquidity  tests until the quarter  ending March 31, 2004.  Unrestricted  cash balances
        cannot be less than  $25,000,000 at any time through  September 30, 2004 or  $75,000,000  thereafter.
        The company is in compliance with these requirements at March 31, 2003.

        During the year ended March 31, 2002,  the Company  entered  into a credit  agreement to borrow up to
        $72,000,000  for the purchase of three Airbus  aircraft with a maximum  borrowing of $24,000,000  per
        aircraft.  During  the  year  ended  March  31,  2003,  the  Company  entered  into a  sale-leaseback
        transaction  for one of these  purchased  aircraft and repaid the remaining loan with the proceeds of
        the sale.  Each  remaining  aircraft  loan has a term of 10 years  and is  payable  in equal  monthly
        installments,  including  interest,  payable in arrears.  The aircraft secure the loans.  Each of the
        remaining  loans  require  monthly  principal and interest  payments of $215,000 and $218,110,  bears
        interest  with rates of 6.71% and 6.54%,  with  maturities  in May and August  2011,  at which time a
        balloon payment totaling  $10,200,000 is due with respect to each loan.

        During the year ended March 31, 2003,  the Company  entered into  additional  loans to finance  seven
        additional  Airbus aircraft with interest rates based on LIBOR plus margins that adjust  quarterly or
        semi-annually.  At March 31, 2003  interest  rates for these loans  ranged from 2.56% to 3.01%,  each
        loan  has a term of 12  years  and  each  loan  has  balloon  payments  ranging  from  $4,800,000  to
        $7,770,000 at the end of the term.  The loans are secured by a aircraft.

        Maturities of long-term debt are as follows:

                                   2004                      $   20,473,446
                                   2005                          16,863,741
                                   2006                          22,139,219
                                   2007                          22,724,668
                                   2008                          45,776,232
                                   Thereafter                   154,234,644  
                                                              $ 282,211,949
                                                            ===================

(9)    Income Taxes

        Income tax expense  (benefit) for the years ended March 31, 2003,  2002, and 2001  including  amounts
        recorded as the cumulative effect of a change in accounting principle, was as follows:

                                              Current             Deferred               Total
                  Year ended March 31, 2003:
                    U.S. Federal          $ (24,433,153)         $12,515,808       $ (11,917,345)
                    State and local                -              (1,467,730          (1,467,730)   
                                          $ (24,433,153)         $11,048,078       $ (13,385,075)
                                         =================== ==================== ===============

                  Year ended March 31, 2002:
                    U.S. Federal          $   4,714,262          $ 3,971,593       $   8,685,855
                    State and local           (867,353)              463,809            (403,544)   
                                          $   3,846,909          $ 4,435,402       $   8,282,311
                                         =================== ==================== ===============

                  Year ended March 31, 2001:
                    U.S. Federal          $  28,441,039          $ 1,008,515       $  29,449,554
                    State and local          3,877,611               137,500           4,015,111    
                                          $  32,318,650          $ 1,146,015       $  33,464,665
                                         =================== ==================== ===============




       The differences between the Company's effective rate for income taxes and the federal statutory rate
       are shown in the following table:

                                               2003               2002              2001
             Income  tax (benefit) expense
               at the statutory rate           (35%)               35%               35%
             State and local income tax,
               net of federal income tax
               benefit                          (3%)               (3%)               3%
             Nondeductible expenses              1%                 1%                     
                                               (37%)               33%               38%
                                     =================  ================= ===============

        The tax effects of temporary  differences that give rise to significant  portions of the deferred tax
        assets (liabilities) at March 31, 2003 and 2002 are presented below:

                                                                     2003                 2002
                Deferred tax assets:
                  Accrued vacation and health insurance
                    liability not deductible for tax purposes   $  2,383,676         $  1,719,555
                  Accrued workers compensation liability
                    not deductible for tax purposes                  939,777              483,879
                  Deferred rent not deductible for tax
                    purposes                                       3,025,846            1,157,725
                  Impairment recorded on inventory
                    and fixed assets not deductible
                    for tax purposes                               1,420,127              564,317
                  State tax loss carryforward                           -               1,815,034
                  Deferred revenue currently taxable                    -               3,760,000
                  Other                                            1,314,577              207,479   
                    Total gross deferred tax assets             $ 14,659,037        $   4,132,955
                                                               ==================   ===================

               Deferred tax liabilities:
                  Equipment depreciation and amortization       $(29,107,695)       $  (8,438,857)
                  Accrued maintenance expense deductible
                     for tax purposes                                   -                (724,659)
                  Prepaid commissions                                (55,639)            (622,835)  

                    Total gross deferred tax liabilities        $(29,887,993)       $  (9,061,692)
                                                               ================== ===================
                    Net deferred tax liabilities                $(15,228,956)       $  (4,928,737)


        The net deferred tax assets (liabilities) are reflected in the accompanying balance sheet as
        follows:

                                                                     2003                 2002

                  Current deferred tax assets                   $  4,788,831        $   1,788,078
                  Non-current deferred tax liabilities           (20,017,787)          (6,716,815)  
                     Net deferred tax liabilities               $(15,228,956)       $  (4,928,737)
                                                             ==================== ====================

        During the year ended  March 31,  2001,  the  Company  accrued  income tax expense at a rate of 38.7%
        which was greater than the actual  effective tax rate of 37.6%  determined upon completion and filing
        of the income tax returns in December  2001. As a result,  during the year ended March 31, 2002,  the
        Company  recorded  a credit to income  tax  expense  totaling  $1,327,000  for this  excess  accrual.
        During the year ended March 31, 2002,  the Company also  recorded a $441,000  reduction to income tax
        expense as a result of a review and  revision of state tax  apportionment  factors used in filing the
        amended state tax returns for 2000.

(10)     Warrants and Stock Purchase Rights

        In April 1998, in  connection  with a private  placement of shares of its Common  Stock,  the Company
        issued a warrant to an institutional  investor to purchase  1,075,393 shares of its Common Stock at a
        purchase  price  of  $2.50  per  share.  During  the  years  ended  March  31,  2002  and  2001,  the
        institutional  investor  exercised 525,000 and 550,394 warrants,  respectively,  with net proceeds to
        the Company totaling $1,312,500 and $1,375,984.

        In February 2003, the Company issued warrants to purchase  3,833,946  shares of common stock at $6.00
        per  share to the  ATSB and to two  other  guarantors,  as  discuss  in note 7. The  warrants  had an
        estimated  fair value of  $9,282,538  when issued and expire  seven years  after  issuance.  The fair
        value for these  options was  estimated  at the date of grant using a  Black-Scholes  option  pricing
        model.

        In February 1997,  the Board of Directors  declared a dividend of one Common Stock purchase right for
        each share of the  Company's  Common  Stock  outstanding  on March 15,  1997.  Each right  entitles a
        shareholder  to purchase one share of the  Company's  Common Stock at a purchase  price of $65.00 per
        full common share,  subject to  adjustment.  There are  currently  0.67 rights  associated  with each
        outstanding  share of Common  Stock.  The  rights are not  currently  exercisable,  but would  become
        exercisable  if certain  events  occurred  relating to a person or group  acquiring or  attempting to
        acquire  20 percent or more of the  outstanding  shares of the  Company's  Common  Stock.  The rights
        expire on  February  20,  2007,  unless  redeemed  by the  Company  earlier.  Once the rights  become
        exercisable,  each  holder of a right will have the right to receive,  upon  exercise,  Common  Stock
        (or, in certain  circumstances,  cash,  property or other  securities of the Company)  having a value
        equal to two times the exercise price of the right.

(11)   Stock Option Plan

        The Company has a stock  option plan whereby the Board of  Directors  or its  Compensation  Committee
        may grant  options to purchase  shares of the  Company's  Common Stock to  employees,  officers,  and
        directors of the Company.

        Under the plan,  the Company has  reserved  an  aggregate  of  6,375,000  shares of Common  Stock for
        issuance  pursuant to the  exercise of options.  With  certain  exceptions,  options  issued  through
        March 31,  2003  generally  vest  over a  five-year  period  from the date of grant and  expire  from
        March 9,  2004 to March 27, 2013.  At March 31, 2003,  475,075  options are available for grant under
        the plan.

        A summary of the stock option  activity and related  information  for the years ended March 31, 2003,
        2002 and 2001 is as follows:

                                                 2003                    2002                    2001         
                                                        Weighted-               Weighted-                Weighted-
                                                         Average                 Average                  Average
                                                        Exercise                Exercise                 Exercise
                                          Options        Price     Options       Price     Options        Price
                                                                                                              
        Outstanding-beginning of year    2,070,033       $8.78    2,203,444      $6.07    2,629,469       $3.61
        Granted                            667,500      $12.07      579,300     $14.95      517,500      $11.56
        Exercised                         (252,719)      $2.44     (528,711)     $3.45     (879,025)      $2.18
        Surrendered                        (53,999)     $12.72     (184,000)    $11.27      (64,500)      $5.95
        Outstanding-end of year          2,430,815      $10.28    2,070,033      $8.78    2,203,444       $2.23
                                      =========================================================================

        Exercisable at the end of year   1,168,815      $10.01      831,834      $6.65      911,945       $3.16

        Exercise  prices for  options  outstanding  under the plan as of March 31,  2003 ranged from $.667 to
        $24.168 per share.  The  weighted-average  remaining  contractual life of those options is 7.3 years.
        A summary of the  outstanding  and  exercisable  options at March 31,  2003,  segregated  by exercise
        price ranges, is as follows:


                                                          Weighted-
                                                           Average
                                          Weighted-       Remaining                       Weighted-
     Exercise Price      Options           Average       Contractual      Exercisable      Average
         Range         Outstanding      Exercise Price  Life (in years)     Options     Exercise Price    
     $ 0.667 - $ 4.98    357,515            $2.61            5.4            191,515        $1.7615
     $ 5.150 - $ 8.834   883,000             6.59            7.1            431,500         6.18000
     $10.001 - $ 14.85   541,000            12.35            7.5            201,500        11.8000
     $15.140 - $19.461   533,000            16.89            8.8            253,000        17.0800
     $21.200 - $24.168   116,300            21.95            8.7             91,300        21.8200        
                       2,430,815           $10.28            7.4          1,168,815       $10.01
                      ====================================================================================

(12)    Retirement Plans

        Employee Stock Ownership Plan

        The Company has  established an Employee  Stock  Ownership Plan (ESOP) which inures to the benefit of
        each employee of the Company,  except those employees  covered by a collective  bargaining  agreement
        that  does  not  provide  for  participation  in the  ESOP.  Company  contributions  to the  ESOP are
        discretionary  and may vary from year to year.  In order for an employee to receive an  allocation of
        Company  Common  Stock from the ESOP,  the  employee  must be  employed on the last day of the ESOP's
        plan year, with certain  exceptions.  The Company's annual  contribution to the ESOP, if any, will be
        allocated  among the eligible  employees of the Company as of the end of each plan year in proportion
        to the relative  compensation  (as defined in the ESOP) earned that plan year by each of the eligible
        employees.  The ESOP does not provide for  contributions by participating  employees.  Employees will
        vest in  contributions  made to the ESOP based upon their years of service with the  Company.  A year
        of service  is an ESOP plan year  during  which an  employee  has at least  1,000  hours of  service.
        Vesting generally occurs at the rate of 20% per year,  beginning after the first year of service,  so
        that a participating  employee will be fully vested after five years of service.  Distributions  from
        the ESOP will not be made to employees  during  employment.  However,  upon termination of employment
        with the  Company,  each  employee  will be  entitled  to receive  the  vested  portion of his or her
        account balance.

        During the years ended March 31, 2002 and 2001, the Company  contributed  173,018 and 135,000 shares,
        respectively to the plan. Total Company  contributions  to the ESOP from inception  through March 31,
        2003 totaled 1,194,831 shares.  In May 2003, the Company  contributed  347,968 shares to the plan for
        the plan year ending  December  31,  2003.  The Company  accrued  $521,954 of the expense  associated
        with this for the three  months ended March 31, 2003 as an accrued  liability at March 31, 2003.  The
        Company  recognized  compensation  expense during the years ended  March 31,  2003,  2002 and 2001 of
        $2,642,545, $2,368,644 and $1,411,876, respectively, related to its contributions to the ESOP.

        Retirement Savings Plan

        The Company has  established a Retirement  Savings Plan (401(k)).  Participants  may contribute  from
        1%  to  15%  of  their  pre-tax  annual   compensation.   Annual   individual   pre-tax   participant
        contributions  are  limited to $12,000 if under the age of 50, and  $14,000 if over the age of 50 for
        calendar  year 2003,  $11,000 for calendar  year 2002 and $10,500 for calendar  year 2001,  under the
        Internal Revenue Code.  Participants are immediately vested in their voluntary contributions.

        The Company's  Board of Directors  have elected to match 50% of participant  contributions  up to 10%
        of salaries from May 2000 through  December  2003.  During the years ended March 31, 2003,  2002, and
        2001,  the  Company  recognized  compensation  expense  associated  with the  matching  contributions
        totaling  $2,536,363,  $2,087,984 and $1,286,611,  respectively.  Future matching  contributions,  if
        any,  will be  determined  annually  by the Board of  Directors.  In order to  receive  the  matching
        contribution,  participants  must be  employed  on the last day of the plan year.  Participants  will
        vest in  contributions  made to the 401(k)  based upon their  years of service  with the  Company.  A
        year of  service  is a 401(k)  plan year  during  which a  participant  has at least  1,000  hours of
        service.  Vesting  generally  occurs at the rate of 20% per year,  beginning  after the first year of
        service,  so that a participant  will be fully vested after five years of service.  Upon  termination
        of employment with the Company,  each  participant  will be entitled to receive the vested portion of
        his or her account balance.

        Retirement Health Plan

        In conjunction with the Company's  collective  bargaining  agreement with its pilots,  retired pilots
        and their  dependents  may retain  medical  benefits under the terms and conditions of the Health and
        Welfare  Plan for  Employees  of  Frontier  Airlines,  Inc.  ("the  Plan")  until age 65. The cost of
        retiree medical  benefits are continued  under the same  contribution  schedule as active  employees.
        The following table provides a  reconciliation  of the changes in the benefit  obligations  under the
        Plan for the years ended March 31, 2003 and 2002.

        Reconciliation of benefit obligation:

                                                                      2003           2002
                         Obligation at beginning of period      $   758,162     $  344,348
                           Service cost                             423,009        402,866
                           Interest cost                             55,445         25,288
                           Benefits paid                            (22,450)        (4,627)
                           Net actuarial loss (gain)              1,072,584         (9,713)   
                         Obligation at end of period            $ 2,286,750     $  758,162
                                                                ==============================

        A 1% change in the  healthcare  cost  trend rate used in  measuring  the  accumulated  postretirement
benefit obligation (APDO) at March 31, 2003, would have the following effects:

                                                                      1% increase     1% decrease

           Increase (decrease) in total service and interest cost       42,185         (40,466)
           Increase (decrease) in the APBO                             241,040        (210,594)


        The following is a statement of the funded status as of March 31:

                                                                      2003           2002
                         Funded status                               $(2,286,750)    $  (758,162)
                         Unrecognized net acturial loss (gain)         1,055,873         (16,711)
                         Accrued benefit liability                   $(1,230,877)    $  (774,873)
                                                                    =============================

        The Company used the following actuarial assumptions to account for this postretirement benefit plan:

                                                        2003           2002           2001

               Weighted average discount rate           6.50%          7.50%          7.50%
               Assumed healthcare cost trend rate (1)   9.75%          6.50%          6.50%

        (1)  Trend rates were assumed to reduce until 2011 when an ultimate rate of 4.25% is reached.



(13)    Earnings Per Share

        The following table sets forth the computation of basic and diluted earnings per share:

                                                               2003               2002               2001
        Numerator:
          Income (loss) before cumulative effect of
            change in method of accounting for
            maintenance                                   $ (24,853,800)       $16,549,990        $54,867,773
          Cumulative effect of change in method
            of accounting for naintenance                    2,010,672               -                  -     
          Net income (loss)                               $ (22,843,128)       $16,549,990        $54,867,773
                                                        ======================================================

        Denominator:
          Weighted average shares outstanding,
            basic                                            29,619,742         28,603,861         27,152,099
          Dilutive effect of employee stock options                -               911,289          1,260,094
          Dilutive effect of warrants                              -                  -               430,590 

          Adjusted weighted-average shares
            outstanding, diluted                             29,619,742         29,515,150         28,842,783
                                                        ======================================================

        Basic earnings (loss) per share:
          Income (loss) before cumulative
            effect of change in method of
            accounting for maintenance                    $       (0.84)       $      0.58         $     2.02
          Cumulative effect of change in
            method of accounting for
            maintenance                                            0.07                  -                  -
                                                                                                              

            Basic earnings (loss) per share               $       (0.77)       $      0.58         $     2.02
                                                        ======================================================

        Diluted earnings (loss) per share:
          Income (loss) before cumulative
            effect of change in method of
            accounting for maintenance                    $       (0.84)       $      0.56         $     1.90
          Cumulative effect of change in method
            of accounting for maintenance                          0.07                  -                  -
                                                                                                              
            Diluted earnings (loss) per share             $       (0.77)       $      0.56         $     1.90
                                                        ======================================================

        For the years  ending  March 31, 2002 and 2001,  the Company has excluded  from its  calculations  of
        diluted  earnings per share,  326,800 and 97,500 options and warrants,  with exercise  prices ranging
        from  $15.14 to  $24.17,  and $15.19 to  $24.17,  respectively,  because  the  exercise  price of the
        options and warrants was less than the average  market price of the common shares for the  respective
        year.  All  outstanding  options and warrants  were  excluded  from the  calculation  of earnings per
        share for the year ended March 31, 2003 since the effect was anti-dilutive.

(14)    Concentration of Credit Risk

        The Company does not believe it is subject to any significant  concentration  of credit risk relating
        to receivables.  At March 31, 2003 and 2002, 68.4% and 64.9% of the Company's  receivables  relate to
        tickets  sold to  individual  passengers  through  the use of major  credit  cards,  travel  agencies
        approved  by the  Airlines  Reporting  Corporation,  tickets  sold  by  other  airlines  and  used by
        passengers on Company  flights,  the United States Postal Service,  and the Internal Revenue Service.
        Receivables  related to tickets sold are  short-term,  generally  being settled shortly after sale or
        in the month following ticket usage.

(15)   Commitments and Contingencies

        From time to time,  we are engaged in routine  litigation  incidental  to our  business.  The Company
        believes there are no legal  proceedings  pending in which the  Company is a party or of which any of
        our  property  may be subject to that are not adequately covered by  insurance  maintained  by us, or
        which,  if adversely  decided,  would have a material  adverse  affect upon our business or financial
        condition.

        In March 2000, the Company entered into an agreement with AVSA,  S.A.R.L.,  as subsequently  amended,
        to  purchase  up to 31 new Airbus  aircraft.  During the years  ended  March 31,  2003 and 2002,  the
        Company took delivery of nine and three of these  aircraft,  respectively.  As of March 31, 2003, the
        Company has remaining firm purchase  commitments  for six additional  aircraft which are scheduled to
        be delivered in calendar  years 2003 through  2005.  Under the terms of the purchase  agreement,  the
        Company is required to make scheduled pre-delivery  payments.  These payments are non-refundable with
        certain  exceptions.  As of March 31,  2003,  the Company  has made  pre-delivery  payments  totaling
        $30,531,894 to secure these aircraft and option  aircraft.  Pre-delivery  payments due in fiscal year
        2004  approximate  $8,724,175.  The balance of the total purchase price must be paid upon delivery of
        each  aircraft.  In order to complete the purchase of these  aircraft,  it will be necessary  for the
        Company  to secure  financing.  The  amount  of  financing  required  will  depend  on the  number of
        aircraft  purchase  options  exercised  and the  amount  of cash  generated  by  operations  prior to
        delivery of the  aircraft.  As of March 31,  2003,  the Company has  arranged  financing  for four of
        these aircraft.

        In October 2002 we entered  into a purchase and  long-term  services  agreement  with LiveTV to bring
        DIRECTV  AIRBORNE(TM)satellite  programming  to every  seatback in our Airbus fleet.  We completed the
        installation  of the LiveTV  system on all Airbus  aircraft  in our fleet in February  2003.  We have
        agreed to the  purchase of 46 units of the  hardware,  however,  we have the option to cancel up to a
        total of 14 units by  providing  written  notice of  cancellation  at least 12 months in  advance  of
        installation.

        The  aggregate  additional  amounts due under this  purchase  commitment  and  estimated  amounts for
        buyer-furnished  equipment,  spare parts for both the purchased and leased  aircraft and to equip the
        aircraft with LiveTV was approximately $145,619,000 at March 31, 2003.





(16)    Selected Quarterly Financial Data (Unaudited)

                                                 First          Second            Third           Fourth
                                                Quarter (1)     Quarter (1)      Quarter (1)      Quarter
        2003
         Revenues                              $ 111,812,407   $ 119,354,524    $ 120,253,288    $ 118,515,696
                                             =============== ================ ================ ================
        Operating                             $ 114,910,166   $ 122,557,105    $ 126,608,444    $ 136,484,109
        Expenses                             =============== ================ ================ ================
        Loss before cumulative effect of
          change in accounting principle      $  (2,472,421)  $  (3,054,494)   $  (6,367,833    $ (12,959,052)
        Cumulative effect of change in
          method of accounting for
          maintenance                             2,010,672            -                -                -  
        Net loss                              $     461,749   $  (3,054,494)   $  (6,367,833)   $ (12,959,052)                                                          $ (461,749)
                                             =============== ================ ================ ================

        Basic loss per share:
          Loss before cumulative
            effect of change in
            accounting principle              $       (0.08)  $       (0.10)   $       (0.21)   $       (0.44)
         Cumulative effect of change in
           method of accounting for
           maintenance                                 0.07               -                -                -
                                                                                                            
        Basic loss per share                  $       (0.01)  $       (0.10)   $       ( .21)   $       (0.44)
                                             =============== ================ ================ ================

        Diluted loss per share:
          Loss before cumulative
            effect of change in
            accounting principle              $       (0.08)          (0.10)           ( .21)           (0.44)

          Cumulative effect of change in
            method of accounting for
            maintenance                                0.07               -                -                -
                                                                                                            
          Diluted loss per share              $       (0.01)          (0.10)           ( .21)           (0.44)
                                             =============== ================ ================ ================


        2002

        Revenues                              $ 123,316,357   $ 116,006,211    $   92,556,856   $ 113,195,301
                                             =============== ================ ================ ================
        Operating Expenses                    $ 112,010,797   $ 114,035,857    $   95,849,342   $ 106,793,009
                                             =============== ================ ================ ================
        Net income                            $   7,739,597   $   7,278,583    $      908,623   $     623,187
                                             =============== ================ ================ ================

        Earnings per share:
          Basic                               $        0.27            0.26             0.03             0.02
                                             =============== ================ ================ ================
          Diluted                             $        0.26            0.24             0.03             0.02
                                             =============== ================ ================ ================

 (1)    Income  before  the  cumulative  effect of the  change in the method of  accounting  for  maintenance
        for the first,  second,  and third  quarters of the year ended March 31, 2003 differs from the amount
        previously  reported  on Form  10-Q by  $463,151,  $933,182,  and  ($202,221),  respectively, because
        the change in method of  accounting  for  maintenance was applied  retroactively  to April 1, 2002
        (Note 1).

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TABLE OF CONTENTS

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2005
o	TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-12805

FRONTIER AIRLINES, INC.
(Exact name of registrant as specified in its charter)

Colorado (State or other jurisdiction of incorporated or organization)		84-1256945 (I.R.S. Employer Identification No.)
7001 Tower Road, Denver, CO (Address of principal executive offices)		80249 (Zip Code)
Registrant's telephone number including area code: (720) 374-4200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value Title of Class

Indicate by check mark whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 ý No o

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

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

The aggregate market value of common stock held by non-affiliates of the Company computed by reference to the last quoted price at which such stock sold on such date as reported by the Nasdaq National Market as of September 30, 2004 was $270,181,214.

The number of shares of the Company's common stock outstanding as of June 1, 2005 is 36,024,342.

Documents incorporated by reference—Certain information required by Parts II and III is incorporated by reference to the Company's 2005 Proxy Statement.

TABLE OF CONTENTS


PART I
Item 1:		Business
Item 2:		Properties
Item 3:		Legal Proceedings
Item 4:		Submission of Matters to a Vote of Security Holders
PART II
Item 5:		Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6:		Selected Financial Data
Item 7:		Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A:		Quantitative and Qualitative Disclosures About Market Risk
Item 8:		Financial Statements and Supplementary Data
Item 9:		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A:		Controls and Procedures
Item 9B:		Other Information
PART III
Item 10:		Directors and Executive Officers of the Registrant
Item 11:		Executive Compensation
Item 12:		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13:		Certain Relationships and Related Transactions
Item 14:		Principal Accountant Fees and Services
PART IV
Item 15:		Exhibits and Financial Statement Schedules

PART I

Special Note About Forward-Looking Statements—This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that describe the business and prospects of Frontier Airlines, Inc. and the expectations of our company and management. All statements included in this report that address activities, events or developments that we expect, believe, intend or anticipate will or may occur in the future, are forward-looking statements. When used in this document, the words "estimate," "anticipate," "project" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. These risks and uncertainties include, but are not limited to: the timing of, and expense associated with, expansion and modification of our operations in accordance with our business strategy or in response to competitive pressures or other factors; failure of our new markets to perform as anticipated; the inability to achieve a level of revenue through fares sufficient to obtain profitability due to competition from other air carriers and excess capacity in the markets we serve; the inability to obtain sufficient gates at Denver International Airport to accommodate the expansion of our operations; general economic factors and behavior of the fare-paying public and its potential impact on our liquidity; terrorist attacks or other incidents that could cause the public to question the safety and/or efficiency of air travel; operational disruptions, including weather; industry consolidation; the impact of labor disputes; enhanced security requirements; changes in the government's policy regarding relief or assistance to the airline industry; the economic environment of the airline industry generally; increased federal scrutiny of low-fare carriers generally that may increase our operating costs or otherwise adversely affect us; actions of competing airlines, such as increasing capacity and pricing actions of United Airlines ("United") and other competitors and other actions taken by United either in or out of bankruptcy protection; the availability of suitable aircraft, which may inhibit our ability to achieve operating economies and implement our business strategy; the unavailability of, or inability to secure upon acceptable terms, debt or operating lease financing necessary to acquire aircraft which we have ordered; uncertainties regarding aviation fuel prices, and various risk factors to our business discussed elsewhere in this report. Because our business, like that of the airline industry generally, is characterized by high fixed costs relative to revenues, small fluctuations in our revenue per available seat mile ("RASM") or cost per available seat mile ("CASM") can significantly affect operating results. These risks and factors are not exclusive, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this filing.

Item 1: Business

General

Now in our eleventh year of operations, we are a low cost, affordable fare airline operating primarily in a hub and spoke fashion connecting cities coast to coast through our hub at Denver International Airport ("DIA"). We are the second largest jet service carrier at DIA based on departures. As of June 1, 2005, we, in conjunction with Frontier JetExpress operated by Horizon Air Industries, Inc. ("Horizon"), operate routes linking our Denver hub to 44 U.S. cities spanning the nation from coast to coast and to five cities in Mexico. During the year ended March 31, 2005, we began certain point-to- point routes to Mexico from non-hub cities. As of June 1, 2005, we provided jet service to Cancun, Mexico directly from four non-hub cities and we have submitted applications to the United States Department of Transportation ("DOT") for authority to provide jet transportation to Cozumel, Mexico from DIA and to Puerto Vallarta from Kansas City and Salt Lake City.

We were organized in February 1994 and we began flight operations in July 1994 with two leased Boeing 737-200 jets. We have since expanded our fleet in service to 46 jets as of June 1, 2005 (32 of which we lease and 14 of which we own), consisting of 39 Airbus A319s and seven Airbus A318s. In April 2005 we completed our plan to replace our Boeing aircraft with new purchased and leased Airbus jet aircraft. This plan began in May 2001 and we retired our last Boeing aircraft from our fleet in

April 2005. During the years ended March 31, 2005 and 2004, we increased year-over-year capacity by 27.4% and 19.0%, respectively. During the year ended March 31, 2005, we increased mainline passenger traffic by 28.6% over the prior year, outpacing our increase in capacity during the period. We intend to continue our growth strategy and will add frequency to new markets and existing markets that we believe are underserved.

We currently operate on 16 gates on Concourse A at DIA on a preferential basis. We use these 16 gates and share use of up to four common use regional jet parking positions to operate approximately 222 daily mainline flight departures and arrivals and 52 Frontier JetExpress daily system flight departures and arrivals.

In September 2003, we signed a 12-year agreement with Horizon, under which Horizon operates up to nine 70-seat CRJ 700 aircraft under our Frontier JetExpress brand. The service began on January 1, 2004 with three aircraft. We have increased JetExpress aircraft to a total of eight aircraft in service and one spare aircraft as of June 1, 2005. We control the scheduling of this service. We reimburse Horizon for its expenses related to the operation plus a margin. The agreement provides for financial incentives, penalties and changes to the margin based on the performance of Horizon and our financial performance. As of June 1, 2005, Frontier JetExpress provides service to Albuquerque, New Mexico; Boise, Idaho; Billings, Montana; El Paso, Texas; Little Rock, Arkansas; Oklahoma City, Oklahoma; Omaha, Nebraska; Spokane, Washington; Tucson, Arizona; and Tulsa, Oklahoma, and supplements our mainline service to San Jose, California; and Austin, Texas. This service replaced our codeshare arrangement with Mesa Airlines, which terminated on December 31, 2003.

Our filings with the Securities and Exchange Commission are available at no cost on our website, www.frontierairlines.com, in the Investor Relations folder contained in the section titled "About Frontier". These reports include our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 reports on Forms 3, 4 and 5, and any related amendments or other documents, and are made available as soon as reasonably practicable after we file the materials with the SEC.

Our corporate headquarters are located at 7001 Tower Road, Denver, Colorado 80249. Our administrative office telephone number is 720-374-4200 and our reservations telephone number is 800-432-1359.

Business Strategy and Markets

Our business strategy is to provide air service at affordable fares to high volume markets from our DIA hub and limited point-to-point routes outside of our DIA hub. Our strategy is based on the following factors:

•: Stimulate demand by offering a combination of low fares, quality service and frequent flyer credits in our frequent flyer program, EarlyReturns.
•: Expand our Denver hub operation and increase connecting traffic by adding additional high volume markets to our current route system and by code sharing agreements and other relationships with other airlines.
•: Continue filling gaps in flight frequencies to current markets from our DIA hub and evaluate other opportunities for additional non-hub point-to-point routes.

Route System Strategy

Our route system strategy encompasses connecting our Denver hub to top business and leisure destinations. We currently serve 45 of the top 50 destinations from Denver, as defined by the U.S. Department of Transportation's Origin and Destination Market Survey. During the year ended

March 31, 2005 and as of June 1, 2005, we added departures from DIA to the following cities with commencement dates as follows:

Destination		Commencement Date
Washington, D.C. (Dulles International)(1)		April 11, 2004
Anchorage, Alaska(2)		May 9, 2004
Billings, Montana(3)		May 23, 2004
Spokane, Washington(3)		May 23, 2004
Philadelphia, Pennsylvania		May 23, 2004
Nashville, Tennessee		June 20, 2004
Little Rock, Arkansas(3)		October 10, 2004
Detroit, Michigan		May 8, 2005
Tulsa, Oklahoma(3)		May 22, 2005

(1): Service discontinued on January 31, 2005.
(2): Service is seasonal and was terminated on September 25, 2004 and resumed on May 8, 2005.
(3): Flights operated exclusively by Frontier JetExpress.

On April 11, 2004, we began our first significant non-hub point-to-point routes from Los Angeles, California. We began service from Los Angeles International Airport ("LAX") to Kansas City, Missouri; Minneapolis/St. Paul, Minnesota; St. Louis, Missouri and Philadelphia, Pennsylvania. Due to the disappointing passenger loads and yields in these markets, we began termination of our point-to-point service from LAX on August 15, 2004. By February 2005, all point-to-point route service from LAX was discontinued.

In July 2004, we began our first point-to-point non-hub routes to Cancun, Mexico. We began service from Cancun, Mexico to the following cities with the commencement dates and current frequencies as follows:

Destination	Round-Trip Frequencies Scheduled Per Week as of June 1, 2005	Commencement Date
Kansas City, Missouri	3	July 2004
Salt Lake City, Utah	1	July 2004
Nashville, Tennessee	3	November 2004
Austin, Texas(1)	—	November 2004
St. Louis, Missouri	3	February 2005

(1): Discontinued service on March 18, 2005

We have filed an application with the U.S. Department of Transportation and have received authority to fly non-stop from our Denver hub to Cozumel, Mexico three times per week. We also received authority to offer non-stop service to Puerto Vallarta from Kansas City and Salt Lake City with three flights per week in each market. Current agreements between United States of America and the country of Mexico restrict service between city pairs between the two countries, such that applications for authorization are often challenged and not necessarily successful. If granted authority from the DOT, both the Puerto Vallarta and the Cozumel service would begin in the 2005-2006 winter season and Cozumel would represent our sixth non-stop Mexico destination from our Denver hub.

We intend to begin new service to Akron-Canton Airport (CAK) in Ohio from our DIA hub with one daily round-trip flight on June 15, 2005 to be expanded to two round-trip frequencies on June 26, 2005. We also intend to begin service to San Antonio International Airport (SAT) in Texas from our DIA hub with two daily round-trip frequencies on June 26, 2005. In addition, due to our increased

traffic in the first part of fiscal year 2006, we announced that we intend to increase frequencies in the following markets: Reno, Nevada; San Jose, California; Nashville, Tennessee; San Francisco, California; Dallas, Texas; St. Louis, Missouri; Milwaukee, Wisconsin; Minneapolis-St. Paul, Minnesota and Sacramento, California. In addition, we announced that we intend to expand the 2005 season for Anchorage, Alaska to January 3, 2006 and we intend to add another frequency on June 19, 2005. We also announced on May 26, 2005 that we intend to begin new service to both Dayton International Airport (DAY) and Fresno Yosemite International Airport (FAT) from our DIA hub. Frontier JetExpress will operate this route with two daily roundtrip flights beginning August 31, 2005.

We will continue to maintain a disciplined growth strategy by focusing on the growth of our DIA hub, expanding our point-to-point service to Mexico through partnerships with tour operators, increasing frequency on our existing routes, and entering new markets.

