ATLAS AIR WORLDWIDE HOLDINGS INC (Form: 10-Q, Received: 11/13/2006 06:05:10)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

______________

FORM 10-Q
______________

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___

0-25732
( Commission File Number)

Atlas Air Worldwide Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware	13-4146982
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

2000 Westchester Avenue, Purchase, New York	10577
(Address of principal executive offices)	(Zip Code)

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

______________

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, per Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS: As of September 30, 2006, there were 19,996,261 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets at September 30, 2006 (unaudited)	1
	and December 31, 2005

	Condensed Consolidated Statements of Income for the Three and Nine Months	2
	Ended September 30, 2006, and 2005 (unaudited)

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended	3
	September 30, 2006, and 2005 (unaudited)

	Notes to Unaudited Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.	Exhibits	39

	Signatures	40

	Exhibit Index	41

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Atlas Air Worldwide Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)

	September 30,			December 31,
	2006			2005
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	172,837		$	305,890
Restricted funds held in trust		140			1,077
Accounts receivable, net of allowance of $2,839
and $4,898, respectively		127,384			131,244
Prepaid maintenance		60,850			49,619
Deferred taxes		25,575			10,094
Prepaid expenses and other current assets		37,779			31,298
Total current assets		424,565			529,222
Other Assets
Property and equipment, net		578,319			573,870
Deposits and other assets		22,510			22,147
Lease contracts and intangible assets, net		40,257			55,571
Total Assets	$	1,065,651		$	1,180,810

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	21,143		$	27,588
Accrued liabilities		168,737			178,741
Current portion of long-term debt and capital leases		19,246			53,380
Total current liabilities		209,126			259,709
Other Liabilities
Long-term debt and capital leases		403,923			529,742
Deferred tax liability		14,772			18,540
Other liabilities		29,747			14,914
Total other liabilities		448,442			563,196
Commitments and contingencies (Note 6)
Stockholders’ Equity
Preferred stock, $1 par value; 10,000,000 shares authorized;
no shares issued		—			—
Common stock, $0.01 par value; 50,000,000 shares authorized;
20,117,663 and 19,881,907 shares issued,
19,996,261 and 19,815,338 shares outstanding (net of treasury
stock) at September 30, 2006 and December 31, 2005,
respectively		202			199
Additional paid-in-capital		288,973			256,046
Common stock to be issued to creditors		12,782			13,389
Treasury stock, at cost; 121,402 and 66,569 shares, respectively		(4,524	)		(2,257	)
Deferred compensation		-			(6,043	)
Retained earnings		110,650			96,571
Total stockholders’ equity		408,083			357,905
Total Liabilities and Stockholders’ Equity	$	1,065,651		$	1,180,810

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

Atlas Air Worldwide Holdings, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)

		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2006			2005			2006			2005

Operating Revenues	$	361,072		$	404,899		$	1,059,642		$	1,147,030

Operating Expenses
Aircraft fuel		122,522			105,115			339,009			286,633
Salaries, wages and benefits		59,731			61,686			178,901			175,747
Maintenance, materials and repairs		32,966			49,467			116,845			172,422
Aircraft rent		38,534			37,552			114,489			111,981
Ground handling and airport fees		19,301			16,017			54,211			53,525
Landing fees and other rent		16,394			20,393			50,271			59,445
Depreciation and amortization		10,275			11,768			30,320			37,838
Gains on disposal of aircraft		(6,256	)		(7,467	)		(9,035	)		(7,467	)
Travel		11,219			14,896			37,057			44,248
Pre-petition and post-emergence costs
and related professional fees		39			504			316			2,988
Other		23,482			26,955			76,718			77,418
Total operating expenses		328,207			336,886			989,102			1,014,778

Operating income		32,865			68,013			70,540			132,252

Non-operating Expenses
Interest income		(2,679	)		(2,015	)		(9,921	)		(4,134	)
Interest expense		14,216			19,634			48,704			55,432
Loss on extinguishment of debt		12,518			-			12,518			-
Other (income) expense, net		398			(228	)		(513	)		1,942
Total non-operating expenses		24,453			17,391			50,788			53,240

Income before income taxes		8,412			50,622			19,752			79,012
Income tax expense		1,330			20,759			5,673			32,620
Net income	$	7,082		$	29,863		$	14,079		$	46,392

Income per share:

Basic	$	0.34		$	1.47		$	0.68		$	2.29

Diluted	$	0.34		$	1.44		$	0.67		$	2.24

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

Atlas Air Worldwide Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

		Nine Months Ended
		September 30,		September 30,
		2006			2005

Cash Flows from Operating Activities:
Net income	$	14,079		$	46,392
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		30,320			37,838
Accretion of debt discount		9,424			12,729
Amortization of operating lease discount		1,381			1,376
Loss on extinguishment of debt		12,518			-
Provision (release of allowance) for doubtful accounts		(628	)		(3,586	)
Gains on disposal of aircraft		(9,035	)		(7,467	)
Amortization of debt issuance cost		1,011			253
Stock-based compensation expense		5,366			3,051
Other, net		3,032			-
Changes in operating assets and liabilities		(23,576	)		98,449
Net cash provided by operating activities		43,892			189,035

Cash Flows from Investing Activities:
Capital expenditures		(25,971	)		(24,070	)
Decrease in restricted funds held in trust		937			19,822
Insurance proceeds		-			12,550
Proceeds from sale of aircraft		26,380			-
Net cash provided by investing activities		1,346			8,302

Cash Flows from Financing Activities:
Proceeds from loan		-			10,000
Proceeds from stock option exercises		3,718			164
Purchase of treasury stock		(2,267	)		(2,260	)
Excess tax benefits from share-based compensation expense		3,044			-
Loan fees		(250	)		(92	)
Payments on debt		(182,536	)		(61,275	)
Net cash used by financing activities		(178,291	)		(53,463	)

Net increase (decrease) in cash and cash equivalents		(133,053	)		143,874

Cash and cash equivalents at the beginning of period		305,890			133,917

Cash and cash equivalents at the end of period	$	172,837		$	277,791

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

Atlas Air Worldwide Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2006

1. Basis of Presentation

The accompanying interim Condensed Consolidated Financial Statements (the “Financial Statements”) are unaudited and have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. As permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”), the Financial Statements exclude certain footnote disclosures normally included in audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In the opinion of management, the Financial Statements contain all adjustments, consisting of normal recurring items, necessary to fairly present the financial position of Atlas Air Worldwide Holdings, Inc. (“Holdings” or “AAWW”) and its consolidated subsidiaries as of September 30, 2006, the results of operations for the three and nine months ended September 30, 2006 and 2005 and cash flows for the nine months ended September 30, 2006 and 2005. The Financial Statements include the accounts of Holdings and its consolidated subsidiaries. All significant inter-company accounts and transactions have been eliminated. The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2005 included in the Annual Report on Form 10-K of Holdings that was filed with the SEC on April 14, 2006 (the “2005 10-K”).

Holdings is the parent company of two principal operating subsidiaries, Atlas Air, Inc. (“Atlas”) and Polar Air Cargo, Inc. (“Polar”). Holdings, Atlas, Polar and Holdings’ other subsidiaries are referred to collectively as the “Company”. The Company provides air cargo and related services throughout the world, serving Asia, Australia, the Pacific Rim, Europe, South America and the United States through: (i) airport-to-airport scheduled air cargo service (“Scheduled Service”); (ii) contractual lease arrangements in which the Company provides the aircraft, crew, maintenance and insurance (“ACMI”); and (iii) seasonal, commercial, military and ad-hoc charter services (see Note 5). The Company operates only Boeing 747 freighter aircraft.

The Company’s quarterly results have in the past been subject to seasonal and other fluctuations and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.

Except for per share data, all dollar amounts are in thousands unless otherwise noted.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the Financial Statements and footnotes thereto. Actual results may differ from those estimates. Important estimates include asset lives, valuation allowances (including, but not limited to, those related to receivables, inventory and deferred taxes), income tax accounting, self-insurance employee benefit accruals, accounting for stock options and contingent liabilities.

Assets Held for Sale

In August 2005, aircraft tail number N921FT and two related spare engines were listed for sale by the Company and were sold in April 2006 for a gain of $2.8 million, net of related selling expenses.

In June 2006, three additional Boeing 747-200 aircraft, tail numbers N509MC, N355MC and N534MC, were listed for sale and accounted for as assets held for sale. In addition, two other Boeing 747-200 aircraft, tail numbers N508MC and N920FT, are under capital lease and available for sublease. The Company performed an impairment test on all the aircraft and spare engines and determined that fair market value exceeded book value.

The aggregate carrying value of aircraft and spare engines held for sale at September 30, 2006 and December 31, 2005 was $12.1 million and $5.7 million, respectively, which is included within Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

In September 2006, aircraft tail numbers N509MC and N534MC were sold for a total of approximately $18.0 million and the Company recorded a gain on the sale of approximately $6.2 million, net of related selling expenses.

During October 2006, the Company completed sublease agreements of aircraft tail numbers N920FT and N508MC, respectively.

Investments

The Company holds a minority interest (49%) in a private company, which is accounted for under the equity method. The September 30, 2006 and December 31, 2005 aggregate carrying value of the investment of $3.9 million and $8.2 million, respectively, is included within Deposits and other assets in the Condensed Consolidated Balance Sheets. The decrease in the carrying value relates to the reduction in the intangible assets resulting from the impact of the reduction in pre-emergence tax liabilities and valuation allowances (see Note 8 for further discussion).

These assets principally relate to the private company’s airline operating certificate and the Company’s proportionate share of the equity in the private company. Fair value of this investment was determined by an independent appraisal as of July 27, 2004 as part of fresh start accounting.

Concentration of Credit Risk and Significant Customers

United States Military Airlift Mobility Command (“AMC”) charters accounted for 23.4% and 28.5% of the Company’s total revenues for the three months ended September 30, 2006 and 2005, respectively, and 21.7% and 26.9% of the Company’s total revenues for the nine months ended September 30, 2006 and 2005, respectively. Accounts receivable from the AMC were $17.2 million and $24.4 million at September 30, 2006 and December 31, 2005, respectively. The International Airline of United Arab Emirates (“Emirates”) accounted for 12.7% and 9.6% of the Company’s total revenues for the three months ended September 30, 2006 and 2005, respectively, and 12.3% and 9.8% of the Company’s total revenues for the nine months ended September 30, 2006 and 2005, respectively. Accounts receivable from Emirates were $15.3 million and $13.4 million at September 30, 2006 and December 31, 2005, respectively. No other customer accounted for 10% or more of the Company’s total operating revenues during these periods.

Debt and Debt Discount

The Company terminated its revolving credit facility (the “Revolving Credit Facility”) with Congress Financial Corporation and Wachovia Bank, National Association effective August 1, 2006. No early termination penalties or fees resulted from the early termination of the Revolving Credit Facility.

On July 31, 2006, the Company repaid in full approximately $140.8 million in outstanding loans and terminated its two credit facilities with Deutsche Bank Trust Company Americas (“Deutsche Bank”). The Company’s two credit facilities with Deutsche Bank were a loan that was made to a wholly-owned subsidiary, Atlas Freighter Leasing III, Inc., and another loan made to Atlas (the “Aircraft Credit Facility” or “ACF”). See Note 7 to the audited consolidated financial statements included in the 2005 10-K for a full description of these facilities. In connection with the repayment, the Company incurred a one-time, non-cash pre-tax expense of approximately $12.5 million related to the write-off of the remaining unamortized discount and financing costs associated with such debt. As a result of the facility terminations, all covenants associated with them have been eliminated. In addition, liens were removed on certain Company assets, including one 747-100 aircraft, fourteen 747-200 aircraft, one 747-300 aircraft, certain accounts receivable, certain inventory and spare parts and certain spare engines.

At September 30, 2006 and December 31, 2005, the Company had $84.9 million and $106.8 million, respectively, of unamortized discount related to fair market value adjustments recorded against debt upon application of fresh-start accounting, which is included in Long-term debt and capital leases in the Condensed Consolidated Balance Sheets (including current portions thereof). The discount is being amortized to interest expense using the effective interest method.

Intangible Assets

During the nine months ended September 30, 2006, the Company wrote off its intangible assets as a result of the reduction of the Company’s tax liabilities and valuation allowances (see Note 8 for further discussion). The intangibles were included within Lease contracts and intangible assets, net in the Condensed Consolidated Balance Sheets.

Balance at December 31, 2005	$	13,934
Amortization		(561	)
Release of tax reserves, net		(13,373	)
Balance at September 30, 2006	$	-

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income tax uncertainties. This interpretation is effective January 1, 2007 for the Company. The Company has not yet determined the impact that this interpretation will have on its results from operations or financial position.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (SAB 108). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. The Company does not believe SAB 108 will have a material impact on its results of operations or financial position.

Reclassifications

Certain reclassifications have been made in the prior year’s Condensed Consolidated Financial Statement amounts and related note disclosures to conform to the current year’s presentation.

3. Stock-Based Compensation Plans

At September 30, 2006, the Company has a 2004 Long Term Incentive and Share Award Plan (the “2004 LTIP”) which provides for awards of up to approximately 2.3 million shares of AAWW’s common stock to employees in various forms. These include non-qualified options, incentive stock options, share appreciation rights, restricted shares, restricted share units, performance shares and performance units, dividend equivalents and other share-based awards. Prior to January 1, 2006, the Company accounted for these awards under the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related Interpretations, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). Stock-option based employee compensation cost recognized in the Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2005 related only to restricted stock awards, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant, which under APB 25 was deemed to be non-compensatory. Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, Share-Based Payment (“SFAS No. 123R”), using the modified-prospective transition method. Therefore, compensation expense recognized during the three and nine months ended September 30, 2006 includes compensation expense for all newly granted and unvested stock options, restricted shares and options that are expected to vest subsequent to January 1, 2006, and results for prior periods have not been restated.

In November 2005, the FASB staff issued FASB Staff Position (“FSP”) No. FAS 123R-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards . This FSP provides an elective alternative simplified method for calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123R and reported in the Condensed Consolidated Statements of Cash Flows. Companies may take up to one year from the effective date of the FSP to evaluate the available transition alternatives and make a one-time election as to which method to adopt. The Company will complete its evaluation during the fourth quarter of 2006.

As a result of the adoption of SFAS No. 123R on January 1, 2006, the Company’s income before income taxes and net income for the three months ended September 30, 2006 are $0.7 million and $0.6 million lower, respectively, and for the nine months ended September 30, 2006, are $2.2 million and $1.6 million lower, respectively, than if the Company had continued to account for share-based compensation under APB 25. Basic and diluted income per share for the three months ended September 30, 2006 would each have been $0.03 higher and for the nine months ended September 30, 2006 would have been $0.08 and $0.08 higher, respectively, if the Company had not adopted SFAS No. 123R.

Prior to the adoption of SFAS No. 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Condensed Consolidated Statement of Cash Flows. SFAS No. 123R requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for those options (excess tax benefits) to be classified as financing cash flows. The excess cash tax benefit classified as a financing cash inflow for the nine months ended September 30, 2006 was $3.1 million.

The fair value of all option grants is estimated using the Black-Scholes-Merton option pricing model. The fair value is then amortized on a straight-line basis over the vesting period or requisite service period, if shorter. The following table illustrates the effect on net income if the fair-value-based method per SFAS No. 123 had been applied to all outstanding awards for the three and nine months ended September 30, 2005.

		Three Months			Nine Months
		Ended			Ended
		September 30,			September 30,
		2005			2005

Net income, as reported	$	29,863		$	46,392
Add: Restricted stock expense, net of tax		577			1,820
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards		(971	)		(2,790	)

Pro forma net income	$	29,469		$	45,422

Basic income per share:
As reported	$	1.47		$	2.29
Pro forma	$	1.45		$	2.24
Diluted income per share:
As reported	$	1.44		$	2.24
Pro forma	$	1.42		$	2.20

While the fair-value-based method prescribed by SFAS No. 123R is similar to the fair-value-based method disclosed under the provisions of SFAS No. 123 in most respects, there are some differences. SFAS No. 123R requires the Company to estimate option forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those estimates. As a result, the Company records stock-based compensation expense only for those awards expected to vest. For periods prior to January 1, 2006, the Company accounted for forfeitures as they occurred under the pro forma disclosure provisions of SFAS No. 123.

The fair value of all option grants is estimated using the Black-Scholes-Merton option pricing model. The fair value is then amortized on a straight-line basis over the vesting period or requisite service period, if shorter. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the average of the historical volatility of a peer group of several similar entities, due to the limited trading history of the Company’s stock. Historically, the average expected life was based on the vesting period of the option. Option grants on or after January 1, 2006 will have expected lives adjusted for the expected exercise behavior of option recipients. The risk-free interest rate is based on U.S. Treasury constant maturities (nominal) with a term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on historical termination behavior, as well as an analysis of actual option forfeitures. The assumptions used in the Black-Scholes-Merton option pricing model are as follows:

	Nine Months Ended
	September 30,	September 30,
	2006	2005
Expected stock price volatility	26.1-37.4%	38.5%
Risk free interest rate	2.81-5.17%	3.80-4.03%
Expected life of options (years)	0.75-4.25	3.0-4.0
Expected annual dividend per share	None	None
Estimated annual forfeiture rate	5.0%	None

Non-qualified Stock Options

The portion of the 2004 LTIP applicable to employees is administered by the compensation committee (the “Compensation Committee”) of the board of directors of the Company (the “Board”), which also establishes the terms of the awards. Non-qualified stock options and restricted shares have been the only forms of awards under the 2004 LTIP granted by the Compensation Committee to date. A total of 611,425 shares of common stock remained available for future award grants (including restricted stock and stock options) to management and the Board as of September 30, 2006.

Non-qualified stock options granted under the 2004 LTIP vest over a three or four year period, which generally is the requisite service period, and expire seven to ten years from the date of grant. As of September 30, 2006, options to acquire a total of 1,073,700 shares of common stock have been granted to management under the 2004 LTIP. Non-qualified stock options may be granted at any price but, generally, are not granted with an exercise price less than the fair market value of the stock on the date of grant.

Included within the 2004 LTIP is a separate sub-plan (the “2004 Employee Plan”), which provides for awards of up to 495,303 shares of common stock to employees in the form of non-qualified options or incentive stock options. The portion of the 2004 Employee Plan applicable to employees is administered by the Compensation Committee of the Board, which also establishes the terms of the awards. As of September 30, 2006, non-qualified stock options have been the only form of award granted by the Compensation Committee since the adoption of the 2004 Employee Plan.

Non-qualified stock options granted under the 2004 Employee Plan vest over a three year period, which generally is the requisite service period, and expire seven years from the date of grant. Options to acquire a total of 299,979 shares of common stock have been granted to employees under the 2004 Employee Plan. A total of 195,324 shares of common stock remained available for future award grants as of September 30, 2006.

A summary of the Company’s options as of September 30, 2006 and changes during the nine months then ended is presented below:


						Weighted-Average			Aggregate
			Weighted-			Remaining			Intrinsic
	Number of		Average			Contractual Term			Value
	Options		Exercise Price			(in years )			(in thousands )
Outstanding at December 31, 2005	1,102,122			$	21.29
Granted	75,000				48.79
Exercised	(172,315	)			21.81
Forfeited	(41,692	)			24.93
Outstanding at September 30, 2006	963,115			$	23.18		6.4	$	19,982

Exercisable at September 30, 2006	388,506			$	19.26		5.3	$	9,426

The weighted average fair value of the options granted during the three months ended September 30, 2006 was $16.31 and $18.05 and $8.52 during the nine months ended September 30, 2006 and 2005, respectively. The total fair value for the options that vested during the three and nine months ended September 30, 2006 was $6.3 million and $8.9 million, respectively. No options were granted during the three months ended September 30, 2005.

The total intrinsic value of options exercised for the three and nine months ended September 30, 2006 was $0.6 million and $3.7 million, respectively.

As of September 30, 2006, there was $3.8 million of total unrecognized compensation cost related to non-vested stock options granted. The cost is expected to be recognized over the remaining weighted-average life of 1.1 years.

Restricted Share Awards

Restricted shares granted under the 2004 LTIP vest and are being expensed over three, four or five year periods which generally are the requisite service periods, as applicable. As of September 30, 2006, a total of 763,267 restricted shares have been granted under the 2004 LTIP. All shares were valued at their fair market value on the date of issuance and the fair value for all shares granted is $12.3 million. This amount was originally recorded in equity as Deferred compensation and the unamortized amount of $6.0 million at December 31, 2005 was reclassified to Additional paid-in capital upon adoption of SFAS No. 123R. For the three months ended September 30, 2006 and 2005, the Company recognized compensation expense of $1.1 million and $1.1 million, respectively, and for the nine months ended September 30, 2006 and 2005, the Company recognized compensation expense of $3.2 million and $3.1 million, respectively, for restricted share awards. The compensation expense recognized for restricted share awards subsequent to adoption of SFAS No. 123R is net of estimated forfeitures. The effect of estimated forfeitures to unvested awards previously expensed prior to January 1, 2006 was immaterial. Unrecognized compensation cost as of September 30, 2006 was $6.4 million and will be recognized over the remaining weighted average life of 1.2 years.

A summary of the Company’s restricted shares as of September 30, 2006 and changes during the nine months then ended are presented below:

			Weighted-Average
	Number		Grant-Date
Restricted Share Awards	of Shares		Fair Value

Unvested at December 31, 2005	413,665			$	18.74
Granted	104,667				46.71
Vested	(199,995	)			18.28
Forfeited	(87,435	)			18.65
Unvested at September 30, 2006	230,902			$	31.85

The weighted-average grant-date fair value of restricted shares granted during the three months ended September 30, 2006 and September 30, 2005, was $39.13 and $28.53, respectively, and $46.71 and $25.92 for the nine months ended September 30, 2006 and September 30, 2005, respectively.

4. Related Party Transactions

James S. Gilmore III, a non-employee director of the Company, is a partner at the law firm of Kelley Drye & Warren LLP. The Company paid legal fees to the firm of Kelley Drye & Warren LLP of $0.1 million and $1.0 million for the three months ended September 30, 2006 and 2005, respectively and $0.6 million and $3.5 million for the nine months ended September 30, 2006 and 2005, respectively. At September 30, 2006 and December 31, 2005, the Company had a payable balance to Kelley Drye & Warren LLP of zero and $0.2 million, respectively, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets. Mr. Gilmore has not served on the Audit Committee since joining the Board in July 2004.

Atlas dry leases three owned aircraft to a company in which the Company owns a minority investment as of September 30, 2006. The investment is accounted for under the equity method. The leases have terms that mature at various dates through July 2007. The leases provide for payment of rent and a provision for maintenance costs associated with the aircraft. Total rental income for the three aircraft was $11.5 million and $11.2 million for the three months ended September 30, 2006 and 2005, respectively, and $34.0 million and $33.5 million for the nine months ended September 30, 2006 and 2005, respectively.

5. Segment Reporting

The Company has four reportable segments: Scheduled Service, ACMI, AMC Charter and Commercial Charter. All reportable segments are engaged in the business of transporting air cargo but have different operating and economic characteristics which are separately reviewed by the Company’s management. The Company evaluates performance and allocates resources to its segments based upon income (loss) before income taxes, excluding pre-petition and post-emergence costs and related professional fees, unallocated corporate and other items (“Fully Allocated Contribution” or “FAC”). Management views FAC as the best measure to analyze profitability and contribution to net income or loss of the Company’s individual segments. Management allocates the cost of operating aircraft among the various segments on an average cost per aircraft type. Under-utilized aircraft costs are allocated to segments based on Block Hours flown for Scheduled Service, AMC and Commercial Charter. For ACMI, management only allocates costs of operating aircraft based on the number of aircraft dedicated to ACMI customers.

The Scheduled Service segment provides airport-to-airport scheduled air freight and available on-forwarding services primarily to freight forwarding customers. By transporting cargo in this way, the Company carries all of the commercial revenue risk (yields and cargo loads) and bears all of the direct costs of operation, including fuel. Distribution costs include direct sales costs through the Company’s own sales force and through commissions paid to general sales agents. Commission rates typically range between 2.5% and 5% of commissionable revenue sold. Scheduled Service is highly seasonal, with peak demand coinciding with the retail holiday season, which traditionally begins in September and lasts through mid-December.

The ACMI segment provides aircraft, crew, maintenance and insurance services, whereby customers receive the use of an insured and maintained aircraft and crew in exchange for, in most cases, a guaranteed monthly level of operation at a predetermined rate for defined periods of time. The customer bears the commercial revenue risk and the obligation for other direct operating costs, including fuel.

The AMC Charter segment provides full-planeload charter flights to the U.S. Military through the AMC. The AMC Charter business is similar to the Commercial Charter business in that the Company is responsible for the direct operating costs of the aircraft. However, in the case of AMC operations, the price of fuel used during AMC flights is fixed by the military. The contracted charter rates (per mile) and fuel prices (per gallon) are established and fixed by the AMC for twelve-month periods running from October to September of the next year. The Company receives reimbursement from the AMC each month if the price of fuel paid by the Company to vendors for AMC missions exceeds the fixed price; if the price of fuel paid by the Company is less than the fixed price, then the Company pays the difference to the AMC. The AMC buys capacity on a fixed basis annually and on an ad-hoc basis continuously. The Company competes for this business through a teaming arrangement devised for the allocation of AMC flying among competing carriers. At September 30, 2006, there were three groups of carriers (or teams) and several independent carriers that are not part of any other team that compete for the business. The Company is a member of a team led by FedEx Corporation (“FedEx”) and pays a commission to the FedEx team based upon the revenues the Company receives under such contracts. The formation of additional competing teaming arrangements, an increase by other air carriers in their commitment of aircraft to the Civil Reserve Air Fleet (“CRAF”) program, or the withdrawal of any of the current team members, especially FedEx, or a reduction of the number of planes pledged to the CRAF program by our team, could adversely affect the amount of AMC business awarded to the Company in the future.

The Commercial Charter segment provides full-planeload airfreight capacity on one or multiple flights to freight forwarders, airlines and other air cargo customers. Charters are typically paid in advance and as with Scheduled Service, the Company bears the direct operating costs (except as otherwise defined in the charter contracts).

All other revenue includes dry lease income and other incidental revenue not allocated to any of the four segments described above.

The following table sets forth revenues and FAC for the Company’s four reportable business segments reconciled to operating income (loss) and income (loss) before income taxes as required by SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, for the three and nine months ended September 30, 2006 and 2005:

		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2006			2005			2006			2005
Revenues:
Scheduled Service	$	158,458		$	138,546		$	439,717		$	400,661
ACMI		94,047			115,876			294,599			348,037
AMC Charter		84,574			115,516			229,651			308,789
Commercial Charter		11,986			22,823			60,269			53,923
All Other		12,007			12,138			35,406			35,620
Total operating revenues	$	361,072		$	404,899		$	1,059,642		$	1,147,030

FAC:
Scheduled Service	$	(6,772	)	$	6,913		$	(17,324	)	$	(597	)
ACMI		12,674			12,533			28,722			16,841
AMC Charter		11,389			18,873			9,338			46,015
Commercial Charter		(2,282	)		2,070			(6,878	)		3,355

Total FAC		15,009			40,389			13,858			65,614

Add back (subtract):
Unallocated other		(296	)		3,270			9,692			8,919
Gain on disposal of aircraft		6,256			7,467			9,035			7,467
Pre-petition and post-emergence costs
and related professional fees		(39	)		(504	)		(316	)		(2,988	)
Interest income		(2,679	)		(2,015	)		(9,921	)		(4,134	)
Interest expense		14,216			19,634			48,704			55,432
Other, net		398			(228	)		(513	)		1,942

Operating income		32,865			68,013			70,539			132,252

(Add back) subtract:
Interest income		(2,679	)		(2,015	)		(9,921	)		(4,134	)
Interest expense		14,216			19,634			48,704			55,432
Loss on extinguishment of debt		12,518			-			12,518			-
Other, net		398			(228	)		(513	)		1,942

Income before income taxes	$	8,412		$	50,622		$	19,751		$	79,012

6. Commitments and Contingencies

On May 12, 2005, the Company entered into a slot conversion agreement with Israel Aircraft Industries Ltd. and PSF Conversions LLP (“IAI”) pursuant to which the Company had the option to convert four Boeing 747-400 passenger aircraft to Boeing 747-400 special freighter (“747-400SF”) configuration during the period from late 2007 to mid 2009. The agreement also included an option covering the modification of up to nine additional Boeing 747-400 passenger aircraft to 747-400SF aircraft during the period from 2009 to 2011. At December 31, 2005, the Company had a balance of $2.5 million of capitalized option costs, including capitalized interest of $0.1 million, which was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.

On July 31, 2006, the Company sent IAI a notice of termination of the slot conversion agreement. The Company has entered into discussions with IAI for alternative uses of the deposits previously made by the Company on the slot conversion agreement. During 2006, the Company made additional deposits on the slot conversions. The Company has reclassified the deposits as a receivable of $2.5 million included in Prepaid expenses and other current assets and Prepaid maintenance of $1.6 million in the Condensed Consolidated Balance Sheets as of September 30, 2006.

On September 8, 2006, Atlas and The Boeing Company (“Boeing”) entered into a purchase agreement (the “Agreement”) providing for the purchase by Atlas of 12 Boeing 747-8 freighter aircraft. The Agreement provides for deliveries of the aircraft to begin in 2010, with all 12 aircraft expected to be in service by the end of 2011. In addition, the Agreement provides Atlas with rights to purchase up to an additional 14 Boeing aircraft, of which one is being held under option. Committed expenditures under this Agreement, including agreements for spare engines and related flight equipment, including estimated amounts for contractual price escalations, pre-delivery deposits and required option payments, will be approximately $36.2 million for the remainder of 2006, $32.2 million in 2007, $246.7 million in 2008, $184.1 million in 2009, $991.9 million in 2010 and $690.5 million thereafter. Under the Agreement, Atlas has accrued the initial deposit of $40.0 million of which $2.9 million was paid as of September 30, 2006, and is included in Property and equipment, net in the Condensed Consolidated Balance Sheets. On October 6, 2006, Atlas made a payment of $35.1 million related to the initial deposit.

On September 11, 2006, Atlas received a commitment to provide financing for up to four of the first twelve Boeing 747-8 aircraft to be delivered. Atlas has accrued the financing costs associated with this commitment of $1.0 million as of September 30, 2006, which is included in Deposits and other assets in the Condensed Consolidated Balance Sheets.

On September 20, 2006, the Company entered into a fixed forward purchase commitment for 5.5 million gallons of aviation fuel at a total cost of $10.5 million for use during the fourth quarter of 2006.

Guarantees and Indemnifications

Financings and Guarantees

Information with respect to indemnities and guarantees appears in Note 13 of the 2005 10-K.

Restricted Deposits and Letters of Credit

At September 30, 2006 and December 31, 2005, respectively the Company had $4.3 million and $0.9 million of restricted deposits either pledged under standby letters of credit related to collateral or for certain deposits required in the normal course for items, including, but not limited to, foreign exchange trades, airfield privileges, judicial deposits and insurance. These amounts are included in Deposits and other assets in the Condensed Consolidated Balance Sheets.

Legal Proceedings

Except for the updated items below, information with respect to legal proceedings appears in Note 13 of the 2005 10-K.

Brazilian Customs Claim

Polar was cited for two alleged customs violations in Sao Paulo, Brazil relating to shipments of goods dating back to 1999 and 2000. Each claim asserts that goods listed on the flight manifest of two separate Polar scheduled service flights were not on board the aircraft upon arrival in Brazil. The claims seek unpaid customs duties, taxes, penalties and interest from the date of the alleged infraction in the amounts of approximately $10.0 million and $7.9 million, respectively.

The Company has presented defenses in each case to the customs authority in Campinas, Brazil. With respect to the $10.0 million claim, the Company’s defense was denied at the first level of the administrative process. On June 28, 2006 the Company filed its appeal of the administrative decision with the Council of Contributors. As required by local law, the appeal was accompanied by a judicial deposit of approximately 30% of the claimed amount. If the appeal is denied by the Council of Contributors, the Company intends to pursue further appeals in the Brazilian federal courts. With respect to the $7.9 million claim, the customs authority has yet to rule on the Company’s defense.

In both cases, the Company believes that the amounts claimed are substantially overstated due to a calculation error when considering the type and amount of goods missing. Furthermore, the Company will seek appropriate indemnity from the shipper in each claim. The Company believes that its ultimate exposure to this matter is not expected to materially affect its financial condition, results of operations or liquidity.

The Company is currently defending other Brazilian customs claims which individually, or in the aggregate, will not have a material impact on the Company.

Department of Justice Investigation and Related Litigation

The Department of Justice (the “DOJ”) has initiated an investigation into the pricing practices of a number of cargo carriers, including Polar (the “DOJ Investigation”). In connection with the DOJ Investigation, Polar was served with a search warrant at its Long Beach, California office on February 14, 2006, pursuant to which government agents obtained certain files and interviewed a number of office staff members. Polar also received a subpoena dated February 14, 2006 requesting discovery of additional relevant documents. The Company is fully cooperating with the DOJ in its investigation. Other than the subpoena, there has been no complaint or demand of the Company by the DOJ regarding the matters that are the subject of the DOJ Investigation.

As a result of the DOJ Investigation, AAWW, Polar and a number of other cargo carriers have been named co-defendants in approximately 80 class action suits filed in multiple jurisdictions of the U.S. Federal District Court. The complaints universally allege, among other things, that the defendants, including AAWW and Polar, manipulated the market price for air cargo services sold domestically and abroad through the use of surcharges. They seek treble damages and injunctive relief. All of the suits have been transferred or are awaiting transfer to the United States District Court for the Eastern District of New York, where the cases have been consolidated for pre-trial purposes. The Company has notified its directors and officers’ insurance carrier of these lawsuits and has engaged outside counsel. Also, the Company has contacted counsel for the other named defendants with respect to conducting a joint defense in an effort to limit defense costs where possible. Further, the Company, Polar and a number of other cargo carriers have been named as defendants in a civil class action suit in Ontario, Canada that is substantially similar to the class action suits in the United States.

Additionally in early 2006, Polar also received notification from Swiss authorities that they have opened an investigation into the freight pricing practices of several carriers, including Polar, on routes between Switzerland and the United States. While there has been no specific complaint or demand by the Swiss authorities of Polar in respect of the matters that are the subject of the Swiss investigation, Polar may be called upon to provide information to the Swiss authorities at some future time.

SEC Investigation

The SEC has withdrawn its proofs of claim filed in connection with the Company’s Chapter 11 bankruptcy proceedings. The Company is currently engaged in discussions with the SEC regarding a Wells Notice issued to the Company in October 2004. Pending possible resolution of this matter, the Company will continue to cooperate fully with the SEC in respect of its investigation of the Company. The Company believes that its ultimate exposure to this matter is not expected to materially affect its financial condition, results of operations or liquidity.

Southern Litigation

On September 29, 2006, the Company settled its litigation with respect to Southern Air, Inc. As part of the settlement, Southern Air, Inc. released all claims asserted or which could have been asserted against the Company and the trial court entered an order which dismissed all claims brought against the Company with prejudice on the merits. There are therefore no affirmative claims being asserted against the Company in the action at this time. In addition, by virtue of this dismissal, the Company obtained an order from the Bankruptcy Court expunging all claims of Southern Air, Inc. in the Company’s Chapter 11 bankruptcy proceedings.

Bankruptcy Proofs of Claim

Since the Company’s emergence from bankruptcy in July of 2004, the Company has devoted significant effort to reconcile claims to determine the validity, extent, priority and amount of asserted claims against the debtors’ bankruptcy estates. To further this process, the Company has filed several objections to general unsecured claims and to cure claims, including the objection to the claims made by the Internal Revenue Service (the “IRS”), which is described below.

Total Claims

As of September 30, 2006, the Company has reviewed over 3,050 scheduled and filed claims aggregating approximately $7.7 billion, with a maximum of $690.1 million of claims that could potentially be allowed. Approximately $667.3 million of claims have been allowed as of September 30, 2006, including $13.0 million of cure claims and $6.0 million of other secured and priority claims. Claims of $22.8 million remain unresolved; however, the amount of unresolved claims continues to be reduced by virtue of the ongoing claims reconciliation process.

Atlas General Unsecured Claims

As of September 30, 2006, the Company has made pro rata distributions of 16,185,033 of the 17,202,666 shares of common stock allocated to holders of allowed general unsecured claims against Holdings, Atlas, Airline Acquisition Corp. I and Atlas Worldwide Aviation Logistics, Inc., based on the allowed claims through July 1, 2006. General unsecured claims of approximately $2.6 billion were filed against these entities. As of September 30, 2006, claims of $607.0 million have been allowed, claims of $22.7 million remain disputed, and the balance of claims have been withdrawn or disallowed; however, the amount of unresolved claims continues to be reduced by virtue of the ongoing claims reconciliation process.

On October 12, 2006, the Company distributed 396,625 shares of common stock pursuant to the claims process. As of that date, there are 621,008 shares of common stock to be distributed to claims holders. The remaining shares of common stock will be distributed to general unsecured claims holders on a periodic basis.

Polar General Unsecured Claims

The Company has paid cash equal to sixty cents on the dollar for allowed unsecured claims against Polar. General unsecured claims of approximately $408.5 million were filed against Polar. As of September 30, 2006, claims of $41.3 million have been allowed, claims of $0.1 million remain disputed and the balance of claims have been withdrawn or disallowed; however, the amount of unresolved claims continues to be reduced by virtue of the ongoing claims reconciliation process. The Company estimates the additional allowed general unsecured claims against Polar will ultimately be less than $0.1 million.

Administrative Claims

IRS Claim

As part of an ongoing audit and in conjunction with the claims process from the Company’s bankruptcy, the IRS submitted proofs of claim with the bankruptcy court for alleged income tax, employee withholding tax, Federal Unemployment Tax Act (“FUTA”) and excise tax obligations, including penalties and interest. On July 20, 2006, the Bankruptcy Court confirmed an “Order to Allow IRS Employment Tax Claims.” The IRS amended its proofs of claim against Atlas and Polar for employee withholding tax and FUTA tax, reducing the asserted liability to approximately $4.6 million of priority unsecured claims pursuant to an agreement reached with the Company. The Company paid the IRS claim on July 24, 2006 and the Company reversed $5.4 million in excess reserves to income in the second quarter of 2006. The Company reached a final settlement of an income tax examination during September of 2006. The settlement did not require any payment of cash income taxes, interest or penalties. As a result of this settlement, the Company reduced its income tax reserves by approximately $20.1 million relating to the years 2001 through 2003. The Company released approximately $18.1 million of the reserves as a reduction to intangible assets and additional paid-in capital. These reserves were recorded prior to the Company’s emergence from bankruptcy and were released in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The remainder of the reserves of approximately $2.0 million was recorded subsequent to the Company’s emergence from bankruptcy and was applied as a reduction to income tax expense.

In addition, based on the settlement, the Company determined that additional tax loss carryforwards of $133.3 million were available and accordingly recorded a deferred tax asset of $46.6 million. The Company also recorded an offsetting

valuation allowance of $32.7 million against that deferred tax asset, resulting in a net deferred tax asset of $13.9 million being reflected from the settlement with a related credit to additional paid in capital.

Other Contingencies

In May 2006, as part of the Company’s ongoing review of internal processes and procedures, Polar identified and notified HM Revenue and Customs (“HMRC”) in the United Kingdom that certain contractors, who were engaged to perform various services at Polar’s Prestwick, Scotland maintenance facility, may now be deemed employees under UK law. As a result, Polar may have been required to withhold taxes and other amounts on behalf of such persons. Polar is attempting to settle this matter with the HMRC and has established a payroll tax accrual for its estimated liability. The Company believes that its ultimate exposure to this matter is not expected to materially affect its financial condition, results of operations or liquidity.

The Company has certain other contingencies resulting from litigation and claims incident to the ordinary course of business. Management believes that the ultimate disposition of these contingencies, with the exception of those noted above, is not expected to materially affect the Company’s financial condition, results of operations or liquidity.

7. Income Per Share and Number of Common Shares Outstanding

Basic income per share represents net income divided by the weighted average number of common shares outstanding during the measurement period. Diluted income per share represents net income divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period.

The calculation of basic and diluted income per share for the following periods is as follows (dollars and shares in thousands):

		For the Three Months Ended				For the Nine Months Ended
		September 30,		September 30,		September 30,		September 30,
		2006		2005		2006		2005
Numerator:
Net income	$	7,082	$	29,863	$	14,079	$	46,392

Denominator for basic earnings per share		20,730		20,306		20,613		20,243
Effect of dilutive securities:
Stock options		275		273		301		238
Restricted stock		105		208		165		229
Denominator for diluted earnings per share		21,110		20,787		21,079		20,710

Basic income per share	$	0.34	$	1.47	$	0.68	$	2.29
Diluted income per share	$	0.34	$	1.44	$	0.67	$	2.24

8. Taxes

The Company’s effective tax rates are 15.8% and 41.0% for the three months ended September 30, 2006 and 2005, respectively, and 28.7% and 41.3% for the nine months ended September 30, 2006 and 2005, respectively. The 2006 rates differ from the statutory rate primarily due the final settlement of an income tax examination during the third quarter of 2006 and also to the non-deductibility of certain items for tax purposes and the relationship of these items to the Company’s projected operating results for the year. The settlement of the income tax examination reduced the Company’s income tax expense for the third quarter by approximately $2.0 million. This reduction resulted in a lower effective tax rate for the three and nine months ended September 30, 2006. For 2005, the rates exceeded the statutory rate due to the effect of state taxes and non-deductible items.