Marketing and Sales

Our sales efforts are targeted to price-sensitive passengers in both the leisure and corporate travel markets. In the leisure market, we offer discounted fares marketed through the Internet, newspaper, radio and television advertising along with special promotions. In May 2003, we launched a new brand strategy and advertising campaign designed to identify Frontier as "A Whole Different Animal" and set us apart from our competition. The campaign includes television, print and radio components that began running in the Denver market and have since expanded to additional markets along our routes. We have gathered extensive customer and employee feedback that has allowed us to identify elements of service that are important to our customers who have the potential to fly with us more often.

In conjunction with the branding campaign, we have signed sponsorship agreements to be the exclusive airline of The Pepsi Center in Denver, Denver's National Hockey League team, the Colorado Avalanche, and Denver's National Basketball Association team, the Nuggets. We have also signed sponsorship agreements with Colorado's Major League Baseball team the Rockies, Colorado's National Lacrosse League team, the Colorado Mammoth, and Colorado's Arena Football League team, the Colorado Crush. We have also entered into sponsorship agreements to be the exclusive airline partner for the college athletic programs of the Air Force Academy, Colorado State University, the University of Denver, the University of Northern Colorado, and the University of Colorado. The agreements allow for prominent signage in applicable stadiums and arenas, participation in-game promotions, receipt of prominent logo and advertising placement in publications and access to joint promotion opportunities. These agreements vary in terms of length and the amount and method of compensation to the sponsored entities.

In order to increase connecting traffic, we began two code share agreements, one with Great Lakes Aviation Ltd. in July 2001 and the other with Mesa Air Group operating as Frontier JetExpress in February 2002. Mesa was replaced with Horizon in January 2004. We have also negotiated interline agreements with 106 domestic and international airlines serving cities on our route system. Generally, these agreements include joint ticketing and baggage services and other conveniences designed to expedite the connecting process.

To balance the seasonal demand changes that occur in the leisure market, we have introduced programs over the past several years that are designed to capture a larger share of the corporate market, which tends to be less seasonal than the leisure market. These programs include negotiated fares for large companies that sign contracts committing to a specified volume of travel, future travel credits for small and medium size businesses contracting with us, and special discounts for members of various trade and nonprofit associations.

We also pursue sales opportunities with meeting and convention arrangers and government travel offices. The primary tools we use to attract this business include personal sales calls, direct mail and

telemarketing. In addition, we offer air/ground vacation packages to many destinations on our route system under contracts with various tour operators.

Our relationship with travel agencies is important to us and other airlines. In March 2002, several of the major airlines eliminated travel agency "base" commissions but continued to pay individually negotiated incentive commissions to select agents. Effective June 1, 2002, we also eliminated travel agency base commissions with the exception of certain strategic relationships. We communicate with travel agents through personal visits by our executives and sales managers, sales literature mailings, trade shows, telemarketing and advertising in various travel agent trade publications.

We participate in the four major computer reservation systems used by travel agents to make airline reservations: Amadeus, Galileo, Worldspan and Sabre. We maintain reservation centers in Denver, Colorado and Las Cruces, New Mexico, operated by our employees.

LiveTV

In October 2002, we signed a purchase and long-term services agreement with LiveTV to bring DIRECTV AIRBORNE™ satellite programming to every seatback in our Airbus fleet. DIRECTV® programming features 24 channels of live television delivered to each seat. We implemented a $5 per segment usage charge for access to the system to offset the costs for the system equipment, programming, and services. In 2005, we continued to improve our customers' flying experience by adding four additional channels that offer current-run pay-per-view movies.

Customer Loyalty Program

Effective February 1, 2001, we commenced EarlyReturns, our own frequent flyer program. Our frequent flyer program won awards at the 2004 Freddie Awards for frequent flyer programs and was one of the youngest frequent flyer programs to be recognized. EarlyReturns was awarded second place for best customer service, best award redemption, best bonus promotion, and best award for the 15,000 miles ticket redemption. In addition, EarlyReturns was awarded third place for program of the year. We believe that our frequent flyer program offers some of the most generous benefits in the industry, including a free round-trip after accumulating only 15,000 miles (25,000 miles to our destinations in Mexico). There are no blackout dates for award travel. Additionally, members who earn 25,000 or more EarlyReturns flight miles annually attain Summit Level status, which includes a 50% mileage bonus on each paid Frontier flight, priority check-in and boarding, complimentary on-board alcoholic beverages and DIRECTV, extra allowance on checked baggage and priority baggage handling, guaranteed reservations on any Frontier flight when purchasing an unrestricted coach class ticket at least 72 hours prior to departure, standby at no charge on return flights the day before, the day of, and the day after, and access to an exclusive customer service toll-free phone number. Members who earn 15,000 - 24,999 EarlyReturn flight miles annually attain Ascent Level status, which includes a 25% mileage bonus on each Frontier flight, priority check-in and boarding, complimentary DIRECTV service, and access to an exclusive customer service toll-free phone number. Members earn one mile for every mile flown on Frontier plus additional mileage with program partners, which presently include Midwest Airlines, Virgin Atlantic Airways, Alamo, Hertz, National and Dollar Car Rentals, Kimpton Boutique Hotels, Inverness Hotel & Golf Resort, Peaks at Vail Resorts, The Flower Club, Citicorp Diners Club, Inc., and Qwest Communications. To apply for the EarlyReturns program, customers may visit our Web site at www.frontierairlines.com; obtain an EarlyReturns enrollment form at any of our airport counters or call our EarlyReturns Service Center toll-free hotline at 866-26-EARLY, or our reservations at 800-432-1FLY.

In March 2003, we entered into a co-branded credit card arrangement with a MasterCard issuing bank. Credit card users earn miles on their credit card purchases. We receive fees for new accounts, the

purchase of frequent flier miles awarded to credit card customers and a percentage of the annual renewal fees.

Product Pricing

We offer a range of fares, including 21-day, 14-day, 7-day and 3-day advanced purchase fares, and a walkup fare. Walkup fares are refundable and changeable in each market. In addition to our regular fare structure, we frequently offer sale fares in the markets we serve and match the sale fares offered by other airlines. We offer both one-way and round-trip fares not requiring a Saturday night stay.

Competition and Market Barriers

The Airline Deregulation Act of 1978 produced a highly competitive airline industry, freed of certain government regulations that for 40 years prior to the Deregulation Act had dictated where domestic airlines could fly and how much they could charge for their services. Since then, we and other smaller carriers have entered markets long dominated by larger airlines with substantially greater resources, such as United Airlines, American Airlines, Northwest Airlines and Delta Air Lines.

In February 2003, United launched a new low-fare airline, Ted, which we believe was developed in an attempt to operate with lower costs than United's mainline operations. We cannot predict if other major carriers will also begin to offer low-cost business models in response to competition from low-fare airlines or whether these attempts will prove to be successful. By April 2005, United had implemented capacity reductions and shifted certain routes from mainline service aircraft to regional jets such that 40% of all United departures from Denver are flown by regional aircraft.

We compete principally with United, the dominant carrier at DIA. During the month of April 2005, United, Ted, and its commuter affiliates had a total market share at DIA of approximately 56.0%, down from 59.7% during the month of April 2004. United has a competitive advantage due to its larger number of flights from DIA, its significantly broader domestic and international route system, and its offering a multiple class cabin for most of its flights. Our market share, including our codeshare affiliates, at DIA for the month of April 2005 approximated 19.5%, up from 17.4% during the month of April 2004. As of June 1, 2005, we directly compete with United and United regional jet affiliates on 94% of the cities we serve out of DIA. We compete with United primarily on the basis of fares, fare flexibility, the number of markets we operate in and the number of frequencies within a market, our frequent flyer programs, the level of passenger entertainment available on our aircraft and the quality of our customer service.

Where we do not compete directly with United, we compete with many other air carriers for the limited number of passengers desiring to travel between the cities we serve. With excess capacity in these and almost all markets, it is extremely difficult to demand fare levels sufficient to offset the high costs of operating an airline, particularly the current high prices for aviation fuel.

At the present time, New York's LaGuardia and John F. Kennedy International Airports and Washington Ronald Reagan National Airport are regulated by means of "slot" allocations, which represent government authorization to take off or land at a particular airport within a specified time period. Federal Aviation Administration ("FAA") regulations require the use of each slot at least 80% of the time and provide for forfeiture of slots in certain circumstances. We were awarded six high-density exemption slots at LaGuardia, and at the present time, we utilize four of these slots to operate two daily round-trip flights between Denver and LaGuardia. In addition to slot restrictions, National is limited by a perimeter rule, which limits flights to and from National to 1,250 miles. In April 2000, the Wendell H. Ford Aviation Investment and Reform Act for the 21^st Century, or AIR 21, was enacted. AIR 21 authorized the Department of Transportation ("DOT") to grant up to 12 slot exemptions beyond the 1,250-mile National perimeter, provided certain specifications are met. Under AIR 21, we were awarded two slots for one daily round-trip flight. In 2004 the Vision 100—Century of

Flight Aviation Authorization Act was enacted, which authorized the DOT to grant an additional 12 slot exemptions into Reagan National. In April 2004, we were granted four additional slots at National for two additional round-trip flights.

Another airport we serve, John Wayne International Airport in Santa Ana, California (SNA), is also slot controlled at the local level as mandated by a federal court order. We were originally awarded six arrival and departure slots at SNA, or three daily round-trips. We began service with two daily round-trips to SNA in August 2003 and began a third daily round- trip in March 2004.

Maintenance and Repairs

All of our aircraft maintenance and repairs are accomplished in accordance with our maintenance program approved by the FAA. We maintain spare or replacement parts primarily in Denver, Colorado. Spare parts vendors supply us with certain of these parts, and we purchase or lease others from other airline or vendor sources.

Since mid-1996, we have trained, staffed and supervised our own maintenance work force at Denver, Colorado. We sublease a portion of Continental Airlines' hangar at DIA where we currently perform most of our own maintenance through the "D" check level. We also maintain line maintenance facilities at Phoenix, Arizona and Kansas City, Missouri. Outside FAA approved contractors perform other major maintenance, such as major engine repairs. We have attempted to level our engine maintenance expenses by entering into a Maintenance Cost Per Hour ("MCPH") agreement with GE Engine Services, Inc. ("GE"). This agreement is for a 12-year period from the effective date for our owned aircraft or May 1, 2019, whichever comes first. For each leased aircraft, the agreement term coincides with the initial lease term of 12 years. This agreement precludes us from using another third party for such services during the term on the covered engines. This agreement requires monthly payments at a specified rate times the number of flight hours the engine operated during that month. For our leased aircraft, the lessors pay GE directly for the repair of aircraft engines in conjunction with this agreement from reserve accounts established under the applicable lease documents. Currently, all of our owned aircraft and 27 of our leased aircraft are subject to GE MCPH agreement.

Under our aircraft lease agreements, we pay all expenses relating to the maintenance and operation of our aircraft, and we are required to pay supplemental monthly rent payments to the lessors based on usage. Supplemental rents are applied against the cost of scheduled major maintenance. To the extent not used for major maintenance during the lease terms, excess supplemental rents are forfeited to the aircraft lessors after termination of the lease.

Our monthly completion factors for the years ended March 31, 2005, 2004, and 2003 ranged from 99.3% to 99.9%, 98.9% to 99.9%, and from 98.2% to 99.7%, respectively. The completion factor is the percentage of our scheduled flights that were operated by us, whether or not delayed (i.e., not canceled). Canceled flights were principally a result of mechanical problems and, to a lesser extent, weather. We believe that the year over year improvement in our monthly completion factors is attributable to better maintenance and the increase in aircraft reliability as a result of the new Airbus aircraft added to our fleet.

For six consecutive years starting in 1999, our maintenance and engineering department received the FAA's highest award, the Diamond Certificate of Excellence, in recognition of 100 percent of our maintenance and engineering employees completing advanced aircraft maintenance training programs. The Diamond Award recognizes advanced training for aircraft maintenance professionals throughout the airline industry. We were the first Part 121 domestic air carrier to achieve 100 percent participation in this training program by our maintenance employees.

Fuel

During the years ended March 31, 2005, 2004, and 2003, jet fuel, including hedging activities, accounted for 21.6%, 17.7% and 17.2%, respectively, of our operating expenses. We have arrangements with major fuel suppliers for substantial portions of our fuel requirements, and we believe that these arrangements assure an adequate supply of fuel for current and anticipated future operations. Jet fuel costs are subject to wide fluctuations as a result of sudden disruptions in supply beyond our control. Therefore, we cannot predict the future availability and cost of jet fuel with any degree of certainty. Fuel prices increased significantly in fiscal 2005. Our average fuel price per gallon including hedging activities, taxes and into-plane fees was $1.41 for the year ended March 31, 2005, with the monthly average price per gallon during the same period ranging from a low of $1.19 to a high of $1.64. Our average fuel price per gallon including hedging activities, taxes and into-plane fees was $1.04 for the year ended March 31, 2004, with the monthly average price per gallon during the same period ranging from a low of 89¢ to a high of $1.20. As of June 1, 2005, the price per gallon was approximately 1.71¢ excluding the impact of fuel hedges. We implemented a fuel-hedging program in November 2002, under which we enter into Gulf Coast jet fuel option contracts to partially protect us against significant increases in fuel prices. Our fuel-hedging program is limited in fuel volume and duration. As of March 31, 2005, we had hedged approximately 28% of our projected fuel requirements for the quarter ending June 30, 2005. On May 13, 2005, we entered into an additional derivative transaction that hedges approximately 20% of our projected fuel requirements for the period from July 1, 2005 to December 31, 2005.

Increases in fuel prices or a shortage of supply could have a material adverse effect on our operations and financial results. Our ability to pass on increased fuel costs to passengers through price increases or fuel surcharges may be limited, particularly because of our affordable fare strategy.

Insurance

We carry insurance limits of $1.0 billion per aircraft per occurrence in property damage and passenger and third-party liability insurance, and insurance for aircraft loss or damage with deductible amounts as required by our aircraft lease agreements, and customary coverage for other business insurance. While we believe such insurance is adequate, there can be no assurance that such coverage will adequately protect us against all losses that we might sustain. Our aircraft hull and liability coverage renewed on June 7, 2004 for one year and will be extended beyond the expiration date through December 31, 2005 at reduced rates.

In December 2002, through authority granted under the Homeland Security Act of 2002, the U.S. government expanded its insurance program to enable airlines to elect either the government's excess third-party war risk coverage or for the government to become the primary insurer for all war risks coverage. We elected to take primary government coverage in February 2003 and dropped the commercially available war risk coverage. The Appropriations Act of 2002 authorized the government to offer both policies through August 31, 2004. The Emergency Wartime Supplemental Appropriations Act extended the government's mandate to provide war-risk insurance until December 31, 2004. Pursuant to the Consolidated Appropriations Act of 2005, Congress further extended the government's mandate to provide war-risk insurance until August 31, 2005, at the discretion of the Secretary of Transportation. We cannot assure you that any extension will occur, or if it does, how long the extension will last. We expect that if the government stops providing war risk coverage to the airline industry, the premiums charged by aviation insurers for this coverage will be substantially higher than the premiums currently charged by the government.

Employees

As of June 1, 2005, we had 4,526 employees, including 3,612 full-time and 914 part-time personnel. Our employees included 528 pilots, 789 flight attendants, 1,156 customer service agents, 457 ramp service agents, 353 reservations agents, 116 aircraft appearance agents, 69 catering agents, 331 mechanics and related personnel, and 727 general management and administrative personnel. We consider our relations with our employees to be good.

We have established a compensation philosophy that we will pay competitive wages compared to other airlines of similar size and other employers with which we compete for our labor supply. Employees have the opportunity to earn bonuses under our profit sharing program and may be granted shares of the Company's common stock under our Employee Stock Ownership Program, ("ESOP"). The bonus and ESOP grants are discretionary and reviewed by our Board of Directors each year.

Effective May 2000, we enhanced our 401(k) Retirement Savings Plan by announcing an increased matching contribution by the Company. Participants may receive a 50% Company match for contributions up to 10% of salary. This match is discretionary and is approved on an annual basis by our Board of Directors. The Board of Directors has approved the continuation of the match through the plan year ending December 31, 2005.

For the plan years ended December 31, 2005, 2004 and 2003, the Board of Directors contributed 346,400, 298,174, and 347,968 shares of stock to the ESOP, respectively. These shares are allocated to eligible employees at the end of the plan year. Employees become vested in shares allocated to their account 20% per year, and may obtain a distribution of vested shares upon leaving the company. We believe that the 401(k) match and the Company ESOP and the related vesting schedules of 20% per year may reduce our employee turnover rates.

In March 2005, we adopted a new annual bonus and long-term incentive plan for our officers and directors. The long-term incentive plan included the issuance of 172,578 stock-only stock appreciation rights, 63,994 restricted stock units and a three-year cash incentive pool for the fiscal year ending March 31, 2006. Annual bonuses and three-year cash incentive pools are paid out based upon pre-tax profits and a modifier based on our annual pre-tax profit performance relative to peer group companies.

Three of our employee groups have voted for union representation: our pilots voted in November 1998 to be represented by an independent union, the Frontier Airline Pilots Association, our dispatchers voted in September 1999 to be represented by the Transport Workers Union, and our mechanics voted in July 2001 to be represented by the International Brotherhood of Teamsters. The first bargaining agreement for the pilots, which has a five-year term, was ratified and became effective in May 2000. Negotiations for a new agreement began in May 2005. The first bargaining agreement for the dispatchers, which had a three-year term, was ratified and became effective in September 2000. A new three-year agreement with the dispatchers became effective on September 14, 2003. The first bargaining agreement for the mechanics, which has a three-year term, was ratified and became effective in July 2002. Negotiations for a new agreement will begin in mid-2005. In July 2003, the International Brotherhood of Teamsters filed an application with the National Mediation Board, ("NMB"), for an accretion of the Company's aircraft appearance agents and maintenance cleaners into the mechanics union. On October 9, 2003, the NMB issued a decision that the aircraft appearance agents and maintenance cleaners should be accreted into the mechanics union. We appealed this decision, and in February 2004 the NMB denied the appeal. Negotiations with these two employee groups began in May 2004. As of June 1, 2005, no definitive agreement has been reached with these two work groups. Since 1997, we have had other union organizing attempts that were defeated by our flight attendants, ramp service agents, and material services specialists. However, we have received official notification from the NMB of a representation application for the Association of Flight Attendants—CWA. An election has been authorized which will occur this summer.

All new employees are subject to pre-employment drug testing. Those employees who perform safety sensitive functions are also subject to random drug and alcohol testing, and mandatory testing in the event of an accident.

Training, both initial and recurring, is required for many employees. We train our pilots, flight attendants, ground service personnel, reservations personnel and mechanics. FAA regulations require pilots to be licensed as commercial pilots, with specific ratings for aircraft to be flown, to be medically certified or physically fit, and have recent flying experience. Mechanics, quality control inspectors and flight dispatchers must be licensed and qualified for specific aircraft. Flight attendants must have initial and periodic competency, fitness training and certification. The FAA approves and monitors our training programs. Management personnel directly involved in the supervision of flight operations, training, maintenance and aircraft inspection must meet experience standards prescribed by FAA regulations.

Government Regulation

General. All interstate air carriers are subject to regulation by the DOT, the FAA and other state and federal government agencies. In general, the amount of regulation over domestic air carriers in terms of market entry and exit, pricing and inter-carrier agreements has been greatly reduced since the enactment of the Deregulation Act.

U.S. Department of Transportation. The DOT's jurisdiction extends primarily to the economic aspects of air transportation, such as certification and fitness, insurance, advertising, computer reservation systems, deceptive and unfair competitive practices, and consumer protection matters such as compliance with the Air Carrier Access Act, on-time performance, denied boarding, discrimination and baggage liability. The DOT also is authorized to require reports from air carriers and to investigate and institute proceedings to enforce its economic regulations and may, in certain circumstances, assess civil penalties, revoke operating authority and seek criminal sanctions. We hold a Certificate of Public Convenience and Necessity issued by the DOT that allows us to engage in air transportation.

Transportation Security Administration. On November 19, 2001, in response to the terrorist acts of September 11, 2001, the President of the United States signed into law the Aviation and Transportation Security Act ("ATSA"). The ATSA created the Transportation Security Administration, an agency within the DOT, to oversee, among other things, aviation and airport security. The ATSA provided for the federalization of airport passenger, baggage, cargo, mail and employee and vendor screening processes. The ATSA also enhanced background checks, provided federal air marshals aboard flights, improved flight deck security, and enhanced security for airport perimeter access. The ATSA also required that all checked baggage be screened by explosive detection systems by December 31, 2002.

U.S. Federal Aviation Administration. The FAA's regulatory authority relates primarily to flight operations and air safety, including aircraft certification and operations, crew licensing and training, maintenance standards, and aircraft standards. The FAA also oversees aircraft noise regulation, ground facilities, dispatch, communications, weather observation, and flight and duty time. It also controls access to certain airports through slot allocations, which represent government authorization for airlines to take off and land at controlled airports during specified time periods. The FAA has the authority to suspend temporarily or revoke permanently the authority of an airline or its licensed personnel for failure to comply with FAA regulations and to assess civil and criminal penalties for such failures. We hold an operating certificate issued by the FAA pursuant to Part 121 of the Federal Aviation Regulations. We must have and we maintain FAA certificates of airworthiness for all of our aircraft. Our flight personnel, flight and emergency procedures, aircraft and maintenance facilities and station operations are subject to periodic inspections and tests by the FAA.

Environmental Matters. The Aviation Safety and Noise Abatement Act of 1979, the Airport Noise and Capacity Act of 1990 and Clean Air Act of 1963 oversee and regulate airlines with respect to aircraft engine noise and exhaust emissions. We are required to comply with all applicable FAA noise control regulations and with current exhaust emissions standards. Our fleet is in compliance with the FAA's Stage 3 noise level requirements. In addition, various elements of our operation and maintenance of our aircraft are subject to monitoring and control by federal and state agencies overseeing the use and disposal of hazardous materials and storm water discharge. We believe we are currently in substantial compliance with all material requirements of these agencies.

Railway Labor Act/National Mediation Board. Our labor relations with respect to our unionized employees are covered under Title II of the Railway Labor Act and are subject to the jurisdiction of the NMB.

Foreign Operations. The availability of international routes to U.S. carriers is regulated by treaties and related agreements between the United States and foreign governments. The United States typically follows the practice of encouraging foreign governments to enter into "open skies" agreements that allow multiple carrier designation on foreign routes. In some cases, countries have sought to limit the number of carriers allowed to fly these routes. Certain foreign governments impose limitations on the ability of air carriers to serve a particular city and/or airport within their country from the U.S. For a U.S. carrier to fly to any such international destination, it must first obtain approval from both the U.S. and the "foreign country authority". For those international routes where there is a limit to the number of carriers or frequency of flights, studies have shown these routes have more value than those without restrictions. In the past, U.S. government route authorities have been sold between carriers.

Foreign Ownership. Pursuant to law and DOT regulation, each United States air carrier must qualify as a United States citizen, which requires that its President and at least two-thirds of its Board of Directors and other managing officers be comprised of United States citizens, that not more than 25% of its voting stock may be owned by foreign nationals, and that the carrier not be otherwise subject to foreign control.

Miscellaneous. We are also subject to regulation or oversight by other federal and state agencies. Antitrust laws are enforced by the U.S. Department of Justice and the Federal Trade Commission. All air carriers are subject to certain provisions of the Communications Act of 1934 because of their extensive use of radio and other communication facilities, and are required to obtain an aeronautical radio license from the Federal Communications Commission. The Immigration and Naturalization Service, the U.S. Customs Service and the Animal and Plant Health Inspection Service of the U.S. Department of Agriculture each have jurisdiction over certain aspects of our aircraft, passengers, cargo and operations.

Risk Factors

In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating our business and us. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. In addition, please read "Special Note About Forward-Looking Statements" in this Form 10-K, where we describe additional uncertainties associated with our business and the forward-looking statements included or incorporated by reference in this Form 10-K. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere included or incorporated by reference in this Form 10-K. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

Risks Related to Frontier

We may not be able to obtain or secure financing for our new aircraft.

As of March 31, 2005, we have commitments to purchase 13 additional new Airbus A319 aircraft over approximately the next three years. We have secured leasing commitments for seven additional Airbus A319 aircraft. As of June 1, 2005, we have financing commitments for all of our Airbus deliveries through December 31, 2006. To complete the purchase of the remaining aircraft, we must secure aircraft financing, which we may not be able to obtain on terms acceptable to us, if at all. The amount of financing required will depend on the required down payment on mortgage-financed aircraft and the extent to which we lease as opposed to purchase the aircraft. We are exploring various financing alternatives, including, but not limited to, domestic and foreign bank financing, leveraged lease arrangements or sale/leaseback transactions. There can be no guarantee that additional financing will be available when required or on acceptable terms. The inability to secure the financing could have a material adverse effect on our cash balances or result in delays in or our inability to take delivery of Airbus aircraft that we have agreed to purchase, which would impair our strategy for long-term growth and could result in the loss of pre-delivery payments and deposits previously paid to the manufacturer, and/or the imposition of other penalties or the payment of damages for failure to take delivery of the aircraft in accordance with the terms of the purchase agreement with the manufacturer.

We have a significant amount of fixed obligations and we will incur significantly more fixed obligations, which could increase the risk of failing to meet payment obligations.

As of March 31, 2005, our total debt was $306 million. Maturities of our long-term debt are $18.2 million in fiscal year 2006, $19.2 million in fiscal year 2007, $20.3 million in fiscal year 2008, $21.5 million in 2009, $22.7 million in 2010, and an aggregate of $199.1 million for the years thereafter. After accounting for the effect of our interest rate derivative hedge, 86.8% of our total long-term debt bears floating interest rates and the remaining 13.2% bears fixed rates. In addition to long-term debt, we have a significant amount of other fixed obligations under operating leases related to our aircraft, airport terminal space, other airport facilities and office space. As of March 31, 2005, future minimum lease payments under non-cancelable operating leases were approximately $132.4 million in fiscal year 2006, $131.1 million in fiscal year 2007, $127.2 million in fiscal year 2008, $122.5 million in fiscal year 2009, $121.4 million in fiscal year 2010 and an aggregate of $642.8 million for the years thereafter. Future minimum lease payments include signed lease agreements representing an obligation to lease seven aircraft over the next two years, which, subject to the satisfaction of certain contingencies, represent lease payments of $180 million in the aggregate. Approximately 85% of our minimum lease payments related to aircraft and leased engines are fixed in nature, and the remaining 15% are adjusted periodically based on floating interest rates. As of March 31, 2005, we have commitments of approximately $524 million to purchase 13 additional aircraft over approximately the next three years, including estimated amounts for contractual price escalations, spare parts to support these aircraft and to equip the aircraft with LiveTV. We will incur additional debt or long-term lease obligations as we take delivery of new aircraft and other equipment and continue to expand into new markets.

Many of our financial obligations contain cross-default provisions.

Financial arrangements that contain cross-default provisions could be declared in default and all amounts outstanding could be declared immediately due and payable. If we did not have sufficient available cash to pay all amounts that become due and payable, or otherwise a default is significant and obligations under our lease and loan agreements are accelerated under default provisions, we may have to seek additional debt or equity financing, which may not be available on acceptable terms, or at all. If such financing were not available, we would have to sell assets in order to obtain the funds required to make the accelerated payments.

Our failure to successfully implement our growth strategy could harm our business.

Our growth strategy involves adding up to 18 additional Airbus aircraft, increasing the frequency of flights to markets we currently serve, expanding the number of markets served and increasing flight connection opportunities. It is critical that we achieve our growth strategy in order for our business to attain economies of scale and to sustain or improve our results of operations. Increasing the number of markets we serve depends on our ability to access suitable airports located in our targeted geographic markets in a manner that is consistent with our cost strategy. We will also need to obtain additional gates and other operational facilities at DIA. Any condition that would deny, limit or delay our access to airports we seek to serve in the future will constrain our ability to grow. Additionally, traffic may not materialize in new markets. Opening new markets requires us to commit a substantial amount of resources, even before the new services commence. Expansion will also require additional skilled personnel, equipment and facilities. An inability to hire and retain skilled personnel or to secure the required equipment and facilities efficiently and cost-effectively may negatively affect our ability to achieve our growth strategy. We cannot assure you that we will be able to successfully expand our existing markets or establish new markets, and our failure to do so could harm our business.

Transition and growth of our fleet and expansion of our markets and services may also strain our existing management resources and systems to the point that they may no longer be adequate to support our operations, requiring us to make significant expenditures in these areas. We expect that we may need to further develop our information technology systems and other corporate infrastructure to accommodate future growth. We cannot assure you that we will be able to sufficiently develop our systems and infrastructure on a timely basis, and the failure to do so could harm our business.

We depend heavily on the Denver market to be successful.

Our business strategy has historically focused on adding flights to and from our Denver base of operations. A reduction in our share of the Denver market, increased competition, or reduced passenger traffic to or from Denver could have a material adverse effect on our financial condition and results of operations. In addition, our dependence on a hub system operating out of DIA makes us more susceptible to adverse weather conditions and other traffic delays in the Rocky Mountain region than some of our competitors that may be better able to spread these traffic risks over large route networks.

We face intense competition and market dominance by United and uncertainty with respect to its ability to emerge from Chapter 11 successfully; we also face competition from other airlines at DIA.

The airline industry is highly competitive, primarily due to the effects of the Airline Deregulation Act of 1978, which substantially eliminated government authority to regulate domestic routes and fares and increased the ability of airlines to compete with respect to flight frequencies and fares. We compete with United in our hub in Denver, and we anticipate that we will compete principally with United in our future market entries. United, Ted, and United's regional airline affiliates are the dominant carriers out of DIA, accounting for approximately 58.0% of all revenue passengers for the year ended March 31, 2005. Fare wars, predatory pricing, "capacity dumping" in which a competitor places additional aircraft on selected routes, and other activities could adversely affect us. The future activities of United and other carriers may have a material adverse effect on our revenues and results of operations. United currently operates 16 flights a week to Mexico that compete with our current routes to Mexico. United has applied for authorization and has been granted authority to fly from Denver to Cozumel, Mexico, which is a market in which we intend to began service during the 2005-2006 winter season. Most of our current and potential competitors have significantly greater financial resources, larger route networks, and superior market identity. In addition, United is currently operating under the protection of Chapter 11 of the Bankruptcy Code. As it seeks to develop a plan of reorganization, United has created a low-cost operation in order to compete more effectively with us

and other low-cost carriers. Denver is a hub for its new low-cost operation, which began in February 2004. United's low-cost venture, and United's ability to lower the costs of its mainline operations through the bankruptcy process, including its ability to shed itself of significant financial obligations under its pension plans, may place downward pressure on air fares charged in the Denver market and adversely affect our market share at DIA and our ability to maintain yields required for profitable operations. The uncertainty regarding United's business plan, its ability to restructure under Chapter 11, and its potential for placing downward pressure on air fares charged in the Denver market are risks on our ability to maintain yields required for profitable operations. In addition, in the last three years Alaska Airlines, Spirit Airlines, JetBlue Airways, AirTran Airways and ATA Airlines, Inc. have commenced service at DIA. These airlines have offered low introductory fares and compete on several of our routes. Competition from these airlines could adversely affect us.

We may not have access to adequate gates or airport slots, which could decrease our competitiveness.

The number of gates, ticket counter or office space available to us at DIA, or any other airport where we operate or seek to commence operations in the future may be limited due the lack of available space or disruptions caused by airport renovation projects. Available facilities may not provide for the best overall service to our customers, and may prevent us from scheduling our flights during peak or opportune times. The lack of available facilities may limit our ability to expand service to certain cities or restrict our ability to plan departures and arrivals in a manner to provide efficient service or connecting times to and through our Denver hub. Inefficient operations may result in a reduction in passenger bookings or lost revenue.

At DIA, our hub, we currently have access to a sufficient number of gates and other facilities to accommodate our level of service. Two of the gates we use at DIA are leased by United, but the airport authority has provided us the right to use these gates on a temporary basis through October 2005. If the airport or United seek to take back control of these gates, we may need to alter our overall flight schedules over the remaining gates in a manner that will increase connecting times for passengers connecting through DIA. This change in flight schedules could result in a decrease in passenger bookings and a loss of revenue from connecting traffic. We are currently conducting negotiations with DIA to develop a permanent solution to our gates needs at DIA, either through new construction or by gaining permanent access to existing gates.

In the United States, the FAA currently regulates slot allocations at O'Hare International Airport in Chicago, JFK and LaGuardia Airports in New York City, and Ronald Reagan National Airport in Washington D.C. John Wayne Airport in Orange County also limits arrivals and departures at its airport for noise control purposes. We currently operate at LaGuardia Airport, Ronald Reagan National Airport and John Wayne Airport by virtue of having been awarded arrival and departure slots at these airports. In each case, the agencies controlling slot allocations reserve the right to recall slot allocations for, among other reasons, lack of meeting frequency or capacity requirements. If we lose existing slot allocations, are denied requests for additional slot allocations at these airports, or are denied slot allocations at other slot-controlled airports where we wish to operate in the future, our ability to provide service would be restricted, eliminated, or reduced. As these cities represent key markets, the resulting restriction on our service could negatively effect our revenue production.

We experience high costs at DIA, which may impact our results of operations.

We operate our hub of flight operations from DIA where we experience high costs. Financed through revenue bonds, DIA depends on landing fees, gate rentals, income from airlines, the traveling public, and other fees to generate income to service its debt and to support its operations. Our cost of operations at DIA will vary as traffic increases or diminishes at that airport. We believe that our operating costs at DIA substantially exceed those that other airlines incur at most hub airports in other cities, which decreases our ability to compete with other airlines with lower costs at their hub airports.

In addition, United, currently operating under the protection of Chapter 11 of the Bankruptcy Code, represents a significant tenant at DIA. At this time, United and DIA have completed negotiations relating to the restructuring of its lease agreement in a fashion that reduces the amounts United is required to pay under its lease. Normally, the decrease in payments by United would result in the increase in amounts paid by all other airlines. At this time, however, the City and County of Denver has agreed to offset the decrease in payments negotiated by United. The City's obligation to make these offset payments is subject to rescission in certain circumstances. If these payments are rescinded, if the renegotiated lease is not approved under United's final plan of reorganization, or if United otherwise significantly reduces operations at DIA, our overall costs at DIA may significantly increase.

Our transition to an Airbus fleet creates risks.

As of June 1, 2005, we operate 46 Airbus aircraft. We completed our transition to operating only Airbus aircraft in April 2005. One of the key elements of this strategy is to produce cost savings because crew training is standardized for aircraft of a common type, maintenance issues are simplified, spare parts inventory is reduced, and scheduling is more efficient. However, during our transition period we had additional costs associated with retraining our Boeing crews in the Airbus aircraft. We expect to incur the last remaining pilot transitional training costs in the quarter ending June 30, 2005. We also retired three Boeing aircraft in advance of the end of the lease agreements in April 2005. As such, we will recognize the remaining lease obligations of these three leased aircraft as an expense in the first quarter of fiscal year 2006. We will incur expenses associated with the return of our remaining out-of-service Boeing aircraft to their respective lessors in both our first and second quarters of fiscal year 2006.