During the three and nine months ended September 30, 2006, the Company recorded a deferred tax provision of approximately $0.8 million and $5.1 million, respectively. The Company reached a final settlement of an income tax examination during the month of September 2006. The settlement did not require any payment of cash income taxes, interest or penalties. In addition, based on the settlement, the Company determined the additional loss carryforwards of $133.3 million were available and recorded a deferred tax asset of $46.6 million. The Company also recorded an offsetting valuation allowance of $32.7 million against that deferred tax asset, resulting in a net deferred tax asset of $13.9 million.

The Company recorded a valuation allowance primarily because of limitations on the utilization of loss carryforwards in future years.

As a result of this settlement, the Company reduced its income tax reserves by approximately $20.1 million relating to the years 2001 through 2003. The Company released approximately $18.1 million of the reserves as a reduction of intangible assets and additional paid-in capital. These reserves were recorded prior to the Company’s emergence from bankruptcy and were released in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. The remainder of the reserves of approximately $2.0 million was recorded subsequent to the Company’s emergence from bankruptcy and was applied as a reduction of income tax expense. As a result of these changes to the Company’s deferred tax assets, the Company has a net deferred tax asset of approximately $11.9 million at September 30, 2006, compared with a net deferred tax liability of approximately $8.4 million at December 31, 2005 (see Note 10 to the audited consolidated financial statements included in the 2005 10-K for further discussion).

9. Subsequent Events

Aircraft Subleases and Sales

During October 2006, the Company completed sublease agreements of aircraft tail numbers N920FT and N508MC, respectively. On November 7, 2006, the Company sold aircraft tail number N858FT for $0.9 million.

Term Sheet with DHL

On October 12, 2006, Polar Air Cargo Worldwide, Inc. (formerly named Airline Acquisition Corp I, "PACW"), a Delaware corporation and a wholly-owned direct subsidiary of AAWW, entered into a term sheet (the "LOI") with DHL Network Operations (USA), Inc. ("DHL"), an Ohio corporation and a wholly-owned indirect subsidiary of Deutsche Post AG, for DHL to acquire a 49% equity interest, including a 25% voting interest, in PACW in exchange for $150 million in cash (the "Purchase Price").

The LOI also contemplates the parties entering into a blocked-space agreement for a 20-year term (subject to early termination at five year intervals), whereby PACW will provide guaranteed access to air cargo capacity on its scheduled-service network to DHL through six Boeing 747-400 freighter aircraft (the "DHL Express Network Service").

Under the LOI, $75 million of the Purchase Price will be paid by DHL at closing, with the remaining $75 million being paid in two equal installments (plus interest) on January 15, 2008 and November 17, 2008, subject to acceleration based upon commencement of the DHL Express Network Service prior to October 31, 2008.

PACW also will enter into a number of commercial arrangements with its affiliates, Atlas and Polar. Under these arrangements, PACW will lease six Boeing 747-400 aircraft and Atlas Air and/or Polar will provide to PACW flight crew, maintenance, insurance and other related services. A number of these commercial arrangements will become effective upon commencement of the DHL Express Network Service.

Commencement of the DHL Express Network Service may occur at any time prior to, but not later than, October 31, 2008. The LOI also provides DHL with the right to request that PACW accelerate commencement of the DHL Express Network Service, and PACW has agreed to take all commercially reasonable steps to undertake such conversion. PACW will continue to operate its regular scheduled service business.

By signing the LOI, the parties have agreed to negotiate in good faith and to execute definitive agreements as soon as possible, but in any event prior to November 10, 2006, or as otherwise agreed to by the parties, and otherwise to use best efforts to consummate the transactions contemplated by the LOI on an expedited basis. DHL has been granted an exclusive period through December 15, 2006 to negotiate definitive documentation with PACW, during which period PACW will negotiate exclusively with DHL and will not negotiate or enter into any alternative transactions. The LOI may be terminated by either party after December 15, 2006 if DHL and PACW have not executed definitive agreements to effectuate the terms of the LOI. The parties are currently in the process of negotiating such definitive agreements, which are subject to the approval of each party’s board of directors and certain regulators including the Department of Transportation (“DOT”).

Fuel Hedges

Subsequent to September 30, 2006 the Company entered into several hedges for aviation fuel which expire on December 31, 2006, and carry a weighted average price of $1.828 per gallon on volume of 9.75 million gallons.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited Financial Statements and notes thereto appearing in this report and our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2005 included in our 2005 10-K.

In this report, references to “we,” “our” and “us” are references to AAWW and its subsidiaries, as applicable.

Background

Certain Terms - Glossary

The following terms represent industry-related items and statistics specific to the airline and cargo industry sectors. They are used by management for statistical analysis purposes to better evaluate and measure operating levels, results, productivity and efficiency.

ATM	Available Ton Miles, which represent the maximum available tons (capacity) per actual miles
	flown. It is calculated by multiplying the available capacity (tonnage) of the aircraft by the miles
	flown by the aircraft.

Block Hours	The time interval between when an aircraft departs the terminal until it arrives at the destination
	terminal.

RATM	Revenue per Available Ton Mile, which represents the average revenue received per available ton
	mile flown. It is calculated by dividing operating revenues by ATMs.

Revenue Per	Calculated by dividing operating revenues by Block Hours.
Block Hour

RTM	Revenue Ton Mile, which is calculated by multiplying actual revenue tons carried by miles flown.

Load Factor	The average amount of weight flown per the maximum available capacity. It is calculated by
	dividing RTMs by ATMs.

Yield	The average amount a customer pays to fly one ton of cargo one mile. It is calculated by dividing
	operating revenues by RTMs.

A/B Checks	Low level maintenance checks performed on aircraft at an interval of approximately 400 to 1,100
	flight hours.

C Checks	High level or “heavy” airframe maintenance checks which are more intensive in scope than an A/B
	Check and are generally performed on an 18 to 24 month interval.

D Checks	High level or “heavy” airframe maintenance checks, which are the most extensive in scope and are
	generally performed on an interval of 6 to 10 years or 25,000 to 28,000 flight hours, whichever
	comes first.

FAC	Income (loss) before taxes, excluding pre-petition and post-emergence costs and related
	professional fees, unallocated corporate and other items. We evaluate performance and allocate
	resources to our segments based upon this measure.

Business Strategy and Outlook

We are the leading provider of outsourced aircraft operations and related services, with operations in Asia, Australia, the Middle East, Africa, Europe, South America and the U.S. We create value by providing our customers a combination of highly reliable and proven aircraft, a large fleet and scale of operations that provide flexibility to meet customer aircraft requirements, high-quality operations, and a track record for handling valuable cargo in a safe and timely manner. We operate aircraft on behalf of airlines, freight forwarders and the U.S. military, as well as for our own account. Our four primary services are:

ACMI, where we provide our customers with the aircraft, crew, maintenance and insurance;
Scheduled service, where we provide freight forwarders and other shippers with scheduled airport-to-airport cargo services;
Air Mobility Command charters, where we provide air cargo services to the U.S. military; and
Commercial charters, where we provide all-inclusive cargo aircraft charters.

We also lease aircraft to other commercial cargo airlines with and without any other support services (which we call “dry leasing”).

Our strategy includes the following:

Focus on long-term contracts;
Enhance service, improve efficiency and reduce costs through continuous improvement initiatives;
Deploy a fleet of leading-edge aircraft; and
Expand our service offerings to meet customer demands.

After our emergence from bankruptcy, we began to implement key initiatives of our strategy and in late 2005, we announced a Continuous Improvement program that, if successfully implemented, could benefit our operating performance by more than $100 million. We expect our 2006 second-half performance will include approximately $14.0 million in benefits from these cost-saving initiatives, primarily in the fourth quarter. The majority of the benefits are likely to be realized in 2007 and the balance in 2008.

Benefits are expected to be generated from increased service reliability and cost savings, including: enhanced employee and operating efficiency to achieve lower per-block hour crew costs; strengthened fuel management practices; enhanced processes for managing aircraft maintenance and improved procurement policies and procedures.

Our fleet renewal efforts are currently focused on phasing out the older aircraft in our fleet. We have sold three Boeing 747-200 aircraft and we have entered into dry leases for two of the three remaining classic aircraft that had ceased flying as of June 30, 2006. In response to this fleet reduction, we have made corresponding reductions in our crew and ground staffing levels.

On July 31, 2006, we repaid in full approximately $140.8 million in outstanding loans and terminated the two credit facilities with Deutsche Bank. We also terminated our Revolving Credit Facility on August 1, 2006. The prepayment and terminations are expected to have a positive effect on future pre-tax earnings and cash flow as the variable rates on the debt far exceeded the average investment rate on the cash used to repay the debt, subject to any future financings. This provides us with increased financial flexibility, as all the restrictive covenants associated with the three facilities have been eliminated.

On September 8, 2006, Atlas and Boeing entered into the Agreement providing for the purchase by Atlas of 12 Boeing 747-8 freighter aircraft. The Agreement provides for deliveries of the aircraft to begin in 2010, with all 12 aircraft expected to be in service by the end of 2011. In addition, the Agreement provides Atlas with rights to purchase up to an additional 14 Boeing aircraft at fixed prices, of which one is being held under option.

Our Scheduled Service business is highly seasonal. We currently expect FAC for the 2006 commercial peak season, which generally runs from September through mid-December, to improve relative to the peak season in 2005. The DOT has recently awarded us an additional four frequencies (for service between the United States and China) effective in March 2007 (bringing the total frequencies to 16).

Block Hours operated in the ACMI segment declined during the first nine months of 2006 compared with the same period in 2005, primarily due to reduced Boeing 747-200 aircraft Block Hours. In early 2006, we capitalized on market opportunities to reduce the number of Boeing 747-200 aircraft used which had the effect of reducing flying in our ACMI segment. The reduction of the less profitable Boeing 747-200 ACMI flying has resulted in improved FAC for the ACMI segment for the nine months ended September 30, 2006 compared with the same period in 2005.

AMC flying has continued to operate at reduced levels through the nine months ended September 30, 2006 and is expected to continue to operate at reduced levels for the remainder of this year. While AMC is expected to be a significant contributor to our 2006 business activity, AMC Block Hours in 2006 will not equal 2005 levels. We have received notice from the AMC that our base rate per Block Hour, excluding fuel costs, will increase in excess of 5.0% and that the pegged price for fuel is 225 cents beginning October 1, 2006.

Aviation fuel is a significant operating cost in our Scheduled Service business. During the nine months ended September 30, 2006, the average price per gallon for non-AMC aviation fuel was 213 cents, an increase of 25.2% over the average price of 170 cents per gallon during the same period in 2005. With respect to the fourth quarter of 2006, we have hedged approximately 42% of our projected scheduled service uplift through a combination of physical fixed fuel purchases and jet fuel swaps. For the swaps, we are the fixed price payor. The hedges, which were entered into at the beginning of the fourth quarter of 2006, expire on December 31, 2006, and carry a weighted average price of $1.828 per gallon on volume of 9.75 million gallons. The physical fixed purchases cover 5.5 million gallons of jet fuel for delivery in the fourth quarter at a fixed cost of $1.913 per gallon (excluding into plane fees and taxes). We are reviewing (but have not committed to) fuel hedging opportunities for 2007.

Also, effective March 2006, Atlas received approval from the Federal Aviation Administration to operate its fleet of Boeing 747-400s under a revised maintenance program, which we expect will lower future maintenance expense. We currently expect our maintenance expense for the remainder of 2006 to be significantly lower than the comparable period of 2005, primarily due to reduced overall Block Hours and the reduction in our operating fleet as described above.

Results of Operations

Three Months Ended September 30, 2006 and 2005

The following discussion should be read in conjunction with our Financial Statements and notes thereto and other financial information appearing and referred to elsewhere in this report.

Operating Statistics

The table below sets forth selected operating data for the three months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease)			Change
Block Hours
Scheduled Service		10,269			8,972			1,297		14.5	%
ACMI		15,773			20,804			(5,031	)	(24.2	%)
AMC Charter		5,196			8,194			(2,998	)	(36.6	%)
Commercial Charter		840			1,364			(524	)	(38.4	%)
All Other		198			182			16		8.8	%
Total Block Hours		32,276			39,516			(7,240	)	(18.3	%)

Revenue Per Block Hour
ACMI	$	5,963		$	5,570		$	393		7.1	%
AMC Charter		16,277			14,098			2,179		15.5	%
Commercial Charter		14,269			16,732			(2,463	)	(14.7	%)

Scheduled Service Traffic
RTM's (000's)		384,061			343,607			40,454		11.8	%
ATM's (000's)		610,307			519,169			91,138		17.6	%
Load Factor		62.9	%		66.2	%		3.3	pts	(5.0	%)
RATM	$	0.260		$	0.267		$	(0.007	)	(2.6	%)
Yield	$	0.413		$	0.403		$	0.010		2.5	%

Fuel
Scheduled Service and Commercial
Charter
Average fuel cost per gallon	$	2.26		$	1.85		$	0.41		22.2	%
Fuel gallons consumed (000's)		37,464			36,063			1,401		3.9	%
AMC
Average pegged fuel cost per gallon	$	2.20		$	1.40		$	0.80		57.1	%
Fuel gallons consumed (000's)		17,137			28,115			(10,978	)	(39.0	%)

Fleet (average during the period)
Operating Aircraft count		32.0			39.0			(7.0	)	(17.9	%)
Dry Leased *		3.0			3.0			-		-
Out of service *		6.0			-			6.0		-

* Dry leased and out of service (including held for sale) aircraft are not included in the operating fleet aircraft count average.

Operating Revenues

The following table compares our operating revenues for the three months ended September 30:

					Increase /			Percent
	2006		2005		(Decrease)			Change
Operating Revenues
Scheduled Service	$	158,458	$	138,546	$	19,912		14.4	%
ACMI		94,047		115,875		(21,828	)	(18.8	%)
AMC Charter		84,574		115,516		(30,942	)	(26.8	%)
Commercial Charter		11,986		22,823		(10,837	)	(47.5	%)
Other revenue		12,007		12,139		(132	)	(1.1	%)
Total operating revenues	$	361,072	$	404,899	$	(43,827	)	(10.8	%)

Scheduled Service revenue increased primarily due to higher Yields and an increase in Block Hours. The increase in Yield is partially attributable to the increase in rates reflecting higher fuel prices. RTMs in the Scheduled Service segment were 384.1 million on a total capacity of 610.3 million ATMs in the third quarter of 2006, compared with RTMs of 343.6 million on a total capacity of 519.2 million ATMs in the third quarter of 2005. Block Hours were 10,269 in the third quarter of 2006, compared with 8,972 for the third quarter of 2005, an increase of 1,297, or 14.5% . Block Hours for the 2005 quarter were negatively impacted by the Polar pilots’ strike which began in the second half of September 2005 and ended in early October 2006. Load Factor was 62.9% with a Yield of $0.413 in the third quarter of 2006, compared with a Load Factor of 66.2% with a Yield of $0.403 in the third quarter of 2005, representing a decrease of 3.3 pts and an increase of 2.5%, respectively. RATM in our Scheduled Service segment was $0.260 in the third quarter of 2006, compared with $0.267 in the third quarter of 2005, representing a decrease of 2.6% .

ACMI revenue decreased primarily due to lower Block Hours, partially offset by an increase in Revenue per Block Hour. ACMI Block Hours were 15,773 for the third quarter of 2006, compared with 20,804 for the third quarter of 2005, a decrease of 5,031 Block Hours, or 24.2% . Revenue per Block Hour was $5,963 for the third quarter of 2006, compared with $5,570 for the third quarter of 2005, an increase of $393 per Block Hour, or 7.1% . The increase in rate per Block Hour reflects higher proportional Boeing 747-400 usage in this segment. The reduction in Block Hours is the result of our sale or dry lease of aircraft that had previously operated in the Boeing 747-200 ACMI market. Total aircraft supporting ACMI, excluding dry leased aircraft as of September 30, 2006, were two Boeing 747-200 aircraft and 10 Boeing 747-400 aircraft, compared with seven Boeing 747-200 aircraft and ten Boeing 747-400 aircraft supporting ACMI at September 30, 2005.

AMC Charter revenue decreased primarily due to lower volume of AMC Charter flights offset by an increase in AMC Charter rates. AMC Charter Block Hours were 5,196 for the third quarter of 2006, compared with 8,194 for the third quarter of 2005, a decrease of 2,998 Block Hours, or 36.6% . Revenue per Block Hour was $16,277 for the third quarter of 2006, compared with $14,098 for the third quarter of 2005, an increase of $2,179 per Block Hour, or 15.5 %. The decrease in AMC Charter activity was the result of an overall reduction in the U.S. Military’s heavy lift requirements and a reduction in the amount of ad-hoc business received. The increase in rate was primarily a function of an increase in the pegged rate for AMC fuel, which increased from 140 cents per gallon for the third quarter of 2005 to 220 cents per gallon for the third quarter of 2006.

Commercial Charter revenue decreased primarily as a result of a decrease in Revenue per Block Hour and lower Block Hours. Commercial Charter Block Hours were 840 for the third quarter of 2006, compared with 1,364 for the third quarter of 2005, a decrease of 524, or 38.4% . Revenue per Block Hour was $14,269 for the third quarter of 2006, compared with $16,732 for the third quarter of 2005, a decrease of $2,463 per Block Hour, or 14.7%. The decrease in Revenue per Block Hour during the period is partly the result of fewer return trips from one-way AMC missions and more westbound Asia-Pacific flights which generally have a lower rate per Block Hour.

Total Operating Revenue decreased in the third quarter of 2006 compared with the third quarter of 2005, primarily as a result of a reduction in Block Hours partially offset by an increase in Revenue per Block Hour.

Operating Expenses

The following table compares our operating expenses for the three months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease )			Change
Operating Expenses
Aircraft fuel	$	122,522		$	105,115		$	17,407		16.6	%
Salaries, wages and benefits		59,731			61,686			(1,955	)	(3.2	%)
Maintenance, materials and repairs		32,966			49,467			(16,501	)	(33.4	%)
Aircraft rent		38,534			37,552			982		2.6	%
Ground handling and airport fees		19,301			16,017			3,284		20.5	%
Landing fees and other rent		16,394			20,393			(3,999	)	(19.6	%)
Depreciation and amortization		10,275			11,768			(1,493	)	(12.7	%)
Gain on disposal of aircraft		(6,256	)		(7,467	)		(1,211	)	(16.2	%)
Travel		11,219			14,896			(3,677	)	(24.7	%)
Pre-petition and post-emergence costs
and related professional fees		39			504			(465	)	(92.3	%)
Other		23,482			26,955			(3,473	)	(12.9	%)
Total operating expense	$	328,207		$	336,886		$	(8,679	)	(2.6	%)

Aircraft fuel expense increased as a result of the increase in fuel prices offset in part by a decrease in fuel consumption. The average fuel price per gallon for the Scheduled Service and Commercial Charter businesses was approximately 226 cents for the third quarter of 2006, compared with approximately 185 cents for the third quarter of 2005, an increase of 41 cents, or 22.2% . Fuel consumption for the Scheduled Service and Commercial Charter businesses increased 1.4 million gallons or 3.9% to 37.5 million gallons for the third quarter of 2006 from 36.1 million gallons during the third quarter of 2005 as a result of increased Block Hours. The average pegged fuel price per gallon for the AMC business was approximately 220 cents for the third quarter of 2006, compared with approximately 140 cents for the third quarter of 2005, an increase of 80 cents, or 57.1%, partially offset by a 11.0 million gallon, or 39.0%, decrease in fuel consumption, to 17.1 million gallons for the third quarter of 2006 from 28.1 million gallons during the third quarter of 2005. The decrease in our AMC fuel consumption corresponds to the decrease of 2,998 Block Hours. We do not incur fuel expense in our ACMI service as the cost of fuel is borne by the customer.

Salaries, wages and benefits decreased primarily as a result of a decrease in crew salaries related to the reduction in the operating fleet and Block Hours offset by the expensing of stock options of $0.7 million for management, crew and other employees under SFAS No. 123R for the third quarter of 2006.

Maintenance materials and repair decreased primarily as a result of fewer engine overhauls and the absence of D Checks offset primarily by one additional C Check. There were three C Checks on a Boeing 747-200 aircraft in the third quarter of 2006, as compared with two C Checks on Boeing 747-200 aircraft and two D Checks during the third quarter of 2005. There were six engine overhauls in the third quarter of 2006 compared with 13 during the third quarter of 2005. The reduction in maintenance costs is also the result of lower Block Hours during 2006 and the absence of A/B Checks related to aircraft that currently are parked or have been sold. The events described above are outsourced maintenance events. We have also realized improvements in the average cost of a C Check as a result of our cost savings initiatives.

Aircraft rent increased slightly due to the increase in re-accommodated air transportation on other freight carriers. Ground handling and airport fees increased mainly as a result of an increase in the Scheduled Service business, the primary user of such services.

Landing fees and other rent decreased primarily due to a reduction in AMC and Commercial Charter Block Hours offset by an increase in Scheduled Service.

Depreciation and amortization decreased primarily due to a $2.5 million decrease in amortization of customer contracts as a result of the substantial reduction in the related intangibles due to the utilization of pre-emergence tax loss carryforwards and release of pre-emergence tax contingency reserves (see Note 8 to the consolidated financial statements included herein).

Gain on disposal of aircraft was the result of the sale of aircraft tail numbers N509MC, and N534MC in 2006 (see Note 2 to our Financial Statements for further discussion) compared with the insurance gain on the disposition of aircraft tail number N808MC in 2005 (see Note 5 to the audited consolidated financial statements included in our 2005 10-K).

Travel decreased primarily due to a reduction in crew travel related to the decrease in total Block Hours and improved efficiency in crew scheduling.

Pre-petition and post-emergence costs and related professional fees decreased due to the winding down of the claims reconciliation process related to the bankruptcy proceedings.

Other operating expenses decreased due to a decrease in professional fees of $2.4 million associated with the redesign of internal controls that occurred in 2005, a $2.0 million decrease in freight and various expenses offset by an increase in consulting fees of $1.3 million.

Total operating expense decreased in the third quarter of 2006 compared with the third quarter of 2005 primarily as a result of a decrease in maintenance expense and salaries wages and benefits partially offset by increased fuel costs.

Non-operating Expenses

The following table compares our non-operating expenses for the three months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease)			Change
Non-operating Expenses
Interest income	$	(2,679	)	$	(2,015	)	$	664		33.0	%
Interest expense		14,216			19,634			(5,418	)	(27.6	%)
Loss on extinguishment of debt		12,518			-			12,518		-
Other (income) expense, net		398			(228	)		(626	)	(274.6	%)

Interest income increased primarily due to a general increase in interest rates.

Interest expense decreased primarily as a result of repayment of debt, including the prepayment of $140.8 million of the Deutsche Bank Facilities floating rate debt on July 31, 2006 (see Note 2 to our Financial Statements for further discussion).

Loss on extinguishment of debt is the result of the prepayment of the Deutsche Bank Facilities (see Note 2 to our Financial Statements for further discussion).

Other (income) expense, net decreased primarily due to unrealized losses on the revaluation of foreign denominated receivables into U.S. dollars. The U.S. dollar had strengthened against most foreign currencies during the period compared with the prior year when the U.S. dollar had weakened against most foreign currencies.

Income taxes. The effective tax rate for the third quarter of 2006 was 15.8% compared with an effective tax rate of 41.0% for the third quarter of 2005. The rates differ from the statutory rate primarily due the final settlement of an income tax examination during the third quarter of 2006 and also to the non-deductibility of certain items for tax purposes and the relationship of these items to the Company’s projected operating results for the year. The settlement of the income tax examination reduced the Company’s income tax expense for the third quarter by approximately $2.0 million. This reduction resulted in a low effective tax rate for the three months ended September 30, 2006.

Segments

Management allocates the cost of operating aircraft among the various segments on an average cost per aircraft type. Under-utilized aircraft costs are allocated to segments based on Block Hours flown for Scheduled Service, AMC and Commercial Charter. For ACMI, we only allocate costs of operating aircraft based on the number of aircraft dedicated to ACMI customers.

The following table compares our FAC for segments (see Note 5 to our Financial Statements for the reconciliation to operating income (loss) and our reasons for using FAC) for the three months ended September 30:

						Increase /			Percent
	2006			2005		(Decrease)			Change
FAC:
Scheduled Service	$	(6,772	)	$	6,913	$	(13,685	)	(198.0	%)
ACMI		12,674			12,533		141		1.1	%
AMC Charter		11,389			18,873		(7,484	)	(39.7	%)
Commercial Charter		(2,282	)		2,070		(4,352	)	(210.2	%)
Total FAC	$	15,009		$	40,389	$	(25,380	)	(62.8	%)

Scheduled Service Segment

FAC relating to the Scheduled Service segment decreased despite the improvement in revenue driven by an increase in Yield and Block Hours. The reduction in FAC is driven primarily by higher fuel costs, the decrease in the return flights of one-way AMC missions and the impact of excess, under-utilized Boeing 747-200 capacity.

ACMI Segment

FAC relating to the ACMI segment increased slightly as a result of an increase in rate per Block Hour reflecting higher proportional Boeing 747-400 usage in this segment offset by the reduction of Block Hours of the less profitable Boeing 747-200 ACMI agreements.

AMC Charter Segment

FAC relating to the AMC Charter segment decreased significantly despite an increase in revenue per Block Hour. The most significant factor impacting the AMC Charter segment was the reduction in Block Hours and the increased fixed cost allocation related to the excess, under-utilized Boeing 747-200 capacity in the third quarter of 2006.

Commercial Charter Segment

FAC relating to the Commercial Charter segment decreased primarily due to higher fuel costs, the decrease in the return flights of one-way AMC missions and the impact of excess, under-utilized Boeing 747-200 capacity.

Nine Months Ended September 30, 2006 and 2005

Operating Statistics

The table below sets forth selected operating data for the nine months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease)			Change
Block Hours
Scheduled Service		28,920			27,989			931		3.3	%
ACMI		49,839			63,901			(14,062	)	(22.0	%)
AMC Charter		14,272			21,932			(7,660	)	(34.9	%)
Commercial Charter		4,104			3,595			509		14.2	%
All Other		575			649			(74	)	(11.4	%)
Total Block Hours		97,710			118,066			(20,356	)	(17.2	%)

Revenue Per Block Hour
ACMI	$	5,911		$	5,446		$	465		8.5	%
AMC Charter		16,091			14,079			2,012		14.3	%
Commercial Charter		14,685			14,999			(314	)	(2.1	%)

Scheduled Service Traffic
RTM's (000's)		1,078,079			1,065,903			12,176		1.1	%
ATM'S (000's)		1,708,803			1,629,053			79,750		4.9	%
Load Factor		63.1	%		65.4	%		(2.3	pts)	(3.5	%)
RATM	$	0.257		$	0.246		$	0.011		4.6	%
Yield	$	0.408		$	0.376		$	0.032		8.5	%

Fuel
Scheduled Service and Commercial Charter
Average fuel cost per gallon	$	2.13		$	1.71		$	0.42		24.6	%
Fuel gallons consumed (000's)		110,937			106,997			3,940		3.7	%

AMC
Average pegged fuel cost per gallon	$	2.20	$	1.40	$	0.80		57.1	%
Fuel gallons consumed (000's)		46,887		74,971		(28,084	)	(37.5	%)

Fleet (average during the period)
Operating Aircraft count *		36.4		39.0		(2.6	)	(6.7	%)
Dry Leased **		3.0		3.0		-		-
Out of service **		2.0		0.6		1.4		233.3	%

* Includes tail number N921FT which did no commercial flying in the first three months of 2006 and was sold in April of 2006. The operating aircraft count also includes the three aircraft held for sale and the two aircraft available for lease at September 30, 2006, which did no commercial flying during the third quarter of 2006.

** Dry leased and out of service aircraft are not included in the operating fleet aircraft count average.

Operating Revenues

The following table compares our operating revenues for the nine months ended September 30:

					Increase /			Percent
	2006		2005		(Decrease)			Change
Operating Revenues
Scheduled Service	$	439,717	$	400,661	$	39,056		9.7	%
ACMI		294,599		348,037		(53,438	)	(15.4	%)
AMC Charter		229,651		308,789		(79,138	)	(25.6	%)
Commercial Charter		60,269		53,923		6,346		11.8	%
Other revenue		35,406		35,620		(214	)	(0.6	%)
Total operating revenues	$	1,059,642	$	1,147,030	$	(87,388	)	(7.6	%)

Scheduled Service revenue increased primarily due to higher Yields and a slight increase in Block Hours. The increase in Yield is partially attributable to the increase in rates reflecting higher fuel prices. Block Hours for the 2005 quarter were negatively impacted by the Polar pilots’ strike which began in the second half of September 2005 and ended in early October 2006. RTMs in the Scheduled Service segment were 1,078.1 million on a total capacity of 1,708.8 million ATMs in the first three quarters of 2006, compared with RTMs of 1,065.9 million on a total capacity of 1,629.1 million ATMs in the first three quarters of 2005. Block Hours were 28,920 in the first three quarters of 2006, compared with 27,989 for the first three quarters of 2005, an increase of 931, or 3.3% . Load Factor was 63.1% with a Yield of $0.408 in the first three quarters of 2006, compared with a Load Factor of 65.4% and a Yield of $0.376 in the first three quarters of 2005 representing a decrease of 2.3 pts. and an increase of 8.5%, respectively. RATM in our Scheduled Service segment was $0.257 in the first three quarters of 2006, compared with $0.246 in the first three quarters of 2005, representing an increase of 4.6%.

ACMI revenue decreased primarily due to lower Block Hours partially offset by an increase in Revenue per Block Hour. ACMI Block Hours were 49,839 for the first three quarters of 2006, compared with 63,901 for the first three quarters of 2005, a decrease of 14,062 Block Hours, or 22.0% . Revenue per Block Hour was $5,911 for the first three quarters of 2006, compared with $5,446 for the first three quarters of 2005, an increase of $465 per Block Hour, or 8.5% . The reduction in Block Hours is the result of our sale or dry lease of aircraft that had previously operated in the Boeing 747-200 ACMI market. The increase in rate per Block Hour reflects higher proportional Boeing 747-400 usage in this segment. Total aircraft supporting ACMI, excluding dry leased aircraft as of September 30, 2006, were two Boeing 747-200 aircraft and 10 Boeing 747-400 aircraft, compared with seven Boeing 747-200 aircraft and ten Boeing 747-400 aircraft supporting ACMI at September 30, 2005.

AMC Charter revenue decreased primarily due to lower volume of AMC Charter flights offset by an increase in our AMC Charter rates. AMC Charter Block Hours were 14,272 for the first three quarters of 2006, compared with 21,932 for the first three quarters of 2005, a decrease of 7,660 Block Hours, or 34.9% . Revenue per Block Hour was $16,091 for the first three quarters of 2006, compared with $14,079 for the first three quarters of 2005, an increase of $2,012 per Block Hour, or 14.3% . The decrease in AMC Charter activity was the result of an overall reduction in U.S. Military’s heavy lift requirements and a reduced amount of ad-hoc business received. The increase in rate was primarily a function of an increase in the pegged rate for AMC fuel, which increased from 140 cents per gallon for the first three quarters of 2005 to 220 cents per gallon for the first three quarters of 2006.

Commercial Charter revenue increased primarily as a result of a higher volume of flights. Commercial Charter Block Hours were 4,104 for the first three quarters of 2006, compared with 3,595 for the first three quarters of 2005, an increase of 509, or 14.2% . Revenue per Block Hour was $14,685 for the first three quarters of 2006, compared with $14,999 for the first three quarters of 2005, a decrease of $314 per Block Hour, or 2.1% . The increase in Block Hour availability is primarily due to the reduction in AMC flying. The decrease in Revenue per Block Hour during the period is the result of fewer return trips from one-way AMC missions and more westbound Asia-Pacific flights which generally have a lower rate per Block Hour.

Total Operating Revenue decreased in the first three quarters of 2006 compared with the first three quarters of 2005, primarily as a result of a reduction in Block Hours partially offset by an increase in Revenue per Block Hour.

Operating Expenses

The following table compares our operating expenses for the nine months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease)			Change
Operating Expenses
Aircraft fuel	$	339,009		$	286,633		$	52,376		18.3	%
Salaries, wages and benefits		178,901			175,747			3,154		1.8	%
Maintenance, materials and repairs		116,845			172,422			(55,577	)	(32.2	%)
Aircraft rent		114,489			111,981			2,508		2.2	%
Ground handling and airport fees		54,211			53,525			686		1.3	%
Landing fees and other rent		50,271			59,445			(9,174	)	(15.4	%)
Depreciation and amortization		30,320			37,838			(7,518	)	(19.9	%)
Gain on disposal of aircraft		(9,035	)		(7,467	)		1,568		21.0	%
Travel		37,057			44,248			(7,191	)	(16.3	%)
Pre-petition and post-emergence costs
and related professional fees		316			2,988			(2,672	)	(89.4	%)
Other		76,718			77,418			(700	)	(0.9	%)
Total operating expense	$	989,102		$	1,014,778		$	(25,676	)	(2.5	%)

Aircraft fuel expense increased as a result of the increase in fuel prices offset in part by a decrease in fuel consumption in the AMC business due to lower Block Hours. The average fuel price per gallon for the Scheduled Service and Commercial Charter businesses was approximately 213 cents for the first three quarters of 2006, compared with approximately 171 cents for the first three quarters of 2005, an increase of 42 cents, or 24.6% and a 3.9 million gallon, or 3.7% and an increase in fuel consumption to 110.9 million gallons for the first three quarters of 2006 from 107.0 million gallons during the first three quarters of 2005 as a result of increased Block Hours. The average pegged fuel price per gallon for the AMC business was approximately 220 cents for the first three quarters of 2006, compared with approximately 140 cents for the first three quarters of 2005, an increase of 80 cents, or 57.1%, partially offset by a 28.1 million gallon, or 37.5% decrease in fuel consumption to 46.9 million gallons for the first three quarters of 2006 from 75.0 million gallons during the first three quarters of 2005. The decrease in our AMC fuel consumption corresponds to the decrease of 7,660 Block Hours from 21,932 to 14,272. We do not incur fuel expense in our ACMI service as the cost of fuel is borne by the customer.

Salaries, wages and benefits increased by $1.8 million as a result of a one time severance package related to the departure of the former CEO and search costs related to hiring our new CEO and the expensing of stock options of $2.2 million for management, crew and other employees under SFAS No. 123R for the third quarter of 2006 offset by a reduction in crew salaries related to the reduction in the operating fleet and Block Hours.

Maintenance materials and repair decreased primarily as a result of fewer C and D Checks and engine overhauls. There were six C Checks on Boeing 747-200 aircraft in the first three quarters of 2006, compared with nine C Checks on Boeing 747-200 aircraft during the first three quarters of 2005. There were three D Checks on Boeing 747-200 aircraft in the first three quarters of 2006 compared with four D Checks on Boeing 747-400 aircraft and two D Checks on Boeing 747-200 aircraft during the first three quarters of 2005. There were 29 engine overhauls in the first three quarters of 2006 compared with 48 during the first three quarters of 2005. In addition, the reduction in maintenance costs results from lower Block Hours during 2006 and the absence of A/B Checks related to aircraft that we are parking or have sold. We have also had improvements in the average cost of a C and D Check as a result of our cost savings initiatives.

Aircraft rent increased slightly due to the increase in re-accommodated air transportation on other freight carriers.

Ground handling and airport fees increased primarily due to an increase in the Scheduled Service business, the primary user of such services partially offset by a reduction in handling costs.

Landing fees and other rent decreased primarily due to a reduction in AMC Block Hours.

Depreciation and amortization decreased primarily due to a $7.1 million decrease in amortization of intangibles as a result of the substantial reduction in the related intangibles due to the utilization of pre-emergence tax loss carryforwards (see Note 8 to the consolidated financial statements included herein).

Gain on disposal of aircraft was the result of the sale of aircraft tail numbers N921FT, N509MC, and N534MC in 2006 (see Note 2 to our Financial Statements for further discussion) compared with the insurance gain on the disposition of aircraft tail number N808MC in 2005 (see Note 5 to the audited consolidated financial statements included in our 2005 10-K).

Travel decreased primarily due to a reduction in crew travel related to the decrease in total Block Hours and improved efficiency in crew scheduling becoming effective in the third quarter.

Pre-petition and post-emergence costs and related professional fees decreased due to the winding down of the claims reconciliation process related to the bankruptcy proceedings.

Other operating expenses decreased slightly primarily due to a decrease in professional fees of $5.3 million associated with the redesign of internal controls, a $5.3 million decrease in freight and various expenses and a $2.0 million benefit for a reduction in interest and penalties from the settlement with the IRS in 2006 offset by an increase in legal and consulting fees of $7.9 million. The first three quarters of 2005 also benefited from a $3.4 million reversal of an allowance for doubtful accounts compared with a benefit of $0.6 million in 2005.

Total operating expense decreased in the first three quarters of 2006 compared with the first three quarters of 2005, primarily as a result of a decrease in maintenance expense, landing fees, travel, depreciation and amortization, partially offset by increased fuel costs.

Non-operating Expenses

The following table compares our non-operating expenses for the nine months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease)			Change
Non-operating Expenses
Interest income	$	(9,921	)	$	(4,134	)	$	5,787		140.0	%
Interest expense		48,704			55,432			(6,728	)	(12.1	%)
Loss on extinguishment of debt		12,518			-			12,518		-
Other (income) expense, net		(513	)		1,942			2,455		126.4	%

Interest income increased primarily due to an increase in our average available cash balances, augmented by a general increase in interest rates.

Interest expense decreased primarily as a result of repayment of debt including the prepayment of $140.8 million of the Deutsche Bank Facilities floating rate debt on July 31, 2006 (see Note 2 to our Financial Statements for further discussion).

Loss on extinguishment of debt is the result of the prepayment of the Deutsche Bank Facilities (see Note 2 to our Financial Statements for further discussion).

Other, net improved primarily due to unrealized gains on the revaluation of foreign denominated receivables into U.S. dollars. The U.S. dollar had weakened against most foreign currencies during the period compared with the prior year when the U.S. dollar had strengthened against most foreign currencies.

Income taxes. The effective tax rate for the first three quarters of 2006 was 28.7% compared with an effective tax rate of 41.8% for the first three quarters of 2005. The rates differ from the statutory rate primarily due the final settlement of an income tax examination during the third quarter of 2006 and also to the non-deductibility of certain items for tax purposes and the relationship of these items to the Company’s projected operating results for the year. The settlement of the income tax examination reduced the Company’s income tax expense for the third quarter by approximately $2.0 million. This

reduction resulted in a low effective tax rate for the nine months ended September 30, 2006.

Segments

Management allocates the cost of operating aircraft among the various segments on an average cost per aircraft type. Under-utilized aircraft costs are allocated to segments based on Block Hours flown for Scheduled Service, AMC and Commercial Charter. ACMI is only allocated costs of operating aircraft based on the number of aircraft dedicated to ACMI customers.

The following table compares our FAC for segments (see Note 5 to our Financial Statements for the reconciliation to operating income (loss) and our reasons for using FAC) for the nine months ended September 30:

							Increase /			Percent
	2006			2005			(Decrease)			Change
FAC:
Scheduled Service	$	(17,324	)	$	(597	)	$	(16,727	)	2,801.8	%
ACMI		28,722			16,841			11,881		70.5	%
AMC Charter		9,338			46,015			(36,677	)	(79.7	%)
Commercial Charter		(6,878	)		3,355			(10,233	)	(305.0	%)
Total FAC	$	13,858		$	65,614		$	(51,756	)	(78.9	%)

Scheduled Service Segment

ACMI Segment

FAC relating to the ACMI segment increased as a result of the reduction of Block Hours of the less profitable Boeing 747-200 ACMI leases offset by an increase in rate per Block Hour reflecting higher proportional Boeing 747-400 usage in this segment.

AMC Charter Segment

Commercial Charter Segment

Liquidity and Capital Resources

At September 30, 2006, we had cash and cash equivalents of $172.8 million, compared with $305.9 million at December 31, 2005, a decrease of $133.1 million, or 43.5% . In the third quarter of 2006, we used approximately $140.8 million of available cash to prepay our two credit facilities with Deutsche Bank and we terminated our Revolving Credit Facility. Despite the reduction in our cash balance as a result of these transactions, we still consider cash on hand and cash generated from operations to be more than sufficient to meet our debt and lease obligations and to finance expected capital expenditures of approximately $11.3 million for the remainder of 2006. Subsequent to September 30, 2006, we paid $35.1 million to Boeing as part of the initial deposit on our aircraft purchase agreement with Boeing.

Operating Activities. Net cash provided by operating activities for the first three quarters of 2006 was $44.1 million, compared with net cash provided by operating activities of $189.0 million for the first three quarters of 2005. The decrease in cash provided by operating activities is primarily related to a decrease in operating results and a larger reduction in accrued liabilities in the first three quarters of 2006 compared with 2005.

Investing Activities. Net cash provided by investing activities was $1.3 million for the first three quarters of 2006, consisting primarily of proceeds from sale of aircraft of $26.4 million and a decrease in restricted funds held in trust of $0.9 million offset, by capital expenditures of $26.0 million. Net cash provided by investing activities was $8.3 million

for the first three quarters of 2005, which reflects insurance proceeds of $12.6 million and a decrease in restricted funds held in trust of $19.8 million, offset by capital expenditures of $24.1 million.

Financing Activities. Net cash used by financing activities was $178.5 million for the first three quarters of 2006, which consisted primarily of $182.5 million of payments on long-term debt and capital lease obligations and a $2.3 million purchase of treasury stock offset by $3.5 million in proceeds from the exercise of stock options and a $3.2 million tax benefit on restricted stock and stock options. Net cash used by financing activities was $53.5 million for the first three quarters of 2005, which consisted primarily of $61.3 million of payments on long-term debt and capital lease obligations and $2.3 million of purchases of treasury stock, offset by $10.0 million in loan proceeds from the Revolving Credit Facility that was subsequently repaid.