Since we operate only Airbus aircraft and GE engines, we are dependent on single manufacturers for future aircraft acquisitions or deliveries, spare parts or warranty service. If Airbus is unable to perform its obligations under existing purchase agreements, or is unable to provide future aircraft or services, whether by fire, strike or other events that affect its ability to fulfill contractual obligations or manufacture aircraft or spare parts, we would have to find another supplier for our aircraft. Currently, Boeing is the only other manufacturer from which we could purchase or lease alternate aircraft. If we were forced to acquire Boeing aircraft, we would need to address fleet transition issues, including substantial costs associated with retraining our employees, acquiring new spare parts, and replacing our manuals. In addition, the fleet efficiency benefits described above may no longer be available.

We also are particularly vulnerable to any problems that might be associated with the Airbus aircraft. Our business would be significantly disrupted if an FAA airworthiness directive or service bulletin were issued resulting in the grounding of all Airbus aircraft of the type we operate while the defect is being corrected. Our business could also be harmed if the public avoids flying Airbus aircraft due to an adverse perception about the aircraft's safety or dependability, whether real or perceived, in the event of an accident or other incident involving an Airbus aircraft of the type we fly.

We are reliant on one vendor to provide our LiveTV service

One of the unique features of our Airbus fleet is that every seat in each of our Airbus aircraft is equipped with LiveTV. LiveTV is provided by LiveTV, LLC, a subsidiary of JetBlue Airways, a competitor of ours. We do not know of any other company that could provide us with LiveTV equipment and if LiveTV were to stop supplying us with the equipment or service for any reason, we could lose one of the unique services that differentiate us from our competitors.

Our maintenance expenses may be higher than we anticipate and will increase as our fleet ages.

We bear the cost of all routine and major maintenance on our owned and leased aircraft. Maintenance expenses comprise a significant portion of our operating expenses. In addition, we are

required periodically to take aircraft out of service for heavy maintenance checks, which can adversely increase costs and reduce revenue. We also may be required to comply with regulations and airworthiness directives the FAA issues, the cost of which our aircraft lessors may only partially assume depending upon the magnitude of the expense. Although we believe that our owned and leased aircraft are currently in compliance with all FAA issued airworthiness directives, additional airworthiness directives likely will be required in the future, necessitating additional expense.

Because our average age of our aircraft is approximately 2.0 years, our aircraft require less maintenance now than they will in the future. We have incurred lower maintenance expenses because most of the parts on our aircraft are under multi-year warranties. Our maintenance costs will increase significantly, both on an absolute basis and as a percentage of our operating expenses, as our fleet ages and these warranties expire.

Our landing fees may increase because of local noise abatement procedures.

As a result of litigation and pressure from residents in the areas surrounding airports, airport operators have taken actions over the years to reduce aircraft noise. These actions have included regulations requiring aircraft to meet prescribed decibel limits by designated dates, curfews during night time hours, restrictions on frequency of aircraft operations, and various operational procedures for noise abatement. The Airport Noise and Capacity Act of 1990 recognized the right of airport operators with special noise problems to implement local noise abatement procedures as long as the procedures do not interfere unreasonably with the interstate and foreign commerce of the national air transportation system. Compliance with local noise abatement procedures may lead to increased landing fees.

An agreement between the City and County of Denver and another county adjacent to Denver specifies maximum aircraft noise levels at designated monitoring points in the vicinity of DIA with significant payments payable by Denver to the other county for each substantiated noise violation under the agreement. DIA has incurred these payment obligations and likely will incur such obligations in the future, which it will pass on to us and other air carriers serving DIA by increasing landing fees. Additionally, noise regulations could be enacted in the future that would increase our expenses and could have a material adverse effect on our operations.

Unionization affects our costs and may affect our operations.

Three of our employee groups have voted for union representation: our pilots, dispatchers, and mechanics. In addition, since 1997 we have had union organizing attempts that were defeated by our flight attendants, ramp service agents, and stock clerks. We received official notification from the NMB of a representation application for the Association of Flight Attendants—CWA. An election has been authorized which will occur this summer.

If any group of our currently non-unionized employees were to unionize and we were unable to reach agreement on the terms of their and other currently unionized employee groups' collective bargaining agreements or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting certain groups for their non-union status or conducting sympathy action for fellow members striking at other airlines. Any of these events would be disruptive to our operations and could harm our business.

Our limited marketing alliances could harm our business.

Many airlines have marketing alliances with other airlines, under which they market and advertise their status as marketing alliance partners. Among other things, they share the use of two-letter flight designator codes to identify their flights and fares in the computerized reservation systems and permit reciprocity in their frequent flyer programs. Our program partners presently include Midwest Airlines and Virgin Atlantic Airways, but we do not have the significant network of marketing partners that many other airlines do. Our limited marketing alliances put us at a competitive disadvantage to global network carriers, whose ability to attract passengers through more widespread alliances, particularly on international routes, may adversely affect our passenger traffic, and therefore our results of operations.

Our lack of higher borrowing capacity under our current lines of credit and lack of other borrowing facilities makes us highly dependent upon our existing cash and operating cash flows.

Airlines require substantial liquidity to operate. We have a line of credit with a maximum borrowing amount of $13.0 million based on 50% of the value of certain spare parts inventory. Currently, based on our eligible spare parts inventory, we can borrow up to $7.3 million. We have also entered into a firm commitment for an additional revolving line of credit for $5.0 million subject to the execution and delivery of closing documents. Our limited borrowing capacity means we rely primarily on operating cash flows to provide working capital. Unless we secure additional borrowing capacity under lines of credit, borrowing facilities or other financing, we will be dependent upon our existing cash and operating cash flows to fund our operations and to make scheduled payments on our debt and other fixed obligations. If we deplete our existing cash, fail to generate sufficient funds from operations to meet these cash requirements and are unable to secure a line of credit, borrowing facility or other financing, we could default on our debt and other fixed obligations. Our inability to meet our obligations as they become due would seriously harm our business and financial results, particularly, as discussed earlier, in light of the cross-default clauses contained in many of our financing arrangements.

If we are unable to attract and retain qualified personnel at reasonable costs, our business will be harmed.

Our business is labor intensive, with labor costs representing 30.5% of our operating expenses excluding fuel for the year ended March 31, 2005 and 31.6% of our operating expenses excluding fuel for the year ended March 31, 2004. We expect salaries, wages and benefits to increase on a gross basis. These costs could increase as a percentage of our overall costs, which could harm our business. Our growth plans will require us to hire, train and retain a significant number of new employees in the future. From time to time, the airline industry has experienced a shortage of personnel licensed by the FAA, especially pilots and mechanics. We compete against the major U.S. airlines for labor in these highly skilled positions. Many of the major U.S. airlines offer wage and benefit packages that exceed our wage and benefit packages. As a result, in the future, we may have to increase significantly wages and benefits in order to attract and retain qualified personnel or risk considerable employee turnover. If we are unable to hire, train and retain qualified employees at a reasonable cost, we may be unable to complete our growth plans and our business could be harmed.

We rely heavily on automated systems and technology to operate our business and any failure of these systems could harm our business.

We are increasingly dependent on automated systems and technology to operate our business, enhance customer service and achieve low operating costs, including our computerized airline reservation system, telecommunication systems, website, check-in kiosks and in-flight entertainment systems. Substantial or repeated system failures to any of the above systems could reduce the attractiveness of our services and could result in our customers purchasing tickets from another airline. Any disruptions in these systems could result in the loss of important data, increase our expenses and generally harm our business.

In February 2005, we implemented a new reservation system and modified our website. We experienced cutover problems and have continued to experience system cutover issues. This has caused operational and financial disruptions and may have the effect of discouraging some travelers from purchasing tickets from us. In addition, a seemingly high percentage of customers have been booking flights on our airline through third-party websites, which has increased our distribution costs and required us to increase staffing levels in our reservations offices.

Risks Associated with the Airline Industry

The airline industry has incurred significant losses resulting in airline restructuring and bankruptcies, which could result in changes in our industry.

As a result of slower general economic conditions that have persisted since 2001, domestic airlines have experienced a decline in demand resulting in extensive industry-wide financial losses. While domestic passenger traffic is returning to previous levels, the airline industry has continued to add or restore capacity, resulting in strong price competition. Financial losses have continued into 2004 resulting in airlines renegotiating or attempting to renegotiate labor contracts, reconfiguring flight schedules, furloughing or terminating employees, as well as other efficiency and cost-cutting measures. Two major airlines have reexamined their traditional business models and have created their own low-fare operations. Despite these actions, several airlines have sought or threatened reorganization under Chapter 11 of the U.S. Bankruptcy Code permitting them to reduce labor rates, restructure debt, terminate pension plans and generally reduce their cost structure. Such factors may have a greater impact during time periods when the industry encounters continued financial losses, as airlines under financial pressures may institute pricing structures to achieve near-term survival rather than long-term viability. It is foreseeable that further airline reorganizations, bankruptcies, or consolidations may occur, the effects of which we are unable to predict. We cannot assure you that the occurrence of these events, or potential changes resulting from these events, will not harm our business or the industry.

We may be subject to terrorist attacks or other acts of war and increased costs or reductions in demand for air travel due to hostilities in the Middle East or other parts of the world.

On September 11, 2001, four commercial aircraft were hijacked by terrorists and crashed into The World Trade Center in New York City, the Pentagon in Northern Virginia and a field in Pennsylvania. These terrorist attacks resulted in an overwhelming loss of life and extensive property damage. Immediately after the attacks, the FAA closed U.S. airspace, prohibiting all flights to, from and within the United States of America. Airports reopened on September 13, 2001, except for Washington D.C. Ronald Reagan International Airport, which partially reopened on October 4, 2001.

The September 11 terrorist attacks and the war in Iraq created fear among consumers and resulted in significant negative economic impacts on the airline industry. Primary effects were substantial loss of revenue and flight disruption costs, increased security and insurance costs, increased concerns about the potential for future terrorist attacks, airport shutdowns and flight cancellations and delays due to additional screening of passengers and baggage, security breaches and perceived safety threats, and significantly reduced passenger traffic and yields due to the subsequent drop in demand for air travel.

Given the magnitude and unprecedented nature of the September 11 attacks, the uncertainty and fear of consumers resulting from the war in Iraq, and the potential for other hostilities in other parts of the world, it is uncertain what long-term impact these events will or could have on the airline industry in general and on us in particular. These factors could affect our operating results and financial condition by creating weakness in demand for air travel, increased costs due to new security measures and the potential for new or additional government mandates for security related measures, increased insurance premiums, increased fuel costs, and uncertainty about the continued availability of war risk coverage or other insurances. In addition, several plaintiffs filed lawsuits in the United States District

Court, Southern District of New York based on the events of September 11, 2001. The complaints name as defendants various security system manufacturers and suppliers and several airlines that were operating at Boston Logan International Airport and Portland (Maine) International Jetport on September 11, 2001, including us. The complaints generally allege that the defendants failed to provide adequate security systems or supervision of security procedures at Logan Airport and Portland Jetport. At this time, we have been dismissed from all existing lawsuits, but it is possible for plaintiffs to file new complaints against us until the statute of limitations period expires.

In addition, although the entire industry is substantially enhancing security equipment and procedures, it is impossible to guarantee that additional terrorist attacks or other acts of war will not occur. Given the weakened state of the airline industry, if additional terrorist attacks or acts of war occur, particularly in the near future, it can be expected that the impact of those attacks on the industry may be similar in nature to but substantially greater than those resulting from the September 11 terrorist attacks.

Increases in fuel costs affect our operating costs and competitiveness.

Fuel is a major component of our operating expenses, accounting for 21.6% of our total operating expenses for the year ended March 31, 2005, up from 17.7% for the year ended March 31, 2004. Both the cost and availability of fuel are influenced by many economic and political factors and events occurring in oil producing countries throughout the world, and fuel costs fluctuate widely. Recently the price per barrel of oil is as at an all-time high and has significantly impacted our results of operations. We cannot predict our future cost and availability of fuel, which affects our ability to compete. The unavailability of adequate fuel supplies could have a material adverse effect on our operations and profitability. In addition, larger airlines may have a competitive advantage because they pay lower prices for fuel. We generally follow industry trends by imposing a fuel surcharge in response to significant fuel price increases. However, our ability to pass on increased fuel costs may be limited by economic and competitive conditions. Although we implemented a fuel hedging program in 2003, under which we enter into Gulf Coast jet fuel and West Texas Intermediate crude derivative contracts to partially protect against significant increases in fuel prices, this program is limited in fuel volume and duration. As of March 31, 2005, we had hedged approximately 28% of our projected fuel requirements for the quarter ending June 30, 2005. On May 13, 2005, we entered into an additional derivative instrument that hedge approximately 20% of our projected fuel requirements for the period from July 1, 2005 to December 31, 2005.

The airline industry is seasonal and cyclical, resulting in unpredictable liquidity and earnings.

Because the airline industry is seasonal and cyclical, our liquidity and earnings will fluctuate and be unpredictable. Our operations primarily depend on passenger travel demand and seasonal variations. Our weakest travel periods are generally during the quarters ending in March and December. The airline industry is also a highly cyclical business with substantial volatility. Airlines frequently experience short-term cash requirements. These requirements are caused by seasonal fluctuations in traffic, which often reduce cash during off-peak periods, and various other factors, including price competition from other airlines, national and international events, fuel prices, and general economic conditions including inflation. Our operating and financial results are likely to be negatively impacted by the continued stagnation in national or regional economic conditions in the United States, and particularly in Colorado.

We, like many in the industry, have seen a negative impact to passenger traffic caused by the war with Iraq as well as threats of further terrorist activities. The impact has been more prevalent with our business traffic, which is higher yield traffic that books closer to the date of departure, than with our leisure customers. Even though the threats of further terrorist activities has impacted us, we believe that the larger, more established carriers are being impacted to a greater extent as more price sensitive

business travelers who typically fly these carriers are looking for affordable alternatives similar to the service we provide. The larger carriers have reduced their "close-in" fare structure to more aggressively compete for this traffic. Aggressive pricing tactics by our major competitors have had and could continue to have an impact on our business.

Security screening delays may negatively impact passenger traffic.

The federal government is now responsible for conducting security screening activities at all airports in the United States. The ability to complete this screening quickly and efficiently depends upon the adequacy of the security screening facilities and staffing levels. At times the screening system has resulted in significant delays at larger airports. It is believed that these delays have resulted in a loss of passengers for shorter haul trips. While we have not seen a drastic reduction in passenger traffic in our shorter routes, at times congestion and delays at DIA from security screening are significant. Airlines may be able to augment security services in not vital areas by hiring support staff, which will further increase the security costs being paid by the airlines. Notwithstanding such support, significant delays caused by a lack of federal resources may further reduce passenger traffic and our revenues.

Our insurance costs have increased substantially as a result of the September 11th terrorist attacks, and further increases in insurance costs would harm our business.

Following the September 11 terrorist attacks, aviation insurers dramatically increased airline insurance premiums and significantly reduced the maximum amount of insurance coverage available to airlines for liability to persons other than passengers for claims resulting from acts of terrorism, war or similar events to $50 million per event and in the aggregate. In light of this development, under the Air Transportation Safety and System Stabilization Act, the U.S. government has provided domestic airlines with excess war risk coverage above $50 million up to an estimated $1.6 billion per event for us.

In December 2002, under the Homeland Security Act of 2002, the U.S. government expanded its insurance program to permit airlines to elect either the government's excess third-party coverage or for the government to become the primary insurer for all war risks coverage. We elected the latter in February 2003 and discontinued the commercially available war risk coverage. The Appropriations Act authorized the government to offer both policies through August 31, 2004. The Emergency Wartime Supplemental Appropriations Act extended the government's mandate to provide war-risk insurance until December 31, 2004. Pursuant to the Consolidated Appropriations Act of 2005, Congress further extended the government's mandate to provide war-risk insurance until August 31, 2005, at the discretion of the Secretary of Transportation. We cannot assure you that this coverage will continue. We expect that if the government stops providing war risk coverage to the airline industry, the premiums charged by aviation insurers for this coverage will be substantially higher than the premiums currently charged by the government. Significant increases in insurance premiums would harm our financial condition and results of operations.

Our financial results and reputation could be harmed in the event of an accident or incident involving our aircraft.

An accident or incident involving one of our aircraft could involve repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service, and significant potential claims of injured passengers and others. We are required by the DOT and our lenders and lessors to carry hull, liability and war risk insurance. Although we believe we currently maintain liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate and we may be forced to bear substantial losses from an accident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our business and financial results. Moreover, any aircraft accident or incident, even if fully insured,

could cause a public perception that we are less safe or reliable than other airlines, which would harm our business.

We are in a high fixed cost business, and any unexpected decrease in revenues would harm us.

The airline industry is characterized by low profit margins and high fixed costs primarily for personnel, fuel, aircraft ownership and lease costs and other rents. The expenses of an aircraft flight do not vary significantly with the number of passengers carried and, as a result, a relatively small change in the number of passengers or in pricing would have a disproportionate effect on the airline's operating and financial results. Accordingly, a shortfall from expected revenue levels can have a material adverse effect on our profitability and liquidity. Airlines are often affected by factors beyond their control, including weather conditions, traffic congestion at airports and increased security measures, and irrational pricing from competitors, any of which could harm our operating results and financial condition.

Delays or cancellations due to adverse weather conditions or other factors beyond our control could adversely affect us.

Like other airlines, we are subject to delays caused by factors beyond our control, including adverse weather conditions, air traffic congestion at airports and increased security measures. Delays frustrate passengers, reduce aircraft utilization and increase costs, all of which negatively affect profitability. During periods of snow, rain, fog, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic control problems and breaches in security could harm our operating results and financial condition.

We are subject to strict federal regulations, and compliance with federal regulations increases our costs and decreases our revenues.

Airlines are subject to extensive regulatory and legal requirements that involve significant compliance costs. Any future changes in regulatory over sight of airlines generally, or low-fare carriers in particular, could result in a material increase in our operating expenses or otherwise hinder our business. In the last several years, Congress has passed laws and the DOT and FAA have issued regulations relating to the operation of airlines that have required significant expenditures. For example, the President signed into law the Stabilization Act in November 2001. This law federalized substantially all aspects of civil aviation security and requires, among other things, the implementation of certain security measures by airlines and airports, including a requirement that all passenger baggage be screened. Funding for airline and airport security under the law is primarily provided by a $2.50 per enplanement ticket tax effective February 1, 2002, with authority granted to the TSA to impose additional fees on air carriers if necessary. Under the Appropriations Act enacted on April 16, 2003, the $2.50 enplanement tax was temporarily suspended on ticket sales from June 1, 2003 through September 30, 2003. This enplanement tax resumed on October 1, 2003, and recent legislation, although unsuccessful to date, considered increasing the ticket tax to $5.00 per enplanement. To the extent this increase could not be passed on to the passenger, it would result in a significant increase in our cost of operations. In addition, the acquisition, installation and operation of the required baggage screening systems by airports will result in capital expenses and costs by those airports that will likely be passed on to the airlines through increased use and landing fees. On February 17, 2002, the Stabilization Act imposed a base security infrastructure fee on commercial air carriers in an amount equal to the calendar year ended 2000 airport security expenses. The infrastructure fee for us is $1,625,000 annually subject to final audit. In 2004, the TSA announced that the fee structure would remain in place until further notice. A revision in the fee structure assessed by the TSA could result in increased cost for us.

Although we have obtained the necessary authority from the DOT and the FAA to conduct flight operations and are currently obtaining such authority from the FAA with respect to our Airbus aircraft, we must maintain this authority by 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. We believe that the FAA strictly scrutinizes smaller airlines like ours, which makes us susceptible to regulatory demands that can negatively impact our operations. We may not be able to continue to comply with all present and future rules and regulations. In addition, we cannot predict the costs of compliance with these regulations and the effect of compliance on our profitability, although these costs may be material. We also expect substantial FAA scrutiny as we transition from our Boeing fleet to an all Airbus fleet. An accident or major incident involving one of our aircraft would likely have a material adverse effect on our business and results of operations.

Item 2: Properties

Aircraft

As of June 1, 2005, excluding JetExpress, we operate 39 Airbus A319 aircraft and seven Airbus A318 aircraft in all-coach seating configurations. The age of these aircraft, their passenger capacities and expiration years for the leased aircraft are shown in the following table:

Aircraft Model	No. of Aircraft	Year of Manufacture	Approximate Seating Capacity	Lease Expiration
A319	30	2003 - 2005	132	2007 - 2017
A319	9	2001 - 2003	132	Owned
A318	5	2003 - 2004	114	Owned
A318	2	2004	114	2016

We have completed our fleet replacement plan to phase out our Boeing aircraft and replace them with a combination of Airbus A319 and A318 aircraft. In March 2000, we entered into a purchase agreement with Airbus, as subsequently amended in 2003, to purchase 32 Airbus aircraft. As of March 31, 2005, we had taken delivery of 19 of these aircraft, three of which we sold and leased back. In addition, prior to the delivery of two aircraft in fiscal year 2004, we assigned delivery to two lessors and agreed to lease these aircraft over 12-year terms. Our purchase agreement with Airbus also includes purchase rights for up to 23 additional aircraft, and allows us to purchase Airbus A318 or A320 aircraft in lieu of the A319 aircraft at our option. As of March 31, 2005, we intend to lease as many as seven additional A319 aircraft from third party lessors over the next two years. We have remaining firm purchase commitments for 13 Airbus aircraft, including one aircraft we intend to sign agreements for sale-leaseback transactions with third party lessors. We anticipate the following fleet composition as of the end of each fiscal year through 2008:

Fiscal Year Ending	A319	A318	End of Year Cumulative Total Fleet
March 31, 2006	43	7	50
March 31, 2007	50	7	57
March 31, 2008	55	7	62

This table does not include any of the 23 Airbus aircraft for which we have purchase rights, which would allow us to take delivery of additional A319 or A320 aircraft beginning in fiscal year 2006.

This table above does not include three Boeing 737-300 aircraft we ceased using on April 10, 2005 prior to the lease expiration dates, which ranged from June 2005 to May 2006.

Facilities

In January 2001, we moved our general and administrative offices to a new headquarters facility near DIA, where we lease approximately 70,000 square feet of space, at an average annual rental of approximately $1,045,000 plus operating and maintenance expenses. The lease expires January 2015. We also lease an additional 14,000 square feet of space in a building adjacent to our main headquarters, at an average annual rental of approximately $187,000 plus operating and maintenance expenses. The lease expires in July 2008.

The Denver reservations facility relocated in July 2001 to a 16,000 square foot facility, also in Denver, which we have leased for a 10-year lease term ending in June 2011, at an average annual rental of approximately $141,000 plus operating and maintenance expenses. In August 2000, we established a second reservations center facility in Las Cruces, New Mexico. This facility is approximately 12,000 square feet and is leased for a term of 122 months ending August 2010, at an average annual rental of approximately $129,000 plus operating and maintenance expenses.

We have entered into an airport lease and facilities agreement expiring in 2010 with the City and County of Denver at DIA for ticket counter space, gates and associated operations space at a current annual rental rate of approximately $11,645,000 for these facilities. Plans to work with DIA for the construction of additional gates have been placed on hold. In the interim, we have gained temporary rights to two gates, and permanent rights to one gate, previously used by United on the east end of Concourse A. We are currently obligated to return the two temporary gates to United in October 2005. DIA has also completed construction of two temporary gates on the west end of Concourse A. We are currently using all five of these temporary gates. Our future growth may require us to work with DIA and the City and County of Denver to develop access to additional gates and other airport facilities. Should the construction of additional facilities be required to meet our growth needs, it is likely we would be obligated to lease the additional facilities, thereby increasing our overall rates and charges paid to the airport. Because our overall rates and charges will be based on the final project costs as well as the number of passengers and gross weight landed at the airport, it is not possible at this time to determine the amount of future rates and charges at DIA will be.

We sublease a portion of Continental Airlines' hangar at DIA until February 2007 for a current annual rental of approximately $2,904,000. Upon 18 months written notice, either party can terminate the agreement.

Each of our airport locations requires leased space associated with gate operations, ticketing and baggage operations. We either lease the ticket counters, gates and airport office facilities at each of the airports we serve from the appropriate airport authority or sublease them from other airlines. Total annual rent expense for these facilities, excluding DIA, is approximately $16,704,000 based on rents paid for the month of March 2005. Additionally, we lease maintenance facilities in Kansas City, Missouri and Phoenix, Arizona at a current annual rental of approximately $212,000 for these facilities. In August 2003, we closed our maintenance facility in El Paso, Texas but we are still obligated for the monthly rent through August 2007. The current annual rental for our El Paso, Texas maintenance facility is approximately $88,000.

Item 3: Legal Proceedings

From time to time, we are engaged in routine litigation incidental to our business. We believe there are no legal proceedings pending in which we are a party or of which any of our property is the subject that are not adequately covered by insurance maintained by us or which have sufficient merit to result in a material adverse affect upon our business, financial condition, results of operations, or liquidity.

Item 4: Submission of Matters to a Vote of Security Holders

During the fourth quarter of the fiscal year covered by this report, we did not submit any matters to a vote of our security holders through the solicitation of proxies or otherwise.

PART II

Item 5: Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

Our common stock is listed on the NASDAQ National Market and is traded under the symbol FRNT. As of June 1, 2005, there were 1,391 holders of record of our common stock. The following table shows the range of high and low sales prices per share for our common stock for the periods indicated as reported by NASDAQ.

	High		Low
2005 Quarter Ended
June 30, 2004	$	11.63	$	8.49
September 30, 2004		11.03		7.02
December 31, 2004		13.08		6.71
March 31, 2005		11.59		8.06
2004 Quarter Ended
June 30, 2003	$	10.00	$	4.95
September 30, 2003		18.26		9.06
December 31, 2003		19.40		11.94
March 31, 2004		15.17		8.90

Dividend Policy

We have not declared or paid cash dividends on our common stock. We currently intend to retain any future earnings to fund operations and the continued development of our business, and, thus, do not expect to pay any cash dividends on our common stock in the foreseeable future. Future cash dividends, if any, will be determined by our Board of Directors and will be based upon our earnings, capital requirements, financial condition and other factors deemed relevant by the Board of Directors.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this Item is incorporated herein by reference to the data under the heading "Securities Authorized for Issuance Under Equity Compensation Plans" in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held on September 8, 2005. We intend to file the definitive Proxy Statement with the SEC on or before July 29, 2005.

Item 6: Selected Financial Data

The following selected financial and operating data as of and for each of the years ended March 31, 2005, 2004, 2003, 2002, and 2001 are derived from our audited financial statements. This data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition

and Results of Operations," and the financial statements and the related notes thereto included elsewhere in this report.

		Year Ended March 31,
		2005			2004		2003			2002		2001
		(Amounts in thousands except per share amounts)
Statement of Operations Data:
Total operating revenues		$	833,639		$	643,679	$	469,936		$	445,075	$	472,876
Total operating expenses			860,087			616,197		500,727			428,689		392,155

Operating income (loss)			(26,448	)		27,482		(30,791	)		16,386		80,721
Income (loss) before income tax expense (benefit) and cumulative effect of change in accounting principle			(35,838	)		20,457		(39,509	)		24,832		88,332
Income tax expense (benefit)			(12,408	)		7,822		(14,655	)		8,282		33,464
Income (loss) before cumulative effect of change in accounting principle			(23,430	)		12,635		(24,854	)		16,550		54,868
Cumulative effect of change in accounting principle			—			—		2,011			—		—

Net income (loss)			(23,430	)		12,635		(22,843	)		16,550		54,868
Income (loss) per share before cumulative effect of a change in accounting principle:
	Basic	$	(0.66	)	$	0.39	$	(0.84	)	$	0.58	$	2.02
	Diluted	$	(0.66	)	$	0.36	$	(0.84	)	$	0.56	$	1.90
Net income (loss) per share:
	Basic	$	(0.66	)	$	0.39	$	(0.77	)	$	0.58	$	2.02
	Diluted	$	(0.66	)	$	0.36	$	(0.77	)	$	0.56	$	1.90
Balance Sheet Data:
Cash, cash equivalents and short-term investments		$	174,795		$	190,609	$	104,880		$	89,555	$	111,251
Current assets			275,550			269,733		191,291			193,393		199,794
Total assets			792,011			769,706		588,315			413,685		295,317
Current liabilities			233,850			181,659		130,519			152,064		136,159
Long-term debt			282,792			280,001		261,739			66,832		204
Total liabilities			554,090			511,764		429,348			244,552		150,538
Stockholders' equity			237,920			257,942		158,967			169,133		144,779
Working capital			41,700			88,074		60,772			41,329		63,635

		Year Ended March 31,
		2005			2004			2003			2002			2001
Selected Operating Data:
Passenger revenue (000s)(1)
	Mainline	$	731,822		$	615,390		$	460,188		$	435,946		$	462,609
	Regional Partner(2)		84,269			11,191			—			—			—

	System Combined	$	816,091		$	626,581		$	460,188		$	435,946		$	462,609
Revenue passengers carried (000's)
	Mainline		6,653			5,569			3,926			3,069			3,017
	Regional Partner(2)		872			115			—			—			—

	System Combined		7,525			5,684			3,926			3,069			3,017
Revenue passenger miles (RPMs) (000's)(3)
	Mainline		6,587,589			5,120,587			3,599,553			2,756,965			2,773,833
	Regional Partner(2)		527,205			75,974			—			—			—

	System Combined		7,114,794			5,196,561			3,599,553			2,756,965			2,773,833
Available seat miles (ASMs) (000's)(4)
	Mainline		9,115,868			7,153,740			6,013,261			4,592,298			4,260,461
	Regional Partner(2)		736,287			111,144			—			—			—

	System Combined		9,852,155			7,264,884			6,013,261			4,592,298			4,260,461
Passenger load factor(5)
	Mainline		72.3	%		71.6	%		59.9	%		60.0	%		65.1	%
	Regional Partner(2)		71.6	%		68.4	%		—			—			—
	System Combined		72.2	%		71.5	%		59.9	%		60.0	%		65.1	%
Mainline break-even load factor(6)			75.0	%		68.8	%		65.0	%		56.6	%		52.7	%
Mainline block hours(7)			182,581			142,466			120,297			92,418			83,742
Mainline departures			72,888			61,812			53,081			41,736			38,556
Mainline average seats per departure			130			132			132			132			132
Mainline average stage length			962			877			858			834			837
Mainline average length of haul			990			919			917			898			919
Mainline average daily block hour utilization(8)			11.1			10.4			9.8			9.1			9.4
Yield per RPM (cents)(9)(10)
	Mainline		11.03			11.96			12.74			15.78			16.66
	Regional Partner(2)		15.98			14.73			—			—			—
	System Combined		11.39			12.01			12.74			15.78			16.66
Total yield per RPM (cents)(11)
	Mainline		11.38			12.35			13.06			16.14			17.05
	Regional Partner(2)		15.98			14.73			—			—			—
	System Combined		11.72			12.39			13.06			16.14			17.05
Yield per ASM (cents)(10)(12)
	Mainline		7.97			8.56			7.63			9.47			10.85
	Regional Partner(2)		11.45			10.07			—			—			—
	System Combined		8.23			8.59			7.63			9.47			10.85
Total yield per ASM (cents)(13)
	Mainline		8.22			8.84			7.81			9.69			11.10
	Regional Partner(2)		11.45			10.07			—			—			—
	System Combined		8.46			8.86			7.81			9.69			11.10
Cost per ASM (cents)
	Mainline		8.42			8.41			8.33			9.33			9.20
	Regional Partner(2)		12.56			13.17			—			—			—
	System Combined		8.73			8.48			8.33			9.33			9.20
Mainline fuel expense per ASM (cents)			2.04			1.52			1.43			1.33			1.66
Mainline cost per ASM excluding fuel (cents)(14)			6.38			6.89			6.90			8.00			7.54
Mainline average fare(15)		$	102		$	104		$	109		$	132		$	146
Mainline average aircraft in service			44.9			37.3			33.8			27.8			24.5
Mainline aircraft in service at end of year			47.0			38.0			36.0			30.0			25.0
Mainline average age of aircraft at end of year			2.5			3.9			7.4			10.6			11.4
Average fuel cost per gallon		$	1.41		$	1.04		$	0.96		$	0.87		$	1.07
Fuel gallons consumed (000s)			131,906			104,799			89,236			70,530			66,724

(1): "Passenger revenue" includes revenues for non-revenue passengers, charter revenues, administrative fees, and revenue recognized for unused tickets that are greater than one year from issuance date. The incremental revenue from passengers connecting from regional flights to mainline flights is included in our mainline passenger revenue.

(2): In September 2003, we signed a 12-year agreement with Horizon, under which Horizon operates up to nine 70-seat CRJ 700 aircraft under our Frontier JetExpress brand. The service began on January 1, 2004 and replaced our codeshare with Mesa Airlines which terminated on December 31, 2003. In accordance with Emerging Issues Task Force No. 01-08, "Determining Whether an Arrangement Contains a Lease" ("EITF 01-08"), we have concluded that the Horizon agreement contains leases as the agreement conveys the right to use a specific number and specific type of aircraft over a stated period of time. Therefore, we began recording revenues and expenses related to the Horizon agreement gross. Under the Mesa agreement, we recorded JetExpress revenues reduced by related expenses net in other revenues. JetExpress operations under the Mesa agreement from April 1, 2003 to December 31, 2003 and from February 1, 2003 to March 31, 2003 are not included in regional partner statistics in 2004 and 2003 as the Mesa arrangement was effective prior to May 28, 2003, the effective date of EITF 01-08.

Amounts included in other revenues for Mesa for the years ended March 31, 2005, 2004, 2003, 2002 and 2001 were as follows:

	Year Ended March 31,
	2005		2004			2003			2002		2001
Mesa revenues (000s)	$	—	$	25,155		$	1,608		$	—	$	—
Mesa expenses (000s)		—		(23,438	)		(2,314	)		—		—

Net amount in other revenues	$	—	$	1,717		$	(706	)	$	—	$	—

Mesa's revenue passenger miles (RPMs) and available seat miles (ASMs) for the years ended March 31, 2005, 2004, 2003, 2002 and 2001 were as follows:

	Year Ended March 31,
	2005	2004	2003	2002	2001
Mesa RPMs (000s)	—	148,163	11,004	—	—
Mesa ASMs (000s)	—	174,435	17,759	—	—

(3): "Revenue passenger miles," or RPMs, are determined by multiplying the number of fare-paying passengers carried by the distance flown. This represents the number of miles flown by revenue paying passengers.
(4): "Available seat miles," or ASMs, are determined by multiplying the number of seats available for passengers by the number of miles flown.
(5): "Passenger load factor" is determined by dividing revenue passenger miles by available seat miles. This represents the percentage of aircraft seating capacity that is actually utilized.
(6): "Break-even load factor" is the passenger load factor that will result in operating revenues being equal to operating expenses, assuming constant revenue per passenger mile and expenses.