Debt Agreements

See Note 7 to the audited consolidated financial statements included in the 2005 10-K for a description of the Company’s debt obligations and amendments thereto during the bankruptcy proceedings.

See Note 9 to our Financial Statements herein for a discussion of our prepayment and termination of three credit facilities.

Commitment for Future Financing

In connection with the order for the new aircraft from Boeing, on September 11, 2006 we received a commitment from a lender to provide financing for up to four of the first eight aircraft to be delivered.

Off-Balance Sheet Arrangements

There were no material changes in our off-balance sheet arrangements during the three months ended September 30, 2006.

Contractual Obligations

The table below provides details of our future cash contractual obligations as of September 30, 2006 (in millions).


		Total		Less Than 1 Year		1 to 3 Years		4 Years		Thereafter

Debt and capital lease
obligations (1)	$	511.0	$	6.6	$	105.2	$	33.2	$	366.0
Interest on debt (2)		285.6		9.2		103.3		30.0		143.1
Aircraft operating leases		2,343.1		32.0		416.8		143.0		1,751.3
Other operating leases		25.3		1.6		14.1		4.3		5.3
Aircraft Purchase commitments		2,181.6		36.2		463.0		991.9		690.5
	$	5,346.6	$	85.6	$	1,102.4	$	1,202.4	$	2,956.2

	(1)	Debt and capital lease obligations reflect gross amounts (see Note 2 to our Financial Statements for a discussion of the related unamortized discount).

	(2)	Amount represents interest on fixed rate debt.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," included in our 2005 10-K, except for the adoption of SFAS No. 123R on January 1, 2006.

Stock-based compensation. The adoption of SFAS No. 123R in 2006 requires the recording of stock-based compensation expense for issuances under our stock option plan over their requisite service period using a fair value approach similar to the pro forma disclosure requirements of SFAS No. 123. SFAS No. 123R does not mandate an option-pricing model to be used in determining fair value, but does require that the model selected consider certain variables. Different models would result in different valuations. Regardless of the method selected, significant judgment is required for some of the valuation assumptions. The most significant of these is the volatility of our common stock, estimated forfeiture rate and the estimated term that our stock options will be outstanding. The valuation calculation is sensitive to even slight changes in these estimates (see Note 3 to our Financial Statements for a further discussion).

Recent Accounting Pronouncements

See Note 2 to our Financial Statements for a discussion of new accounting pronouncements.

Forward Looking Statements

Our disclosure and analysis in this report, including but is not limited to the information discussed in the “Business Strategy and Outlook” section above, contain forward-looking information about our financial results, estimates and business prospects that involve substantial risks and uncertainties. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will," "target" and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies such as legal proceedings and financial results.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K reports filed with the SEC. Our 2005 10-K listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find an updated amended and restated version of them in Part II, Item 1A of this report, and investors should refer to and consider them carefully. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risks from the information provided in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” included in our 2005 10-K, except as follows:

Aviation fuel . Our results of operations are affected by changes in the price and availability of aviation fuel. Market risk is estimated at a hypothetical 10% increase or decrease in the average cost per gallon of fuel for the first three quarters of 2006. Based on actual fuel consumption during the first three quarters of 2006 for the Scheduled Service and Commercial Charter business segments, such an increase or decrease would result in a change to aviation fuel expense of approximately $23.6 million for the first three quarters of 2006. Fuel prices for AMC are set each September by the military and are fixed for the year and adjusted to actual costs incurred. ACMI does not present an aviation fuel market risk, as the cost of fuel is borne by the customer.

In 2005 and the first nine months of 2006, we did not realize any benefit from fuel hedging arrangements. With respect to the fourth quarter of 2006, we have hedged approximately 42% of our projected scheduled service fuel uplift through a combination of physical fixed fuel purchases and jet fuel swaps. With respect to the swaps, we are the fixed price payor. The swaps were entered into at the beginning of the fourth quarter of 2006, and expire on December 31, 2006, and carry a weighted average price of $1.828 per gallon on volume of 9.75 million gallons. During September 2006, we entered into a fixed forward purchase commitment for an aggregate 5.5 million gallons of aviation fuel at a fixed cost of $1.913 per gallon (excluding taxes and into-plane fees) for use during the fourth quarter of 2006. There can be no

assurance that our hedging strategy will successfully mitigate our fuel cost exposure. We are reviewing but have not implemented any hedging strategies with respect to our 2007 exposure. Based on market conditions, we may or may not hedge 2007 fuel exposure.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC. An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures as of September 30, 2006. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2006.

Remediation of Material Weaknesses and Significant Deficiencies

We have continued to make significant progress to remediate identified internal control deficiencies and to establish adequate internal controls over financial reporting during the quarter ended September 30, 2006. As we continue to evaluate the operating effectiveness of internal controls during 2006, it is possible that management will identify additional deficiencies that meet the definition of a material weakness and there can be no assurance that all material weaknesses will be remediated by December 31, 2006.

Changes in Internal Control over Financial Reporting

Other than as expressly noted above in this Item 4, there were no changes in our internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f), identified in connection with the evaluation of our controls performed during the fiscal quarter ended September 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

With respect to the fiscal quarter ended September 30, 2006, the information required in response to this Item is set forth in Note 6 to our Financial Statements contained in this report, and such information is incorporated herein by reference. Such description contains all of the information required with respect hereto.

ITEM 1A. RISK FACTORS

You should carefully consider each of the following Risk Factors and all other information in this report. These Risk Factors are not the only ones facing us. Our operations could also be impaired by additional risks and uncertainties. If any of the following risks and uncertainties develop into actual events, our business, financial condition and results of operations could be materially and adversely affected.

RISKS RELATED TO OUR BUSINESS

Risks Related to Our ACMI Business

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

During the nine months ended September 30, 2006 and 2005, and the years ended December 31, 2005 and 2004, our ACMI business accounted for approximately 27.8%, 30.3%, 28.8% and 26.6%, respectively, of our operating revenues. We depend on a limited number of significant customers for our ACMI business. In the years ended December 31, 2003, 2004 and 2005, the number of our ACMI customers ranged from 7 to 12. In addition, Emirates accounted for 12.3%, 9.8%, 9.7% and 9.1% of our operating revenues for the nine months ended September 30, 2006 and 2005 and for the years ended December 31, 2005 and 2004, respectively. We typically enter into ACMI contracts with terms of one year up to five years with our customers and the terms of these contracts expire on a staggered basis over the next 4.5 years. There is a risk that our customers, including Emirates, may not renew their ACMI contracts with us on favorable terms or at all. Entering into ACMI contracts with new customers generally requires a long sales cycle, and as a result, if our ACMI contracts are not renewed, our business, results of operations and financial condition could be materially adversely affected.

Our ACMI growth strategy could be adversely affected by a significant delay in the delivery of our new Boeing 747-8 freighter aircraft, or if such aircraft do not meet their performance specifications.

In September 2006, we placed an order for 12 new Boeing 747-8 freighter aircraft that are scheduled to be delivered in 2010 and 2011. As part of this transaction, we also hold rights to purchase up to an additional 14 747-8 aircraft at fixed prices, of which one is being held under option. The addition of these new aircraft is a material component of our ACMI growth strategy. Although the 747-8 aircraft shares many of the same components used in other Boeing 747 models, it is a new aircraft model and has not yet received the necessary regulatory approvals and certifications. Any significant delay in Boeing’s production or delivery schedule, including because of delay in receiving the necessary approvals and certifications, could delay the delivery and deployment of these aircraft. Although Boeing has provided us with performance guarantees, there is a risk that the new aircraft may not meet the performance specifications that are important to our customers, which could adversely affect our ability to deploy these aircraft in a timely manner or at favorable rates.

Risks Related to Our AMC Charter Business

We derive a significant portion of our revenues from our AMC charter business, and a substantial portion of these revenues were generated pursuant to ad hoc flying, as opposed to fixed contract arrangements with the AMC. In the longer term, we expect that the revenues from our AMC charter business may decline from 2006 levels, which could have a material adverse effect on our business, results of operations and financial condition.

During the nine months ended September 30, 2006 and 2005 and the years ended December 31, 2005 and 2004, approximately 21.7%, 26.9%, 27.2% and 20.0%, respectively, of our operating revenues were derived from our AMC charter business. In each of these years, the revenues derived from expansion flights for the Air Mobility Command significantly exceeded the value of the fixed flight component of our AMC contract.

We expect that our AMC charter business, especially expansion flights, will be a significant source of our revenue for the foreseeable future, however over the long-term, revenues derived from the AMC charter business may decline from fiscal year 2006 levels as a result of reduced military heavy lift requirements. Revenues from our AMC charter business are derived from one-year contracts that the Air Mobility Command is not required to renew. Changes in national and international political priorities can significantly affect the volume of our AMC charter business, especially the volume of expansion flying. Any decrease in U.S. military activity could reduce our AMC charter business. In addition, our share of the total AMC charter business depends on several factors, including the total fleet size we commit to the CRAF program and the total number of aircraft deployed by our partners and competitors in the program. The Air Mobility Command holds all carriers to certain on-time performance requirements. To the extent that we fail to meet those performance requirements, or if we fail to perform or to pass semi-annual inspections, our revenues from our AMC charter business could decline through a suspension or termination of our AMC contract. Our revenues could also decline due to a reduction in the revenue rate we are paid by the Air Mobility Command, a greater reliance by the AMC on its own freighter fleet or a reduction in our allocation of expansion flying. If our AMC charter business declines significantly, it could have a material adverse effect on our business, results of operations and financial condition.

Our AMC charter business is dependent on our participation in a team accredited to participate in the CRAF program. If one of our team members withdraws from the program, or if our competitors commit additional aircraft to this program, our share of AMC flying may decline, which could have a material adverse effect on our results of operations and financial condition.

Each year, the Air Mobility Command grants a certain portion of its AMC charter business to different airlines based on a point system that is determined by the amount and type of aircraft pledged to the CRAF program. We participate in the CRAF program through a teaming arrangement with other airlines, led by FedEx Corporation. Our team is one of three major teams participating in the CRAF program. The formation of competing teaming arrangements, an increase by other air carriers in their commitment of aircraft to the program, the withdrawal of our team’s current partners, especially FedEx, or a reduction of the number of planes pledged to the CRAF program by our team could adversely affect the volume of and our revenues from our AMC charter business which could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Scheduled Service Business

Operating results in our scheduled service business may vary significantly from period to period, which could cause us to fail to meet operating targets and result in a decline in our stock price.

During the nine months ended September 30, 2006 and 2005 and the years ended December 31, 2005 and 2004, approximately 41.5%, 34.9% 34.4% and 45.3% of our operating revenues were derived from our scheduled service business. Our scheduled service business operates according to fixed flight schedules regardless of the amount of cargo transported. Consequently, a significant portion of our scheduled services costs are fixed, such as crew, fuel, capital costs, maintenance, and facilities expenses. The revenues generated from our scheduled services business vary significantly from period to period depending on a number of factors outside our control, including global airfreight demand, competition, global economic conditions and increases in fuel costs. As a result, if revenue for a particular period is below expectations, we will be unable to proportionately reduce our operating expenses for that period. Any revenue shortfall during a quarterly or annual period may thus cause our profitability for that period to fall below the expectations of public market analysts or investors, which could cause the price of our common stock to fall. Accordingly, you should not rely on period-to-period comparisons of operating results in our scheduled service business as an indicator of future performance.

Under the proposed terms of our blocked space agreement with DHL, DHL has committed to certain guaranteed capacity utilization, which we expect will account for a material portion of our scheduled service capacity. While we expect that our proposed venture with DHL will provide increased revenue stability in our scheduled service business, we cannot assure you that we will achieve the level of expected revenue from this transaction in accordance with our timetable, or at all.

We could lose our rights to fly into limited-entry markets primarily in Asia if we fail to fully utilize them which could materially adversely affect our scheduled service business. If additional route rights in the limited entry markets where we currently have a presence are awarded to other carriers, the value of our existing rights may be diminished.

A significant amount of our business, primarily in the scheduled service business, is conducted in limited-entry international markets with U.S.-negotiated rights that have been awarded in competitive carrier selection proceedings. This includes our Japan rights, China rights and our rights to carry local traffic between Hong Kong and other countries. Limited-

entry rights are typically subject to loss for underutilization and there is a risk that some of our limited-entry rights may lapse if economic conditions and reduced demand from our customers preclude us from using them in full. The inability to obtain additional limited-entry routes might adversely affect our ability to quickly respond to any increased demand for scheduled service and thus limit our growth opportunities. If additional carriers are awarded route rights in the limited entry markets where we currently operate, we will face increased competition which could have an adverse effect on the rates we are able to charge for our service and the value of our limited entry rights may be diminished.

We may be unable to complete, or may be delayed in completing, our contemplated transaction with DHL. An inability to complete the transaction would impact our business strategy and may impact our stock price.

On October 12, 2006, one of our wholly owned subsidiaries, PACW entered into a letter of intent with DHL Network Operations (USA), Inc. for DHL to acquire a 49% equity interest and a 25% voting interest, in PACW. It is also contemplated that DHL will enter into a commercial arrangement whereby PACW will provide express network services to DHL through various commercial intercompany arrangements with one or more of its affiliates. These proposed transactions with DHL are an important part of enhancing the performance of our scheduled service business. While we are currently in the process of negotiating and finalizing definitive agreements with DHL, there can be no assurance that we will be able to enter into these definitive agreements on acceptable terms or at all. The completion of the contemplated transaction is subject to some closing conditions that are outside of our control, such as review and approval by regulatory authorities and third party consents. As a result, we can provide no assurance that this transaction will be completed. Our inability to complete this transaction, or delays in completing this transaction, may adversely impact our ability to execute our business strategy which could have a material adverse effect on our business, results of operations and financial condition.

Our proposed agreements with DHL will require us to meet certain performance targets in our scheduled service operations, including accelerated flying and processing schedules. Failure to meet these performance targets could lead to penalties under these agreements, or termination of the agreements.

Our ability to derive our desired economic benefits from our proposed transactions with DHL depends substantially on our ability to successfully meet strict performance standards and deadlines for processing cargo as part of an express cargo and freight network. These performance standards will impose more stringent time schedules on our scheduled service business than we currently operate under and we will be required to commence operating under these tighter time schedules by October 31, 2008 or an earlier date if requested by DHL. If we are not able to successfully transition our scheduled service to these accelerated schedules in a timely manner, we may not be able to achieve the projected revenues and profitability from this contract.

Our blocked space agreement with DHL will confer certain termination rights to DHL which, if exercised or triggered, may result in us being unable to realize the full benefits of this transaction.

The proposed terms of our blocked space agreement with DHL give DHL the option to terminate the agreement for convenience, on one year's notice to us, at the fifth, tenth or fifteenth anniversary of the commencement date. Further, DHL has a right to terminate for cause in the event that we default on our performance or we are unable to perform for reasons beyond our control. If DHL exercises its termination rights, we will not be able to achieve the projected revenues and profitability from this contract.

Risks Related to Our Business Generally

While our revenues may vary significantly from period to period, a substantial portion of our operating expenses are fixed. These fixed costs limit our ability to quickly change our cost structure to respond to any declines in our revenues, which could result in us failing to meet analyst and investor expectations.

To maintain our level of operations, a substantial portion of our costs are fixed, such as capital costs and debt service, crew, fuel, and maintenance and facility costs. Operating revenues from our business are directly affected by our ability to maintain high utilization of our aircraft and services at favorable rates. The utilization of our aircraft and our ability to obtain favorable rates are, in turn, affected by many factors, including global demand for airfreight, global economic conditions, fuel costs, and the deployment by our current and potential customers of their own aircraft, among others, causing our revenues to vary significantly over time. As a result, if our revenues for a particular period are below expectations, we will be unable to proportionately reduce our operating expenses for that period. Any revenue shortfall during a quarterly or annual period may cause our profitability for that period to fall below the expectations of public market analysts or investors.

We have a limited number of revenue producing assets. The loss of one or more of our aircraft for an extended period of time could have a material adverse effect on our business, results of operations and financial condition.

Our operating revenues depend on our ability to effectively deploy all the aircraft in our fleet and maintain high utilization of these aircraft at favorable rates. In the event that one or more of our aircraft are out of service for an extended period of time, our operating revenues will significantly decrease and we may have difficulty fulfilling our obligations under one or more of our existing contracts. Many of our aircraft are deployed in potentially dangerous locations and carry hazardous cargo incidental to the services we provide in support of U.S. military activities, particularly in shipments to the Middle East. Other areas through which our flight routes pass are subject to geopolitical instability, which increases the risk of a loss of, or damage to, our aircraft, or death or injury to our personnel. While we maintain insurance to cover the loss of an aircraft, except for limited situations, we do not have insurance against the loss arising from business interruption. It is difficult to replace lost or substantially damaged aircraft due to the high capital requirements and long delivery lead times for new aircraft or to locate appropriate in-service aircraft for lease or sale. The loss of revenue resulting from any such business interruption, and the cost, long lead time and difficulties in sourcing a replacement aircraft, could have a material adverse effect on our business, results of operations and financial condition.

Should any of our aircraft become underutilized in our ACMI or AMC charter business, failure to redeploy these aircraft at favorable rates in our other lines of business or to successfully and timely dispose of such aircraft could have a material adverse effect on our business, results of operations and financial condition.

We provisionally allocate our aircraft among our business segments according to projected demand. If demand in our ACMI or AMC charter businesses weakens so that we have underutilized aircraft, we will seek to redeploy these aircraft in our other lines of business. If we are unable to successfully deploy these aircraft at favorable rates or achieve a timely disposal of such aircraft, our long term results of operations could be materially affected.

Our substantial obligations, including aircraft lease and other obligations, could impair our financial condition and adversely affect our ability to raise additional capital to fund our operations or capital requirements, all of which could limit our financial resources and ability to compete, and may make us more vulnerable to adverse economic events.

As of September 30, 2006, we had total obligations of approximately $2.9 billion, including our aircraft lease, debt and other obligations. Our outstanding financial obligations could have negative consequences, including:

making it more difficult to pay principal and interest with respect to our debt and lease obligations;
requiring us to dedicate a substantial portion of our cash flow from operations for interest, principal and lease payments and reducing our ability to use our cash flow to fund working capital and other general corporate requirements;
increasing our vulnerability to general adverse economic and industry conditions; and
limiting our flexibility in planning for, or reacting to, changes in business and in our industry.

Our ability to service our debt and meet our lease and other obligations as they come due is dependent on our future financial and operating performance. This performance is subject to various factors, including factors beyond our control, such as changes in global and regional economic conditions, changes in our industry, changes in interest or currency exchange rates, the price and availability of aviation fuel and other costs, including labor and insurance. Accordingly, we cannot assure you that we will be able to meet our debt service, lease and other obligations as they become due or otherwise.

Certain of our debt and lease obligations contain a number of restrictive covenants. In addition, many of our debt and lease obligations have certain cross default and cross acceleration provisions.

These restrictive covenants, under certain circumstances, could impact our ability to:

pay dividends or repurchase stock;
consolidate or merge with or into other companies or sell all of our assets; and/or
expand in a material way into lines of businesses beyond existing business activities or those which are cargo-related and/or aviation-related and similar businesses.

In certain circumstances, a covenant default under one instrument could cause us to be in default of other obligations as well. Any such unremedied defaults could lead to an acceleration of repayment in full of any amounts owing, and in certain circumstances, potentially could cause us to lose possession or control of certain aircraft.

We have a number of contractual obligations, including progress payments, associated with our order of 12 Boeing 747-8 freighter aircraft. If we are unable to obtain financing for these aircraft and/or make the required progress payments, our growth strategy will be disrupted and our business, results of operations and financial condition could be materially adversely affected.

In September 2006, we placed an order for 12 new Boeing 747-8 freighter aircraft that are scheduled to be delivered in 2010 and 2011. As part of this transaction, we also hold options and rights to purchase up to an additional 14 747-8 aircraft at fixed prices. We are required to pay significant pre-delivery deposits to Boeing for these aircraft. We commenced making these pre-delivery payments in the third quarter of 2006. As of September 30, 2006, we had commitments of approximately $2.2 billion associated with this aircraft order. We typically finance our aircraft, including the required progress payments, through either mortgage debt or lease financing. Although we have received standby financing commitments to finance four of these aircraft, we cannot assure you that we will be able to meet the financing conditions contained in these commitments or to secure other financing at all or on terms attractive to us. If we are unable to secure such financing on acceptable terms, we may be required to incur financing costs that are substantially higher than what we currently anticipate.

Fuel price volatility could adversely affect our business and operations, especially in our scheduled service and commercial charter businesses.

The price of aircraft fuel is unpredictable and has been increasingly volatile over the past few years. Fuel is one of the most significant expenses in our scheduled service and commercial charter businesses. For the nine months ended September 30, 2006 and 2005 and the years ended December 31, 2005 and 2004, fuel costs were approximately 34.4%, 28.2% 30.0% and 25.6%, respectively, of our total operating expenses. Although we attempt to pass on increases in the price of aircraft fuel to our scheduled service and commercial charter customers by imposing a surcharge, we end up bearing a portion of any price increases. There can be no assurance that we will be able to continue to impose such surcharges in the future. In 2005 and the first nine months of 2006 we did not enter into fuel hedging arrangements. With respect to the fourth quarter of 2006, we have hedged approximately 42% of our projected scheduled service fuel requirements through a combination of physical fixed fuel purchases and jet fuel swaps. However, there can be no assurance that our hedging strategy will successfully mitigate our fuel cost exposure. We are reviewing but have not implemented any fuel hedging strategies with respect to 2007 exposure.

In addition, while our ACMI contracts require our customers to pay for aviation fuel, if fuel costs increase significantly our customers may reduce the volume and frequency of cargo shipments or find less costly alternatives for cargo delivery, such as land and sea carriers.

Our insurance coverage may become more expensive and difficult to obtain.

Aviation insurance premiums historically have fluctuated based on factors that include the loss history of the industry in general, and the insured carrier in particular. Future terrorist attacks and other adverse events involving aircraft could result in increases in insurance costs and could affect the price and availability of such coverage. We have, as have most other U.S. airlines, purchased our war-risk coverage through a special program administered by the federal government. The Federal Aviation Administration is currently providing war-risk hull and cargo loss, crew and third-party liability insurance through December 31, 2006 as required by the Homeland Security Act of 2002, as amended by the Consolidated Appropriations Act of 2005 and by the Transportation Appropriations Act of 2006 and as further extended by the U.S. Secretary of Transportation. If the federal war-risk coverage program terminates or provides significantly less coverage in the future, we would likely face a material increase in the cost of war-risk coverage, and because of competitive pressures in the industry, our ability to pass this additional cost on to customers may be limited.

There can be no assurance that we will be able to maintain our existing coverage on terms favorable to us, that the premiums for such coverage will not increase substantially or that we will not bear substantial losses and lost revenues from accidents or other adverse events. Substantial claims resulting from an accident in excess of related insurance coverage or a significant increase in our current insurance expense could have a material adverse effect on our business, results of operations and financial condition. Additionally, while we carry insurance against the risks inherent to our operations, which we believe are consistent with the insurance arrangements of other participants in our industry, we cannot assure you that we are adequately insured against all risks. If our liability exceeds the amounts of our insurance coverage, we would be required to pay the excess amount, which could be material to our business and operations.

As a U.S. government contractor, we are subject to a number of procurement and other rules and regulations that add costs to our business. A violation of these rules and regulations could lead to termination or suspension of our government contracts and could prevent us from entering into contracts with government agencies in the future.

In order to do business with government agencies, we must comply with, and are affected by, many laws and regulations, including those related to the formation, administration and performance of U.S. government contracts. These laws and regulations, among other things:

require, in some cases, certification and disclosure of all cost and pricing data in connection with contract negotiations, and may give rise to U.S. government audit rights;
impose accounting rules that dictate how we define certain accounts, define allowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. government contracts;
establish specific health, safety and doing-business standards; and
restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

These laws and regulations affect how we do business with our customers and, in some instances, impose added costs on our business. A violation of these laws and regulations could result in the imposition of fines and penalties or the termination of our contracts. In addition, the violation of certain other generally applicable laws and regulations could result in our suspension or debarment as a government contractor.

Our financial condition could suffer if we experience unanticipated costs or enforcement action as a result of the SEC investigation, the Department of Justice fuel surcharge investigation and other lawsuits and claims.

On October 28, 2004, the SEC issued a Wells notice to us indicating that the SEC is considering bringing a civil action against us alleging that we violated certain financial reporting provisions of the federal securities laws from 1999 to 2002. In addition, on February 14, 2006, the Department of Justice served us with a subpoena in connection with its investigation into the fuel surcharge pricing practices of approximately 20 air cargo carriers. Other than the subpoena, there has been no complaint or demand of us by the Department of Justice, and we are fully cooperating with this investigation. As a result of the investigation, we and a number of other cargo carriers have been named co-defendants in approximately 80 class action suits filed in multiple jurisdictions of the U.S. Federal District Court, and have been named in a civil class action suit in Ontario, Canada, which is substantially similar to the U.S. class action suits. We have also received notification from Swiss authorities that they are investigating the freight pricing practices of several carriers, including us, on routes between Switzerland and the U.S. The Swiss authorities have not made any specific complaint or demand on us. We are also party to a number of other claims, lawsuits and pending actions, which we consider to be routine and incidental to our business (see Note 6 to our Financial Statements appearing elsewhere in this report).

While we are currently engaged in discussions with the SEC regarding the Wells notice and continue to cooperate fully with the SEC and the Department of Justice, we cannot assure you that we will be able to resolve these or the other matters discussed above on terms favorable to us or that they will not have a material adverse effect on our business, results of operations or financial condition.

We had significant deficiencies and a material weakness in our internal controls over financial reporting.

At the conclusion of the audit of our consolidated financial statements for the year ended December 31, 2005, our independent registered public accounting firm, Ernst & Young LLP, noted in a letter to management and the audit committee of our Board several significant deficiencies and one material weakness. However, Ernst & Young was not engaged to perform an audit or our internal controls over financial reporting. Accordingly, Ernst & Young has not expressed an opinion on the effectiveness of our internal controls over financial reporting. Through the nine months ended September 30, 2006, our management believes that we have taken appropriate steps that are intended to remediate the material weakness and significant deficiencies identified. However, we cannot confirm the effectiveness of our enhanced internal controls until we and our independent auditors have conducted sufficient testing. Such testing is to occur through the first quarter of 2007, with respect to the period through December 31, 2006. Accordingly, we will continue to monitor the effectiveness of these controls, and will make any further changes as management determines appropriate.

As we continue to evaluate the operating effectiveness of our internal controls during 2006, it is possible that management will identify additional deficiencies that meet the definition of a material weakness or significant deficiency and there can be no

assurance that all such additional material weaknesses or significant deficiencies will be remediated by December 31, 2006 or thereafter in a timely manner. If we are unsuccessful in our efforts to permanently and effectively remediate these deficiencies and the material weakness, or otherwise fail to maintain adequate internal controls over financial reporting, our ability to accurately and timely report our financial condition may be adversely impacted, which could, among other things, limit our access to the capital markets. In addition, if we do not remediate any material weakness, we will not be able to conclude, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and Item 308 of Regulation S-K of the Securities Act, that our internal controls over financial reporting are effective. We cannot assure you as to what conclusions our management or independent registered public accounting firm might reach with respect to their evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2006, the date at which we are first required to report such conclusions. In the event of non-compliance, we may lose credibility with our customers, suppliers and other our stakeholders, and our stock price may be adversely impacted, resulting in a material adverse effect on our business, results of operations and financial condition.

We are party to collective bargaining agreements with our U.S. crew members that could result in higher labor costs than faced by some of our non-unionized competitors putting us at a competitive disadvantage, and could result in a work interruption or stoppage, which could materially adversely affect our business, results of operations and financial condition.

All our U.S. crewmembers are represented by two unions. Collectively, these employees represented approximately 49.5%, 49.0% and 54.0% of our workforce as of September 30, 2006 and years ended December 31, 2005 and 2004, respectively. We are subject to risks of increased labor costs associated with having a partially unionized workforce, as well as a greater risk of work interruption or stoppage. During 2005, a strike by our Polar crewmembers was resolved after a 20-day work stoppage. However, we cannot assure you that disputes, including disputes with certified collective bargaining representatives of our employees, will not arise in the future or will result in an agreement on terms satisfactory to us. Such disputes and the inherent costs associated with their resolution could have a material adverse effect on our business, results of operations and financial condition.

In November 2004, in order to increase efficiency and assist in controlling certain costs, we initiated steps to combine the U.S. crewmember bargaining units of Atlas and Polar. These actions are in accordance with the terms and conditions of Atlas and Polar’s collective bargaining agreements, which provide for a seniority integration process and the negotiation of a single collective bargaining agreement. In the event that we are unsuccessful in reaching agreement on a single collective bargaining agreement, any unresolved issues will be submitted to binding arbitration. While we cannot assure you as to the outcome of such arbitration, an adverse decision by the arbitrator could materially increase our crew costs. We may not be able to quickly or fully recover these increased costs in our rates which could have a material adverse effect on our business, results of operations and financial condition.

Our scheduled service and commercial charter businesses, and our revenue from those businesses are seasonal.

Our scheduled service and commercial charter businesses are seasonal in nature, with peak activity occurring during the retail holiday season, which traditionally begins in September and lasts through mid-December. This typically results in a significant decline in demand for these services in the first quarter of the fiscal year. Our ACMI contracts typically allow our customers to cancel a maximum of 5% of the guaranteed hours of aircraft utilization over the course of a year. Our customers often exercise those cancellation options early in the first quarter of the year, when the demand for air cargo capacity has been historically low following the seasonal holiday peak in the fourth quarter. While our scheduled service and commercial charter revenues fluctuate as described above, a significant proportion of the costs associated with these businesses, such as maintenance and facilities costs, are fixed and cannot easily be reduced to match the seasonal drop in demand. As a result, our net operating results are subject to a high degree of seasonality.

Volatility in international currency markets may adversely affect demand for our services.

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

We rely on third party service providers. If these service providers do not deliver the high level of service and support required in our business, we may lose customers and our revenue will suffer.

We rely on third parties to provide certain essential services on our behalf, including maintenance and ground handling. In certain locations, there may be only one or a few sources of supply for these services. If we are unable to effectively manage these third parties, they may provide inadequate levels of support which could have an adverse impact on our operations resulting in an adverse impact on our results of operations. Any material problems with the efficiency and timeliness of our contract services, or an unexpected termination of those services, could have a material adverse effect on our business, results of operations and financial condition.

RISKS RELATED TO OUR INDUSTRY

We depend on certain levels of worldwide economic activity to operate our business successfully. Any significant decrease in demand for air cargo transport could adversely affect our business and operations.

Our success is highly dependent upon the level of business activity and overall economic conditions in the U.S. and abroad, including import and export demand in our key markets and levels of international U.S. military activity. Any economic downturn in the U.S. or in our key markets overseas, or any business shift towards using less time sensitive modes of freight transportation, such as land or sea based cargo services, is likely to adversely affect demand for the delivery services offered by our scheduled service business. Additionally, a prolonged economic slowdown may increase the likelihood that our ACMI customers would reduce the scope of services we provide to them which could adversely affect our business and operations.

The market for air cargo services is highly competitive and if we are unable to compete effectively, we may lose current customers or fail to attract new customers.

Each of the markets we participate in is highly competitive and fragmented. We offer a broad range of aviation services and our competitors vary by geographic market and type of service and include other international and domestic contract carriers, regional and national ground handling and logistics companies, internal cargo units of major airlines and third party cargo providers. Competition in the air cargo and transportation market is influenced by several key factors. Regulatory requirements to operate in the U.S. domestic air cargo market have been reduced, facilitating the entry into domestic markets by foreign air cargo companies. In addition, we expect that new freighter aircraft, including passenger aircraft that have been converted into freighter aircraft, that enter the market are likely to add to the supply of available cargo aircraft.

We are subject to extensive governmental regulations and our failure to comply with these regulations in the U.S. and abroad, or the adoption of any new laws, policies or regulations or changes to such regulations may have an adverse effect on our business.

Our operations are subject to complex aviation and transportation laws and regulations, including Title 49 of the U.S. Code (formerly the Federal Aviation Act 1958, as amended), under which the U.S. Department of Transportation and the U.S. Federal Aviation Administration exercise regulatory authority over air carriers. In addition, our business activities fall within the jurisdiction of various other federal, state, local and foreign authorities, including the U.S. Department of Defense, the U.S. Transportation Security Administration, U.S. Customs and Border Protection, the Treasury Department’s Office of Foreign Assets Control and the U.S. Environmental Protection Agency. In addition, other countries in which we operate have similar regulatory regimes to which we are subjected. These laws and regulations may require us to maintain and comply with the terms of a wide variety of certificates, permits, licenses, noise abatement standards and other requirements and our failure to do so could result in substantial fines or other sanctions. These U.S. and foreign aviation regulatory agencies have the authority to modify, amend, suspend or revoke the authority and licenses issued to us for failure to comply with provisions of law or applicable regulations and may impose civil or criminal penalties for violations of applicable rules and regulations. Such fines or sanctions, if imposed, could have a material adverse effect on our mode of conducting business, results of operations and financial condition. In addition, U.S. and foreign governmental authorities may adopt new regulations, directives or orders that could require us to take additional and potentially costly compliance steps or result in the grounding of some of our aircraft, which could increase our operating costs or result in a loss of revenues, which could have a material adverse effect on our business, results of operations and financial condition.

International aviation is increasingly subject to conflicting requirements imposed or proposed by the U.S. and foreign governments. This is especially true in the areas of transportation security, aircraft noise and emissions control. Recently, the European Commission proposed that the European Union adopt, through its legislative process, limitations on the ability of European Union carriers to wet lease (through ACMI arrangements) aircraft from non-European Union carriers. These and other similar regulatory developments could increase business uncertainty for commercial air-freight carriers.

The airline industry, which encompasses both the travel and air freight industries, is subject to numerous security regulations and rules which increase costs. Imposition of more stringent regulations and rules than currently exist could materially increase our costs and have a material adverse effect on our results of operations.

The Transportation Security Administration has increased security requirements in response to increased levels of terrorist activity, and has adopted comprehensive new regulations governing air cargo transportation, including all-cargo services, in such areas as cargo screening and security clearances for individuals with access to cargo. Additional measures, including a requirement to screen cargo, have been proposed, which if adopted, may have an adverse impact on our ability to efficiently process cargo and would increase our costs. The cost of compliance with increasingly stringent regulations could have a material adverse effect on our business, results of operations and financial condition.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Our common stock share price has been, and is likely to continue to be, volatile.

The trading price of our common shares is subject to wide fluctuations in response to a variety of factors, including quarterly variations in our operating results, economic conditions of the airline industry generally or airline cargo carriers specifically, general economic conditions or other events and factors that are beyond our control.

In the past, following periods of significant volatility in the overall market and in the market price of a company's securities, securities class action litigation has been instituted against these companies in some circumstances. If this type of litigation were instituted against us following a period of volatility in the market price for our common stock, it could result in substantial costs and a diversion of our management's attention and resources, which could have a material adverse effect on our business, results of operations and financial condition.

We have not paid cash dividends and do not expect to pay dividends in the future, which means that our stockholders may not be able to realize the value of our common stock except through sale. In addition, certain of our financing arrangements contain financial covenants that limit our ability to pay dividends.

We have never declared or paid cash dividends. We expect to retain earnings for our business and do not anticipate paying dividends on our common stock at any time in the foreseeable future. Because we do not anticipate paying dividends in the future, a sale of shares likely is the only opportunity our stockholders will have to realize the value of our common stock. In addition, certain of our financing arrangements contain financial covenants that limit our ability to pay dividends.

Provisions in our restated certificate of incorporation and by-laws and Delaware law might discourage, delay or prevent a change in control of our company and, therefore, depress the trading price of our common stock.

Provisions of our restated certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger, acquisition or other change in control, which stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of common stock. These include the following:

the ability of our board of directors to designate the terms of, and issue new series of, preferred stock without stockholder approval;
the ability of our board of directors to make, alter or repeal our by-laws;
the inability of stockholders to act by written consent or to call special meetings of stockholders; and
advance notice requirements for stockholder proposals and director nominations.

Except for the provision dealing with the issuance of new series of preferred stock, the affirmative vote of at least two thirds of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions. In addition, absent approval of our board of directors, our by-laws may only be amended or repealed by the affirmative vote of at least two thirds of our shares entitled to vote.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-traded Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years had owned, 15% of our voting stock, for a period of three years after the date of the

transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The existence of the above provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of us, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We made the following repurchases of shares of our common stock during the fiscal quarter ended September 30, 2006:

						Maximum Number (or
					Total Number of	Approximate Dollar
					Shares Purchased as	Value) of Shares that
					Part of Publicly	May Yet Be Purchased
	Total Number of		Average Price		Announced Plans or	Under the Plans or
Period	Shares Purchased (a)		Paid per Share		Programs (b)	Programs

July 1, 2006 through July		—		—	—	—
31, 2006

August 1, 2006 through		51,898		$41.04	—	—
August 31, 2006

September 1, 2006 through		—		—	—	—
September 30, 2006

Total		51,898		$41.04	—	—

(a) This column reflects the repurchase of 51,898 shares of common stock to satisfy individual tax liabilities of our employees relating to the vesting of restricted shares.

(b) There are no approved share repurchase programs.

ITEM 6. EXHIBITS

a. Exhibits

See accompanying Exhibit Index included after the signature page of this report for a list of exhibits filed or furnished with this report.

SIGNATURES

Pursuant to the requirements 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.

		Atlas Air Worldwide Holdings, Inc.

Dated: November 9, 2006		/s/ William J. Flynn
		William J. Flynn
		President and Chief Executive Officer

Dated: November 9, 2006		/s/ Michael L. Barna
		Michael L. Barna
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description

	10.1	Purchase Agreement Number 3134, dated as of September 8, 2006, between The Boeing Company and Atlas Air, Inc. (Atlas has filed a request with the Commission for confidential treatment as to certain portions of this document)

	10.2	Employment Agreement dated September 19, 2006, between Atlas Air, Inc. and John Dietrich.

	31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer, furnished herewith.

	31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer, furnished herewith.

	32.1	Section 1350 Certifications, furnished herewith.

Exhibit 10.1

PURCHASE AGREEMENT NUMBER 3134

between

THE BOEING COMPANY

and

ATLAS AIR, INC.

Relating to Boeing Model 747-8 Freighter Aircraft

TABLE OF CONTENTS

ARTICLES SA NUMBER

1. Quantity, Model and Description

2. Delivery Schedule

3. Price

4. Payment

5. Miscellaneous

TABLE

1. Aircraft Information Table

2. Option Aircraft Information Table

3. Purchase Rights Aircraft Information Table

EXHIBIT

A. Aircraft Configuration

B. Aircraft Delivery Requirements and Responsibilities

SUPPLEMENTAL EXHIBITS

AE1. Escalation Adjustment/Airframe and Optional Features

CS1. Customer Support Variables

EE1. Engine Escalation/Engine Warranty and Patent Indemnity

SLP1. [ * ] Service Life Policy [ * ]

LETTER AGREEMENTS

3134 - 01 Open Configuration Matters

3134 - 02 Spare Parts Initial Provisioning

RESTRICTED LETTER AGREEMENTS

6-1162-ILK-0203        747-8 Freighter Special Matters Letter

6-1162-ILK-0204        747-8 Freighter Performance Retention Commitment

6-1162-ILK-0205        Airworthiness Directive Cost Participation Program

6-1162-ILK-0206        Maintenance Cost Protection Program

6-1162-ILK-0207        Special Matters relating to [ * ]

6-1162-ILK-0208        Promotional Support Agreement

6-1162-ILK-0209        Aircraft Performance Guarantees

6-1162-ILK-0210        Remedy for Deviation from Block Fuel Guarantees

6-1162-ILK-0211        Demonstration Flight Waiver

6-1162-ILK-0214        Right to Purchase Additional Aircraft

6-1162-ILK-0215        Option Aircraft

6-1162-ILK-0216        Service Reliability Guarantee

Purchase Agreement No. 3134

between

The Boeing Company

and

ATLAS AIR, INC.

This Purchase Agreement No. 3134 dated as of September 8, 2006 between The Boeing Company (BOEING) and ATLAS AIR, INC. (CUSTOMER) relating to the purchase and sale of Model 747-8 Freighter aircraft together with all tables, exhibits, supplemental exhibits, letter agreements and other attachments thereto, if any, (PURCHASE AGREEMENT) incorporates the terms and conditions of the Aircraft General Terms Agreement dated as of JUNE 6,1997 between the parties, identified as AGTA-TLS (AGTA).

Article 1. QUANTITY, MODEL AND DESCRIPTION.

The aircraft to be delivered to Customer will be designated as Model 747-8 Freighter aircraft (the AIRCRAFT). Boeing will manufacture and sell to Customer Aircraft conforming to the configuration described in Exhibit A in the quantities listed in Table 1 to the Purchase Agreement.

Article 2. DELIVERY SCHEDULE.

The scheduled months of delivery of the Aircraft are listed in the attached Table 1. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.

Article 3. PRICE.

3.1 AIRCRAFT BASIC PRICE. The Aircraft Basic Price is listed in Table 1 in subject to escalation dollars. The engine prices for the 747-8 Freighter Aircraft are included in the Airframe Price.

3.2 ADVANCE PAYMENT BASE PRICES. The Advance Payment Base Prices listed in Table 1 were calculated utilizing the latest escalation factors available to Boeing on the date of this Purchase Agreement projected to the month of scheduled delivery.

Article 4. PAYMENT.