A reconciliation of the components of the calculation of break-even load factor is as follows:

		Year Ended March 31,
		2005			2004			2003			2002			2001
		(in thousands)
(Income) loss before cumulative effect of accounting change		$	23,430		$	(12,635	)	$	24,854		$	(16,550	)	$	(54,868	)
	Income tax (expense) benefit		12,408			(7,822	)		14,655			(8,282	)		(33,465	)
	Passenger revenue		731,822			615,390			460,188			435,946			462,609
	Regional Partner Expense		(92,481	)		(14,634	)		—			—			—
	Regional Partner Revenue		84,269			11,191			—			—			—
	Charter revenue		(5,381	)		(2,724	)		(1,515	)		(1,101	)		(472	)

Passenger revenue mainline (excluding charter and regional partner revenue required to break even)		$	754,067		$	588,766		$	498,182		$	410,013		$	373,804

The calculation of the break-even load factor follows:

	Year Ended March 31,
	2005			2004			2003			2002			2001
	(in thousands)
Calculation of break-even load factor:
Passenger revenue mainline (excluding charter and regional partner revenue required to break even) ($000s)	$	754,067		$	588,766		$	498,182		$	410,013		$	373,804
Mainline yield per RPM (cents)		11.03			11.96			12.74			15.78			16.66

Mainline revenue passenger miles (000s) to break even assuming constant yield per RPM		6,838,110			4,920,834			3,909,610			2,598,989			2,243,642

Mainline available seat miles (000's)		9,115,868			7,153,740			6,013,261			4,592,298			4,260,461

Mainline break-even load factor		75.0	%		68.8	%		65.0	%		56.6	%		52.7	%

Note—Some items may not add or recalculate due to rounding.

(7): "Mainline block hours" represent the time between aircraft gate departure and aircraft gate arrival.
(8): "Mainline average daily block hour utilization" represents the total block hours divided by the number of aircraft days in service, divided by the weighted average of aircraft in our fleet during that period. The number of aircraft includes all aircraft on our operating certificate, which includes scheduled aircraft, as well as aircraft out of service for maintenance and operational spare aircraft, and excludes aircraft removed permanently from revenue service or new aircraft not yet placed in revenue service. This represents the amount of time that our aircraft spend in the air carrying passengers.
(9): "Yield per RPM" is determined by dividing passenger revenues (excluding charter revenue) by revenue passenger miles.
(10): For purposes of these yield calculations, charter revenue is excluded from passenger revenue. These figures may be deemed non-GAAP financial measures under regulations issued by the Securities and Exchange Commission. We believe that presentation of yield excluding charter revenue is useful to investors because charter flights are not included in RPMs or ASMs. Furthermore, in preparing operating plans and forecasts, we rely on an analysis of yield exclusive

of charter revenue. Our presentation of non-GAAP financial measures should not be viewed as a substitute for our financial or statistical results based on GAAP. The calculation of passenger revenue excluding charter revenue is as follows:

		Year Ended March 31,
		2005		2004		2003		2002		2001
Passenger revenues—mainline, as reported		$	731,822	$	615,390	$	460,188	$	435,946	$	462,609
	Less: charter revenue		5,381		2,724		1,515		1,101		472

Passenger revenues—mainline excluding charter			726,441		612,666		458,673		434,845		462,137
	Add: Passenger revenues—regional partner		84,269		11,191		—		—		—

Passenger revenues, system combined		$	810,710	$	623,857	$	458,673	$	434,845	$	462,137

(11): "Total yield per RPM" is determined by dividing total revenues by revenue passenger miles. This represents the average amount one passenger pays to fly one mile.
(12): "Yield per ASM" or "RASM" is determined by dividing passenger revenues (excluding charter revenue) by available seat miles.
(13): "Total yield per ASM" is determined by dividing total revenues by available seat miles.
(14): This may be deemed a non-GAAP financial measure under regulations issued by the Securities and Exchange Commission. We believe the presentation of financial information excluding fuel expense is useful to investors because we believe that fuel expense tends to fluctuate more than other operating expenses. Excluding fuel from the cost of mainline operations facilitates the comparison of results of operations between current and past periods and enables investors to better forecast future trends in our operations. Furthermore, in preparing operating plans and forecasts, we rely, in part, on trends in our historical results of operations excluding fuel expense. However, our presentation of non-GAAP financial measures should not be viewed as a substitute for our financial results determined in accordance with GAAP.
(15): "Mainline average fare" excludes revenue included in passenger revenue for charter and non-revenue passengers, administrative fees, and revenue recognized for unused tickets that are greater than one year from issuance date.

Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We intend to continue our focused growth strategy, which included the completion of a fleet transition from a Boeing fleet to an all Airbus fleet in April 2005. One of the key elements of this strategy is to produce cost savings because crew training is standardized for aircraft of a common type, maintenance issues are simplified, spare parts inventory is reduced, and scheduling is more efficient. As of March 31, 2005, we have remaining firm purchase commitments for 13 Airbus aircraft from Airbus, and intend to lease as many as seven additional A319 aircraft from third party lessors over the next two years. We intend to use these additional aircraft to provide service to new markets and/or to add frequencies to existing markets that we believe are underserved.

The airline industry continues to operate in an intensely competitive market. We expect competition will remain intense, as adverse economic conditions continue to exist. Business and leisure travelers continue to reevaluate their travel budgets and remain highly price sensitive. Increased competition has prompted aggressive strategies from competitors through discounted fares and sales promotions. Additionally, the intense competition has created financial hardship for some of our competitors that have been forced to reduce capacity or have been forced into bankruptcy protection.

We believe we have a proven management team and a strong company culture and will continue to focus on differentiating the product and service we provide to our passengers. We believe our affordable pricing, accommodating service and comfortable airplanes differentiate our product and service from our competitors. Safety is a primary concern, and we are proud that our maintenance staff has been awarded the FAA Diamond Award for Excellence for six straight years—an award that recognizes our commitment to the ongoing training and education of our maintenance staff. Our product begins with the Airbus aircraft, which offers a comfortable passenger cabin that we configure with one-class of comfortable seating, superb leg room, and in-seat 24 channel live television entertainment. We also provide four additional channels that offer current-run pay-per-view movies. Augmenting our product is our team of dedicated employees who strive to offer friendly customer service and keep operations running efficiently, which we believe leads to lower operating costs.

Year in Review

During the year ended March 31, 2005, we had a net loss of $23,430,000. This was driven by rising fuel costs and a decline in our average fare as we continue to operate in a highly competitive environment. We have seen a sharp rise in fuel costs since January 2004, and fuel costs may continue to increase or remain at these historically high levels. Our average fuel cost per gallon, including hedging activities, was $1.41 for the year ended March 31, 2005 compared to $1.04 during the same period last year, an increase of 35.6%. The average cost of fuel for the fiscal year ended March 31, 2005 includes an unrealized derivative gain of $2,837,000 or 2.2¢ per gallon compared to an unrealized gain of $469,000 or less than 1 cent per gallon reflected in the average cost of fuel for the fiscal year ended March 31, 2004.

Fleet and Operational Upgrades

In October 2004, the FAA authorized us to conduct Category II and limited Category III instrument approaches with our Airbus fleet. This reduces the previous landing minimums from 200 feet decision height and 1,800 feet runway visual range ("RVR") to 100 feet decision height and 1,200 feet RVR for Category II approaches and 100 feet decision height and 1,000 feet RVR for Category III approaches. In March 2005, the approach minimums for Category III was further reduced to 700 feet RVR and by October 2005 we anticipate authority to conduct Category III approaches to 300 feet RVR. We expect these new landing minimum criteria to reduce the number of diversions required

because of low visibility, a condition that occurs with some regularity at a number of the cities we serve.

We have entered into separate agreements with CFMI and Airbus to increase the engine thrust and maximum take-off weight on ten of our owned A319 aircraft to improve the operational performance of these aircraft. This sub-fleet of ten aircraft is comprised of eight aircraft that are currently in service and two aircraft that will be delivered in the summer of 2005. The agreement with CFMI calls for an increase in the maximum rated thrust from a base of 22,000 to 23,500 pounds per engine. The agreement with Airbus calls for an increase in the maximum take-off weight from a base of 70 tons to 75.5 tons. The improved operational performance will allow us to serve longer haul markets such as Denver to Anchorage, or to depart from cities with short runways while carrying a full passenger load. Modifications on the eight aircraft currently in our fleet were completed in March 2005. The two aircraft scheduled for delivery in the summer of 2005 will be delivered from the factory with the additional thrust and take-off weight upgrades in place.

Highlights from the 2005 Fiscal Year

•: We celebrated our ten-year anniversary of flight operations in July 2004.
•: We took delivery of 13 new Airbus A319 aircraft, three new Airbus A318 aircraft and retired seven Boeing B737 aircraft, for a net increase of nine aircraft and a fleet total of 47 available for revenue service at year end.
•: We celebrated 25 million passenger enplanements.
•: We announced plans to double service year-over-year to Mexico during the peak travel seasons of December 2004 and March/April 2005.
•: We completed pilots' Category II/III initial trainings, which allows our Airbus pilots to land in reduced visibility and saves the airline from costly diversions and delays.
•: We began mainline service to Anchorage, Alaska; Philadelphia, Pennsylvania; and Nashville, Tennessee.
•: We began service on Frontier JetExpress to Little Rock, Arkansas; Billings, Montana and Spokane, Washington.
•: We began service from St. Louis, Missouri; Austin, Texas; Nashville, Tennessee; Salt Lake City, Utah; and Kansas City, Missouri to Cancun, Mexico.
•: We became the official airline of Intrawest Colorado, parent company to "Colorado's Favorite Ski Resorts," Winter Park/Mary Jane and Copper Mountain resorts in Colorado.
•: We continued our legacy as a community leader by officially partnering with three local charities: Volunteers of America, Colorado Make-a-Wish Foundation, and the Children's Hospital.
•: We signed a pre-purchase seat agreement with Apple Vacations for flights between Denver and four vacation destinations in Mexico: Cancun, Puerto Vallarta, Mazatlan, and Cabo San Lucas to begin as early as June 2005. The agreement provides a revenue guarantee, and allows Apple Vacations confirmed flight inventory.

Outlook

We expect our full-year available seat mile capacity for fiscal year 2006 to increase by approximately 7%-8% over fiscal year 2005. While the industry revenue environment remains extremely competitive, our passenger revenue per available seat mile is expected to increase slightly in fiscal year

2006. Fuel costs have risen sharply in 2005 and may remain at these historically high levels or increase even further. In addition, we will have a charge of approximately $3,320,000 in fiscal year 2006 related to the termination of three Boeing aircraft we ceased using on April 10, 2005. Our 2006 forecast excludes the effects of any additional stock compensation expense that we would incur from the implementation of SFAS No. 123(R), Share-Based Payment, which has been delayed until our fiscal year commencing April 1, 2006. We continue to assess our implementation options and evaluate the impact this pronouncement will have on us.

Selected Operating Statistics

The following table provides our operating revenues and expenses for our mainline operations, expressed as mainline cost per ASM, ("CASM") and as a percentage of total mainline operating revenues, for the years ended March 31, 2005, 2004, and 2003. Regional partner revenues, expenses and ASMs were excluded from this table to provide comparable amounts to the prior years presented. This data should be read in conjunction with "Selected Financial Data" contained in Item 6 to this report.

		2005			2004			2003
		Cost Per ASM	% Of Total Revenue		Cost Per ASM	% Of Total Revenue		Cost Per ASM	% Of Total Revenue
		(in cents)			(in cents)			(in cents)
Revenues:
	Passenger—mainline	8.03	97.6	%	8.60	97.3	%	7.65	97.9	%
	Cargo	0.05	0.7	%	0.11	1.3	%	0.09	1.2	%
	Other	0.14	1.7	%	0.13	1.4	%	0.07	0.9	%

Total revenues		8.22	100.0	%	8.84	100.0	%	7.81	100.0	%

Operating expenses:
	Flight operations	1.45	17.6	%	1.47	16.6	%	1.42	18.2	%
	Aircraft fuel expense	2.04	24.8	%	1.52	17.2	%	1.43	18.3	%
	Aircraft lease expense	0.95	11.6	%	0.98	11.1	%	1.18	15.0	%
	Aircraft and traffic servicing	1.42	17.3	%	1.54	17.5	%	1.44	18.4	%
	Maintenance	0.84	10.2	%	0.99	11.1	%	1.22	15.6	%
	Promotion and sales	0.84	10.2	%	0.91	10.3	%	0.88	11.3	%
	General and administrative	0.53	6.5	%	0.52	5.8	%	0.43	5.6	%
	Aircraft lease and facility exit costs	—	—		0.07	0.8	%	—	0.0	%
	Losses on sales of assets, net	—	—		0.03	0.3	%	—	0.0	%
	Impairment and other related charges	0.06	0.7	%	0.05	0.6	%	0.04	0.5	%
	Depreciation	0.29	3.5	%	0.33	3.8	%	0.29	3.7	%

Total operating expenses		8.42	102.4	%	8.41	95.1	%	8.33	106.6	%

Results of Operations—Year Ended March 31, 2005 Compared to Year Ended March 31, 2004

We had a net loss of $23,430,000, or $0.66 per diluted share, for the year ended March 31, 2005 as compared to net income of $12,635,000, or $0.36 per diluted share, for the year ended March 31, 2004. Included in our net loss for the year ended March 31, 2005 were the following items before the effect of income taxes: a write down of $5,123,000 of the carrying value of Boeing rotable spare parts which was partially offset by an unrealized gain on fuel hedges of $2,837,000. These items, net of income taxes, increased our net loss by 4¢ per diluted share. Included in our net income for the year ended March 31, 2004 were the following items before the effect of profit sharing and income taxes: $15,024,000 of compensation received under the Appropriations Act offset by the write-off of deferred loan costs of $9,816,000 associated with the prepayment of all of a $70,000,000 government guaranteed

loan; a charge for Boeing aircraft and facility lease exit costs of $5,372,000; a loss of $1,838,000 on the sale of one Airbus aircraft in a sale-leaseback transaction and from the sale of a spare engine and other assets; a write down of $3,560,000 of the carrying value of spare engines and rotable parts that support the Boeing 737-300 aircraft; and $1,152,000 of flight crew training expenses related to the start-up of our new Frontier JetExpress regional jet relationship with Horizon. These items, net of income taxes and profit sharing, reduced net income by 12¢ per diluted share.

Our mainline passenger yield per RPM was 11.03¢ and 11.96¢ for the years ended March 31, 2005 and March 31, 2004, respectively, or a decrease of 7.8%. Our length of haul was 990 and 919 miles for the years ended March 31, 2005 and March 31, 2004, respectively, or an increase of 7.7%. Our mainline average fare was $102 for the year ended March 31, 2005 as compared to $104 for the year ended March 31, 2004, a decrease of 1.9%. Our mainline yield per ASM ("RASM") for the years ended March 31, 2005 and March 31, 2004 was 7.97¢ and 8.56¢, respectively, a decrease of 6.9%. The decreases in the mainline average fare and mainline RASM were offset by an increase in our mainline load factor to 72.3% for the year ended March 31, 2005 as compared to 71.6% for the year ended March 31, 2004, an increase of .07 points. In February 2004, we capped all fares to and from Denver at $314 one-way, excluding passenger facility, security or segment fees, with the exception of flights to Mexico and Anchorage, Alaska. The fare cap was a 25 to 50 percent reduction from the February 2003 caps of $399 and $499. Although this created downward pressure on our mainline passenger yield per RPM and average fare, we believe the effect on our revenues was offset by an increase in passenger traffic. Pricing caps on airfare, as a policy, were eliminated shortly after fiscal year 2005 began. Additionally, we believe that our average fare during the year ended March 31, 2005 was negatively impacted as a result of aggressive pricing actions by our competitors in all of the markets we serve and is systemic across the entire industry.

Our mainline CASM, for the year ended March 31, 2005 and 2004 was 8.42¢ and 8.41¢, respectively. Mainline CASM, excluding fuel for the years ended March 31, 2005 and 2004 were 6.38¢ and 6.89¢, respectively, a decrease of .51¢ or 7.4%. Our mainline CASM excluding fuel decreased during the year ended March 31, 2005 primarily as a result of the realized benefits of efficiencies of scale associated with increasing capacity while controlling costs which resulted in a decrease in traffic and servicing costs of .12¢ and promotion and sales of .07¢. In addition, maintenance cost per ASM decreased by .15¢ as a result of the reduction in our Boeing fleet that was replaced with new Airbus A319 aircraft. Included in mainline CASM for the year ended March 31, 2004 was .09¢ per ASM for profit sharing bonuses and 0.07¢ for aircraft lease and facility exit costs. As a result of our net loss for the year ended March 31, 2005, we did not accrue for bonuses. Mainline CASM also decreased as a result of an increase in our daily block hour utilization as discussed below and economies of scale associated with lower increases in indirect costs as compared to the 27.4% increase in mainline ASMs over the prior comparable period.

During the year ended March 31, 2005, our average daily block hour utilization increased to 11.1 from 10.4 for the year ended March 31, 2004, or 6.7%. The calculation of our block hour utilization includes all aircraft that are on our operating certificate, which includes scheduled aircraft, as well as aircraft out of service for maintenance and operational spare aircraft, and excludes aircraft removed permanently from revenue service or new aircraft not yet placed in revenue service. It excludes Frontier JetExpress aircraft operated by Horizon.

For the years ended March 31, 2005 and 2004, our mainline break-even load factors were 75.0% and 68.8%, respectively, compared to our achieved passenger load factors of 72.3% and 71.6%, respectively. Our mainline break-even load factor increased from the prior comparable period largely as a result of a decrease in our average fare to $102 during the year ended March 31, 2005 from $104 during the year ended March 31, 2004. At the passenger levels in effect during the fiscal year ending March 31, 2005, the $2 decrease in average fare equaled a revenue decrease of approximately $13,306,000 million.

Small fluctuations in our yield per revenue passenger mile or cost per available seat mile can significantly affect operating results because we, like other airlines, have high fixed costs in relation to revenues. Airline operations are highly sensitive to various factors, including the actions of competing airlines and general economic factors, which can adversely affect our liquidity, cash flows and results of operations.

Revenues

Our revenues are highly sensitive to changes in fare levels. Competitive fare pricing policies have a significant impact on our revenues. Because of the elasticity of passenger demand, we believe that increases in fares may at certain levels result in a decrease in passenger demand in many markets. We cannot predict future fare levels, which depend to a substantial degree on competitive factors and the economy. When sale prices or other price changes are initiated by competitors in our markets, we believe that we must, in most cases, match those competitors in order to maintain our market share. Passenger revenues are seasonal depending on the markets' locations.

Passenger Revenues—Mainline. Passenger revenues from our mainline operations totaled $731,822,000 for the year ended March 31, 2005 compared to $615,390,000 for the year ended March 31, 2004, or an increase of 18.9% on increased ASMs of 1,962,000, or 27.4%. Mainline passenger revenues include revenues for reduced rate standby passengers, administrative fees, revenue recognized for tickets that are not used within one year from their issue dates and revenue recognized from our co-branded credit card agreement. We carried 6,653,000 mainline revenue passengers during the year ended March 31, 2005 compared to 5,569,000 mainline revenue passengers during the year ended March 31, 2004, an increase of 19.5%. We had an average of 44.9 aircraft in our mainline fleet during the year ended March 31, 2005 compared to an average of 37.3 mainline aircraft during the year ended March 31, 2004, an increase of 20.4%. Mainline RPMs for the year ended March 31, 2005 were 6,587,589,000 compared to 5,120,587,000 for the year ended March 31, 2004, an increase of 28.6%. Our mainline load factor increased to 72.3% for the year ended March 31, 2005 from 71.6% for the prior comparable period, an increase of 0.7 points, or 1.0%.

Passenger Revenues—Regional Partner. Regional partner revenues, consisting of revenues from Frontier JetExpress operated by Horizon, totaled $84,269,000 for the year ended March 31, 2005 and totaled $11,191,000 for the year ended March 31, 2004. Revenues of $25,155,000 from the Frontier JetExpress service, formerly provided by Mesa, were netted against related expenses and included in "Other revenues" for the year ended March 31, 2005. As such, the fiscal year 2004 amounts only represent three months of service with a limited number of aircraft. The incremental revenue from passengers connecting to/from regional flights to mainline flights is included in our mainline passenger revenue. Horizon began service January 1, 2004 and replaced the Frontier JetExpress service formerly provided by Mesa. See footnote (2) in Item 6. "Selected Financial Data", which explains the different accounting methods for our Frontier JetExpress operations.

Cargo Revenues. Cargo revenues, consisting of revenues from freight and mail service, totaled $4,958,000 and $8,077,000 for the years ended March 31, 2005 and 2004, respectively, representing 0.7% and 1.3%, respectively, of total mainline revenues, a decrease of 0.6%. During the year ended March 31, 2005, we determined that carrying mail for the United States Postal Service was not profitable and we terminated our contract effective July 1, 2004. This adjunct to the passenger business is highly competitive and depends heavily on aircraft scheduling, alternate competitive means of same day delivery service and schedule reliability.

Other Revenues. Other revenues, comprised principally of LiveTV sales, net revenue from the Mesa codeshare agreement of $1,717,000 (in 2004 only), liquor sales, ground handling fees, and excess baggage fees, totaled $12,591,000 and $9,021,000 or 1.7% and 1.4% of total operating revenues for the

years ended March 31, 2005 and 2004, respectively. Other revenue increased over the prior comparable period primarily as a result of an increase in LiveTV sales.

Operating Expenses

Operating expenses include those related to flight operations, aircraft and traffic servicing, maintenance, promotion and sales, Frontier JetExpress operations, general and administrative and depreciation and amortization. Total operating expenses were $860,087,000 and $616,197,000, respectively, for the years ended March 31, 2005 and 2004, and represented 103.2% and 95.7% of total revenue, respectively. Operating expenses excluding expenses from our regional partner operations totaled $767,606,000 for the year ended March 31, 2005, or 102.4% of total revenue, excluding regional partner revenues. Operating expenses excluding expenses from our regional partner totaled $601,563,000 for the year ended March 31, 2004, or 95.1% of total revenue, excluding regional partner revenues. Operating expenses increased as a percentage of revenue during the year ended March 31, 2005 largely a result of a 35.6% increase in our aircraft fuel cost per gallon for the year ended March 31, 2005 as compared to the year ended March 31, 2004.

Salaries, Wages and Benefits. We record salaries, wages and benefits within the specific expense category identified in our statements of operations to which they pertain. Salaries, wages and benefits totaled $203,398,000 and $160,260,000 and were 27.1% and 25.3% of total revenues excluding regional partner revenues for the years ended March 31, 2005 and 2004, respectively, an increase of 26.9%. Salaries, wages and benefits increased over the prior period largely as a result of overall wage increases and an increase in the number of employees to support our ASM growth of 27.4% during the year ended March 31, 2005. Our employees increased from approximately 4,100 in March 2004 to approximately 4,500 in March 2005, or 9.8%.

Flight Operations. Flight operations expenses of $132,023,000 and $105,255,000 were 17.6% and 16.6% of total revenue excluding revenues from our regional partner operations for the years ended March 31, 2005 and 2004, respectively, an increase of 25.4%. Flight operations expenses include all expenses related directly to the operation of the aircraft excluding depreciation of owned aircraft and lease expenses and including insurance expenses, pilot and flight attendant compensation, in-flight catering, crew overnight expenses, flight dispatch and flight operations administrative expenses.

Aircraft insurance expenses totaled $10,219,000 (1.4% of total revenues excluding revenues from our regional partner operations) for the year ended March 31, 2005. Aircraft insurance expenses for the year ended March 31, 2004 were $9,950,000 (1.6% of total revenues excluding revenues from our regional partner operations). Aircraft insurance expenses decreased per RPM as a result of less expensive war risk coverage that is presently provided by the FAA compared to the coverage that was previously provided by commercial underwriters combined with a 25% decrease in our basic hull and liability insurance rates effective June 7, 2004. The current FAA war risk policy is in effect until August 31, 2005. We do not know whether the government will extend the coverage beyond August 2005, and if it does, how long the extension will last. We expect that if the government stops providing excess war risk coverage to the airline industry, the premiums charged by aviation insurers for this coverage will be substantially higher than the premiums currently charged by the government or the coverage will not be available from reputable underwriters.

Pilot and flight attendant salaries before payroll taxes and benefits totaled $72,487,000 and $53,358,000 or 9.7% and 8.7% of passenger revenue, excluding revenues from our regional partner operations, for each of the years ended March 31, 2005 and 2004, or an increase of 35.9%. Pilot and flight attendant compensation for the year ended March 31, 2005 increased as a result of a 20.4% increase in the average number of mainline aircraft in service combined with an increase of 28.2% in mainline block hours, a general wage increase in flight attendant and pilot salaries and additional crew required to replace those who were attending training on the Airbus equipment. We pay pilot and

flight attendant salaries for training, consisting of approximately six weeks each, prior to scheduled increases in service, which can cause the compensation expense during such periods to appear high relative to the average number of aircraft in service.

Aircraft Fuel Expense. Aircraft fuel expenses include both the direct cost of fuel including taxes as well as the cost of delivering fuel into the aircraft. Aircraft fuel costs of $185,821,000 for 131,906,000 gallons used and $108,863,000 for 104,799,000 gallons used resulted in an average fuel cost of $1.41 and $1.04 per gallon for the years ended March 31, 2005 and 2004, respectively. Aircraft fuel expenses represented 24.8% and 17.2% of total revenue, excluding revenue from our regional partner operations, for the years ended March 31, 2005 and 2004, respectively. Fuel prices are subject to change weekly, as we purchase a very small portion in advance for inventory. We initiated a fuel-hedging program in late November 2002, which decreased fuel expense by $7,605,000 for the year ended March 31, 2005 and decreased fuel expense by $1,387,000 for the year ended March 31, 2004. Fuel hedging gains include unrealized fuel gains of $2,837,000 and $469,000 in 2005 and 2004, respectively. Fuel consumption for the years ended March 31, 2005 and 2004 averaged 722 and 736 gallons per block hour, respectively, or a decrease of 1.9%. Fuel consumption per block hour decreased during the year ended March 31, 2005 from the prior year because of the more fuel-efficient Airbus aircraft added to our fleet coupled with the reduction in our Boeing fleet, which had higher fuel burn rates, partially offset by the increase in our load factors.

Aircraft Lease Expenses. Aircraft lease expenses totaled $87,096,000 (11.6% of total revenues excluding revenues from our regional partner operations) and $70,061,000 (11.1% of total revenues excluding revenues from our regional partner operations) for the years ended March 31, 2005 and 2004, respectively, or an increase of 24.3%. The increase is a result of an increase in the average number of leased aircraft to 30.9 from 26.0, or 18.8%, during the year ended March 31, 2005 compared to the same period in 2004.

Aircraft and Traffic Servicing. Aircraft and traffic servicing expenses were $129,470,000 and $110,378,000 (an increase of 17.3%) for the years ended March 31, 2005 and 2004, respectively, and represented 17.3% and 17.5% of total revenues, excluding revenues from our regional partner operations. Aircraft and traffic servicing expenses include all expenses incurred at airports, including landing fees, facilities rental, station labor, ground handling expenses (passenger and cargo) and interrupted trip expenses associated with delayed or cancelled flights. Interrupted trip expenses are amounts paid to other airlines to reaccommodate passengers as well as hotel, meal and other incidental expenses. Aircraft and traffic servicing expenses increase with the addition of new cities and departures to our route system. As of March 31, 2005, we served 39 cities with mainline service compared to 38 as of March 31, 2004, or an increase of 2.6%. During the year ended March 31, 2005, our mainline departures increased to 72,888 from 61,812 during the year ended March 31, 2004, or 17.9%. Aircraft and traffic servicing expenses were $1,776 per mainline departure for the year ended March 31, 2005 as compared to $1,786 per mainline departure for the year ended March 31, 2004, or a decrease of $10 per mainline departure. Aircraft and traffic servicing expenses decreased per mainline departure principally as a result of better on-time performance and fewer expenses paid for delayed or misconnected flights. In addition, commencing in the July 2004 we no longer carried U.S. mail and our ground handling expenses decreased accordingly.

Maintenance. Maintenance expenses for the years ended March 31, 2005 and 2004 of $76,679,000 and $70,444,000, respectively, were 10.2% and 11.1% of total revenues, excluding revenues from our regional partner operations, an increase of 8.9%. These include all labor, parts and supplies expenses related to the maintenance of the aircraft. Maintenance costs per block hour for the years ended March 31, 2005 and 2004 were $420 and $494 per block hour, respectively, a decrease of 15.0%. Maintenance cost per block hour decreased as a result of the addition of new Airbus aircraft that are less costly to maintain than our older Boeing aircraft, offset by return condition expenses related to the 7 Boeing aircraft returned and/or retired in fiscal year 2005. The owned Airbus fleet is new and we are experiencing a "maintenance holiday". As our Airbus aircraft age, they will require more maintenance and maintenance expenses will increase.

Promotion and Sales. Promotion and sales expenses totaled $76,462,000 and $65,322,000 and were 10.2% and 10.3% of total revenues, excluding revenues from our regional partner operations, for the years ended March 31, 2005 and 2004, respectively. These include advertising expenses, telecommunications expenses, wages and benefits for reservation agents and reservations supervision, marketing management and sales personnel, credit card fees, travel agency commissions and computer reservations costs. During the year ended March 31, 2005, promotion and sales expenses per mainline passenger decreased to $11.49 compared to $11.73 for the year ended March 31, 2004, a decrease of 2.0%. Promotion and sales expenses per mainline passenger decreased as a result of variable expenses that are based on lower average fares and economies of scale associated with our growth.

General and Administrative. General and administrative expenses for the years ended March 31, 2005 and 2004 totaled $48,351,000 and $36,750,000, and were 6.5% and 5.8% of total revenues, excluding revenues from our regional partner operations, respectively, or an increase of 31.6%. General and administrative expenses include the wages and benefits for several of our executive officers and various other administrative personnel including legal, accounting, information technology, aircraft procurement, corporate communications, training and human resources and other expenses associated with these departments. Employee health benefits, accrued vacation and bonus expenses, general insurance expenses including worker's compensation and write-offs associated with credit card and check fraud are also included in general and administrative expenses. Our employees increased from approximately 4,100 in March 2004 to approximately 4,500 in March 2005, or 9.8%. Accordingly, we experienced increases in our human resources, training, information technology, and health insurance benefit expenses. As a result of our pre-tax loss for the year ended March 31, 2005, we did not accrue bonuses which are solely based on profitability. General and administrative expenses also include $2,960,000 of expenses related to the conversion to our new reservation system and $603,000 of out-of-pocket costs to comply with the Sarbanes-Oxley Act of 2002. During the year ended March 31, 2004, we accrued $2,436,000 for employee performance bonuses, or 0.4% of total revenues. General and administrative expenses also increased with a general increase in the cost of providing health insurance.

Regional Partner Expense. Regional partner expenses for the year ended March 31, 2005 totaled $92,481,000, and were 109.7% of total regional partner revenues compared to expenses of $14,634,000, or 130.8%, of total regional partner revenue for the year ended March 31, 2004. Regional partner expenses include all direct costs associated with Frontier JetExpress operated by Horizon. Horizon began service January 1, 2004 and replaced the JetExpress service formerly provided by Mesa. During the year ended March 31, 2004, $23,438,000 in Mesa expenses were netted against related revenues and included in "Other revenues". See footnote (2) in "Selected Financial Data", which explains the different accounting methods for our Frontier JetExpress operations for Horizon and Mesa. During the year ended March 31, 2004, we incurred $1,152,000 for flight crew training costs and other related costs associated with the start-up of our regional partnership with Horizon. We do not expect to incur these costs going forward unless we were to add additional aircraft under the Horizon agreement, which we do not contemplate at this time. For additional information about Frontier JetExpress, see Note 1 of the Notes to the Financial Statements.

Impairment and Other Related Charges. During the year ended March 31, 2005 we recorded additional impairments and other related charges totaling $5,123,000 on the carrying value of our Boeing 737 expendable inventory, rotable parts and a spare engine as a result of further market declines and the results of actual sales. Included in this amount are estimated selling costs that we expect to pay on the sale of our assets held for sale totaling $541,000. We believe the decline in resale values of parts for the less fuel-efficient Boeing 737 aircraft was due in part to increasing fuel prices during the past year. The impairment on spare and rotables is a result of further market declines for Boeing parts coupled with the results of actual sales history. In August 2004, we began selling our Boeing spare parts. Our analysis of these sales compared to the impaired value of these parts as of

December 31, 2004 indicated that we were selling these rotable parts at approximately 90% of the carrying value. The impairment recorded for the year ended March 31, 2004 was $3,560,000, which also related to the impairment of Boeing spare engines and rotable parts that supported the Boeing 737 aircraft.

Depreciation. Depreciation expenses of $26,498,000 and $23,720,000, an increase of 11.7%, were approximately 3.5% and 3.8% of total revenues, excluding revenues from our regional partner operations, for the years ended March 31, 2005 and 2004, respectively. These expenses include depreciation of aircraft and aircraft components, office equipment, ground station equipment and other fixed assets. Depreciation expense increased over the prior year largely as a result of an increase in the average number of Airbus A318 and A319 aircraft owned from an average of 11.4 during the year ended March 31, 2004 to an average of 14.0 for the year ended March 31, 2005, an increase of 22.8%.

Nonoperating Income (Expense). Net nonoperating expenses totaled $9,391,000 for the year ended March 31, 2005 compared to net nonoperating expense of $7,025,000 for the year ended March 31, 2004. Interest income increased to $3,758,000 during the year ended March 31, 2005 from $2,074,000 for the prior period due to an increase in investment rates earned on investments. Interest expense was $13,184,000 for the year ended March 31, 2005 as compared to $13,961,000 for the prior period. Interest expense for the year ended March 31, 2004 included the interest expense associated with a $70,000,000 government guaranteed loan we obtained in February 2002 and subsequently repaid in December 2003. The decrease in interest was due to the repayment of this loan, which was offset by an increase in interest expense associated with the financing of additional aircraft purchased since March 31, 2004.