4.1 Boeing acknowledges receipt of a deposit in the amount shown in Table 1 for each Aircraft (DEPOSIT).

4.2 The standard advance payment schedule for the Model 747-8 Freighter aircraft requires Customer to make certain advance payments, expressed in a percentage of the Advance Payment Base Price of each Aircraft beginning with a payment of l%, less the Deposit, on the effective date of the Purchase Agreement for the Aircraft. Additional advance payments for each Aircraft are due as specified in and on the first business day of the months listed in the attached Table 1.

4.3 For any Aircraft whose scheduled month of delivery is less than 24 months from the date of this Purchase Agreement, the total amount of advance payments due for payment upon signing of this Purchase Agreement will include all advance payments which are past due in accordance with the standard advance payment schedule set forth in paragraph 4.2 above.

4.4 Customer will pay the balance of the Aircraft Price of each Aircraft at delivery.

Article 5. ADDITIONAL TERMS.

5.1 EXCUSABLE DELAY. Article 7.1 of the basic articles of the AGTA is revised to read as follows:

7.1 GENERAL. Boeing will not be liable for any delay in the scheduled delivery month of an aircraft or other performance under a purchase agreement caused by (i) acts of God; (ii) war or armed hostilities; (iii) government acts or priorities; (iv) fires, floods, or earthquakes; (v) strikes or labor troubles causing cessation, slowdown, or interruption of work; (vi) inability, after due and timely diligence, to procure materials, systems, accessories, equipment or parts; (vii) inability, after due and timely diligence, to obtain type certification; or (viii) any other cause to the extent such cause is beyond Boeing's control and not occasioned by Boeing's fault or negligence. A delay resulting from any such cause is defined as an EXCUSABLE DELAY.

5.2 AIRCRAFT INFORMATION TABLE. Table 1 consolidates information contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft,
(ii) applicable Detail Specification, (iii) month and year of scheduled deliveries, (iv) Aircraft Basic Price, (v) applicable escalation factors and
(vi) Advance Payment Base Prices and advance payments and their schedules.

5.3 ESCALATION ADJUSTMENT/AIRFRAME AND OPTIONAL FEATURES. Supplemental Exhibit AE1 contains the applicable airframe and optional features escalation formula.

5.4 BUYER FURNISHED EQUIPMENT VARIABLES. Supplemental Exhibit BFE1 contains vendor selection dates and other variables applicable to the Aircraft./

5.5 CUSTOMER SUPPORT VARIABLES. Information, training, services and other things furnished by Boeing in support of introduction of the Aircraft into Customer's fleet are described in Supplemental Exhibit CS1.

5.6 SERVICE LIFE POLICY COMPONENT VARIABLES. Supplemental Exhibit SLP1 lists the airframe and landing gear components covered by the Service Life Policy for the Aircraft (COVERED COMPONENTS).

5.7 PUBLIC ANNOUNCEMENT. Each of Customer and Boeing reserves the right to make a public announcement regarding Customer's purchase of the Aircraft upon approval of its press release by the other party's public relations department or other authorized representative.

5.8 NEGOTIATED AGREEMENT; ENTIRE AGREEMENT. This Purchase Agreement, including the provisions of Article 8.2 of the AGTA relating to insurance, and Article 11 of Part 2 of Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of discussion and negotiation and is understood by the parties; the Aircraft Price and other agreements of the parties stated in this Purchase Agreement were arrived at in consideration of such provisions. This Purchase Agreement, including the AGTA, contains the entire agreement between the parties and supersedes all previous proposals, understandings, commitments or representations whatsoever, oral or written, and may be changed only in writing signed by authorized representatives of the parties.

DATED AS OF SEPTEMBER 8, 2006:

ATLAS AIR, INC.                                    THE BOEING COMPANY



                                                   [ * ]
/s/ William J. Flynn
---------------------------------------------      -----------------------------

BY:   Mr. William J. Flynn                         BY:   [ * ]
      ---------------------------------------      -----------------------------

ITS:  President and Chief Executive Officer        ITS:  Attorney In Fact
      ---------------------------------------      -----------------------------

                                   TABLE 1 TO
                           PURCHASE AGREEMENT NO. 3134
               AIRCRAFT INFORMATION TABLE FOR THE 747-8F AIRCRAFT

AIRFRAME MODEL/MTOW:                747-8F      970,000 pounds        DETAIL SPECIFICATION:                  D019U020 (7/31/2006)

ENGINE MODEL/THRUST:               GENX-2B67     66,500 pounds        AIRFRAME PRICE BASE YEAR/ESCALATION
                                                                           FORMULA:                           [ * ]         [ * ]

AIRFRAME PRICE:                                 $        [ * ]        ENGINE PRICE BASE YEAR/ESCALATION
                                                                           FORMULA:                            N/A           N/A
OPTIONAL FEATURES:                              $        [ * ]
                                                ---------------

                                                                      AIRFRAME ESCALATION DATA:

SUB-TOTAL OF AIRFRAME AND
   FEATURES:                                    $        [ * ]        BASE YEAR INDEX (ECI):                       [ * ]

ENGINE PRICE (PER AIRCRAFT):                    $        [ * ]        BASE YEAR INDEX (CPI):                       [ * ]

AIRCRAFT BASIC PRICE (EXCLUDING BFE/SPE):       $        [ * ]
                                                ===============

BUYER FURNISHED EQUIPMENT (BFE) ESTIMATE:       $            0

SELLER PURCHASED EQUIPMENT (SPE) ESTIMATE:      $            0

REFUNDABLE DEPOSIT/AIRCRAFT AT PROPOSAL
ACCEPT:                                         $        [ * ]

------------------------------------------------------------------------------------------------------------------------------------
                                                             ESCALATION     ADVANCE PAYMENT PER AIRCRAFT (AMTS. DUE/MOS. PRIOR TO
                       ESCALATION                             ESTIMATE                              DELIVERY):
 DELIVERY  NUMBER OF     FACTOR   AIRCRAFT  MANUFACTURER  ADV PAYMENT BASE ---------------------------------------------------------
   DATE     AIRCRAFT   (AIRFRAME)   BLOCK   SERIAL NUMBER   PRICE PER A/P      [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                         [ * ]                                                 [ * ]       [ * ]           [ * ]           [ * ]
Feb-2010       1         [ * ]       A         37562           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37563           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37564           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37565           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37566           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37567           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37561           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37568           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37569           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37570           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
  [ * ]                  [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
  [ * ]        1         [ * ]       A         37571           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                         [ * ]                                 [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
Oct-2011       1         [ * ]       A         37572           [ * ]           [ * ]       [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------

Total: 12

                                   TABLE 2 TO
                           PURCHASE AGREEMENT NO. 3134
        OPTION AIRCRAFT DELIVERY, DESCRIPTION, PRICE AND ADVANCE PAYMENTS


AIRFRAME MODEL/MTOW:                747-8F       970,000 pounds           DETAIL SPECIFICATION:                D0 19U020 (7/31/2006)

ENGINE MODEL/THRUST:               GENX-2B67     66,500 pounds            AIRFRAME PRICE BASE YEAR/ESCALATION
                                                                               FORMULA:                          [ * ]       [ * ]

AIRFRAME PRICE:                                  $       [ * ]            ENGINE PRICE BASE  YEAR/ESCALATION
                                                                               FORMULA:                           N/A         N/A
OPTIONAL FEATURES:                               $       [ * ]
                                                 --------------

                                                                          AIRFRAME ESCALATION DATA:
SUB-TOTAL OF AIRFRAME AND
   FEATURES:                                     $       [ * ]            BASE YEAR INDEX (ECI):                       [ * ]

ENGINE PRICE (PER AIRCRAFT):                     $       [ * ]            BASE YEAR INDEX (CPI):                       [ * ]

AIRCRAFT BASIC PRICE (EXCLUDING BFE/SPE):        $       [ * ]
                                                 ==============

BUYER FURNISHED EQUIPMENT (BFE) ESTIMATE:        $           0

SELLER PURCHASED EQUIPMENT (SPE) ESTIMATE:       $           0

NON-REFUNDABLE DEPOSIT/AIRCRAFT AT DEF
AGREEMT:                                         $       [ * ]

------------------------------------------------------------------------------------------------------------------------------------
                                                           ESCALATION
                       ESCALATION                           ESTIMATE
  DELIVERY   NUMBER OF   FACTOR                         ADV PAYMENT BASE     ADVANCE PAYMENT PER AIRCRAFT (AMTS. DUE/MOS. PRIOR TO
    DATE     AIRCRAFT  (AIRFRAME)                         PRICE PER A/P                           DELIVERY):
------------------------------------------------------------------------------------------------------------------------------------
                                                                              [ * ]        [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                                                                              [ * ]        [ * ]           [ * ]           [ * ]
   [ * ]      [ * ]      [ * ]      [ * ]      [ * ]         [ * ]            [ * ]        [ * ]           [ * ]           [ * ]
------------------------------------------------------------------------------------------------------------------------------------

TOTAL: [ * ]

TABLE 3 TO
PURCHASE AGREEMENT NO. 3134
PURCHASE RIGHTS AIRCRAFT INFORMATION TABLE

Customer may elect to exercise up to [ * ] Purchase Rights Aircraft for delivery from [ * ] through [ * ], inclusive.

Such election will require a minimum of [ * ] written notice from the month of requested delivery and will be subject to available position (STAP) subject to conditions as follows:

1.1.1      purchase  rights  are  offered  to  Customer on a non-
           exclusive basis;

1.1.2      the  terms  and  conditions  of Article 3. (PRICE) are
           applicable as follows:

       1.1.2.1   The Airframe Price,  Optional Features Price and
                 Aircraft   Basic   Price  will  be  adjusted  to
                 Boeing's  then current  prices for such elements
                 as of the date of  execution  of the  definitive
                 purchase  agreement  for the  aircraft for which
                 the purchase rights are exercised.

       1.1.2.2   The escalation  indices and methodology  used to
                 estimate the Advance Payment Base Prices will be
                 adjusted to Boeing's then current provisions for
                 such elements as of the date of execution of the
                 definitive purchase agreement.

REMAINING PURCHASE RIGHTS FOR AIRCRAFT WITH DELIVERY TO OCCUR FROM [ * ] THROUGH
[ * ], INCLUSIVE: [ * ]

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

ATLAS AIR, INC.

Exhibit A to Purchase Agreement Number 3134

AIRCRAFT CONFIGURATION

Dated DECEMBER 2005

relating to

BOEING MODEL 747-8 FREIGHTER (747-8 F) AIRCRAFT

The Customer Airplane Description is based on Boeing Airplane Description D019U022 dated 90 days after firm configuration. Such Airplane Description will be comprised of Boeing Airplane Description D019U020, Revision C, dated July 31, 2006 (BASELINE SPECIFICATION), or later Boeing Airplane Description version then released, as amended to incorporate the Options accepted by Customer as more fully discussed in Letter Agreement 3134, Open Configuration Matters (OPEN CONFIGURATIONS MATTER LETTER). The [ * ] on the Aircraft will be equal or better than that [ * ].

The Detail Specification is the Baseline Specification and will be revised to include Options accepted by Customer as more fully discussed in the Open Configurations Matter Letter. Customer will have the chance to make input on [ * ].

The Aircraft Basic Price does not include an estimated price or price for Options, Buyer Furnished Equipment or Seller Purchased Equipment.

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

between

THE BOEING COMPANY

and

ATLAS AIR, INC.

Exhibit B to Purchase Agreement Number 3134

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

relating to

BOEING MODEL 747-8 FREIGHTER AIRCRAFT

Both Boeing and Customer have certain documentation and approval responsibilities at various times during the construction cycle of Customer's Aircraft that are critical to making the delivery of each Aircraft. This Exhibit B documents those responsibilities and indicates Boeing's recommended completion deadlines for the actions to be accomplished.

1. GOVERNMENT DOCUMENTATION REQUIREMENTS.

Certain actions are required to be taken by Customer in advance of the scheduled delivery month of each Aircraft with respect to obtaining certain government issued documentation.

1.1 AIRWORTHINESS AND REGISTRATION DOCUMENTS.

Not later than [ * ] PRIOR TO DELIVERY of each Aircraft. Customer will notify Boeing of the registration number to be painted on the side of the Aircraft. In addition, and not later than [ * ] PRIOR TO DELIVERY of each Aircraft, Customer will, by letter to the regulatory authority having jurisdiction, authorize the temporary use of such registration numbers by Boeing during the pre-delivery testing of the Aircraft.

Customer is responsible for furnishing any Temporary or Permanent Registration Certificates required by any governmental authority having jurisdiction to be displayed aboard the Aircraft after delivery.

1.2 CERTIFICATE OF SANITARY CONSTRUCTION.

NON-U.S. REGISTERED AIRCRAFT. Customer requires, and Boeing will provide Customer as a "no cost" option, a United States Certificate of Sanitary Construction at the time of delivery of the Aircraft. Boeing will obtain the Certificate from the United States Public Health Service and present it to Customer at the time of Aircraft delivery.

B-1

1.3 CUSTOMS DOCUMENTATION.

1.3.1 IMPORT DOCUMENTATION. If the Aircraft is intended to be exported from the United States. Customer must notify Boeing not later than [ * ] PRIOR TO DELIVERY of each Aircraft of any documentation from Boeing required from Boeing by the customs authorities or by any other agency of the country of import.

1.3.2 GENERAL DECLARATION - U.S. If the Aircraft is intended to be exported from the United States, Boeing will prepare Customs Form 7507, General Declaration, for execution by U.S. Customs immediately prior to the ferry flight of the Aircraft. For this purpose, Customer will furnish to Boeing not later than [ * ] PRIOR TO DELIVERY all information required by U.S. Customs or U.S. Immigration and Naturalization Service, including without limitation (i) a complete crew and passenger list identifying the names, birth dates, passport numbers and passport expiration dates of all crew and passengers and (ii) a complete ferry flight itinerary, including point of exit from the United States for the Aircraft.

If Customer intends, during the ferry flight of an Aircraft, to land at a U.S. airport after clearing Customs at delivery, Customer must notify Boeing not later than [ * ] PRIOR TO DELIVERY of such intention. If Boeing receives such notification, Boeing will provide to Customer the documents constituting a Customs permit to proceed, allowing such Aircraft to depart after any such landing. Sufficient copies of completed Form 7507, along with passenger manifest, will be furnished to Customer to cover U.S. stops scheduled for the ferry flight.

1.3.3 EXPORT DECLARATION - U.S. If the Aircraft is intended to be exported from the United States, Boeing will prepare Form 7525V and, [ * ], will submit such Form to U.S. Customs in Seattle in order to obtain clearance for the departure of the Aircraft, including any cargo, from the United States. U.S. Customs will deliver the Export Declaration to the U.S. Department of Commerce after export.

2. INSURANCE CERTIFICATES.

Unless provided earlier, Customer will provide to Boeing not later than [ * ] PRIOR TO DELIVERY of the first Aircraft, a copy of the requisite annual insurance certificate in accordance with the requirements of Article 8 of the AGTA.

B-2

3. NOTICE OF FLYAWAY CONFIGURATION.

Not later than [ * ] PRIOR TO DELIVERY of the Aircraft, Customer will provide to Boeing a configuration letter stating the requested "flyaway configuration" of the Aircraft for its ferry flight. This configuration letter should include:

(i) the name of the company which is to furnish fuel for the ferry flight and any scheduled post-delivery flight training, the method of payment for such fuel. and fuel load for the ferry flight;

(ii) the cargo to be loaded and where it is to be stowed on board the Aircraft, the address where cargo is to be shipped after flyaway and notification of any hazardous materials requiring special handling;

(iii) any BFE equipment to be removed prior to flyaway and returned to Boeing BFE stores for installation on Customer's subsequent Aircraft;

(iv) a complete list of names and citizenship of each crew member and non-revenue passenger who will be aboard the ferry flight; and

(v) a complete ferry flight itinerary.

4. DELIVERY ACTIONS BY BOEING.

4.1 SCHEDULE OF INSPECTIONS. All FAA, Boeing, Customer and, if required, U.S. Customs Bureau inspections will be scheduled by Boeing for completion prior to delivery or departure of the Aircraft. Customer will be informed of such schedules [ * ].

4.2 SCHEDULE OF DEMONSTRATION FLIGHTS. All FAA and Customer demonstration flights will be scheduled by Boeing for completion prior to delivery of the Aircraft.

4.3 SCHEDULE FOR CUSTOMER'S FLIGHT CREW. Boeing will inform Customer of the date that a flight crew is required for acceptance routines associated with delivery of the Aircraft.

4.4 FUEL PROVIDED BY BOEING. Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft.

AIRCRAFT MODEL                               FUEL PROVIDED
---------------                            -----------------

747                                              [ * ]

B-3

4.5 FLIGHT CREW AND PASSENGER CONSUMABLES. Boeing will provide reasonable quantities of food, coat hangers, towels, toilet tissue, drinking cups and soap for the first segment of the ferry flight for the Aircraft.

4.6 DELIVERY PAPERS, DOCUMENTS AND DATA. Boeing will have available at the time of delivery of the Aircraft certain delivery papers, documents and data for execution and delivery. If title for the Aircraft will be transferred to Customer through a Boeing sales subsidiary and if the Aircraft will be registered with the FAA, Boeing will pre-position in Oklahoma City, Oklahoma for filing with the FAA at the time of delivery of the Aircraft an executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of title to the Aircraft from Boeing's sales subsidiary to Customer. It is understood by the parties that the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on Matters Specific to Aircraft Equipment and the regulations issued thereunder (collectively, the "Cape Town Convention") will be applicable to the Purchase Agreement. The parties agree that each shall appoint an administrator and/or a professional registry user entity, as applicable, that can consent to the registration of Customer's international interest in the Aircraft with the international registry located in Dublin, Ireland (the "International Registry"). Further, Boeing shall consent to Customer's filing of its international interest in the Aircraft after passage of title to the Aircraft from Boeing to the Customer, provided that such filing is correct and complete.

4.7 DELEGATION OF AUTHORITY. If specifically requested in advance by Customer, Boeing will present a certified copy of a Resolution of Boeing's Board of Directors, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft.

5. DELIVERY ACTIONS BY CUSTOMER.

5.1 AIRCRAFT RADIO STATION LICENSE. At delivery Customer will provide its Aircraft Radio Station License to be placed on board the Aircraft following delivery.

5.2. AIRCRAFT FLIGHT LOG. At delivery Customer will provide the Aircraft Flight Log for the Aircraft.

5.3 DELEGATION OF AUTHORITY. Customer will present to Boeing at delivery of the Aircraft an original or certified copy of Customer's Delegation of Authority designating and authorizing certain persons to act on its behalf in connection with delivery of the specified Aircraft.

B-4

ESCALATION ADJUSTMENT

AIRFRAME AND OPTIONAL FEATURES

between

THE BOEING COMPANY

and

ATLAS AIR, INC.

Supplemental Exhibit AE1 to Purchase Agreement Number 3134

FOR MODEL 747-8 FREIGHTER AIRCRAFT: THE AIRFRAME PRICE INCLUDES THE ENGINE PRICE

AT ITS BASIC THRUST LEVEL.

AE1

1. FORMULA

Airframe and Optional Features price adjustments (Airframe Price Adjustment) are used to allow prices to be stated in current year dollars at the signing of this Purchase Agreement and to adjust the amount to be paid by Customer at delivery for the effects of economic fluctuation. The Airframe Price Adjustment will be determined at the time of Aircraft delivery in accordance with the following formula:

Pa = [ * ]

Where:

        Pa =               Airframe   Price  Adjustment.   (For  Models
                           717-200, 737-600, 737-700, 737-800, 737-900,
                           747-8,  777-200LR,  777-F, and 777-300ER the
                           Airframe  Price includes the Engine Price at
                           its basic thrust level.)

         P =               Airframe  Price  plus  the  price   of   the
                           Optional   Features (as set forth in Table 1
                           of this Purchase Agreement).
                                  L =       [ * ]

                           Where:

                           [ * ]  is the base year airframe  escalation
                           index (as set  forth  in  Table  1  of  this
                           Purchase Agreement);

                           [ * ] is the three-month  arithmetic average
                           value  of   [ * ]  for  October,   November,
                           and December [ * ], using [ * ];

                           [ * ] is the three-month  arithmetic average
                           value  of   [ * ]  for  October,  November,
                           and December [ * ], using the [ * ]; and

                           [ * ] is a value  determined  using the U.S.
                           Department   of   Labor,   Bureau  of  Labor

Statistics, [ * ], calculated by establishing a three-month arithmetic average value (expressed as a decimal and rounded to the nearest tenth) using the values for the 11th, 12th, and 13th months prior to the month of scheduled delivery of the applicable Aircraft. As the [ * ] values are only

AE1-1

released on a quarterly basis, the value released for the first quarter will be used for the months of January, February, and March; the value released for the second quarter will be used for the months of April, May, and June; the value released for the third quarter will be used for the months of July, August, and September; the value released for the fourth quarter will be used for the months of October, November, and December.