Income Tax Expense (Benefit). We recorded an income tax benefit of $12,408,000 during the year ended March 31, 2005 at a 34.6% rate compared to income tax expense of $7,822,000 during the year ended March 31, 2004 at a 38.2% effective tax rate. During the year ended March 31, 2005, the Company's tax benefit was at a federal rate of 35.0% plus the blended state rate of 3.0% (net of federal benefit) and was decreased by the tax effect of permanent differences of 2.0%. During the year ended March 31, 2005, the Company recorded a valuation allowance of $262,000 against certain state net operating loss carryforwards since it was more likely than not that the tax benefit was not going to be realized due to the lack of taxable income in these jurisdictions, which approximated 1.0%. During the year ended March 31, 2004 the Company recorded a $558,000 reduction to income tax expense as a result of an adjustment to deferred income taxes provided for in prior years, which approximated 3%.

Results of Operations—Year Ended March 31, 2004 Compared to Year Ended March 31, 2003

We had net income of $12,635,000 or 36¢ per diluted share for the year ended March 31, 2004 as compared to a net loss of $22,843,000 or 77¢ per diluted share for the year ended March 31, 2003. Included in our net income for the year ended March 31, 2004 were the following items before the effect of profit sharing and income taxes: $15,024,000 of compensation received under the Appropriations Act offset by the write-off of deferred loan costs of $9,816,000 associated with the prepayment of all of the government guaranteed loan; a charge for Boeing aircraft and facility lease exit costs of $5,372,000; a loss of $1,838,000 on the sale of one Airbus aircraft in a sale-leaseback transaction and from the sale of a spare engine; a write down of $3,560,000 of the carrying value of spare engines and rotable parts that support the Boeing 737-300 aircraft; and $1,152,000 of flight crew training expenses related to the start-up of our new Frontier JetExpress regional jet relationship with Horizon. These items, net of income taxes and profit sharing, reduced net income by 12¢ per diluted share. Our net loss for the year ended March 31, 2003 included a $2,011,000 after-tax credit for the cumulative effect of a change in accounting for major aircraft overhauls from the accrual method to the expense as incurred method. The net loss before the cumulative effect of the change in accounting was $24,854,000, or $0.84 per common share. Our net loss for the year ended March 31, 2003 included the

following items on a pre-tax and profit sharing basis: the cost associated with the early extinguishment of debt totaling $1,774,000 and a write-down of the carrying values of the Boeing spare aircraft parts totaling $2,478,000. These items, net of income taxes and profit sharing, increased our net loss by 9¢ per diluted share.

Our mainline passenger yield per RPM was 11.96¢ and 12.74¢ for the years ended March 31, 2004 and March 31, 2003, respectively, or a decrease of 6.1%. Our length of haul was 919 and 917 miles for the years ended March 31, 2004 and March 31, 2003, respectively, or an increase of .2%. Our mainline average fare was $104 for the year ended March 31, 2004 as compared to $109 for the year ended March 31, 2003, a decrease of 4.6%. The decrease in the average fare is offset by an increase in our mainline load factor to 71.6% for the year ended March 31, 2004 as compared to 59.9% for the year ended March 31, 2003, an increase of 11.7 points. As part of our new fare structure, which we implemented in February 2003, our highest-level business fares were initially reduced by 25 to 45 percent, and our lowest available walk-up fares were reduced by 38 to 77 percent. This fare structure was comprised of six fare categories and capped all fares to and from Denver at $399 or $499 one-way, excluding passenger facility, security or segment fees, depending on length of haul. Although this has created downward pressure on our mainline passenger yield per RPM and average fare, we believe the effect on our revenues was offset by an increase in passenger traffic. Our mainline RASM for the years ended March 31, 2004 and March 31, 2003 was 8.56¢ and 7.63¢, respectively, an increase of 12.2%. Additionally, we believe that our average fare during the year ended March 31, 2004 was negatively impacted as a result of intense competition from United, a carrier operating under Chapter 11 bankruptcy protection, which is our principal competitor at DIA. We also believe that passenger traffic during the year ended March 31, 2003 was impacted by the threat of war with Iraq, which began in March 2003. During March 2003, the Denver area also experienced an unusual blizzard, which caused DIA to be closed for approximately two days.

Our mainline CASM for the year ended March 31, 2004 and 2003 was 8.41¢ and 8.33¢, respectively, an increase of .08¢ or 1.0%. Mainline CASM excluding fuel for the years ended March 31, 2004 and 2003 was 6.89¢ and 6.90¢, respectively, a decrease of .01¢ or .3%. Our mainline CASM increased during the year ended March 31, 2004 as a result of an increase in the average price of fuel per gallon from 96¢ to $1.04 or an increase of .09¢ per ASM; an increase in aircraft and traffic servicing expenses combined with sales and promotions expenses of .13¢ as a result of the increase in the number of passengers we served and general increases in DIA facility charges as well as related increases in sales and promotion expenses for booking fees associated with the increase in passengers, the ongoing costs of LiveTV service of .04¢; and an increase in general and administrative expenses of .09¢ as a result of the bonus accrual associated with our return to profitability and an increase in health insurance costs. Mainline CASM also increased over the prior comparable period .07¢ for costs associated with aircraft lease and facility exit costs and .02¢ for a loss on the sale-leaseback of an aircraft. These increases were partially offset by a decrease of .20¢ in aircraft lease expense as a result of replacing four leased aircraft with four additional purchased aircraft, offset by an increase in related depreciation expense of .04¢ and a decrease of .22¢ in maintenance expense principally as a result of the reduction in the number of aircraft in our Boeing fleet that were replaced with new Airbus A319 and A318 aircraft.

During the year ended March 31, 2004, our average daily block hour utilization increased to 10.4 from 9.8 for the year ended March 31, 2003. The calculation of our block hour utilization includes all aircraft that are on our operating certificate, which includes scheduled aircraft, as well as aircraft out of service for maintenance and operational spare aircraft, and excludes aircraft removed permanently from revenue service or new aircraft not yet placed in revenue service. It also excludes Frontier JetExpress aircraft operated by Horizon.

For the years ended March 31, 2004 and 2003, our mainline break-even load factors were 68.8% and 65.0%, respectively, compared to our achieved passenger load factors of 71.6% and 59.9%. Our

mainline break-even load factor increased from the prior comparable period largely as a result of a decrease in our average fare to $104 during the year ended March 31, 2004 from $109 during the year ended March 31, 2003.

Revenues

Passenger Revenues—Mainline. Passenger revenues from our mainline operations totaled $615,390,000 for the year ended March 31, 2004 compared to $460,188,000 for the year ended March 31, 2003, or an increase of 33.7%, on increased ASMs of 1,140,479,000, or 19.0%. Passenger revenues include revenues for reduced rate standby passengers, administrative fees, and revenue recognized for tickets that are not used within one year from their issue dates. We carried 5,569,000 revenue passengers during the year ended March 31, 2004 compared to 3,926,000 revenue passengers during the year ended March 31, 2003, an increase of 41.8%. We had an average of 37.3 aircraft in our mainline fleet during the year ended March 31, 2004 compared to an average of 33.8 aircraft during the year ended March 31, 2003, an increase of 10.4%. RPMs for the year ended March 31, 2004 were 5,120,587,000 compared to 3,599,553,000 for the year ended March 31, 2003, an increase of 42.3%. Our load factor increased to 71.6% for the year ended March 31, 2004 from 59.9% for the prior comparable period, an increase of 11.7 points, or 19.5%.

Passenger Revenues—Regional Partner. Regional partner revenues, consisting of revenues from Frontier JetExpress operated by Horizon, totaled $11,191,000 for the year ended March 31, 2004 and none for the year ended March 31, 2003. Horizon began service January 1, 2004 and replaced the Frontier JetExpress service formerly provided by Mesa. Revenues from the Frontier JetExpress service, formerly provided by Mesa of $25,155,000 and $1,608,000, were netted against related expenses and included in "Other revenues" for the year ended March 31, 2004 and 2003, respectively. See footnote (2) in Item 6. "Selected Financial Data", which explains the different accounting methods for our Frontier JetExpress operations.

Cargo Revenues. Cargo revenues, consisting of revenues from freight and mail service, totaled $8,077,000 and $5,557,000 for the years ended March 31, 2004 and 2003, respectively, representing 1.3% and 1.2%, respectively, of total mainline revenues, an increase of 45.3%. Cargo revenues increased in fiscal year 2004 over the prior comparable periods as a result of our contract to carry mail under a contract with the United States Postal Service that began in June 2003. We terminated the US Postal Service contract effective July 1, 2004.

Other Revenues. Other revenues, comprised principally of LiveTV sales, net revenue from the Mesa codeshare agreement, liquor sales, ground handling fees, and excess baggage fees, totaled $9,021,000 and $4,191,000 or 1.4% and .9% of total operating revenues for the years ended March 31, 2004 and 2003, respectively. Other revenue increased over the prior comparable period predominately as a result of LiveTV sales and the net loss of $706,000 recorded in 2003 for the Mesa code share agreement compared to net revenue of $1,717,000 in 2004. LiveTV sales commenced during the fourth fiscal quarter for the year ended March 31, 2003.

Operating Expenses

Total operating expenses were $616,197,000 and $500,727,000, respectively, for the years ended March 31, 2004 and 2003, and represented 95.7% and 106.6% of total revenue, respectively. Operating expenses excluding expenses from our regional partner operations totaled $601,562,000 for the year ended March 31, 2004, or 95.1% of total revenue, excluding regional partner revenues. Operating expenses decreased as a percentage of revenue during the year ended March 31, 2004 as a result of an increase in total revenue as compared to the year ended March 31, 2003.

Salaries, Wages and Benefits. Salaries, wages and benefits totaled $160,260,000 and $125,847,000 and were 25.3% and 26.8% of total revenues excluding regional partner revenues for the years ended March 31, 2004 and 2003, respectively, an increase of 27.3%. Salaries, wages and benefits increased over the prior comparable periods largely as a result of our bonus accrual due to our return to profitability, overall wage increases, and an increase in the number of employees to support our ASM growth of 19.0% during the year ended March 31, 2004 as well as the ASM growth that we expected for fiscal year 2005. Our employees increased from approximately 3,160 in March 2003 to approximately 4,100 in March 2004, or 29.7%.

Flight Operations. Flight operations expenses of $105,255,000 and $85,675,000 were 16.6% and 18.2% of total revenue excluding revenues from our regional partner operations for the years ended March 31, 2004 and 2003, respectively, an increase of 22.9%.

Aircraft insurance expenses totaled $9,950,000 (1.6% of total revenues excluding revenues from our regional partner operations) for the year ended March 31, 2004. Aircraft insurance expenses for the year ended March 31, 2003 were $11,095,000 (2.4% of total revenues excluding revenues from our regional partner operations). Aircraft insurance expenses decreased per RPM as a result of less expensive war risk coverage that is presently provided by the FAA compared to the coverage that was previously provided by commercial underwriters combined with a 30% decrease in our basic hull and liability insurance rates effective June 7, 2003.

Pilot and flight attendant salaries before payroll taxes and benefits totaled $53,358,000 and $42,982,000 or 8.7% and 9.3% of passenger revenue, excluding revenues from our regional partner operations, for each of the years ended March 31, 2004 and 2003, or an increase of 24.1%. Pilot and flight attendant compensation for the year ended March 31, 2004 increased as a result of a 10.4% increase in the average number of mainline aircraft in service and an increase of 18.4% in mainline block hours, respectively, a general wage increase in flight attendant and pilot salaries and additional crew required to replace those who were attending training on the Airbus equipment.

Aircraft Fuel Expense. Aircraft fuel expenses include both the direct cost of fuel including taxes as well as the cost of delivering fuel into the aircraft. Aircraft fuel costs of $108,863,000 for 104,799,000 gallons used and $86,064,000 for 89,236,000 gallons used resulted in an average fuel cost of $1.04 and 96¢ per gallon for the years ended March 31, 2004 and 2003, respectively. Aircraft fuel expenses represented 17.2% and 18.3% of total revenue, excluding revenue from our regional partner operations, for the years ended March 31, 2004 and 2003, respectively. We initiated a fuel hedging program in late November 2002, which decreased fuel expense by $1,387,000 for the year ended March 31, 2004 and $558,000 for the year ended March 31, 2003. Fuel hedging gains include an unrealized fuel gain of $469,000 in the fiscal year ended 2004 and an unrealized fuel loss of $167,000 in the fiscal year ended 2003. Fuel consumption for the years ended March 31, 2004 and 2003 averaged 736 and 742 gallons per block hour, respectively, or a decrease of .8%. Fuel consumption per block hour decreased during the year ended March 31, 2004 from the prior year because of the more fuel-efficient Airbus aircraft added to our fleet coupled with the reduction in our Boeing fleet, which had higher fuel burn rates, partially offset by the increase in our load factors.

Aircraft Lease Expenses. Aircraft lease expenses totaled $70,061,000 (11.1% of total revenues excluding revenues from our regional partner operations) and $70,239,000 (15.0% of total revenues excluding revenues from our regional partner operations) for the years ended March 31, 2004 and 2003, respectively, or a decrease of .3%. The decrease is a result of a decrease in the average number of leased aircraft to 26.0 from 27.9, or 6.8%, during the year ended March 31, 2004 compared to the same period in 2003.

Aircraft and Traffic Servicing. Aircraft and traffic servicing expenses were $110,378,000 and $86,448,000 (an increase of 27.7%) for the years ended March 31, 2004 and 2003, respectively, and

represented 17.5% and 18.4% of total revenues, excluding revenues from our regional partner operations. Aircraft and traffic servicing expenses increase with the addition of new cities and departures to our route system. As of March 31, 2004, we served 43 cities compared to 38 as of March 31, 2003, or an increase of 13.2%. During the year ended March 31, 2004, our mainline departures increased to 61,812 from 53,081 during the year ended March 31, 2003, or 16.4%. Aircraft and traffic servicing expenses were $1,786 per departure for the year ended March 31, 2004 as compared to $1,629 per departure for the year ended March 31, 2003, or an increase of $157 per departure. Aircraft and traffic servicing expenses increased per departure as a result of general increases in airport rents and landing fees and a 41.9% increase in mainline passengers for the year ended March 31, 2004 as compared to the prior year. Certain airport facility rent charges are calculated using the numbers of originating and departing passengers, as well as additional personnel required to handle the increased number of passengers. Additionally, cargo (including mail) revenue increased 45.3% for the year ended March 31, 2004 as compared to the prior year. Aircraft and traffic servicing expenses increase with increases in passengers and cargo handling. We also experienced higher landing fees associated with the Airbus aircraft, which have higher landing weights than the Boeing aircraft.

Maintenance. Maintenance expenses for the years ended March 31, 2004 and 2003 of $70,444,000 and $73,081,000, respectively, were 11.1% and 15.6% of total revenues, excluding revenues from our regional partner operations, a decrease of 3.6%. Maintenance costs per block hour for the years ended March 31, 2004 and 2003 were $494 and $608 per block hour, respectively, a decrease of 18.8%. Maintenance cost per block hour decreased as a result of the addition of new Airbus aircraft that are less costly to maintain than our older Boeing aircraft.

Promotion and Sales. Promotion and sales expenses totaled $65,322,000 and $53,032,000 and were 10.3% and 11.3% of total revenues, excluding revenues from our regional partner operations, for the years ended March 31, 2004 and 2003, respectively. During the year ended March 31, 2003, we reduced advertising expenditures in order to apply those funds toward our new branding campaign that was scheduled to begin in March 2003. Due to the commencement of the hostilities in Iraq, we postponed the roll out of our branding campaign until May 2003. Additionally, during the year ended March 31, 2004, we became heavily involved in sports team sponsorships as part of our branding awareness initiative. During the year ended March 31, 2004, promotion and sales expenses per mainline passenger decreased to $11.73 compared to $13.51 for the year ended March 31, 2003, a decrease of 13.2%. Promotion and sales expenses per passenger decreased as a result of variable expenses that are based on lower average fares, the elimination of substantially all travel agency commissions effective on tickets sold after May 31, 2002, and economies of scale associated with our growth.

General and Administrative. General and administrative expenses for the years ended March 31, 2004 and 2003 totaled $36,750,000 and $26,061,000, and were 5.8% and 5.6% of total revenues, excluding revenues from our regional partner operations, respectively, or an increase of 41.0%. During the year ended March 31, 2004, we accrued $2,436,000 for employee performance bonuses, or .4% of total revenues. Bonuses are based on profitability. As a result of our pre-tax loss for the year ended March 31, 2003, we did not accrue bonuses. Our employees increased from approximately 3,160 in March 2003 to approximately 4,100 in March 2004, or 29.7%. Accordingly, we experienced increases in our human resources, training, information technology, and health insurance benefit expenses. General and administrative expenses also increased with a general increase in the cost of providing health insurance.

Regional Partner Expense. Regional partner expenses for the year ended March 31, 2004 totaled $14,634,000, and were 130.8% of total regional partner revenues. Horizon began service January 1, 2004 and replaced the JetExpress service formerly provided by Mesa. During the year ended March 31, 2003 and through December 31, 2004, expenses were netted against related revenues associated with Mesa and included in other revenues. During the year ended March 31, 2004 and 2003, $23,438,000

and $2,314,000, respectively, in Mesa expenses were netted against related revenues and included in "Other revenues". See footnote (2) in "Selected Financial Data", which explains the different accounting methods for our Frontier JetExpress operations for Horizon and Mesa. During year ended March 31, 2004, we incurred $1,152,000 for flight crew training costs and other related costs associated with the start-up of our regional partnership with Horizon. For additional information about Frontier JetExpress, see Note 1 of the Notes to the Financial Statements.

Aircraft Lease and Facility Exit Costs. During the year ended March 31, 2004, we ceased using three of our Boeing 737-200 leased aircraft, two of which had lease terminations in October 2003 and one with a lease termination date in October 2005. In August 2003, we closed our maintenance facility in El Paso, Texas, which had a lease termination date in August 2007. As a result of these transactions we recorded a pre-tax charge of $5,372,000. This amount includes the estimated fair value of the remaining lease payments and the write off of the unamortized leasehold improvements on the aircraft and the facility.

Losses on Sales of Assets, net. During the year ended March 31, 2004, we incurred losses totaling $1,838,000 on the sales of assets, which included a loss of $1,323,000 on the sale-leaseback of an Airbus A319 aircraft.

Impairment and Other Related Charges. Impairment and other related charges for the year ended March 31, 2004 was $3,560,000 compared to $2,478,000 for the year ended March 31, 2003. These impairments relate to the write-down of the spare parts inventory that supports the Boeing 737 aircraft.

Depreciation. Depreciation expenses of $23,720,000 and $17,650,000, an increase of 34.4%, were approximately 3.8% and 3.7% of total revenues, excluding revenues from our regional partner operations, for the years ended March 31, 2004 and 2003, respectively. Depreciation expense increased over the prior year largely as a result of an increase in the average number of Airbus aircraft owned from an average of 6.3 during the year ended March 31, 2003 to an average of 11.4 for the year ended March 31, 2004, an increase of 81.0%.

Nonoperating Income (Expense). Net nonoperating expenses totaled $7,025,000 for the year ended March 31, 2004 compared to net nonoperating expense of $8,718,000 for the year ended March 31, 2003. Interest income increased to $2,074,000 during the year ended March 31, 2004 from $1,883,000 for the prior period due to an increase in invested cash. Interest expense increased to $13,961,000 for the year ended March 31, 2004 from $8,041,000 for the prior period as a result of interest expense associated with the financing of additional aircraft purchased since March 31, 2003 and the government guaranteed loan we obtained in February 2003 which we subsequently repaid in December 2003.

We completed a public offering of 5,050,000 shares of common stock in September 2003. Under the terms of our government guaranteed loan, we were required to make a prepayment of the loan equal to 60% of the net proceeds from the offering. As a result, we prepaid approximately $48,418,000 on the loan. In December 2003, we repaid the remaining loan balance due of $11,582,000. As a result of paying off the government guaranteed loan, we wrote off approximately $9,816,000 of deferred loan costs associated with the prepayment amount. Of this amount, approximately $8,053,000 represented the unamortized portion of the value assigned to the warrants issued to ATSB and to two other guarantors in connection with the loan transaction.

Offsetting these nonoperating expenses during the year ended March 31, 2004 is pre-tax compensation of $15,024,000 as a result of payments under the Appropriations Act for expenses and foregone revenue related to aviation security. We received a total of $15,573,000 in May 2003, of which we paid $549,000 to Mesa Airlines for the revenue passengers Mesa carried as Frontier JetExpress.

During the year ended March 31, 2003, we completed a sale-leaseback transaction of one of our purchased aircraft and paid off the loan that was collateralized by this aircraft. As a result, we incurred $1,774,000 in costs associated with the early extinguishment of this debt.

Income Tax Expense (Benefit). We recorded income tax expense of $7,822,000 during the year ended March 31, 2004 at a 38.2% effective tax rate, compared to an income tax benefit of $14,655,000 for the year ended March 31, 2003, at a 37.1% effective tax rate. During the ended March 31, 2004, the Company's tax expense was at a federal rate of 35.0% plus the blended state rate of 3.0% (net of federal benefit) and was increased by the tax effect of permanent differences of 3.0%. During the year ended March 31, 2004 the Company recorded a $558,000 reduction to income tax expense as a result of an adjustment to deferred income taxes provided for in prior years, which approximated 3.0%. The expected benefit for the year ended March 31, 2003 was at a federal rate of 35.0% plus the blended state rate of 3.7% (net of federal tax benefit) and was reduced by the tax effect of permanent differences of 1.0%.

Liquidity and Capital Resources

Our liquidity depends to a large extent on the number of passengers who fly with us, the fares we charge, our operating and capital expenditures, our financing activities, and the cost of fuel. We depend on lease or mortgage-style financing to acquire all of our aircraft, including 20 additional Airbus aircraft that as of March 31, 2005 are scheduled for delivery through March 2008.

We had cash, cash equivalents and short-term investments of $174,795,000 and $190,609,000 at March 31, 2005 and March 31, 2004, respectively. At March 31, 2005, total current assets were $275,550,000 as compared to $233,850,000 of total current liabilities, resulting in working capital of $41,700,000. At March 31, 2004, total current assets were $269,733,000 as compared to $181,659,000 of total current liabilities, resulting in working capital of $88,074,000. The decrease in our working capital from March 31, 2004 is largely a result of capital expenditures and debt principal payments.

Operating activities. Cash provided by operating activities for the year ended March 31, 2005 was $19,240,000. This is attributable to our net loss adjusted for non-cash charges and credits and changes in working capital accounts. Our restricted investments increased largely as a result of increased collateral requirements for our bankcard processor associated with the increase in our air traffic liability and an increase in collateral for our workers' compensation insurance. Prepaid expenses increased principally as a result of an increase in fuel deposits (due to the increase in the price of fuel and an increase in fuel consumption associated with the increase in block hours flown) and prepaid expenses related to passenger expenses increased due to the increase in passenger traffic over the prior year. Additionally, prepaid aircraft rents increased as a result of the net increase of eight leased aircraft we took delivery of during the year. Inventories increased as a result of an increase in the value of our fuel inventory and for the increase in the number of aircraft in our fleet. Our air traffic liability increased as a result of the growth of our business associated with the increase in the number of aircraft in our fleet and the associated increase in the number of passengers we carried. Our accrued expenses increased as a result of increases in employee benefits associated with the increase in the number of employees, increases in health care expenses, and increases in passenger related taxes associated with our increase in revenue and passengers carried.

Cash provided by operating activities for the year ended March 31, 2004 was $128,018,000. This is attributable to our net income adjusted for non-cash charges and credits and changes in working capital accounts. Our air traffic liability increased as a result in the growth of our business associated with the increase in the number of aircraft in our fleet coupled with the increase in the number of passengers we carried in excess of our increased capacity. Our accrued expenses increased as a result of increases in employee benefits associated with the increase in the number of employees and increases in health care expenses, the bonus accrual for our employees as a result of our profitability and increases in passenger related taxes associated with our increase in revenue and passengers carried.

Investing Activities. Cash provided by investing activities for the year ended March 31, 2005 was $14,841,000. Aircraft lease and purchase deposits made during the period were $21,436,000 which was offset by deposits returned or applied to aircraft purchases of $23,008,000. Capital expenditures were

$128,776,000 for the year ended March 31, 2005 and included the purchase of one Airbus A318 aircraft; and two Airbus A319 aircraft and one spare engine that were delivered to us and that we sold in sale-leaseback transactions. Additionally, capital expenditures included the purchase of LiveTV equipment, rotable aircraft components, aircraft improvements, ground equipment, and equipment related to our new reservation system. We applied pre-delivery payments totaling $6,412,000 for the purchase of an Airbus A318 aircraft to the purchase of that aircraft, and the pre-delivery deposits totaling $14,716,000 for the two Airbus A319 aircraft were returned to us upon sale of the aircraft. We received $80,963,000 from the sale of the two new A319 aircraft and two spare engines that we sold in sale-leaseback transactions, two spare engines for our Boeing fleet and other Boeing spare parts. We also sold $57,600,000 of short-term securities.

Cash used in investing activities for the year ended March 31, 2004 was $193,576,000. Aircraft lease and purchase deposits made during this period were $39,987,000, which was offset by deposits returned of $33,541,000. Restricted investments decreased by $2,444,000 which was associated with collateral on returned aircraft and new aircraft deliveries where we substituted cash security deposits in lieu of the letters of credit that were previously in place. We also had net purchases totaling $55,265,000 of short-term securities. We used $134,651,000 for the purchase of four additional Airbus aircraft, aircraft leasehold improvements including LiveTV, ground equipment to support increased below-wing operations, and computer equipment, including scanning equipment for our new mail transportation requirements.

Financing Activities. Cash provided by financing activities for the year ended March 31, 2005 was $7,705,000. During the year ended March 31, 2005, we borrowed $22,000,000 for the purchase of one Airbus A318 aircraft and paid $18,373,000 of debt principal payments on our 14 owned aircraft. During the year ended March 31,2005 we also had short-term borrowings of $5,000,000 under a revolving line of credit, received $349,000 from the exercise of common stock options and paid 1,271,000 of fees for debt financing.

During the year ended March 31, 2004, we completed a public offering of 5,050,000 shares of our common stock. We received $81,077,000, net of offering expenses, from the sale of these shares and we also received $1,001,000 from the exercise of common stock options. We borrowed $98,500,000 to finance the purchase of four Airbus aircraft and made principal repayments on debt of $83,325,000. In July 2003, we received an income tax refund from the Internal Revenue Service totaling $26,574,000 and prepaid $10,000,000 on our government guaranteed loan upon receipt of this refund. In September 2003, we used $48,418,000 of the proceeds from the stock offering to prepay a portion of the government guaranteed loan. Both prepayments were required by the loan agreement. In December 2003, we repaid the remaining loan balance due of $11,582,000.

Other Items that Impact our Liquidity

In February 2005, we placed in production a Sabre, Inc. customer automation solution, SabreSonic™, to power our reservations and check-in capabilities along with a broad scope of technology for streamlining our operations and improving revenues. This solution replaces Electronic Data Systems' Shares, a system we have used since our inception in 1994. With SabreSonic, we will have access to real-time passenger data including the customer's history with Frontier and any EarlyReturns frequent flyer activity, current travel plans and any changes made to an existing reservation. The data can be accessed by our customer service agents via an open-source, Windows-based interface at all customer touch points including the website, reservations, the ticket counter and the gate, providing a seamless customer service experience from the time the customer books the ticket until they arrive at their final destination. During the year ended March 31, 2005 we incurred approximately $2,960,000 in costs associated with this transition. We anticipate further expenses in fiscal year 2006 related to this system.

We entered into an agreement with two vendors to market and sell all of our Boeing 737-200 and certain Boeing 737-300 spare parts inventories. We have completed the process of transferring the initial inventory package to these vendors. We began to actively sell these parts in August 2004. Once we have completed the required return condition maintenance on the retired Boeing aircraft, we will sell the remaining Boeing spare parts. As of March 31, 2005, the carrying value of our Boeing spare parts inventories totaled $7,060,000. As we continue to have Boeing parts available for sale to these vendors, we will reflect the fair value of the rotables less selling costs. As of March 31, 2005, we have recognized $744,000 in gross proceeds resulting in a net gain on our expendable and rotable inventory totaling approximately $66,000.

We continue to assess our liquidity position in light of our aircraft purchase commitments and other capital requirements, the economy, our competition, and other uncertainties surrounding the airline industry. Prior to applying for a government guaranteed loan under the Stabilization Act, we filed a shelf registration with the Securities and Exchange Commission in April 2002 that allows us to sell equity or debt securities from time to time as market conditions permit. In September 2003, we completed a public offering of 5,050,000 shares of our common stock for approximately $81.1 million, substantially all of which were used to prepay the government guarantee loan. As of March 31, 2005, there is $64,150,000 remaining on the shelf registration. We may need to continue to explore avenues to enhance our liquidity if our current economic and operating environment does not improve. We intend to continue to examine domestic or foreign bank aircraft financing, bank lines of credit and aircraft sale-leasebacks, the sale of equity or debt securities, and other transactions as necessary to support our capital and operating needs. For further information on our financing plans and activities and commitments, see "Contractual Obligations" and "Commercial Commitments" below.

We expect to continue generating positive cash flow from our operations for the foreseeable future. We have obtained financing for all of our aircraft deliveries scheduled for calendar years 2005 and 2006 and expect to have adequate liquidity to cover our contractual obligations. However, we cannot predict future trends or predict whether current trends and conditions will continue. Our future liquidity and capital resources may be impacted by many factors, including "Risk Factors" in Item 1 of this report.

Contractual Obligations

The following table summarizes our contractual obligations as of March 31, 2005:

	Less than 1 year		1-3 years		4-5 years		After 5 years		Total
Long-term debt—principle payments(1)	$	18,223,000	$	39,573,000	$	44,207,000	$	199,012,000	$	301,015,000
Long-term debt—interest payments(1)		15,571,000		28,109,000		23,620,000		32,516,000		99,816,000
Short-term borrowings		5,000,000		—		—		—		5,000,000
Operating leases(2)		132,430,000		258,271,000		243,956,000		642,780,000		1,277,437,000
Unconditional purchase obligations(3)(4)(5)		98,824,000		436,465,000		10,634,000		—		545,923,000

Total contractual cash obligations	$	270,048,000	$	762,418,000	$	322,417,000	$	874,308,000	$	2,229,191,000

(1): At March 31, 2005, we had 14 loan agreements for nine Airbus A319 aircraft and five Airbus A318 aircraft. Two of the loans have a term of 10 years and are payable in equal monthly installments, including interest, payable in arrears. These loans require monthly principal and interest payments of $215,000 and $218,000, bear interest with rates of 6.71% and 6.54%, with maturities in May and

August 2011, at which time a balloon payment totaling $10,200,000 is due with respect to each loan. The remaining 12 loans have interest rates based on LIBOR plus margins that adjust quarterly or semi-annually. At March 31, 2005, interest rates for these loans ranged from 3.50% to 5.25%. Each of these loans has a term of 12 years, and each loan has balloon payments ranging from $2,640,000 to $7,770,000 at the end of the term. All of the loans are secured by the aircraft. Actual interest payments will change based on changes in LIBOR.

(2): As of March 31, 2005, we lease 28 Airbus A319 type aircraft, two Airbus A318 aircraft, and five Boeing 737 type aircraft under operating leases with expiration dates ranging from 2005 to 2017. Two of the Boeing 737 type aircraft are no longer in service and three were taken out of service in April 2005. The table above includes lease payments through the end of the lease term for four of the Boeing aircraft and one negotiated early termination fee for a Boeing aircraft we are returning to the lessor prior to the expiration date of the lease. Under all of our leases, we have made cash security deposits or arranged for letters of credit representing approximately two months of lease payments per aircraft. At March 31, 2005, we had made cash security deposits of $16,551,000 and had arranged for letters of credit of $2,034,000 collateralized by restricted cash balances. Additionally, we are required to make additional rent payments to cover the cost of major scheduled maintenance overhauls of these aircraft. These additional rent payments are based on the number of flight hours flown and/or flight departures and are not included as an obligation in the table above.
: During the fiscal year ended March 31, 2004, we entered into additional aircraft lease agreements for two Airbus A318 aircraft and 18 Airbus A319 aircraft. Three of the aircraft leases were a result of sale-leaseback transactions of three new Airbus aircraft. As of March 31, 2005, we have taken delivery of 12 of these aircraft. The remaining seven aircraft are scheduled for delivery beginning in May 2005 through February 2007. As of March 31, 2005, we have made $1,302,000 in security deposit payments for future leased aircraft deliveries. Total lease obligations include seven A319 aircraft not yet received.
: We also lease office and hangar space, spare engines and office equipment for our headquarters and airport facilities, and certain other equipment with expiration dates ranging from 2005 to 2015. In addition, we lease certain airport gate facilities on a month-to-month basis. Amounts for leases that are on a month-to-month basis are not included as an obligation in the table above.
(3): As of March 31, 2005, we have remaining firm purchase commitments for 13 additional aircraft and two spare engines, which have scheduled delivery dates beginning in May 2005 and continuing through 2008. Included in the purchase commitments are the remaining amounts due Airbus and amounts for spare aircraft components to support the additional purchase and leased aircraft. We are not under any contractual obligations with respect to spare parts. Under the terms of the purchase agreement, we are required to make scheduled pre-delivery payments for these aircraft. These payments are non-refundable with certain exceptions. As of March 31, 2005, we had made pre-delivery payments on future deliveries totaling $22,976,000 to secure these aircraft.
: We have executed the term sheet for the debt financing for two of our A319 aircraft scheduled for delivery from Airbus in June and July 2005. The terms of these agreements permit us to borrow up to $24,900,000 per aircraft or 80% of the appraised base value of the aircraft, whichever is less, over a period of 12 years at floating interest rates with a balloon payment equal to 20% of the original loan amount due at maturity.
: We have executed loan and security agreements and other related documents in connection with the debt financing for an additional two of our A319 aircraft scheduled for delivery from Airbus in fiscal year 2007. Under the terms of these agreements, upon satisfaction of conditions precedent and the execution and delivery of other closing documents, we are permitted to borrow up to $26,200,000 per aircraft or 80% of the appraised base value of the aircraft, whichever is less, over

a period of 12 years at floating interest rates with a balloon payment equal to 20% of the original loan amount due at maturity. In addition, we have entered into a letter of intent for the purchase and leaseback of one A319 aircraft scheduled for delivery from Airbus in fiscal year 2007. This letter of intent also extends the lease term of two existing aircraft from 60 months to 144 months from the original delivery date. These letters of intent are non-binding as of March 31, 2005 and therefore are not reflected in the contractual obligations table.

: We have signed a letter of intent for the sale-leaseback of one owned and three spare engines scheduled for delivery between October 2004 and February 2006. In October 2004, we completed the sale-leaseback of two of these engines with proceeds totaling $12,186,000. The terms of this agreement allow us to sell each spare engine to the buyer at the time of delivery, and then lease the engines back for a period of ten years commencing on the delivery date. The agreement will provide financing for an additional two spare engines which we expect we will order in the future. The purchase amounts for these spare engines are included as purchase obligations above.
(4): In October 2002, we entered into a purchase and 12-year services agreement with LiveTV to bring DIRECTV AIRBORNE™ satellite programming to every seatback in our Airbus fleet. We agreed to the purchase of 46 units. As of March 31, 2005, we have purchased 44 units and have made deposits toward the purchase of five additional units. We intend to install LiveTV in every new aircraft we place in service. The table above includes amounts for the installation of DirectTV for the remaining 13 aircraft to be purchased and the remaining seven aircraft to be leased, less $1,383,000 million of deposits already paid for five of the installations.
(5): We entered into a services agreement with Sabre, Inc. for its SabreSonic™ passenger solution to power our reservations and check-in capabilities along with a broad scope of technology for streamlining our operations and improving revenues. The table above includes minimum annual fees for system usage fees. Usage fees are based on passengers booked and actual amounts paid may be in excess of the minimum per the contract terms.

Commercial Commitments

Letters of Credit and Cash Deposits

As we enter new markets, increase the amount of space we lease, or add leased aircraft, we are often required to provide the airport authorities and lessors with a letter of credit, bond or cash security deposits. These generally approximate up to three months of rent and fees. We also provide letters of credit for our workers' compensation insurance. As of March 31, 2005, we had outstanding letters of credit, bonds, and cash security deposits totaling $13,160,000, $1,552,000, and $20,563,000, respectively. In order to meet these requirements, we have a letter of credit agreement with a financial institution for up to $20,000,000, which expires December 1, 2005. This facility can be used only for the issuance of standby letters of credit. Any amounts drawn under this facility are fully collateralized by certificates of deposit, which are carried as restricted investments on our balance sheet. As of March 31, 2005, we have utilized $12,410,000 under this credit agreement for standby letters of credit that provide credit support for certain leases. In the event that this facility is not renewed beyond their present expiration dates, the certificates of deposit would be redeemed and paid to the various lessors as cash security deposits in lieu of standby letters of credit. As a result, there would be no impact on our liquidity if these agreements were not renewed. In the event that the surety companies determined that issuing bonds on our behalf were a risk they were no longer willing to underwrite, we would be required to collateralize certain of these lease obligations with either cash security deposits or standby letters of credit, which would decrease our liquidity.

We have a contract with a bankcard processor that requires us to pledge a certificate of deposit equal to a certain percentage of our air traffic liability associated with bankcard customers. As of March 31, 2005, that amount totaled $25,344,000. The amount is adjusted quarterly in arrears based on

our air traffic liability associated with bankcard transactions. As of June 1, 2005, we are required to increase the amount by approximately $8,228,000.

We use the Airline Reporting Corporation ("ARC") to provide reporting and settlement services for travel agency sales and other related transactions. In order to maintain the minimum bond (or irrevocable letter of credit) coverage of $100,000, ARC requires participating carriers to meet, on a quarterly basis, certain financial tests such as, but not limited to, working capital ratio, and percent of debt to debt plus equity. As of December 31, 2004, we met these financial tests and presently are only obligated to provide the minimum amount of $100,000 in coverage to ARC. If we were to fail the minimum testing requirements, we would be required to increase our bonding coverage to four times the weekly agency net cash sales (sales net of refunds and agency commissions). Based on net cash sales remitted to us for the week ended May 27, 2005, the coverage would be increased to $8,914,000 if we failed the tests. If we were unable to increase the bond amount as a result of our then financial condition, we could be required to issue a letter of credit that would restrict cash in an amount equal to the letter of credit.

Hedging Transactions

In November 2002, we initiated a fuel hedging program comprised of swap and collar agreements. Under a swap agreement, we receive the difference between a fixed swap price and a price based on an agreed upon published spot price for jet fuel. If the index price is higher than the fixed price, we receive the difference between the fixed price and the spot price. If the index price is lower, we pay the difference. A collar agreement has a cap price, a primary floor price, and, in the case of a three-way collar, a secondary floor price. When the hedged product's index price is above the cap, we receive the difference between the index and the cap. When the hedged product's index price is below the primary floor but above the secondary floor, we pay the difference between the index and the primary floor. However, when the price is below the secondary floor, we are only obligated to pay the difference between the primary and secondary floor prices. When the price is between the cap price and the primary floor, no payments are required.

In September 2003, we entered into a swap agreement with a notional volume of 630,000 gallons per month for the period from January 1, 2004 to June 30, 2004. The fixed price of the swap was 74.50 cents per gallon and the agreement was estimated to represent 7% of our fuel purchases for that period. On May 21, 2004, we entered into a two-way collar agreement that hedged approximately 25% of our expected fuel requirements in the quarters ended December 31, 2004 and March 31, 2005. The collar uses West Texas Intermediate crude oil as its basis. The cap price is set at $39.00 per barrel, and the floor price is set at $34.85 per barrel. The unrealized net gain on this and derivative contract at March 31, 2005 was $2,837,000 and the realized net gain on all agreements for the year ended March 31,2005 was $4,768,000. On November 12, 2004, we entered into a two-way collar agreement that hedges approximately 28% of our expected fuel requirements for the quarter ended June 30, 2005. This collar uses Gulf Coast Jet A as its basis. The cap price is set at $1.34 per gallon, and the floor price is set at $1.20 per gallon. On May 13, 2005, we entered into an additional derivative transaction that hedges approximately 20% of our projected fuel requirements for the period from July 1, 2005 to December 31, 2005. This collar agreement has a cap price of $53.00 per barrel and the floor is set at $50.73 per barrel.

In March 2003, we entered into an interest rate swap agreement with a notional amount of $27,000,000 to hedge a portion of our LIBOR based borrowings through June 30, 2007. Under the interest rate swap agreement, we are paying a fixed rate of 2.45% and receive a variable rate based on the three month LIBOR. During the years ended March 31, 2005 and 2004, interest expense was increased by $351,000 and $177,000, respectively, for this agreement. Approximately $655,000 of unrealized losses are included in accumulated other comprehensive loss, net of income taxes of $246,000, for the year ended March 31, 2005.

Maintenance Contracts

Effective January 1, 2003, we entered into an engine maintenance agreement with GE Engine Services, Inc. ("GE") covering the scheduled and unscheduled repair of our aircraft engines used on most of our Airbus aircraft, subsequently modified and extended in September 2004. The agreement is for a 12-year period from the effective date for our owned aircraft or May 1, 2019, whichever comes first. For each leased aircraft, the term coincides with the initial lease term of 12 years. This agreement precludes us from using another third party for such services during the term. This agreement requires monthly payments at a specified rate multiplied by the number of flight hours the engines were operated during that month. The amounts due based on flight hours are not included in table above. The costs under this agreement for our purchased aircraft for the year ended March 31, 2005 and 2004 were approximately $2,603,000 and $1,833,000, respectively. For our leased aircraft, we do not make the flight hour payments to GE under the agreement, instead we make engine maintenance reserve payments as required under the applicable lease agreements. At the time a leased engine makes a scheduled shop visit, the lessors pay GE directly fro the repair of aircraft engines from reserve accounts established under the applicable lease documents.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S generally accepted accounting principles 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.

Critical accounting policies are defined as those that are both important to the portrayal of our financial condition and results, and require management to exercise significant judgments. Our most critical accounting policies are described briefly below.

Revenue Recognition

Passenger, cargo, and other revenues are recognized when the transportation is provided or after the tickets expire, one year after date of issuance, and are net of excise taxes, passenger facility charges and security fees. Revenues that have been deferred are included in the accompanying balance sheets as air traffic liability. In limited circumstances, we grant credit for tickets that have expired. We do not recognize as revenue the amount of credits estimated to be granted after the date a ticket expires.

Inventories

Inventories consist of expendable aircraft spare parts, supplies and aircraft fuel and are stated at the lower of cost or market. Inventories are accounted for on a first-in, first-out basis and are charged to expense as they are used. We monitor resale values for Boeing parts quarterly using estimates obtained from our vendors. We evaluated our estimated usage of these parts and the current resale value during the year ended March 31, 2005 and recorded additional provisions totaling $1,263,000. The cost of WTI crude oil increased from $36.74 per barrel at March 31, 2004 to $54.19 per barrel at March 31, 2005. As a result of the increase in the cost of fuel, we have accelerated the dates that we would cease using the Boeing aircraft from September 2005 to mid-April 2005. We believe the decline in resale values of parts for the less fuel-efficient Boeing 737-200 and Boeing 737-300 aircraft was due in part to increasing fuel prices during the past year. Because of the earlier termination date of the use of the Boeing aircraft, our estimated usage of these parts decreased, contributing to the amount of the additional provision recorded during the year ended March 31,2005. During the fiscal year ended March 31, 2004, we recorded a provision for excess Boeing expendable parts inventory totaling $618,000. The provision in 2004 was principally the result of declining resale values of excess Boeing

expendable parts. As of March 31, 2005, the carrying value of our Boeing expendable inventory totaled approximately $1,308, 000.

Impairment of Long-Lived Assets

During the years ended March 31, 2005 and 2004, we recorded impairment charges of $3,860,000 and $3,047,000, respectively. We monitor resale values for Boeing rotables quarterly using estimates obtained from our vendors and records impairment charges based on this analysis and current sales prices. During the year ended March 31, 2005, we recorded impairment charges as a result of further market declines of the carrying values of Boeing 733 expendable inventory, rotable parts and a spare engine. During the year ended March 31, 2004, we recorded an impairment charge for rotables and for two Boeing 737-300 spare engines. The impairment charge totaling $901,000 was principally the result of declining resale values for Boeing rotables. The impairment for the spare engines totaled $2,146,000 and was recorded as a result of our decision to sell these remaining spare engines. The impairment was based on three separate quotes from third parties for a sale-leaseback transaction on these engines. As of March 31, 2005, the carrying value of our Boeing spare parts totaled approximately $5,752,000.

We use the criteria in SFAS No. 144 to determine when an asset is classified as held for sale. Upon classification as held for sale, the long-lived asset or asset group is measured at the lower of its carrying amount or fair value less cost to sell, depreciation is ceased and the asset or asset group is separately presented on the balance sheet.

Aircraft Maintenance

We operate under an FAA-approved continuous inspection and maintenance program. We account for maintenance activities on the direct expense method. Under this method, major overhaul maintenance costs are recognized as expense as maintenance services are performed, as flight hours are flown for nonrefundable maintenance payments required by lease agreements, and as the obligation is incurred for payments made under service agreements. Routine maintenance and repairs are charged to operations as incurred. Prior to fiscal year 2003, we accrued for major overhaul costs on a per-flight-hour basis in advance of performing the maintenance services.

Effective January 1, 2003, the Company executed a 12-year engine services agreement with GE covering the scheduled and unscheduled repair of Airbus engines. This agreement was extended to May 1, 2019 in September 2004. Under the terms of the services agreement, we agreed to pay GE a fixed rate per-engine-hour, payable monthly, and GE assumed the responsibility to overhaul our engines on Airbus aircraft as required during the term of the services agreement, subject to certain exclusions. We believe the fixed rate per-engine hour approximates the periodic cost we would have incurred to service those engines. Accordingly, these payments are expensed as the obligation is incurred.

Derivative Instruments

We account for derivative financial instruments in accordance with the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires us to measure all derivatives at fair value and to recognize them in the balance sheet as an asset or liability. For derivatives designated as cash flow hedges, changes in fair value of the derivative are generally reported in other comprehensive income ("OCI") and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging instruments and ineffective portions of hedges are recognized in earnings in the current period.

We enter into derivative instruments to hedge the interest payments associated with a portion of our LIBOR-based borrowings and fuel purchases. We designate certain interest rate swaps as qualifying

cash flow hedges. We also enter into derivative instruments to reduce exposure to the effect of fluctuations in fuel prices. These transactions are accounted for as trading instruments under SFAS 133. As a result, we record these instruments at fair market value and recognizes realized and unrealized gains and losses in aircraft fuel expense.

Customer Loyalty Program

In February 2001, we established EarlyReturns, a frequent flyer program to encourage travel on our airline and customer loyalty. We account for the EarlyReturns program under the incremental cost method whereby travel awards are valued at the incremental cost of carrying one passenger based on expected redemptions. Those incremental costs are based on expectations of expenses to be incurred on a per passenger basis and include food and beverages, fuel, liability insurance, and ticketing costs. The incremental costs do not include a contribution to overhead, aircraft cost or profit. We do not record a liability for mileage earned by participants who have not reached the level to become eligible for a free travel award. We believe this is appropriate because the large majority of these participants are not expected to earn a free flight award. We do not record a liability for the expected redemption of miles for non-travel awards since the cost of these awards to us is negligible.

As of March 31, 2005 and 2004, we estimated that approximately 102,000 and 47,600 round-trip flight awards, respectively, were eligible for redemption by EarlyReturns members who have mileage credits exceeding the 15,000-mile free round-trip domestic ticket award threshold. As of March 31, 2005 and 2004, we had recorded a liability of approximately $1,275,000 and $584,000, respectively, for these rewards.

Co-Branded Credit Card Arrangement

We entered into a co-branded credit card arrangement with a Mastercard issuing bank in March 2003. The terms of this affinity agreement provide that we will receive a fixed fee for each new account, which varies based on the type of account, and a percentage of the annual renewal fees that the bank receives. We receive an increased fee for new accounts solicited by us. We also receive fees for the purchase of frequent flier miles awarded to the credit card customers.

During the year ended March 31, 2003, we received a $10,000,000 advance from the issuing bank for fees expected to be earned under the program. This advance was recorded as deferred revenue when it was received. Fees earned as credit cards are issued or renewed, and as points are awarded to the credit card customers are applied against this advance. In November 2004, we had earned all of the initial advance.

We account for all fees received under the co-branded credit card program by allocating the fees between the portion that represents the estimated value of the subsequent travel award to be provided, and the portion which represents a marketing fee to cover marketing and other related costs to administer the program. This latter portion (referred to as the marketing component) represents the residual after determination of the value of the travel component. The component representing travel is determined by reference to an equivalent restricted fare, which is used as a proxy for the value of travel of a frequent flyer mileage award. The travel component is deferred and recognized as revenue over the estimated usage period of the frequent flyer mileage awards of 20 months. We record the marketing component of the revenue earned under this agreement as a reduction of sales and promotion expenses in the month received.

Because of our limited history with our frequent flier program, we have estimated the period over which the frequent flier mileage awards will be used based on industry averages adjusted downward to take into account that most domestic airlines require 25,000 frequent flyer miles for a domestic round-trip ticket, whereas we require only 15,000 frequent flyer miles for a domestic round-trip ticket.

For the year ended March 31, 2005, we earned total fees of $12,227,000. Of that amount, $8,455,000 was deferred as the travel award component, and the remaining marketing component of $3,772,000 was recognized as a reduction to sales and promotions expense. For the year ended March 31, 2004, we earned total fees of $4,245,000. Of that amount, $3,286,000 was deferred as the travel award component, and the remaining marketing component of $959,000 was recognized as a reduction to sales and promotions expense. Amortization of deferred revenue recognized in earnings during the years ended March 31, 2005 and 2004 was $4,396,000 and $786,000, respectively.

Self-Insurance

We are self insured for the majority of our group health insurance costs, subject to specific retention levels. We rely on claims experience and the advice of consulting actuaries and administrators in determining an adequate liability for self-insurance claims. Our self-insurance healthcare liability represents our heath insurance underwriter's estimate of claims that have been incurred but not reported as of March 31, 2005. This liability, which totaled $2,098,000 at March 31, 2005, was estimated based on our claims experience. We determine the actual average claims cost per employee and the number of days between the incurrence of a claim and the date it is paid. The estimate of our liability for employee healthcare represents approximately 1.6 months of unreported claims with an increase in claims based on a trend factor of 6.5%

While we believe that the estimate of our self-insurance liabilities are reasonable, significant differences in our experience or a significant change in any of our assumptions could materially affect the amount of healthcare expenses we have recorded.

New Accounting Standards

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payments. SFAS No. 123(R), revised FASB Statement No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). In April 2005, the effective date for SFAS No. 123(R) was changed to the first reporting period that begins after June 15, 2005. Accordingly, the Company plans to adopt SFAS No. 123(R) on April 1, 2006 and use the modified-prospective transition method. Under the modified-prospective method, the Company will recognize compensation expense in the financial statements issued subsequent to the date of adoption for all share-based payments granted, modified or settled after April 1, 2006 as well as for any awards that were granted prior to April 1, 2006 for which requisite service has been provided as of April 1, 2006. The Company will recognize compensation expense on awards granted subsequent to April 1, 2006 using the fair values determined by a valuation model prescribed by SFAS(R). The compensation expense on awards granted prior to April 1, 2006 will be recognized using the fair values determined for the pro forma disclosures on stock-based compensation. The amount of compensation expense that will be recognized on awards that have not fully vested will exclude the compensation expense cumulatively recognized in the pro forma disclosures on stock-based compensation.

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Fuel

Our earnings are affected by changes in the price and availability of aircraft fuel. Market risk is estimated as a hypothetical 10 percent change in the average cost per gallon of fuel for the year ended March 31, 2005. Based on fiscal year 2005 actual fuel usage, such a change would have had the effect

of increasing or decreasing our aircraft fuel expense by approximately $18,577,000 in fiscal year 2005. Comparatively, based on projected fiscal year 2006 fuel usage, including fuel required for our regional partner, such a change would have the effect of increasing or decreasing our aircraft fuel expense by approximately $20,223,000 in fiscal year 2006, excluding the effects of our fuel hedging arrangements. The increase in exposure to fuel price fluctuations in fiscal year 2006 is due to the increase of our average aircraft fleet size projected for the year ending March 31, 2006 and the related gallons expected to be purchased.

In September 2003, we entered into a swap agreement with a notional volume of 630,000 gallons per month for the period from January 1, 2004 to June 30, 2004. The fixed price of the swap was 74.50 cents per gallon and the agreement was estimated to represent 7% of our fuel purchases for that period. The results of operations for the year ended March 31, 2004 include an unrealized derivative gain of $469,000 that is included in fuel expense and a realized net gain of $918,000 in cash settlements received from a counter-party recorded as a decrease in fuel expense. On May 21, 2004, we entered into an additional derivative transaction that is designed to economically hedge approximately 25% of our projected fuel requirements in the quarters ending December 31, 2004 and March 31, 2005. On November 12, 2004, we entered into a two-way collar agreement that hedges approximately 27% of our expected fuel requirements for the quarter ended June 30, 2005. This collar uses Gulf Coast Jet A as its basis. The additional derivative transaction is a collar agreement that uses West Texas Intermediate crude oil as its basis. The cap price is set at $39.00 per barrel, and the floor is set at $34.85 per barrel. The results of operations for the year ended March 31, 2005 include an unrealized derivative gain of $2,837,000 that is included in fuel expense and a realized net gain of $4,768,000 in cash settlements received from a counter-party recorded as a decrease in fuel expense with respect to these two agreements.

Interest

We are susceptible to market risk associated with changes in variable interest rates on long-term debt obligations we incurred and will incur to finance the purchases of our Airbus aircraft. Interest expense on 86.8% of the debt on our owned Airbus A319 and A318 aircraft is subject to interest rate adjustments every three to nine months based upon changes in the applicable LIBOR rate. A change in the base LIBOR rate of 100 basis points (1.0%) would have the effect of increasing or decreasing our annual interest expense by $2,613,000, assuming the loans outstanding that are subject to interest rate adjustments at March 31, 2005 totaling $261,304, 000 are outstanding for the entire period.

In March 2003, we entered into an interest rate swap agreement with a notional amount of $27,000,000 to hedge a portion of our LIBOR based borrowings. Under the interest rate swap agreement, we are paying a fixed rate of 2.45% and receive a variable rate based on the three month LIBOR over the term of the swap that expires in March 2007. As of March 31, 2005, we had hedged approximately 9.7% of our variable interest rate loans. As of March 31, 2005, the fair value of the swap agreement is recorded in the balance sheet as an asset of $300,000.

Item 8: Financial Statements and Supplementary Data

Our financial statements are filed as a part of this report immediately following the signature page.

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A: Controls and Procedures

Disclosure Controls and Procedures

The management of the Company, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2005. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were sufficiently effective to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and instructions for Form 10-K.

Management's Report on Internal Control over Financial Reporting

No change in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended), occurred during the fourth quarter of 2005 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Management's Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in Part II, Item 8 of the Annual Report on Form 10-K.

Item 9B. Other Information

None.

PART III

Item 10: Directors and Executive Officers of the Registrant.

Code of Ethics

The information required by this Item is incorporated herein by reference to the data under the heading "Election of Directors" in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held on September 8, 2005. We will file the definitive Proxy Statement with the Commission on or before July 29, 2005.

Audit Committee Financial Expert

Item 11. Executive Compensation.

The information required by this Item is incorporated herein by reference to the data under the heading "Executive Compensation" in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held on September 8, 2005. We will file the definitive Proxy Statement with the Commission on or before July 29, 2005.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated herein by reference to the data under the heading "Voting Securities and Principal Holders Thereof" in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held on September 8, 2005. We will file the definitive Proxy Statement with the Commission on or before July 29, 2005.

Item 13. Certain Relationships and Related Transactions.

The information required by this Item is incorporated herein by reference to the data under the heading "Related Transactions" in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held on September 8, 2005. We will file the definitive Proxy Statement with the Commission on or before July 29, 2005.

Item 14. Principal Accountant Fees and Services.

The information required by this Item is incorporated herein by reference to the data under the heading "Principal Accountant Fees and Services" in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held on September 8, 2005. We will file the definitive Proxy Statement with the Commission on or before July 29, 2005.

PART IV

Item 15(a): Exhibits and Financial Statement Schedules

Exhibit Numbers		Description of Exhibits
Exhibit 3—Articles of Incorporation and Bylaws:
3.1		Restated Articles of Incorporation of the Company. (Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999)
3.2		Amended and Restated Bylaws of the Company. (Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999)
Exhibit 4—Instruments defining the rights of security holders:
4.1		Specimen common stock certificate of the Company. (Exhibit 4.1 to the Company's Registration Statement on Form SB-2, declared effective May 20, 1994)
4.2		Rights Agreement, dated as of February 20, 1997, between Frontier Airlines, Inc. and American Securities Transfer & Trust, Inc, including the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A and B, respectively (Exhibit 3.1 to the Company's Registration Statement on Form 8-A filed March 12, 1997)
4.2	(a)	Amendment to Rights Agreement dated June 30, 1997. (Exhibit 4.4(a) to the Company's Annual Report on Form 10-KSB for the year ended March 31, 1997; Commission File No. 0-24126)
4.2	(b)	Amendment to Rights Agreement dated December 5, 1997. (Exhibit 4.4(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1999)
4.2	(c)	Third Amendment to Rights Agreement dated September 9, 1999. (Exhibit 4.4 to the Company's Registration Statement on Form 8-A/A filed October 14, 1999)

4.2	(d)	Fourth Amendment to Rights Agreement dated May 30, 2001. (Exhibit 4.4(d) to the Company's Annual Report on Form 10-K for the year ended March 31, 2001)
4.2	(e)*	Fifth Amendment to Rights Agreement dated as of May 2, 2005
4.2	(f)*	Sixth Amendment to Rights Agreement dated as of May 2, 2005
4.3		Frontier Airlines Inc. Warrant to Purchase Common Stock, No. 1—Air Stabilization Board. Two Warrants, dated as of February 14, 2003, substantially identical in all material respect to this Exhibit, have been entered into with each of the Supplemental Guarantors granting each Supplemental Guarantor a warrant to purchase 191,697 shares under the same terms and conditions described in this Exhibit. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission in a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. (Exhibit 4.5 to the Company's Current Report on Form 8-K dated March 25, 2003)
4.4		Registration Rights Agreement dated as of February 14, 2003 by and Frontier Airlines, Inc. as the Issuer, and the Holders to Herein of Warrants to Purchase Common Stock, No Par Value. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission in a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. (Exhibit 4.6 to the Company's Current Report on Form 8-K dated March 25, 2003)
Exhibit 10—Material Contracts:
+10.1		1994 Stock Option Plan. (Exhibit 10.3 to the Company's Registration Statement on Form SB-2, declared effective May 20, 1994).
+10.1	(a)	Amendment No. 1 to 1994 Stock Option Plan. (Exhibit 10.4 to the Company's Annual Report on Form 10-KSB for the year ended March 31, 1995; Commission File No. 0-4877).
+10.1	(b)	Amendment No. 2 to 1994 Stock Option Plan. (Exhibit 10.2 to the Company's Annual Report on Form 10-KSB for the year ended March 31, 1997; Commission File No. 0-24126).
10.2		Airport Use and Facilities Agreement, Denver International Airport (Exhibit 10.7 to the Company's Annual Report on Form 10-KSB for the year ended March 31, 1995; Commission File No. 0-4877).
10.3		Space and Use Agreement between Continental Airlines, Inc. and the Company. (Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended March 31, 1999).
10.3	(a)	Second Amendment to Space and Use Agreement between Continental Airlines, Inc. and the Company. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission in a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
10.4		Airbus A318/A319 Purchase Agreement dated as of March 10, 2000 between AVSA, S.A.R.L., Seller, and Frontier Airlines, Inc., Buyer. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000).

10.5		Aircraft Lease Common Terms Agreement dated as of April 20, 2000 between General Electric Capital Corporation and Frontier Airlines, Inc. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.52 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000).
10.6		Aircraft Lease Agreement dated as of April 20, 2000 between Aviation Financial Services, Inc., Lessor, and Frontier Airlines, Inc., Lessee, in respect of 15 Airbus A319 Aircraft. After 3 aircraft were leased under this Exhibit with Aviation Financial Services, Inc. as Lessor, related entities of Aviation Financial Services, Inc. replaced it as the Lessor, but each lease with these related entities is substantially identical in all material respects to this Exhibit. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.53 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000).
10.7		Lease dated as of May 5, 2000 for Frontier Center One, LLC, as landlord, and Frontier Airlines, Inc., as tenant. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000).
10.7	(a)*	Amendment Number Two to Lease Agreement. Portions of this exhibit has been excluded from the publicly available document and filed separately with the SEC in a confidential treatment request under Rule 24b-2 of the Securities Act of 1934, as amended.
10.8		Operating Agreement of Frontier Center One, LLC, dated as of May 10, 2000 between Shea Frontier Center, LLC, and 7001 Tower, LLC, and Frontier Airlines, Inc. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000).
10.9		Standard Industrial Lease dated April 27, 2000, between Mesilla Valley Business Park, LLC, landlord, and Frontier Airlines, Inc., tenant. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000).
10.10		General Terms Agreement No. 6-13616 between CFM International and Frontier Airlines, Inc. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.60 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.11		Lease Agreement dated as of December 15, 2000 between Gateway Office Four, LLC, Lessor, and Frontier Airlines, Inc., Lessee. (Exhibit 10.61 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).
10.12		Code Share Agreement dated as of May 3, 2001 between Frontier Airlines, Inc. and Great Lakes Aviation, Ltd. Portions of this exhibit have been excluded from the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.62 to the Company's Annual Report on Form 10-K for the year ended March 31, 2001).

10.12	(a)	Amendment No. 1 to the Codeshare Agreement dated as of May 3, 2001 between Frontier Airlines, Inc. and Great Lakes Aviation, Ltd. Portions of the exhibit have been excluded from the publicly available document andan order granting confidential treatment of the excluded material has been received. (Exhibit 10.62(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).
+10.13		Employee Stock Ownership Plan of Frontier Airlines, Inc. as amended and restated, effective January 1, 1997 and executed February 5, 2002. (Exhibit 10.66 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).
+10.14		Amendment of the Employee Stock Ownership Plan of Frontier Airlines, Inc. as amended and restated, effective January 1, 1997 and executed February 5, 2002 for EGTRRA. (Exhibit 10.66(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).
+10.15		Director Compensation Agreement between Frontier Airlines, Inc. and Samuel D. Addoms dated effective April 1, 2002. This agreement was modified on April 1, 2003, to expressly describe the second installment exercise period as on or after December 31, 2003, and the third installment exercise period as on or after April 1, 2004. (Exhibit 10.67 to the Company's Annual Report on Form 10-K for the year ended March 31, 2002).
10.16		Secured Credit Agreement dated as of October 10, 2002 between Frontier Airlines, Inc. and Credit Agricole Indosuez in respect to 3 Airbus 319 aircraft. Portions of this exhibit have been excluded form the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.75 to the Company's Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2002).
10.17		Aircraft Mortgage and Security Agreement dated as of October 10, 2002 between Frontier Airlines, Inc. and Credit Agricole Indosuez in respect to 3 Airbus 319 aircraft. Portions of this exhibit have been excluded form the publicly available document and an order granting confidential treatment of the excluded material has been received. (Exhibit 10.76 to the Company's Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2002).
10.18		Codeshare Agreement dated as of September 18, 2003 between Horizon Air Industries, Inc. and Frontier Airlines, Inc. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission in a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. (Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
10.19		Aircraft Lease Agreement dated as of December 5, 2003 between International Lease Finance Corporation, Inc., and Frontier Airlines, Inc., Lessee, in respect of 1 Airbus A319 Aircraft. Frontier has signed leases for 4 additional Airbus 319 aircraft with this Lessor under Aircraft Lease Agreements that are substantially identical in all material respects to this Exhibit. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission in a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. (Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2003).
+10.20	*	Frontier Airlines 2004 Equity Incentive Plan. (Exhibit B to the Company's 2004 Annual Meeting of Shareholders; filed July 26, 2004).
+10.21	*	Executive Bonus Plan for the Company's fiscal year ending March 31, 2006.

+10.22	*	Long Term Incentive Plan for the Company's fiscal year ending March 31, 2006.
+10.23	*	Form of Stock Appreciation Rights Agreement for issuance of stock appreciation rights pursuant to the Frontier Airlines 2004 Equity Incentive Plan to plan participants, including named executive officers.
+10.24	*	Form of Incentive Stock Option Agreement for issuance on incentive stock options pursuant to the Frontier Airlines 2004 Equity Incentive Plan to plan participants, including named executive officers.
+10.25	*	Form of Stock Unit Agreement for issuance of restricted stock units pursuant to the Frontier Airlines 2004 Equity Incentive Plan to plan participants, including named executive officers.
+10.26	*	Form of Non-Qualified Stock Option Agreement for issuance of non-qualified stock options pursuant to the Frontier Airlines 2004 Equity Incentive Plan to qualifying members of the Company's Board of Directors.
+10.27	*	Summary of Base Salary Compensation Arrangements with Named Executive Officers.
Exhibit 23—Consents of Experts:
23.1	*	Consent of KPMG LLP
Exhibit 31—Certifications
31.1	*	Section 302 certification of President and Chief Executive Officer, Jeffery S. Potter.
31.2	*	Section 302 certification of Chief Financial Officer, Paul H. Tate.
Exhibit 32—Certifications
32.1	**	Section 906 certifications of President and Chief Executive Officer, Jeffery S. Potter,
32.2	**	Section 906 certifications of Chief Financial Officer, Paul H. Tate

*: Filed herewith.
**: Furnished herewith.
+: Management contract or compensatory plan or arrangement.

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.

	FRONTIER AIRLINES, INC.
Date: June 13, 2005	By:	/s/ Paul H. Tate

	Paul H. Tate, Vice President and
	Chief Financial Officer
Date: June 13, 2005	By:	/s/ Elissa A. Potucek

	Elissa A. Potucek, Vice President, Controller,
	Treasurer and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: June 13, 2005	By:	/s/ Jeffery S. Potter

	Jeffery S. Potter, Director
Date: June 13, 2005	By:	/s/ Samuel D. Addoms

	Samuel D. Addoms, Director
Date: June 13, 2005	By:	/s/ William B. McNamara

	William B. McNamara, Director
Date: June 13, 2005	By:	/s/ Paul Stephen Dempsey

	Paul Stephen Dempsey, Director
Date: June 13, 2005	By:	/s/ LaRae Orullian

	B. LaRae Orullian, Director
Date: June 13, 2005	By:	/s/ D. Dale Browning

	D. Dale Browning, Director
Date: June 13, 2005	By:	/s/ Jim Upchurch

	James B. Upchurch, Director
Date: June 13, 2005	By:	/s/ Hank Brown

	Hank Brown, Director
Date: June 13, 2005	By:	/s/ Patricia A. Engels

	Patricia A. Engels, Director

Item 8: Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Frontier Airlines, Inc.:

We have audited the accompanying balance sheets of Frontier Airlines, Inc. as of March 31, 2005 and 2004, and the related statements of operations, stockholders' equity and other comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 financial statements referred to above present fairly, in all material respects, the financial position of Frontier Airlines, Inc. as of March 31, 2005 and 2004, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2005, in conformity with U.S. generally accepted accounting principles.

As discussed in note 1 to the financial statements, the Company changed its method of accounting for aircraft maintenance checks from the accrual method of accounting to the direct expense method in 2003.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Frontier Airlines, Inc.'s internal control over financial reporting as of March 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 13, 2005, expressed an unqualified opinion on management's assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Denver, Colorado
June 13, 2005

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Frontier Airlines, Inc.:

We have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting, that Frontier Airlines, Inc. maintained effective internal control over financial reporting as of March 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Frontier Airlines, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that Frontier Airlines, Inc. maintained effective internal control over financial reporting as of March 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Frontier Airlines, Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Frontier Airlines, Inc., as of March 31, 2005 and 2004, and the related statements of operations, stockholders' equity and other comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2005, and our report dated June 13, 2005 expressed an unqualified opinion on those financial statements. Our report refers to a change in accounting for major engine and airframe component overhaul costs from the accrual method of accounting to the direct expense method in 2003.

/s/ KPMG LLP

Denver, Colorado
June 13, 2005

F-2

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Frontier Airlines, Inc. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As of March 31, 2005, management assessed the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company's internal control over financial reporting as of March 31, 2005 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of March 31, 2005 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report appearing on page F-2.

F-3

FRONTIER AIRLINES, INC.

Balance Sheets

March 31, 2005 and 2004

			2005			2004
Assets
Current assets:
	Cash and cash equivalents		$	171,794,772		$	130,008,729
	Short-term investments (note 4)			3,000,000			60,600,000
	Restricted investments			28,011,395			24,732,024
	Receivables, net of allowance for doubtful accounts of $927,000 and $225,000 at March 31, 2005 and 2004, respectively			37,748,785			26,570,443
	Security and other deposits (note 8)			1,900,250			215,000
	Prepaid expenses and other assets			18,740,220			13,093,499
	Inventories, net of allowance of $3,973,000 and $2,991,000 and March 31, 2005 and 2004, respectively			7,564,342			6,126,573
	Assets held for sale			1,317,334			—
	Deferred tax asset (note 10)			5,472,643			8,386,390

		Total current assets		275,549,741			269,732,658
Property and equipment, net (note 5)				455,813,682			440,470,566
Security and other deposits (note 8)				18,662,421			16,261,690
Aircraft pre-delivery payments				22,976,090			28,329,370
Restricted investments				11,126,307			9,971,212
Deferred loan fees and other assets				7,882,430			4,940,102

			$	792,010,671		$	769,705,598

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	37,240,376		$	31,167,168
	Air traffic liability			112,688,811			83,339,560
	Other accrued expenses (note 7)			55,337,203			44,660,868
	Current portion of long-term debt (note 9)			18,222,539			17,386,538
	Short-term borrowings			5,000,000			—
	Deferred revenue and other liabilities (note 6)			5,361,422			5,105,136

		Total current liabilities		233,850,351			181,659,270
Long-term debt (note 9)				282,792,222			280,000,752
Deferred tax liability (note 10)				17,331,125			32,225,150
Deferred revenue and other liabilities (note 6)				20,116,667			17,878,800

		Total liabilities		554,090,365			511,763,972

Stockholders' equity:
	Preferred stock, no par value, authorized 1,000,000 shares; none issued			—			—
	Common stock, no par value, stated value of $.001 per share, authorized 100,000,000 shares; 35,995,342 and 35,597,442 shares issued and outstanding at March 31, 2005 and March 31, 2004, respectively			35,995			35,597
	Additional paid-in capital			188,165,820			185,078,386
	Unearned ESOP shares (note 14)			(2,270,652	)		(2,182,634	)
	Accumulated other comprehensive loss, net of tax			271,267			(137,785	)
	Retained earnings			51,717,876			75,148,062

		Total stockholders' equity		237,920,306			257,941,626

Commitments and contingencies (notes 3, 8, 14 and 17)
			$	792,010,671		$	769,705,598

See accompanying notes to financial statements.

F-4

FRONTIER AIRLINES, INC.

Statements of Operations

Years Ended March 31, 2005, 2004 and 2003

			2005			2004			2003
Revenues:
	Passenger		$	731,821,890		$	615,389,565		$	460,187,753
	Passenger—regional partner			84,268,560			11,191,338			—
	Cargo			4,957,731			8,077,106			5,557,153
	Other			12,591,260			9,021,133			4,191,009

		Total revenues		833,639,441			643,679,142			469,935,915

Operating expenses:
	Flight operations			132,022,593			105,255,438			85,674,568
	Aircraft fuel expense			185,821,202			108,862,582			86,063,581
	Aircraft lease expense			87,095,717			70,061,270			70,239,038
	Aircraft and traffic servicing			129,469,952			110,377,894			86,447,925
	Maintenance			76,678,749			70,443,627			73,080,757
	Promotion and sales			76,461,549			65,322,259			53,031,888
	General and administrative			48,350,563			36,750,152			26,060,812
	Operating expenses—regional partner			92,480,847			14,634,258			—
	Aircraft lease and facility exit costs			—			5,371,799			—
	Losses on sales of assets, net			84,610			1,837,550			—
	Impairment and other related charges			5,123,224			3,560,151			2,478,486
	Depreciation			26,497,930			23,719,743			17,649,815

		Total operating expenses		860,086,936			616,196,723			500,726,870

		Operating income (loss)		(26,447,495	)		27,482,419			(30,790,955	)

Nonoperating income (expense):
	Interest income			3,757,596			2,074,050			1,882,691
	Interest expense			(13,184,345	)		(13,961,074	)		(8,041,412	)
	Emergency Wartime Supplemental Appropriations Act			—			15,024,052			—
	Loss on early extinguishment of debt			—			(9,815,517	)		(1,774,311	)
	Aircraft lease and facility exit costs			—			—			—
	Unrealized derivative loss			—			—			(132,282	)
	Other, net			36,148			(346,434	)		(652,897	)

		Total nonoperating income (expense), net		(9,390,601	)		(7,024,923	)		(8,718,211	)

Income (loss) before income tax expense (benefit) and cumulative effect of change in accounting method				(35,838,096	)		20,457,496			(39,509,166	)
Income tax expense (benefit)				(12,407,910	)		7,822,361			(14,655,366	)

Income (loss) before cumulative effect of change in accounting method				(23,430,186	)		12,635,135			(24,853,800	)
Cumulative effect of change in method of accounting for maintenance, net of tax (note 1)				—			—			2,010,672

Net income (loss)			$	(23,430,186	)	$	12,635,135		$	(22,843,128	)

See accompanying notes to financial statements.

F-5

FRONTIER AIRLINES, INC.

Statement of Operations, continued

Years Ended March 31, 2005, 2004 and 2003

				2005			2004		2003
Earnings (loss) per share:
	Basic:
		Income (loss) before cumulative effect of change in accounting principle		$	(0.66	)	$	0.39	$	(0.84	)
		Cumulative effect of change in method of accounting for maintenance checks			—			—		0.07

		Net income (loss)		$	(0.66	)	$	0.39	$	(0.77	)

	Diluted:
		Income (loss) before cumulative effect of change in accounting principle		$	(0.66	)	$	0.36	$	(0.84	)
		Cumulative effect of change in method of accounting for maintenance checks			—			—		0.07

		Net income (loss)		$	(0.66	)	$	0.36	$	(0.77	)

	Weighted average shares of common stock outstanding
			Basic		35,641,370			32,732,567		29,619,742

			Diluted		35,641,370			35,276,416		29,619,742

See accompanying notes to financial statements.

F-6

FRONTIER AIRLINES, INC.

Statements of Stockholders' Equity and Other Comprehensive Income (Loss)

Years Ended March 31, 2005, 2004 and 2003

	Common Stock		Additional paid-in capital			Unearned ESOP shares			Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders' equity
Balances, March 31, 2002		29,422		85,867,486			(2,119,670	)		—			85,356,055			169,133,293
Net loss		—		—			—			—			(22,843,128	)		(22,843,128	)
Exercise of common stock options		252		616,695			—			—			—			616,947
Warrants issued in conjunction with debt agreement		—		9,282,538			—			—			—			9,282,538
Tax benefit from exercises of stock options		—		657,806			—			—			—			657,806
Amortization of employee stock compensation		—		—			2,119,670			—			—			2,119,670

Balances, March 31, 2003		29,674		96,424,525			—			—			62,512,927			158,967,126
Net income		—		—			—			—			12,635,135			12,635,135
Other comprehensive loss—unrealized loss on derivative instruments, net of tax of $85,000		—		—			—			(137,785	)		—			(137,785	)

Total comprehensive income																12,497,350

Sale of common stock, net of offering costs of $257,000		5,050		81,072,096			—			—			—			81,077,146
Exercise of common stock options		227		1,000,487			—			—			—			1,000,714
Tax benefit from exercises of stock options		—		1,261,937			—			—			—			1,261,937
Equity adjustment for the repricing of warrants issued in conjunction with a debt agreement		—		116,701			—			—			—			116,701
Contribution of common stock to employees stock ownership plan		646		5,202,640			(5,203,286	)		—			—			—
Amortization of employee stock compensation		—		—			3,020,652			—			—			3,020,652

Balances, March 31, 2004	$	35,597	$	185,078,386		$	(2,182,634	)	$	(137,785	)	$	75,148,062		$	257,941,626
Net loss		—		—			—			—			(23,430,186	)		(23,430,186	)
Other comprehensive income — unrealized gain on derivative instruments, net of tax of $246,000		—		—			—			409,052			—			409,052

Total comprehensive loss																(23,021,134	)

Exercise of common stock options		52		336,775			—			—			—			336,827
Tax benefit from exercises of stock options		—		(288,503	)		—			—			—			(288,503	)
Contribution of common stock to employees stock ownership plan		346		3,027,190			(3,027,536	)		—			—			—
Amortization of employee stock compensation		—		—			2,939,518			—			—			2,939,518
Capital contribution				11,972												11,972

Balances, March 31, 2005	$	35,995	$	188,165,820		$	(2,270,652	)	$	271,267		$	51,717,876		$	237,920,306

See accompanying notes to financial statements.

F-7

FRONTIER AIRLINES, INC.

Statements of Cash Flows

Years ended March 31, 2005, 2004, and 2003

					2005			2004			2003
Cash flows from operating activities:
	Net income (loss)				$	(23,430,186	)	$	12,635,135		$	(22,843,128	)
	Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities:
		Employee stock ownership plan compensation expense				2,939,518			2,498,700			2,641,624
		Depreciation and amortization				27,123,642			25,411,877			18,864,332
		Impairment recorded on property and equipment				3,860,342			3,047,482			—
		Provisions recorded on inventories				1,262,882			617,749			2,478,196
		Write off of deferred loan costs				—			9,815,517			—
		Losses on disposal of equipment and other, net				482,669			1,501,465			573,075
		Unrealized derivative (gains) losses, net				(2,837,000	)		(469,394	)		299,328
		Deferred tax expense				(12,514,853	)		9,957,271			10,300,219
		Changes in operating assets and liabilities:
			Restricted investments			(7,916,066	)		(13,057,670	)		(1,031,556	)
			Receivables			(11,409,993	)		(451,660	)		2,679,621
			Income taxes receivable			231,651			24,363,525			(17,770,072	)
			Security and other deposits			(304,925	)		(328,127	)		144,788
			Prepaid expenses and other assets			(5,646,721	)		(3,590,110	)		1,510,213
			Inventories			(2,700,651	)		(785,486	)		(1,832,654	)
			Deferred loan fees and other assets			1,150,746			1,352,536			(3,906,355	)
			Accounts payable			6,073,208			4,512,197			3,674,660
			Air traffic liability			29,349,251			24,463,937			(2,215,082	)
			Other accrued expenses			11,031,932			22,007,937			32,295
			Refundable stabilization act compensation			—			—			(4,835,381	)
			Accrued maintenance expense			—			—			(2,269,046	)
			Deferred revenue and other liabilities			2,494,153			4,514,925			14,378,900

				Net cash provided by operating activities		19,239,599			128,017,806			873,977
Cash flows from investing activities:
	Aircraft lease and purchase deposits made					(21,436,210	)		(39,986,696	)		(43,945,654	)
	Aircraft lease and purchase deposits returned and applied to aircraft					23,008,434			33,541,079			56,351,125
	Decrease in restricted investments					3,481,600			2,443,500			1,176,700
	Decrease (increase) in short-term investments					57,600,000			(55,265,000	)		(2,735,000	)
	Proceeds from the sale of property and equipment					80,962,695			341,435			29,750,000
	Capital expenditures					(128,775,506	)		(134,650,799	)		(238,667,511	)

				Net cash provided by (used in) investing activities		14,841,013			(193,576,481	)		(198,070,340	)
Cash flows from financing activities:
	Net proceeds from issuance of common stock and warrants					348,799			82,077,860			1,274,753
	Proceeds from short-term borrowings					5,000,000			—			—
	Proceeds from long-term borrowings					22,000,000			98,500,000			241,100,000
	Payment of financing fees					(1,270,839	)		(1,231,201	)		(3,504,435	)
	Principal payments on long-term borrowings					(18,372,529	)		(83,324,659	)		(28,945,720	)
	Principal payments on obligations under capital leases					—			—			(138,020	)

				Net cash provided by financing activities		7,705,431			96,022,000			209,786,578
				Net increase in cash and cash equivalents		41,786,043			30,463,325			12,590,215

Cash and cash equivalents, beginning of year						130,008,729			99,545,404			86,955,189

Cash and cash equivalents, end of year					$	171,794,772		$	130,008,729		$	99,545,404

See accompanying notes to financial statements.

F-8

FRONTIER AIRLINES, INC.

Notes to Financial Statements

March 31, 2005

1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business

Frontier Airlines, Inc. ("Frontier" or the "Company") provides air transportation for passengers and freight. Frontier was incorporated in the State of Colorado on February 8, 1994 and commenced operations on July 5, 1994. The Company, in conjunction with its regional jet partner Frontier JetExpress, currently operates routes linking from its Denver hub to 44 cities coast to coast and five cities in Mexico and service to Cancun, Mexico from four non-hub cities. The Company operates a fleet of 37 Airbus A319 aircraft, seven Airbus A318 aircraft, three Boeing aircraft and nine CRJ 700 aircraft (operated by Horizon Air Industries, Inc.) from its base in Denver, and employs approximately 4,500 aviation professionals as of March 31, 2005.

Airline operations have high fixed costs relative to revenues and are highly sensitive to various factors, including the actions of competing airlines and general economic factors. Small fluctuations in yield per revenue passenger mile or expense per available seat mile can significantly affect operating results.

Preparation of Financial Statements and Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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.

Cash and Cash Equivalents

For financial statement purposes, the Company considers cash and short-term investments with an original maturity of three months or less to be cash equivalents. These investments are stated at cost, which approximates fair value.

Short-term Investments

Short-term investments consist of the following: (a) auction rate securities with auction reset periods less than 12 months, classified as available-for-sale securities stated at fair value; and (b) certificates of deposit with maturities between three months and one year, classified as held-to-maturity and are carried at amortized cost which approximates fair value. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. Interest income is recognized when earned.

Supplemental Disclosure of Cash Flow Information

Cash Paid During the Year for:

		2005			2004			2003
Interest		$	12,345,237		$	9,836,737		$	6,490,758
Taxes		$	160,598		$	312,484		$	—

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Supplemental disclosure of non-cash activities:

In connection with the commercial loan facility the Company obtained during the year ended March 31, 2003, the Company issued warrants to the ATSB and to two other guarantors for the purchase of 3,833,946 of our common stock at $6.00 per share. The warrants had an estimated fair value of $9,282,538 which was recorded as deferred loan fees with a corresponding adjustment to additional paid-in capital. See Note 12.

Restricted Investments

Restricted investments include certificates of deposit which secure certain letters of credit issued primarily to companies which process credit card sale transactions, certain airport authorities and aircraft lessors. Restricted investments are carried at cost, which management believes approximates fair value. Maturities are for one year or less and the Company intends to hold restricted investments until maturity.

Valuation and Qualifying Accounts

The following table summarizes our valuation and qualifying accounts as of March 31, 2005, 2004, and 2003, and the associated activity for the years then ended.

		Allowance for Doubtful Accounts			Allowance for Inventory
Balance at March 31, 2002		$	155,000		$	—
	Additional expenses		477,000			2,478,000
	Deductions		(395,000	)		—

Balance at March 31, 2003			237,000			2,478,000
	Additional expenses		593,000			618,000
	Deductions		(605,000	)		(105,000	)

Balance at March 31, 2004			225,000			2,991,000
	Additional expenses		1,012,000			1,263,000
	Deductions		(310,000	)		(281,000	)

Balance at March 31, 2005		$	927,000		$	3,973,000

Inventories

Inventories consist of expendable aircraft spare parts, supplies and aircraft fuel and are stated at the lower of cost or market. Inventories are accounted for on a first-in, first-out basis and are charged to expense as they are used. The Company monitors resale values for Boeing parts quarterly using estimates obtained from outside vendors. The Company has evaluated the estimated usage of these parts and the current resale value during the year ended March 31, 2005 and recorded additional provisions totaling $1,263,000. The cost of WTI crude oil increased from $36.74 per barrel at March 31, 2004 to $54.19 per barrel at March 31, 2005. As a result of the increase in the cost of fuel, the Company has accelerated the dates to cease using the Boeing aircraft from September 2005 to mid-April 2005. The Company believes the decline in resale values of parts for the less fuel-efficient Boeing 737-200 and Boeing 737-300 aircraft was due in part to increasing fuel prices during the past

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year. Because of the earlier termination date of the use of the Boeing aircraft, the estimated usage of these parts decreased, contributing to the amount of the additional provision recorded during the year ended March 31, 2005. During the fiscal year ended March 31, 2004, the Company recorded a provision for excess Boeing expendable parts inventory totaling $618,000. The provision in 2004 was principally the result of declining resale values of excess Boeing expendable parts. As of March 31, 2005, the carrying value of Boeing expendable inventory totaled approximately $1,308,000.

Property and Equipment

Property and equipment are carried at cost. Major additions, betterments and renewals are capitalized. Depreciation and amortization is provided for on a straight-line basis to estimated residual values over estimated depreciable lives as follows:

Aircraft, spare aircraft parts and flight equipment		7 - 25 years
Improvements to leased aircraft		Life of improvements or term of lease, whichever is less.
Capitalized software		3 years
Ground property; equipment and leasehold improvements		3 - 5 years or term of lease

Residual values for aircraft are at 25% of the aircraft cost.

Deferred Loan Fees

Deferred loan fees, including the estimated fair value of warrants issued to the lenders, are deferred and amortized over the term of the related debt obligation. During the year ended March 31, 2004, the Company wrote off $9,816,000 in deferred loan costs associated with the prepayment of the government guaranteed loan.

Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of the assets. If an impairment occurs, the loss is measured by comparing the fair value of the asset to its carrying amount.

Manufacturers' Credits

The Company receives credits in connection with its purchase of aircraft, engines, auxiliary power units and other rotable parts. These credits are deferred until the aircraft, engines, auxiliary power units and other rotable parts are delivered and then applied as a reduction of the cost of the related equipment.

Aircraft Maintenance

The Company operates under an FAA-approved continuous inspection and maintenance program. The Company accounts for maintenance activities on the direct expense method. Under this method, major overhaul maintenance costs are recognized as expense as maintenance services are performed, as

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flight hours are flown for nonrefundable maintenance payments required by lease agreements, and as the obligation is incurred for payments made under service agreements. Routine maintenance and repairs are charged to operations as incurred. Prior to fiscal 2003 the Company accrued for major overhaul costs on a per-flight-hour basis in advance of performing the maintenance services.

Effective January 1, 2003, the Company and GE Engine Services, Inc. ("GE") executed a twelve-year engine services agreement (the "Services Agreement") covering the scheduled and unscheduled repair of Airbus engines, which was subsequently modified in September 2004. The agreement is for a 12-year period from the effective date for our owned aircraft or May 1, 2019, whichever comes first. For each leased aircraft, the agreement term coincides with the initial lease term of 12 years. Under the terms of the Services Agreement, the Company agreed to pay GE a fixed rate per-engine-hour, payable monthly, and GE assumed the responsibility to overhaul the Company's engines on Airbus aircraft as required during the term of the Services Agreement, subject to certain exclusions. The Company believes the fixed rate per-engine hour approximates the periodic cost the Company would have incurred to service those engines. Accordingly, these payments are expensed as the obligation is incurred.

Effective April 1, 2002, the Company changed its method of accounting for certain aircraft maintenance costs from the accrual method of accounting to the direct expense method. Under the new accounting method, maintenance costs are recognized as expense as maintenance services are performed and as flight hours are flown for nonrefundable maintenance payments required by lease agreements. The Company believes the direct-expense method is preferable in the circumstances because the maintenance liability is not recorded until there is an obligating event (when the maintenance event is actually being performed or flight hours are actually flown), the direct expense method eliminates significant estimates and judgments inherent under the accrual method, and it is the predominant method used in the airline industry. Accordingly, effective April 1, 2002, the Company reversed its major overhaul accrual against the corresponding maintenance deposits and recorded a cumulative effect of a change in accounting principle of $3,196,617 ($2,010,672, net of income taxes).

Advertising Costs

The Company expenses the costs of advertising as promotion and sales in the year incurred. Advertising expense was $10,802,635, $7,897,365 and $5,717,438 for the years ended March 31, 2005, 2004, and 2003, respectively. During the years ended March 31, 2005, 2004 and 2003, the amount of expense recognized related to advertising barter transactions were $2,051,000, $1,635,000, and $629,000, respectively. During the years ended March 31, 2005, 2004 and 2003, the amount of revenue recognized related to advertising barter transactions were $2,324,000, $611,000, and $1,102,000, respectively. Prepaid barter expenses as of March 31, 2005 and 2004 was $474,000 and $450,000, respectively.

Revenue Recognition

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Passenger Traffic Commissions and Related Expenses

Passenger traffic commissions and related expenses are expensed when the transportation is provided and the related revenue is recognized. Passenger traffic commissions and related expenses not yet recognized are included as a prepaid expense.

Frontier Jet Express

In September 2003, the Company signed a 12-year agreement with Horizon Air Industries, Inc. ("Horizon"), under which Horizon will operate up to nine 70-seat CRJ 700 aircraft under our Frontier JetExpress brand. The service began on January 1, 2004 and replaced our codeshare with Mesa Airlines which terminated in December 2003. In accordance with Emerging Issues Task Force No. 01-08, "Determining Whether an Arrangement Contains a Lease" ("EITF 01-08"), we have concluded that the Horizon agreement contains leases as the agreement conveys the right to use a specific number and specific type of aircraft over a stated period of time. Frontier establishes the scheduling, routes and pricing of the flights operated as "Frontier JetExpress" under the agreement. EITF 01-08 was effective for new arrangements or arrangements modified after the beginning of an entity's next reporting period after May 28, 2003. The assessment of whether an arrangement contains a lease is made at the inception of or upon modification of an arrangement. Therefore, we began recording revenues and expenses related to the Horizon Agreement gross, as opposed to net, upon inception of service. Prior to the implementation of EITF 01-08, JetExpress revenues were reduced by related expenses and reported net as other revenues. Revenues are pro-rated to the segment operated by the regional partner based on miles flown and are included in passenger revenues—regional partner. Expenses directly related to the flights flown by the regional partner are included in operating expenses—regional partner. The Company allocates indirect expenses between mainline and JetExpress operations by using regional partner departures, available seat miles, or passengers as a percentage of system combined departures, available seat miles or passengers.

Amounts included in other revenues for the years ended March 31, 2005, 2004, and 2003 were approximately as follows:

	Year Ended March 31
	2005		2004			2003
Mesa revenues	$	—	$	25,155,000		$	1,608,000
Mesa expenses		—		(23,438,000	)		(2,314,000	)

Net amount in other revenues	$	—	$	1,717,000		$	(706,000	)

Customer Loyalty Program

In February 2001, the Company established EarlyReturns, a frequent flyer program to encourage travel on its airline and customer loyalty. The Company accounts for the EarlyReturns program under the incremental cost method whereby travel awards are valued at the incremental cost of carrying one passenger based on expected redemptions. Those incremental costs are based on expectations of expenses to be incurred on a per passenger basis and include food and beverages, fuel, liability insurance, and ticketing costs. The incremental costs do not include a contribution to overhead, aircraft cost or profit. The Company does not record a liability for mileage earned by participants who have not reached the level to become eligible for a free travel award. The Company believes this is appropriate

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because the large majority of these participants are not expected to earn a free flight award. The Company does not record a liability for the expected redemption of miles for non-travel awards since the cost of these awards to us is negligible.

As of March 31, 2005 and 2004, the Company estimated that approximately 102,000 and 47,600 round-trip flight awards, respectively, were eligible for redemption by EarlyReturns members who have mileage credits exceeding the 15,000-mile free round-trip domestic ticket award threshold. As of March 31, 2005 and 2004, the Company had recorded a liability of approximately $1,275,000 and $584,000, respectively, for these rewards.

Co-branded Credit Card Arrangement

The Company entered into a co-branded credit card arrangement with a MasterCard issuing bank in March 2003. The terms of this affinity agreement provide that we will receive a fixed fee for each new account, which varies based on the type of account, and a percentage of the annual renewal fees that the bank receives. The Company receives an increased fee for new accounts solicited by us. The Company also receives fees for the purchase of frequent flier miles awarded to the credit card customers.

The Company accounts for all fees received under the co-branded credit card program by allocating the fees between the portion that represents the estimated value of the subsequent travel award to be provided, and the portion which represents a marketing fee to cover marketing and other related costs to administer the program. This latter portion (referred to as the marketing component) represents the residual after determination of the value of the travel component. The component representing travel is determined by reference to an equivalent restricted fare, which is used as a proxy for the value of travel of a frequent flyer mileage award. The travel component is deferred and recognized as revenue over the estimated usage period of the frequent flyer mileage awards of 20 months. The Company records the marketing component of the revenue earned under this agreement as a reduction of sales and promotion expenses in the month received.

Because of our limited history with our frequent flier program, the Company has estimated the period over which the frequent flier mileage awards will be used based on industry averages adjusted downward to take into account that most domestic airlines require 25,000 frequent flyer miles for a domestic round-trip ticket, whereas the Company requires only 15,000 frequent flyer miles for a domestic round-trip ticket.

For the year ended March 31, 2005, the Company earned total fees of $12,227,000. Of that amount, $8,455,000 was deferred as the travel award component, and the remaining marketing component of $3,772,000 was recognized as a reduction to sales and promotions expense. For the year ended March 31, 2004, the Company earned total fees of $4,245,000. Of that amount, $3,286,000 was deferred as the travel award component, and the remaining marketing component of $959,000 was recognized as a reduction to sales and promotions expense. Amortization of deferred revenue recognized in earnings during the years ended March 31, 2005 and 2004 was $4,396,000 and $786,000, respectively.

Earnings (Loss) Per Common Share

Basic earnings (loss) per common share excludes the effect of potentially dilutive securities and is computed by dividing income by the weighted-average number of common shares outstanding for the

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period. Diluted earnings per common share reflects the potential dilution of all securities that could share in earnings. Shares outstanding include shares contributed to the Employee Stock Option Plan.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under that 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 tax bases of existing assets and liabilities and net operating losses and tax credit carryforwards. A valuation allowance for net deferred tax assets is provided unless realizability is judged by management to be more likely than not. The effect on deferred taxes from a change in tax rates is recognized in income in the period that includes the enactment date.

Fair Value of Financial Instruments

The Company estimates the fair value of its monetary assets and liabilities based upon existing interest rates related to such assets and liabilities compared to current rates of interest for instruments with a similar nature and degree of risk. The Company estimates that the carrying value of all of its monetary assets and liabilities approximates fair value as of March 31, 2005 and 2004 with exception of its fixed rate loans. The estimated fair value of the Company's fixed rate loans based on current rates available to the Company for debt of the same remaining maturity was approximately $36,732,000 as compared to the carrying amount of $39,711,000 at March 31, 2005. The estimated the fair value of the Company's fixed rate loans based on current rates available to the Company for debt of the same remaining maturity was approximately $46,663,000 as compared to the carrying amount of $42,153,000 at March 31, 2004.

Derivative Instruments

The Company accounts for derivative financial instruments in accordance with the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires the Company to measure all derivatives at fair value and to recognize them in the balance sheet as an asset or liability. For derivatives designated as cash flow hedges, changes in fair value of the derivative are generally reported in other comprehensive income ("OCI") and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging instruments and ineffective portions of hedges are recognized in earnings in the current period.

The Company enters into derivative transactions to hedge the interest payments associated with a portion of its LIBOR-based borrowings and fuel purchases. The Company designates certain interest rate swaps as qualifying cash flow hedges. The Company also enters into derivative transactions to reduce exposure to the effect of fluctuations in fuel prices. These transactions are accounted for as trading instruments under SFAS 133. As a result, the Company records these instruments at fair market value and recognizes realized and unrealized gains and losses in aircraft fuel expense.

Self-Insurance

The Company is self-insured for the majority of the group health insurance costs, subject to specific retention levels. The Company records its liability for health insurance claims based on health insurance underwriter's estimate of claims that have been incurred but not reported.

F-15

Stock Based Compensation

Stock options and other stock-based compensation awards are accounted for using the intrinsic value method prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related Interpretations in accounting for its employee stock options and follows the disclosure provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123"). Accordingly, no compensation cost is recognized for options granted at a price equal to the fair market value of the Common Stock on the date of grant. Pro forma information regarding net income and earnings per share is required by SFAS 123, which also requires that the information be determined as if the Company has accounted for its employee stock options under the fair value method of that Statement. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option valuation model. Had compensation cost for the Company's stock-based compensation plan been determined using the fair value of the options at the grant date, the Company's pro forma net income (loss) and earnings (loss) per share would be as follows:

		2005(1)			2004		2003
Net income (loss) as reported		$	(23,430,186	)	$	12,635,135	$	(22,843,128	)
	Less: total compensation expense determined under fair value method, method, net of tax		4,201,805			1,862,553		3,447,779

Pro forma net income (loss)		$	(27,631,991	)	$	10,772,582	$	(26,290,907	)

Earnings (loss) per share, basic:
	As Reported	$	(0.66	)	$	0.39	$	(0.77	)
	Pro Forma	$	(0.78	)	$	0.33	$	(0.89	)
Earnings (loss) per share, diluted:
	As Reported	$	(0.66	)	$	0.36	$	(0.77	)
	Pro Forma	$	(0.78	)	$	0.31	$	(0.89	)

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123(R), Share-Based Payments. SFAS No. 123(R), revised SFAS 123 and supersedes APB Opinion No. 25. SFAS No. 123(R) focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). In April 2005, the effective date for SFAS 123(R) was changed to the first reporting period that begins after June 15, 2005. Accordingly, the Company will adopt SFAS No. 123(R) on April 1, 2006 and use the modified-prospective transition method. Under the modified-prospective method, the Company will recognize compensation expense in the financial statements issued subsequent to the date of adoption for all share-based payments granted, modified or settled after April 1, 2006 as well as for any awards that were granted prior to April 1, 2006 for which requisite service has been provided as of April 1, 2006. The Company will recognize compensation expense on awards granted subsequent to April 1, 2006 using the fair values determined by a valuation model prescribed by SFAS(R). The compensation expense on awards granted prior to April 1, 2006 will be recognized using the fair values determined for the pro forma disclosures on stock-based compensation. The amount of compensation expense that will be recognized on awards that have not fully vested will exclude the compensation expense cumulatively recognized in the pro forma disclosures on stock-based compensation.

F-16

(1): In September and October of 2004, the Company's Board of Directors approved that certain of the Company's stock options with exercise prices in excess of the stock's current market price be modified to accelerate vesting. The purpose of the accelerated vesting was to enable the Company to avoid recognizing compensation expense in its statement of operations associated with these options in future periods upon adoption of SFAS No. 123(R). As a result, a total of 671,500 options became immediately vested. These options originally became vested between October 2004 and March 2009. Exercise prices for these options ranged from $8.00 to $24.17 per share. There were 35 employees affected by the modification. The total accelerated expense as a result of the modification is approximately $2,997,000, net of taxes, and is included in the pro forma numbers presented in the table above.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation, including the reclassification to short-term investments of $58,600,000 of auction rate securities, which were included in cash and cash equivalents at March 31, 2004 because of the short duration of their reset periods. In addition, impairments in the amount of $3,560,000 and $2,478,000 have been reclassified from maintenance expense to impairments and other related charges in the years ended March 31, 2004 and 2003, respectively.

2. Government Assistance

Emergency Wartime Supplemental Wartime Supplement Appropriations Act

The Emergency Wartime Supplemental Appropriations Act (the Appropriations Act) enacted on April 16, 2003, which made available approximately $2.3 billion to U.S. flag air carriers for expenses and revenue foregone related to aviation security. In order to have been eligible to receive a portion of this fund, air carriers must have paid one or both of the TSA security fees, the September 11^th Security Fee and/or the Aviation Security Infrastructure Fee as of the date of enactment of the Appropriations Act. According to the Appropriations Act, an air carrier may use the amount received as the air carrier determines. The Appropriations Act requires air carriers who accept these funds to limit the compensation paid during the 12 month period beginning April 1, 2003 to each executive officer to an amount equal to no more than the annual salary paid to that officer with respect to the air carrier's fiscal year 2002. Pursuant to the Appropriations Act, the Company received $15,573,000 in May 2003, of which $549,000 was paid to Mesa Air Group for the revenue passengers Mesa carried as Frontier JetExpress.

The Appropriations Act provides for additional reimbursements to be made to U.S. flag air carriers for costs incurred related to the FAA requirements for enhanced flight deck door security measures that were mandated as a result of the September 11 terrorist attacks. Pursuant to the Appropriations Act, the Company received $889,000 in September 2003 for expenses related to the installation of enhanced flight deck doors on its aircraft. Upon receipt of the $889,000 reimbursement, the Company credited maintenance expense and charged fixed assets for the labor component of the flight deck door installation, and correspondingly credited property, plant, and equipment to reflect the reimbursement.

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3. Derivative Instruments

Fuel Hedging

In November 2002, the Company initiated a fuel hedging program comprised of swap and collar agreements. Under a swap agreement, the Company receives the difference between a fixed swap price and a price based on an agreed upon published spot price for jet fuel. If the index price is higher than the fixed price, the Company receives the difference between the fixed price and the spot price. If the index price is lower, the Company pays the difference. A collar agreement has a cap price, a primary floor price, and a secondary floor price. When the U.S. Gulf Coast Pipeline Jet index price or WTI price is above the cap, the Company receives the difference between the index and the cap. When the index price is below the primary floor but above the secondary floor, the Company pays the difference between the index and the primary floor. However, when the price is below the secondary floor, the Company is only obligated to pay the difference between the primary and secondary floor prices. When the price is between the cap price and the primary floor, no payments are required.

The Company has entered into the following swap and collar agreements:

Date	Notional volume (gallons per month)	Period covered	Price (per gallon or barrel)	Percentage of estimated fuel purchases
November 2002	770,000	December 1, 2002 - May 31, 2003	$0.7225, fixed	10	%
November 2002	385,000	December 1, 2002 - November 30, 2003	$0.82, with primary floor of $0.72 and secondary floor of $0.645	5	%
March 2003	1,260,000	April 1, 2003 - June 30, 2003	$0.7925, fixed	15	%
April 2003	1,260,000	July 1, 2003 - December 31, 2003	$0.7153, fixed	15	%
September 2003	630,000	January 1, 2004 - June 30, 2004	$0.7450, fixed	7	%
May 2004	420,000	October 1, 2004 - March 31, 2005	$39.0 per barrel, with a floor of $34.8 per barrel	25	%
November 2004	225,000	April 1, 2005 - June 30, 2005	$1.34, with a floor of $1.20	28	%

The results of operations for the year ended March 31, 2005, 2004 and 2003 include an unrealized derivative gain of $2,837,000, an unrealized derivative gain of $469,000 and an unrealized derivative loss of $167,000, respectively, which are included in aircraft fuel expense. Additionally, a realized net gain of approximately $4,768,000, $918,000 and $726,000 in cash settlements from a counter-party is recorded as a reduction of fuel expense for the years ended March 31, 2005, 2004 and 2003, respectively.

Interest Rate Hedging Program

In March 2003, the Company entered into an interest rate swap agreement with a notional amount of $27,000,000 to hedge the interest payments associated with a portion of its LIBOR-based borrowings through June 30, 2007. Under the interest rate swap agreement, the Company is paying a fixed rate of 2.45% and receiving a variable rate based on the three month LIBOR which is reset quarterly. Interest expense for the years ended March 31, 2005 and 2004 includes $177,000 and $351,000, respectively, of settlement amounts paid or payable to the counter party for the period. At March 31, 2005, the

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Company's interest rate swap agreement had an estimated unrealized gain of $300,000 and is included in deferred loan fees and other assets. At March 31, 2004, the Company's interest rate swap agreement has an estimated unrealized loss of $356,000 and is included in other accrued expenses. Changes in the fair value of interest rate swaps designated as hedging instruments are reported in accumulated other comprehensive income (loss) included in stockholders' equity. Approximately $655,000 of unrealized losses are included in accumulated other comprehensive income (loss) included in stockholders' equity, net of income taxes of $246,000, for the year ended March 31, 2005. Approximately $223,000 of unrealized losses are included in accumulated other comprehensive income (loss) included in stockholders' equity, net of income taxes of $85,000, for the year ended March 31, 2004. The unrealized losses are expected to be reclassified into interest expense as a yield adjustment in the same period in which the related interest payments on the LIBOR-based borrowings effects earnings.

4. Investment securities

Investment securities at March 31, 2005 and 2004 consisted of the following:

		2005		2004
Available-for-sale securities:
Auction rate securities collateralized by student loan bonds and corporate debt(2)		$	3,000,000	$	58,600,000

			3,000,000		58,600,000

Held-to-maturity securities:
	U.S. Government and agencies(1)		—		47,406,611
	Bond money market funds(1)		33,699,968		—
	Commercial paper(1)		23,977,360		—
	Cash deposit(2)		—		2,000,000

			57,677,328		49,406,611

Total		$	60,677,328	$	108,006,611

(1): Reported in cash and cash equivalents
(2): Reported in short-term investments

The carrying values of available-for-sale and held-to-maturity securities approximates fair value. There were no unrealized gains or losses on these investments for the years ended March 31, 2005, 2004 and 2003. Contractual maturities of all held-to-maturity securities mature in one year or less. The contractual maturity for the available-for-sale security is November 30, 2032 with a reset date of April 1, 2005.

5. Property and Equipment, Net

As of March 31, 2005 and 2004 property and equipment consisted of the following:

		2005			2004
Aircraft, spare aircraft parts, and improvements to leased aircraft		$	489,324,022		$	458,627,110
Ground property, equipment and leasehold improvements			38,524,096			33,219,581
Construction in progress			231,397			3,940,114

			528,079,515			495,786,805
Less accumulated depreciation and amortization			(72,265,833	)		(55,316,239	)

	Property and equipment, net	$	455,813,682		$	440,470,566

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Airbus flight equipment and manufacturers' credits received or earned but not yet placed in service totaled approximately $62,000 and $3,612,000, at March 31, 2005 and 2004, respectively.

During the years ended March 31, 2005 and 2004, the Company recorded impairment charges of $3,860,000 and $3,047,000, respectively. The Company monitors resale values for Boeing rotables quarterly using estimates obtained from its vendors and records impairment charges based on this analysis and current sales prices. During the year ended March 31, 2005, impairment charges were recorded as a result of further market declines of the carrying values of Boeing 737 expendable inventory, rotable parts and a spare engine. During the year ended March 31, 2004, the impairment charge was for rotables and for two Boeing 737-300 spare engines. The impairment charge totaling $901,000 was principally the result of declining resale values for Boeing rotables. The impairment for the spare engines totaled $2,146,000 and was recorded as a result of the Company's decision to sell these remaining spare engines. The impairment was based on three separate quotes from third parties for a sale leaseback transaction on these engines.

During the year ended March 31, 2004, the Company completed a sale-leaseback transaction of an Airbus A319 aircraft resulting in a loss of $1,323,000. The charge is included in the loss on sale of aircraft in the statement of operations. The Company agreed to lease this aircraft over a 12-year term.

6. Deferred Revenue and Other Liabilities

At March 31, 2005 and 2004, deferred revenue and other liabilities is comprised of the following:

	2005			2004
Deferred revenue related to co-branded credit card	$	6,557,945		$	2,499,281
Advance received for co-branded credit card		—			5,755,000
Deferred rent		18,271,668			13,154,287
Remaining lease payments for aircraft and facilities abandoned before lease termination date		—			1,128,582
Other		648,476			446,786

Total deferred revenue and other liabilities		25,478,089			22,983,936
Less current portion		(5,361,422	)		(5,105,136	)

	$	20,116,667		$	17,878,800

7. Other Accrued Expenses

The March 31, 2005 and 2004 other accrued expenses is comprised of the following:

	2005		2004
Accrued salaries and benefits	$	30,340,793	$	27,120,734
Federal excise and other passenger taxes payable		17,251,283		10,441,301
Property tax payable		2,279,718		1,850,202
Remaining lease payments for aircraft and facilities abandoned before lease termination date		1,063,022		1,695,927
Other		4,402,387		3,552,704

	$	55,337,203	$	44,660,868

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8. Lease Commitments

Aircraft Leases

At March 31, 2005 and 2004, the Company operated 33 and 25 leased aircraft, respectively, which are accounted for under operating lease agreements with initial terms ranging from 5 years to 12 years. Security deposits related to leased aircraft and future leased aircraft deliveries at March 31, 2005 and 2004 totaled $17,853,432 and $12,406,932, respectively, and are included in security and other deposits. Letters of credit issued to certain aircraft lessors in lieu of cash deposits and related restricted investments to secure these letters of credit at March 31, 2005 and 2004 totaled $2,034,000 and $5,515,600, respectively.

During the year ended March 31, 2004, the Company ceased using three of its Boeing 737-200 leased aircraft, two of which had lease terminations in October 2003 and one with a lease termination date in October 2005. This resulted in a charge of $5,054,000, representing the estimated fair value of the remaining lease payments and the write-off of the unamortized leasehold improvements on the aircraft. These charges are included in the Statement of Operations as aircraft lease and facility exit costs.

In addition to scheduled future minimum lease payments, the Company is required to make supplemental rent payments to cover the cost of major scheduled maintenance overhauls of these aircraft. These supplemental rentals are based on the number of flight hours flown and/or flight departures. The lease agreements require the Company to pay taxes, maintenance, insurance, and other operating expenses applicable to the leased property.

Other Leases

The Company leases office and hangar space, spare engines and office equipment for its headquarters, reservation facilities, airport facilities, and certain other equipment. The Company also leases certain airport gate facilities on a month-to-month basis.

During the year ended March 31, 2005, the Company ceased providing air service to a city with an airport facility lease. This resulted in a charge of $50,000. During the year ended March 31, 2004, the Company closed its El Paso, Texas maintenance facility which had a lease termination date of August 2007 resulting in a charge of $318,000, representing the estimated fair value of the remaining lease payments. The charge is included in the Statement of Operations as aircraft lease and facility exit costs.

A summary of the activity charged to the aircraft and property lease termination liabilities are as follows:

		Aircraft			Facility			Total
Initial accrual		$	3,591,739		$	317,567		$	3,909,306
	Lease payments		(1,042,338	)		(42,459	)		(1,084,797	)

Balance, March 31, 2004			2,549,401			275,108			2,824,509
	Additions		—			50,292			50,292
	Lease payments		(1,616,601	)		(75,832	)		(1,692,433	)

Balance, March 31, 2005		$	932,800		$	249,568		$	1,182,368

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A summary of the balance sheet classification of the liabilities are as follows:

	Aircraft		Facility		Total
2005
Current portion included in other accrued expenses	$	932,800	$	130,222	$	1,063,022
Long-term portion included in deferred revenue and other liabilities		—		119,346		119,346

Total	$	932,800	$	249,568	$	1,182,368

2004
Current portion included in other accrued expenses	$	1,619,887	$	76,040	$	1,695,927
Long-term portion included in deferred revenue and other liabilities		929,514		199,068		1,128,582

Total	$	2,549,401	$	275,108	$	2,824,509

For leases that contain escalations, the company records the total rent payable during the lease term on a straight-line basis over the term of the lease and records the difference between the rent paid and the straight-line rent as a deferred rent liability.

At March 31, 2005, commitments under non-cancelable operating leases (excluding aircraft supplemental rent requirements) with terms in excess of one year were as follows:

	Aircraft		Other		Total
2006	$	110,145,479	$	22,284,568	$	132,430,047
2007		111,609,358		19,503,111		131,112,469
2008		111,066,548		16,092,198		127,158,746
2009		106,870,654		15,639,224		122,509,878
2010		106,870,654		14,575,026		121,445,680
Thereafter		627,850,094		14,930,160		642,780,254

Total minimum lease payments	$	1,174,412,787	$	103,024,287	$	1,277,437,074

Rental expense under operating leases, including month-to-month leases, for the years ended March 31, 2005, 2004 and 2003 was $130,205,307, $98,472,585, and $92,337,439, respectively.

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9. Long-term Debt and Short-term Borrowings

Long-term debt and short-term borrowings at March 31, 2005 and 2004 consisted of the following:

	2005			2004
Credit Facility(1)	$	5,000,000		$	—
Aircraft notes payable, 6.62% weighted average fixed interest rate(2)		39,711,187			42,153,401
Aircraft notes payable, variable interest rates based on LIBOR plus margins ranging from 1.25% to 1.70% 4.31% weighted average interest rate at March 31, 2005(3)		151,020,717			159,585,104
Aircraft notes payable, variable interest rates based on LIBOR plus margins ranging from 1.95% to 2.25%, 4.96% weighted average interest rate at March 31, 2005(4)		89,268,847			95,648,785
Aircraft note payable, variable interest rates based on LIBOR plus a margin of 1.95%, for an overall rate of 4.56% at March 31, 2005(5)		21,014,010			—

Total Debt		306,014,761			297,387,290
Less: current maturities		(23,222,539	)		(17,386,538	)

Long-term debt	$	282,792,222		$	280,000,752

(1): In March 2005, the Company entered into a two-year revolving credit facility, ("Credit Facility") to be used in support of letters of credit and for general corporate purposes. Under this facility, the Company may borrow the lesser of $13,000,000 ("maximum commitment amount") or 50% of the current market value of pledged eligible spare parts. Letters of credit available is the maximum commitment amount under the facility less current borrowings. Interest under the Credit Facility is based on the Eurodollar rate plus a margin of 3.75% or Prime plus a margin of 2.0%, for Eurodollar borrowings and alternative base rate borrowings, respectively. In addition, there is a quarterly commitment fee of 0.50% per annum of the unused portion of the facility based on the maximum commitment amount. The agreement contains a covenant that will not permit the Company to maintain an unrestricted cash and cash equivalent position of less than $120,000,000, with a 30-day cure period. The amount available for borrowings under the Credit Facility at March 31, 2005 was $7,246,000, of which $5,000,000 was outstanding at March 31, 2005.
(2): During the year ended March 31, 2002, the Company entered into a credit agreement to borrow up to $72,000,000 for the purchase of three Airbus aircraft with a maximum borrowing of $24,000,000 per aircraft. During the year ended March 31, 2003, the Company entered into a sale-leaseback transaction for one of these purchased aircraft and repaid the loan with the proceeds of the sale. The two remaining aircraft loans have a term of 10 years and are payable in equal monthly installments, including interest, payable in arrears. The aircraft are secured by the aircraft financed. The remaining loans require monthly principal and interest payments of $215,000 and $218,110, respectively, bear interest with rates of 6.71% and 6.54%, with maturities in May and August 2011, at which time a balloon payment totaling $10,200,000 is due with respect to each loan.
(3): During the year ended March 31, 2003, the Company borrowed $171,100,000 for the purchase of seven Airbus A319 aircraft. Each aircraft loan has a term of 12 years and is payable in quarterly or semi-annually installments, including interest, payable in arrears, with a floating interest rate adjusted quarterly or semi-annually based on LIBOR plus margins of 1.25% to 1.70%. At March 31, 2005 interest rates for these loans ranged from 3.50% to 4.76%. At the end of the term,

F-23

there are balloon payments that range from $4,800,000 to $7,770,000 at the end of the term. The loans are secured by the aircraft financed.

(4): During the year ended March 31, 2004, the Company borrowed $98,500,000 for the purchase of four Airbus A318 aircraft. Each aircraft loan has a term of 12 years and is payable in monthly installments, including interest, payable in arrears, with a floating interest rate adjusted quarterly based on LIBOR plus a margin of 2.25% for three of the loans, and LIBOR plus a margin of 1.95% for the fourth. At March 31, 2005 interest rates for these loans ranged from 4.64% to 5.25%. At the end of the term, there is a balloon payment of $3,060,000 each for three of the aircraft loans and $2,640,000 for the fourth. The loans are secured by the aircraft financed.
(5): During the year ended March 31, 2005, the Company borrowed $22,000,000 for the purchase of one Airbus A318 aircraft. The aircraft loan has a term of 12 years and is payable in monthly principle installments of $215,385 as of March 31, 2005, including interest, payable in arrears, with a floating interest rate adjusted quarterly based on LIBOR plus a margin of 1.95% for an overall rate of 4.560% at March 31, 2005. At the end of the term, there is a balloon payment of $2,640,000. A security interest in the aircraft secures the loan.

Maturities of long-term debt and short-term borrowings are as follows:

2006	$	23,222,539
2007		19,243,283
2008		20,330,214
2009		21,494,433
2010		22,712,564
Thereafter		199,011,728

	$	306,014,761

10. Income Taxes

Income tax expense (benefit) for the years ended March 31, 2005, 2004, and 2003, including amounts recorded as the cumulative effect of a change in accounting principle, is presented below.

	Current			Deferred			Total
Year ended March 31, 2005:
U.S. Federal	$	—		$	(11,822,849	)	$	(11,822,849	)
State and local		106,943			(692,004	)		(585,061	)

	$	106,943		$	(12,514,853	)	$	(12,407,910	)

Year ended March 31, 2004:
U.S. Federal	$	(1,891,662	)	$	10,851,098		$	8,959,436
State and local		(243,248	)		(893,827	)		(1,137,075	)

	$	(2,134,910	)	$	9,957,271		$	7,822,361

Year ended March 31, 2003:
U.S. Federal	$	(24,433,153	)	$	12,431,462		$	(12,001,691	)
State and local		—			(1,467,730	)		(1,467,730	)

	$	(24,433,153	)	$	10,963,732		$	(13,469,421	)

Income tax expense (benefit) presented above for the year ended March 31, 2003, is net of $1,185,945 of income tax expense reflected in cumulative effect of change in method of accounting for maintenance.

F-24

The differences between the Company's effective rate for income taxes and the federal statutory rate of 35% are shown in the following table:

	2005			2004			2003
Income tax expense (benefit) at the statutory rate	$	(12,543,334	)	$	7,160,123		$	(13,828,208	)
State and local income tax, net of federal income tax benefit		(931,791	)		646,449			(1,222,250	)
Valuation allowance recorded against certain state net operating loss carryforwards		262,160			—			—
Nondeductible expenses		649,700			573,643			395,092
Adjustment to deferred taxes previously provided		—			(557,854	)		—
Other		155,355			—			—

	$	(12,407,910	)	$	7,822,361		$	(14,655,366	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at March 31, 2005 and 2004 are presented below:

		2005			2004
Deferred tax assets:
	Accrued vacation and health insurance	$	4,010,391		$	3,124,883
	Accrued workers compensation liability		1,337,932			1,667,388
	Deferred rent		6,870,147			4,946,012
	Inventory reserve		1,493,838			1,124,674
	Capitalized interest		2,589,376			2,115,163
	Net operating loss carryforwards		75,357,782			16,940,482
	Alternative minimum tax credit carryforward		1,757,517			1,757,517
	Other		1,536,672			1,571,092

Deferred tax assets			94,953,655			33,247,211
Valuation allowance			(262,160	)		—
	Net deferred tax assets		94,691,495			33,247,211

Deferred tax liabilities:
	Property and Equipment		(106,216,992	)		(57,704,400	)
	Impairment recorded on property and equipment		1,573,327			1,457,787
	Deferred loan fees and other assets		(1,180,368	)		(113,683	)
	Accrued maintenance expense		(362,329	)		(543,495	)
	Prepaid commissions		(363,615	)		(182,180	)

Total gross deferred tax liabilities			(106,549,977	)		(57,085,971	)

Net deferred tax liabilities		$	(11,858,482	)	$	(23,838,760	)

The net deferred tax assets (liabilities) are reflected in the accompanying balance sheet as follows:

	2005			2004
Current deferred tax assets	$	5,472,643		$	8,386,390
Non-current deferred tax liabilities		(17,331,125	)		(32,225,150	)

Net deferred tax liability	$	(11,858,482	)	$	(23,838,760	)

During the year ended March 31, 2005 the Company recorded a valuation allowance against certain state net operating loss carryforwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred assets is dependent upon the generation

F-25

of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at March 31, 2005. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

As of March 31, 2004, the Company had federal net operating loss carryforwards totaling $104,598,000 comprised of $45,638,000 which expires in 2023 and $58,960,000 which expires in 2024. During the year ended March 31, 2005, the Company generated an estimated $91,442,000 in additional federal net operating loss carryforwards which expires in 2025. As of March 31, 2005, the Company has an estimated total federal net operating loss carryforwards of $196,040,000.

11. Common Stock

The Company recorded an approximate $12,000 capital contribution paid to the Company in August 2004 as a result of recovering short-swing profits from a shareholder in accordance with Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) provides that any profit realized by an insider (defined as an officer, director or principal shareholder of an issuer) from a purchase and sale, or any sale and purchase, of an equity security of the issuer within any period of less than nine months are recoverable by the issuer, irrespective of the intention of the insider in entering into such transaction.

The Company completed a secondary public offering of 5,050,000 shares of common stock in September 2003. The Company received $81,077,000, net of offering expenses, from the sale of these shares.

12. Warrants and Stock Purchase Rights

In February 2003, the Company issued warrants to purchase 3,833,946 shares of common stock at $6.00 per share to the ATSB and to two other guarantors. The warrants had an estimated fair value of $9,282,538 when issued and expire seven years after issuance. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model. These warrants have subsequently been repriced from $6.00 to $5.92 per share as a result of the Company's secondary public offering in September. The Company recorded $117,000 as additional debt issuance costs in conjunction with this repricing.

In February 1997, the Board of Directors declared a dividend of one Common Stock purchase right for each share of the Company's Common Stock outstanding on March 15, 1997. Each right entitles a shareholder to purchase one share of the Company's Common Stock at a purchase price of $65.00 per full common share, subject to adjustment. There are currently 0.67 rights associated with each outstanding share of Common Stock. The rights are not currently exercisable, but would become exercisable if certain events occurred relating to a person or group acquiring or attempting to acquire 20 percent or more of the outstanding shares of the Company's common stock. The rights expire on February 20, 2007, unless redeemed by the Company earlier. Once the rights become exercisable, each holder of a right will have the right to receive, upon exercise, common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the right.

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13. Stock Option Plan

On September 9, 2004, the shareholders of the Company approved the Frontier Airlines, Inc. 2004 Equity Incentive Plan (the "2004 Plan"). The 2004 Plan allows the Compensation Committee to grant stock options, stock appreciation rights, restricted stock or stock units, any or all of which may be made contingent upon the achievement of performance criteria. Eligible participants include all full-time director and officer level employees of the Company, and such other employees as may be identified by the Compensation Committee from time to time where legally eligible to participate, and non-employee directors. Subject to plan limits, the Compensation Committee has the discretionary authority to determine the size and timing of an award and the vesting requirements related to the award. The plan expires September 12, 2009. The 2004 Plan allows up to a maximum 2,500,000 shares for option grants and 500,000 shares for restricted stock or restricted stock units, subject to adjustment only to reflect stock splits and similar events. As of March 31, 2005, there have been 210,000 shares of stock options granted. With certain exceptions, options issued under this plan through March 31, 2005 generally vest over a five-year period from the date of grant and expire in ten years from the grant date.

The Company adopted a stock option plan in 1994 whereby the Board of Directors or its Compensation Committee may grant options to purchase shares of the Company's common stock to employees, officers and directors of the Company.

Under the plan, the Company reserved an aggregate of 6,375,000 shares of common stock for issuance pursuant to the exercise of options. With certain exceptions, options issued through March 31, 2004 generally vest over a five-year period from the date of grant and expire from December 14, 2004 to March 8, 2014. The plan terminated on March 10, 2004.

A summary of the stock option activity and related information for the years ended March 31, 2005, 2004 and 2003 is as follows:

	2005				2004				2003
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
Outstanding-beginning of year	2,578,565		$	11.06	2,430,815		$	10.28	2,070,033		$	8.78
Granted	210,000		$	7.91	522,500		$	11.41	667,500		$	12.07
Exercised	(51,500	)	$	6.54	(227,250	)	$	4.40	(252,719	)	$	2.44
Surrendered	(41,515	)	$	16.21	(147,500	)	$	9.67	(53,999	)	$	12.72

Outstanding-end of year	2,695,550		$	10.82	2,578,565		$	11.06	2,430,815		$	10.28

Exercisable at end of year	2,279,050		$	11.50	1,407,899		$	10.43	1,168,815		$	10.01

The grant date fair value of the options granted during the years ended March 31, 2005, 2004 and 2003 were $5.47, $11.41 and $12.07, respectively.

Exercise prices for options outstanding under the plans as of March 31, 2005 ranged from $2.13 to $24.17 per share. The weighted-average remaining contractual life of those options is 6.5 years. A

F-27

summary of the outstanding and exercisable options at March 31, 2005, segregated by exercise price ranges, is as follows:

Exercise Price Range		Options Outstanding	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Exercisable Options	Weighted- Average Exercise Price
$	2.13 - $4.98	154,250	$	3.25	4.9	116,250	$	2.74
$	5.15 - $9.63	1,136,500	$	6.81	6.3	776,000	$	6.63
$	10.00 - $14.85	663,000	$	11.82	6.6	663,000	$	11.82
$	15.14 - $19.21	625,500	$	16.87	7.2	625,500	$	16.87
$	21.20 - $24.17	116,300	$	21.95	6.7	116,300	$	21.95

		2,695,550	$	10.82	6.5	2,297,050	$	11.50

As discussed in Note 1, "Nature of Business and Summary of Significant Accounting Policies—Stock Based Compensation,", in September and October of 2004, the Company's Board of Directors approved that certain of the Company's stock options with exercise prices in excess of the stock's current market price be modified to accelerate vesting. As a result, a total of 671,500 options became immediately vested. Exercise prices for these options ranged from $8.00 to $24.17 per share.

SFAS No. 123 establishes a fair value based method of accounting for stock options. As discussed in Note 1, "Nature of Business and Summary of Significant Accounting Policies—Stock Based Compensation," the Company has elected to continue using the intrinsic value method of accounting prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted by SFAS No. 123.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions:

		2005		2004		2003
Assumptions:
	Risk-free interest rate	3.35	%	2.97	%	4.14	%
	Dividend yield	0	%	0	%	0	%
	Volatility	73.88	%	77.48	%	82.06	%
	Expected life (years)	7		5		5

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options and because changes in the input assumptions can materially affect the fair value estimate, in our opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options.

14. Retirement Plans

Employee Stock Ownership Plan

The Company has established an Employee Stock Ownership Plan ("ESOP") which is for the benefit of each employee of the Company, except those employees covered by a collective bargaining agreement that does not provide for participation in the ESOP. Company contributions to the ESOP are discretionary and may vary from year to year. In order for an employee to receive an allocation of Company common stock from the ESOP, the employee must be employed on the last day of the

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ESOP's plan year, with certain exceptions. The Company's annual contribution to the ESOP, if any, is allocated among the eligible employees of the Company as of the end of each plan year in proportion to the relative compensation (as defined in the ESOP) earned that plan year by each of the eligible employees. The ESOP does not provide for contributions by participating employees. Employees vest in contributions made to the ESOP based upon their years of service with the Company. A year of service is an ESOP plan year during which an employee has at least 1,000 hours of service. Vesting generally occurs at the rate of 20% per year, beginning after the first year of service, so that a participating employee will be fully vested after five years of service. Distributions from the ESOP will not be made to employees during employment. However, upon termination of employment with the Company, each employee will be entitled to receive the vested portion of his or her account balance.

During the year ended March 31, 2005 and 2004, the Company contributed 346,400 and 646,142 shares, respectively to the plan. The Company did not contribute shares to the plan during the year ended March 31, 2003. Total Company contributions to the ESOP from inception through March 31, 2005 totaled 2,187,373 shares. The Company recognized compensation expense during the years ended March 31, 2005, 2004 and 2003 of $2,939,518, $2,498,700, and $2,641,624, respectively, related to its contributions to the ESOP. Compensation expense under the ESOP plan is determined by multiplying the number of the shares contributed by the fair market value of the shares on the date contributed. The fair value of the unearned ESOP shares on March 11, 2005, the date of grant, was $3,027,536. The fair value of the unearned ESOP shares on March 31, 2005 was $3,630,000.

Retirement Savings Plan

The Company has established a Retirement Savings Plan under section 401(k) of the Internal Revenue Code, ("401(k) Plan"). Participants may contribute from 1% to 60% of their pre-tax annual compensation up the maximum amount allowed under the Internal Revenue Code. Participants are immediately vested in their voluntary contributions.

The Company's Board of Directors have elected to match 50% of participant contributions up to 10% of salaries from May 2000 through December 2005. During the years ended March 31, 2005, 2004, and 2003, the Company recognized compensation expense associated with the matching contributions totaling $3,923,750, $2,598,581, and $2,536,363, respectively. Future matching contributions, if any, will be determined annually by the Board of Directors. In order to receive the matching contribution, participants must be employed on the last day of the plan year. Participants vest in contributions made to the 401(k) Plan based upon their years of service with the Company. A year of service is a plan year during which a participant has at least 1,000 hours of service. Vesting generally occurs at the rate of 20% per year, beginning after the first year of service, so that a participant will be fully vested after five years of service. Upon termination of employment with the Company, each participant will be entitled to receive the vested portion of his or her account balance.

Retirement Health Plan

In conjunction with the Company's collective bargaining agreement with its pilots, retired pilots and their dependents may retain medical benefits under the terms and conditions of the Health and Welfare Plan for Employees of Frontier Airlines, Inc. ("the Retirement Health Plan") until age 65. The cost of retiree medical benefits are continued under the same contribution schedule as active employees.

We regularly evaluate ways to better manage employee benefits and control costs. Any changes to the plan or assumptions used to estimate future benefits could have a significant effect on the amount of the reported obligation and future annual expense.

The following table provides a reconciliation of the changes in the benefit obligations under the Retirement Health Plan for the years ended March 31, 2005 and 2004.

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Reconciliation of benefit obligation:

		2005			2004
Obligation at beginning of period		$	3,680,511		$	2,286,750
	Service cost		932,527			640,082
	Interest cost		218,390			146,494
	Benefits paid		(16,756	)		(22,000	)
	Net actuarial loss (gain)		(239,900	)		629,185

Obligation at end of period		$	4,574,772		$	3,680,511

The following is a statement of the funded status as of March 31:

		2005			2004
Funded status		$	(4,574,772	)	$	(3,680,511	)
	Unrecognized net actuarial (gain) loss		1,294,318			1,623,648

Accrued benefit liability		$	(3,280,454	)	$	(2,056,863	)

Net periodic benefit cost for the years ended March 31, 2005, 2004, and 2003 include the following components.

	2005		2004		2003
Service cost	$	932,527	$	640,082	$	423,009
Interest cost		218,390		146,494		55,445
Recognized net actuarial loss		89,430		61,410		—

Net periodic benefit cost	$	1,240,347	$	847,986	$	478,454

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the other postretirement benefit plans. A 1% change in the healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation ("APBO") at March 31, 2005, would have the following effects:

		1% increase			1% decrease
Increase (decrease) in total service and interest cost		$	148,649		$	(128,052	)
Increase (decrease) in the APBO		$	536,445		$	(465,172	)

The measurement dates used to determine the benefit measurements for the plan are March 31, 2005, 2004 and 2003. The Company used the following actuarial assumptions, which were based upon information available as of the beginning of the fiscal year, to account for this postretirement benefit plan:

		2005		2004		2003
Weighted average discount rate		6.0	%	6.0	%	6.5	%
Assumed healthcare cost trend(1)		9.5	%	10.0	%	9.75	%

(1): Trend rates were assumed to reduce until 2014 when an ultimate rate of 5.00% is reached.

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The estimated benefit payments expected to be paid by the Retirement Health Plan, and funded by the Company, for the next ten years and in the aggregate for fiscal years 2015 through 2019 are as follows:

Fiscal year 2006	$	106,724
Fiscal year 2007	$	137,658
Fiscal year 2008	$	252,843
Fiscal year 2009	$	381,990
Fiscal year 2010	$	440,499
Fiscal year 2011	$	515,339
Fiscal year 2012	$	581,228
Fiscal year 2013	$	643,722
Fiscal year 2014	$	649,098
Fiscal year 2015	$	803,895
Fiscal years 2015 -2019	$	3,193,282

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") became law in the United States. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare benefit. This act does not apply to the Company's Retirement Health Plan as the plan does not provide post Medicare benefits.

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15. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

		2005			2004		2003
Numerator:
	Income before cumulative effect of change in method of accounting for maintenance	$	(23,430,186	)	$	12,635,135	$	(24,853,800	)
	Cumulative effect of change in method of accounting for maintenance		—			—		2,010,672

	Net income	$	(23,430,186	)	$	12,635,135	$	(22,843,128	)

Denominator:
	Weighted average shares outstanding, basic		35,641,370			32,732,567		29,619,742
	Dilutive effect of employee stock options		—			582,150		—
	Dilutive effect of warrants		—			1,961,699		—

	Adjusted weighted-average shares outstanding, diluted		35,641,370			35,276,416		29,619,742

Basic earnings (loss) per share:
	Income (loss) before cumulative effect of change in method of accounting for Maintenance	$	(0.66	)	$	0.39	$	(0.84	)
	Cumulative effect of change in method of accounting for maintenance		—			—		0.07

Basic earnings (loss) per share		$	(0.66	)	$	0.39	$	(0.77	)

Diluted earnings (loss) per share:
	Income (loss) before cumulative effect of change in method of accounting for maintenance	$	(0.66	)	$	0.36	$	(0.84	)
	Cumulative effect of change in method of accounting for maintenance		—			—		0.07

Diluted earnings (loss) per share		$	(0.66	)	$	0.36	$	(0.77	)

For the years ending March 31, 2004, the Company has excluded from the calculations of diluted earnings per share 1,022,300 options, with exercise prices ranging from $12.68 to $24.17, because the exercise price of the options was greater than the average market price of the common shares for the respective year. For the years ending March 31, 2005, 2004 and 2003, outstanding options and warrants of 6,529,496, 1,556,265 and 6,264,761, respectively, were excluded from the calculation of diluted earnings per share since the effect would have been anti-dilutive.

16. Concentration of Credit Risk

The Company does not believe it is subject to any significant concentration of credit risk relating to receivables. At March 31, 2005 and 2004, 60.8% and 42.2% of the Company's receivables relate to tickets sold to individual passengers through the use of major credit cards, travel agencies approved by the Airlines Reporting Corporation, tickets sold by other airlines and used by passengers on Company flights, the United States Postal Service, and the Internal Revenue Service. Receivables related to tickets sold are short-term, generally being settled shortly after sale or in the month following ticket usage.

17. Commitments and Contingencies

From time to time, the Company is engaged in routine litigation incidental to our business. The Company believes there are no legal proceedings pending in which the Company is a party or of which

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any of our property may be subject to that are not adequately covered by insurance maintained by us, or which, if adversely decided, would have a material adverse affect upon our business or financial condition.

As of March 31, 2005, the Company has remaining firm purchase commitments for 13 additional aircraft, which have scheduled delivery dates beginning in June 2005 and continuing through March 2008. The Company has also committed to lease as many as seven additional A319 aircraft from third party lessors over the next two years. The Company is not under any contractual obligations with respect to spare parts. Under the terms of the purchase agreement, the Company is required to make scheduled pre-delivery payments for these aircraft. These payments are non-refundable with certain exceptions. As of March 31, 2005, pre-delivery payments on future deliveries were made totaling $22,976,000 to secure these aircraft.

In October 2002 the Company entered into a purchase and long-term services agreement with LiveTV to bring DIRECTV AIRBORNE™ satellite programming to every seatback in our Airbus fleet. The Company agreed to the purchase of 46 units of the hardware. As of March 31, 2005, the Company has purchased 44 units and have made deposits toward the purchase of five additional units. The Company intends to install LiveTV in every new aircraft placed in service.

The Company has aggregate additional amounts due under these purchase commitments and estimated amounts for buyer-furnished equipment, spare parts for both the purchased and leased aircraft and to equip the aircraft with LiveTV. In addition, the Company has commercial commitments under an agreement with SabreSonic™ for its SabreSonic passenger solution to power the reservations and check-in capabilities along. The estimated aggregate amount for these purchase commitments is $545,923,000; $98,824,000 of which is due in fiscal year 2006, $183,460,000 which is due in fiscal year 2007, $253,005,000 which is due in fiscal year 2008, $5,059,000 which is due in fiscal year 2009 and $5,575,000 which is due in fiscal year 2010.

As of March 31, 2005, the Company had approximately 4,500 employees, including 1,613 customer service agents, reservations agents, ramp and other airport personnel; 789 flight attendants, 116 aircraft appearance agents, 382 catering and reservation agents, 727 general management and administrative employees, 528 pilots, 331 mechanics and 14 dispatchers. While there can be no assurance that our generally good labor relations will continue, we have established as a significant component of our business strategy the preservation of good relations with our employees, approximately 22% of whom are represented by unions.

Of those employees covered by collective bargaining agreements, approximately 99% presently have contracts under negotiation or becoming amendable in fiscal year 2006. We continue to believe that mutually acceptable agreements can be reached with such employees, although the ultimate outcome of the negotiations is unknown at this time.

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18. Selected Quarterly Financial Data (Unaudited)

		First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2005
Revenues		$	192,423,070		$	214,434,774		$	208,237,471		$	218,544,126
Operating Expenses		$	200,232,227		$	215,031,732		$	223,520,909		$	221,302,068
Net loss		$	(6,573,718	)	$	(2,081,970	)	$	(11,058,044	)	$	(3,716,454	)
Loss per share:
	Basic	$	(0.18	)	$	(0.06	)	$	(0.31	)	$	(0.10	)

	Diluted	$	(0.18	)	$	(0.06	)	$	(0.31	)	$	(0.10	)

2004
Revenues		$	142,365,950		$	165,620,612		$	163,560,475		$	172,132,105
Operating Expenses		$	136,170,698		$	149,187,408		$	151,071,827		$	179,252,334
Net income (loss)		$	10,933,690		$	1,997,723		$	5,455,864		$	(5,752,142	)
Earnings per share:
	Basic	$	0.37		$	0.07		$	0.15		$	(0.16	)

	Diluted	$	0.36		$	0.06		$	0.14		$	(0.16	)

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