M = [ * ]

Where:

[ * ] is the base year airframe escalation
index (as set forth in Table 1 of this
Purchase Agreement); and

[ * ] is a value determined using the U.S.
Department of Labor, Bureau of Labor
Statistics, [ * ], calculated as a 3-month
arithmetic average of the released monthly
values (expressed as a decimal and rounded
to the nearest tenth) using the values for
the 11th, 12th, and 13th months prior to the
month of scheduled delivery of the
applicable Aircraft.

As an example, for an Aircraft scheduled to be delivered in the month of July, the months of June, July, and August of the preceding year will be utilized in determining the value of ECI-R and CPI.

Note: i. In determining the values of L and M, all calculations and resulting values will be expressed as a decimal rounded to the nearest ten-thousandth.

ii. [ * ] is the numeric ratio attributed to labor in the Airframe Price Adjustment formula.

iii. [ * ] is the numeric ratio attributed to materials in the Airframe Price Adjustment formula.

iv. The denominators (base year indices) are the actual average values reported by the U.S. Department of Labor, Bureau of Labor Statistics. The actual average values are calculated as a 3-month arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest tenth) using the values for the 11th, 12th, and 13th months prior to the airframe

AE1-1

base year. The applicable base year and corresponding denominator is provided by Boeing in Table 1 of this Purchase Agreement.

v. The final value of Pa will be rounded to the nearest dollar.

vi. The Airframe Price Adjustment will not be made if it will result in a decrease in the Aircraft Basic Price.

2. VALUES TO BE UTILIZED IN THE EVENT OF UNAVAILABILITY.

2.1 If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine the
[ * ] values (in contrast to benchmark adjustments or other corrections of previously released values), or for any reason has not released values needed to determine the applicable Airframe Price Adjustment, the parties will, prior to the delivery of any such Aircraft, select a substitute from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations. Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period. However, if within 24 months after delivery of the Aircraft, the Bureau of Labor Statistics should resume releasing values for the months needed to determine the Airframe Price Adjustment, such values will be used to determine any increase or decrease in the Airframe Price Adjustment for the Aircraft from that determined at the time of delivery of the Aircraft.

2.2 Notwithstanding Article 2.1 above, if prior to the scheduled delivery month of an Aircraft the Bureau of Labor Statistics changes the base year for determination of the [ * ] values as defined above, such re-based values will be incorporated in the Airframe Price Adjustment calculation.

2.3 In the event escalation provisions are made non-enforceable or otherwise rendered void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, to equitably adjust the Aircraft Price of any affected Aircraft to reflect an allowance for increases or decreases consistent with the applicable provisions of paragraph 1 of this Supplemental Exhibit AE1 in labor compensation and material costs occurring since August of the year prior to the price base year shown in the Purchase Agreement.

2.4 If within 12 months of Aircraft delivery, the published index values are revised due to an acknowledged error by the Bureau of Labor Statistics, the Airframe Price Adjustment will be re-calculated using the revised index values (this does not include those values noted as preliminary by the Bureau of Labor Statistics). A credit memorandum or supplemental invoice will be issued for the Airframe Price Adjustment difference. Interest charges will not apply for the period of original invoice to issuance of credit memorandum or supplemental invoice.

NOTE: i. The values released by the Bureau of Labor Statistics and available to Boeing [ * ] prior to the first day of the scheduled delivery month of an

AE1-1

Aircraft will be used to determine the [ * ] values for the applicable months (including those noted as preliminary by the Bureau of Labor Statistics) to calculate the Airframe Price Adjustment for the Aircraft invoice at the time of delivery. The values will be considered final and no Airframe Price Adjustments will be made after Aircraft delivery for any subsequent changes in published Index values, subject always to paragraph 2.4 above.

ii. The maximum number of digits to the right of the decimal after rounding utilized in any part of the Airframe Price Adjustment equation will be 4, where rounding of the fourth digit will be increased to the next highest digit when the 5th digit is equal to 5 or greater.

AE1-1

CUSTOMER SUPPORT VARIABLES

between

THE BOEING COMPANY

and

ATLAS AIR, INC.

Supplemental Exhibit CS1 to Purchase Agreement Number 3134

CS1

CUSTOMER SUPPORT VARIABLES

relating to

BOEING MODEL 747-8 FREIGHTER AIRCRAFT

Customer and Boeing will conduct planning conferences approximately 12 months before delivery of the first Aircraft, or as otherwise agreed, to develop and schedule a customized Customer Support Program to be furnished by Boeing in support of the Aircraft.

The customized Customer Services Program will be based upon and equivalent to the entitlements summarized below.

1. MAINTENANCE TRAINING.

1.1 Airplane General Familiarization Course; [ * ] class of [ * ] students;

1.2 Mechanical/Power Plant Systems Course; [ * ] classes of [ * ] students;

1.3 Electrical Systems Course; [ * ] classes of [ * ] students;

1.4 Avionics Systems Course; [ * ] classes of [ * ] students;

1.5 Corrosion Prevention & Control Course: [ * ] class of [ * ] students;

1.6 Aircraft Rigging Course; [ * ] class of [ * ] students;

1.7 Composite Repair for Technicians - Basic; [ * ] class of [ * ] students;

1.8 Cargo Loading Course - [ * ] class of [ * ] students.

1.9 Training materials will be provided to each student. In addition, one set of training materials used in Boeing's training program, including visual aids, Computer Based Training Courseware, instrument panel wall charts, text/graphics, video programs, etc. will be provided for use in Customer's own training program.

1.10 Wherever possible and upon request by Customer, preceding shall be held at Customer's facilities located in the United States of America.

CS1-1

2. FLIGHT TRAINING.

2.1 Transition training for [ * ] flight crews ([ * ] pilots) in [
* ] classes. The training will consist of ground school (utilizing computer based training), fixed base simulator, full flight simulator and actual aircraft training on Customer's Aircraft.

2.2 Flight Dispatcher training; [ * ] classes of [ * ] students;

2.3 Flight Attendant training; [ * ] classes of [ * ] students;

2.4 Performance Engineer training in Boeing's regularly scheduled courses; schedules are published twice yearly.

2.5 Training materials will be provided to each student. In addition, one set of training materials as used in Boeing's training program, including visual aids, Computer Based Training Courseware, instrument panel wall charts, text/graphics, video programs, Flight Attendant Manuals, etc. will be provided for use in Customer's own training program.

2.6 Additional Flight Operations Services:

a. Boeing flight crew personnel to assist in ferrying the first aircraft to Customer's main base;

b. Instructor pilots for [ * ] calendar days for revenue service training assistance;

c. An instructor pilot to visit Customer [ * ] months after revenue service training to review Customer's flight crew operations for a [ * ] week period.

CS1-2

3. PLANNING ASSISTANCE.

3.1 MAINTENANCE AND GROUND OPERATIONS.

Upon request, Boeing will visit Customer's main base to evaluate aircraft maintenance facilities, develop recommendations and assist in maintenance planning.

3.2 SPARES.

a) RECOMMENDED SPARES PARTS LIST (RSPL) customized RSPL, data and documents will be provided to identify spare parts required for Customer's support program nine months before first aircraft. When available, the RSPL for the basic configuration 747-8 freighter aircraft shall be provided by Boeing to the Customer.

b) ILLUSTRATED PARTS CATALOG (IPC) A customized IPC in accordance with ATA 100 will be provided.

c) PROVISIONING TRAINING Provisioning training will be provided for Customer's personnel at Boeing's facilities, where documentation and technical expertise are available. Training is focused on the initial provisioning process and calculations reflected in the Boeing RSPL.

d) SPARES PROVISIONING CONFERENCE A provisioning conference will be conducted, normally at Boeing's facilities where technical data and personnel are available but may be held at Customer's facilities in the United States of America.

4: TECHNICAL DATA AND DOCUMENTS

4.1. FLIGHT OPERATIONS.

Airplane Flight Manual

Operations Manual
Quick Reference Handbook
Weight and Balance Manual
Dispatch Deviation Procedures Guide Flight Crew Training Manual Performance Engineer's Manual Jet Transport Performance Methods FMC Supplemental Data Document Operational Performance Software Fault Reporting Manual
ETOPS Guide Vol. III

CS1-3

Flight Planning and Performance Manual

4.2. MAINTENANCE.

Aircraft Maintenance Manual

Wiring Diagram Manual
Systems Schematics Manual Connector Part Number Options Document Structural Repair Manual Overhaul/Component Maintenance Manual Standard Overhaul Practices Manual Standard Wiring Practices Manual Non-Destructive Test Manual Service Bulletins and Index Corrosion Prevention Manual Fault Isolation Manual Fuel Measuring Stick Calibration Document Power Plant Buildup Manual Central Maintenance Computer System Reporting Table In Service Activity Report All Operator Letters
Service Letters
Structural Item Interim Advisory Maintenance Tips
Combined Index
Baggage/Cargo Loading Manual (747 and 767 Aircraft)

4.3. MAINTENANCE PLANNING.
Maintenance Planning Data Document Maintenance Planning Data Tasks Masterfile Maintenance Task Cards and Index Maintenance Inspection Intervals Report ETOPS Guide Vol. II
Configuration Maintenance and Procedures for Extended Range Operations

4.4. SPARES.

Illustrated Parts Catalog

Standards Books

4.5. FACILITIES AND EQUIPMENT PLANNING.

Facilities and Equipment

Planning Document
Special Tool and Ground Handling Equipment Drawings and Index Supplementary Tooling Documentation Illustrated Tool and Equipment List/Manual Aircraft Recovery Document Airplane Characteristics for Airport Planning Document

CS1-4

Airplane Rescue and Fire Fighting Document Engine Handling Document ETOPS Guide Vol. I

4.6. SUPPLIER TECHNICAL DATA.

Service Bulletins

Ground Support Equipment Data Provisioning Information Component Maintenance/Overhaul Manuals and Index Publications Index
Product Support Supplier Directory

CS1-5

ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY

between

THE BOEING COMPANY

and

ATLAS AIR, INC.

Supplemental Exhibit EE1 to Purchase Agreement Number 3134 (PURCHASE AGREEMENT)

EE1

ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY

relating to

BOEING MODEL 747-8 Freighter AIRCRAFT

1. ENGINE ESCALATION. No separate engine escalation methodology is defined for the 747-8 Freighter Aircraft. Pursuant to the Purchase Agreement, the engine prices for these Aircraft are included in and will be escalated in the same manner as the Airframe Price.

2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN. Boeing has obtained from General Electric Company (GE) GE's guarantee that GE will extend directly to Customer GE's warranty, special guarantees and product support services (hereinafter collectively referred to as the "WARRANTY"); subject, however, to Customer's acceptance of the conditions set forth in the Warranty.

In consideration for Boeing's having obtained GE's guarantee to provide the Warranty directly to the Customer, Customer hereby releases and discharges Boeing from any and all claims, obligations and liabilities whatsoever arising out of the purchase or use of such Engines and Customer hereby waives, releases and renounces all its rights in all such claims, obligations and liabilities.
THE WARRANTY GE EXTENDS DIRECTLY TO CUSTOMER IS EXCLUSIVE, AND IS IN LIEU OF ALL OTHER WARRANTIES WHETHER WRITTEN. ORAL OR IMPLIED. THERE ARE NO IMPLIED WARRANTIES OF FITNESS OR MERCHANTABILITY.

EE1

                           Atlas Air, Inc.
                           2000 Westchester Avenue
                           Purchase, NY 10577-2543

                           Subject:         Supplemental Exhibit SLP1
                                            [ * ] Service Life Policy [ * ]
[GRAPHIC OMITTTED]
                           Reference:       Purchase Agreement No. 3134
                                            (the PURCHASE AGREEMENT)
                                            between The Boeing Company
                                            (BOEING) and Atlas Air, Inc.
                                            (CUSTOMER) relating to Model
                                            747-8 Freighter aircraft (the
                                            AIRCRAFT)

This Letter Agreement amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

[ * ] warranty period for each Boeing Product through the first occurrence of Customer's inspection of each such Boeing Product. [ * ] the parties agree as follows.

1.0 WARRANTY PERIOD.

Article 3 of Part 2 of Exhibit C to the AGTA is
[ * ]:

"3.1 WARRANTY. The warranty period begins on the date of aircraft or Boeing Product delivery DELIVERY) and ends at the applicable time specified in subsections 3.1(i) through 3.1(iii) below:

(i) for Boeing aircraft models 777-200, -300, 737-600, -700, -800, -900, 787 or new aircraft models designed and manufactured with similar, new technology the warranty period ends
[ * ] after Delivery;
(ii) for 747-8 Freighter Customer Aircraft, the warranty period ends
[ * ] after Delivery;
(iii) in addition, for a Boeing Product installed at the time of delivery in a 747-8 Freighter Customer Aircraft but not inspected during the initial [ * ] warranty period, the warranty period continues until the date upon which Customer first inspects such Boeing Product pursuant to its Boeing Maintenance Planning Data Document but not later than [ * ] of such 747-8 Customer Aircraft;
(iv) for any other Boeing aircraft model the warranty period ends [ * ] after Delivery."

3.0 CUSTOMER'S OBLIGATIONS.

Article 6.2 of Part 2 of Exhibit C to the AGTA is [ * ] the following provision:
[GRAPHIC OMITTED]

"(xi) for 747-8 Freighter Customer
Aircraft claims submitted after the
[ * ] warranty period, the specific
reference within the Boeing
Maintenance Planning Data Document
to the inspection requirement for
such Boeing Product."

4.0 SERVICE LIFE POLICY.

Article 2.2 of Part 3 of Exhibit C to the AGTA is amended to read as follows:

"2.2.1 The policy period for SLP Components initially installed on an aircraft is [ * ] after the date of delivery of the aircraft except that for SLP components initially installed on a 747-8 Freighter Customer Aircraft the policy period is [ * ] after the date of delivery of the 747-8 Freighter Customer Aircraft. For this purpose only, the term SLP Components shall also include control surfaces, landing gear doors, and wing-to-body fairings.

2.2.2 The policy period for SLP [
* ] purchased from Boeing by Customer as spare parts is [ * ] from delivery of such SLP [ * ] or [ * ] from the date of delivery of the last aircraft produced by Boeing of a specific model whichever first expires, except that for the 747-8 Freighter Customer Aircraft such policy period is [ * ] from delivery of such SLP component or [ * ] from the date of delivery of the last 747-8 Freighter Customer Aircraft produced by Boeing whichever first expires."

Article 3 of Part 3 of Exhibit C to the AGTA is
[ * ] as follows:

"3. PRICE.

The price Customer will pay for replacement of a failed SLP Component will be calculated pursuant to the following formulas:

(i) For 747-8 Freighter Customer Aircraft only:

P = C(T-[ * ])
[ * ]

where:

P = price to Customer for the replacement part C = SLP Component sales price at time of Correction T = total age in months of the failed SLP Component from the date of delivery to Customer to the date of discovery of such condition and is greater than [ * ]."

If the foregoing correctly sets forth your understanding of our agreement with respect to matters described above, please indicate your acceptance and approval below.

Very truly yours,

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

By: Mr. William J. Flynn

Its: President and Chief Executive Officer

Subject:        Open Configuration Matters (LETTER AGREEMENT)

Reference:      Purchase  Agreement  3134 (the PURCHASE  AGREEMENT)  between The
                Boeing Company (BOEING) and Atlas Air, Inc.  (CUSTOMER) relating
                to Model 747-8 Freighter aircraft (the AIRCRAFT)

This Letter Agreement amends the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1. AIRCRAFT CONFIGURATION.

1.1 INITIAL CONFIGURATION. The initial configuration of Customer's Model 747-8 Freighter Aircraft has been defined by Boeing Model 747-8 Freighter basic specification D019U020, Revision C, dated July 31, 2006 (the BASIC SPECIFICATION) as described in Article 1 and Exhibit A of the Purchase Agreement (the AIRCRAFT CONFIGURATION). The Basic Specification describes the major changes associated with the 747-8 Freighter airplane relative to the model 747-400 Freighter airplane, as such model 747-400 Freighter airplane is described in specification D019U002, Revision H, dated March 29, 2006. Given the long period of time between the Purchase Agreement signing and delivery of the first Aircraft, Customer may have the desire to incorporate certain configuration changes (OPTIONS) into the Aircraft Configuration. For the avoidance of doubt, Attachment A to this Letter Agreement identifies [ * ].

1.2 FINAL CONFIGURATION SCHEDULE. No later than [ * ] prior to the first Aircraft's scheduled delivery month, Boeing and Customer will discuss potential Options. Within [ * ] after that meeting, Boeing will provide Customer with Option proposals for those configuration changes that can be incorporated in Aircraft production. Customer will then have [ * ] to accept or reject these Options.

2. EFFECT ON PURCHASE AGREEMENT.

2.1 BASIC SPECIFICATION. [ * ] which are developed by Boeing between the date of signing of the Purchase Agreement and completion of the final configuration review

described in paragraph 1.2 above will be incorporated into the Aircraft Configuration by written amendment. For the avoidance of doubt, Boeing shall not revise the Aircraft Basic Price and the Advance Payment Base Price of each Aircraft for [ * ], except as permitted under Articles 3 and 4 of Aircraft General Terms Agreement dated as of JUNE 6, 1997 between the parties, identified as AGTA-TLS (AGTA). Additionally Boeing shall not charge the Customer for items shown as features that are basic to the Model 747-8 Freighter aircraft (as the Basic Configuration is described in paragraph l.l herein) [ * ].

2.2 EXHIBIT A. The effects of all Options which are mutually agreed upon between Boeing and Customer for incorporation into the Aircraft Configuration will be incorporated into Exhibit A of the Purchase Agreement by written amendment.

2.3 PERFORMANCE GUARANTEES. Within [ * ] after Customer's acceptance of any Options, Boeing will provide to Customer revisions to the Performance Guarantees to reflect the effects, if any, of the incorporation of such Options on Aircraft performance. Such revisions will be incorporated by written amendment.

2.4 PRICE ADJUSTMENTS. The Aircraft Basic Price and Advance Payment Base Price of each Aircraft included no amount (zero) as an estimate of the value of the Options and any related Seller Purchased Equipment which may be accepted and included in the final Aircraft Configuration. The Aircraft Basic Price and the Advance Payment Base Price of each Aircraft will be increased or decreased as required to reflect the difference between such estimate and the actual prices of the Options accepted by Customer.

3. PURCHASE AGREEMENT AMENDMENT.

Within [ * ] after reaching agreement as to the final Aircraft Configuration, Boeing will provide Customer an amendment to the Purchase Agreement reflecting the effects of the configuration changes agreed to by the parties.

4. CONFIDENTIAL TREATMENT.

faith concludes (based upon an opinion of counsel) that disclosure of information contained in this Letter Agreement may be required by applicable law or governmental regulations, Customer shall advise Boeing in writing prior to such disclosure, if possible, or, if not possible, then promptly upon receiving such order or upon identifying such need to comply, in order to enable Boeing to take whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible in the circumstances.

Very truly yours,

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

      /s/ William J. Flynn
---------------------------------------------

By:   Mr. William J. Flynn
      ---------------------------------------

Its: President and Chief Executive Officer

                        ATTACHMENT A TO Letter Agreement
                                      [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                          REFERENCE
        ATA             OPTION NUMBER                                     TITLE                                        COMMENTS
------------------------------------------------------------------------------------------------------------------------------------
       [ * ]                [ * ]                                         [ * ]                                          [ * ]
------------------------------------------------------------------------------------------------------------------------------------

                        ATTACHMENT A TO Letter Agreement
                                      [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                          REFERENCE
        ATA             OPTION NUMBER                                     TITLE                                        COMMENTS
------------------------------------------------------------------------------------------------------------------------------------
       [ * ]                [ * ]                                         [ * ]                                          [ * ]
------------------------------------------------------------------------------------------------------------------------------------

                        ATTACHMENT A TO Letter Agreement
                                      [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                          REFERENCE
        ATA             OPTION NUMBER                                     TITLE                                        COMMENTS
------------------------------------------------------------------------------------------------------------------------------------
       [ * ]                [ * ]                                         [ * ]                                          [ * ]
------------------------------------------------------------------------------------------------------------------------------------

                        ATTACHMENT A TO Letter Agreement
                                      [ * ]
------------------------------------------------------------------------------------------------------------------------------------
                          REFERENCE
        ATA             OPTION NUMBER                                     TITLE                                        COMMENTS
------------------------------------------------------------------------------------------------------------------------------------
       [ * ]                [ * ]                                         [ * ]                                          [ * ]
------------------------------------------------------------------------------------------------------------------------------------

Atlas Air, Inc.
2000 Westchester Avenue
Purchase, NY 10577-2543

Subject:          Spare Parts Initial Provisioning

Reference:        a)      Purchase  Agreement No. 3134 (the PURCHASE  AGREEMENT)
                          between  The  Boeing  Company  (BOEING) and Atlas Air,
                          Inc. (CUSTOMER)  relating  to  Model  747-8  Freighter
                          aircraft (the AIRCRAFT)

                  b)      Customer  Services  General  Terms  Agreement  No.  7U
                          (CSGTA)  between  Boeing and Customer,  dated November
                          12, 1997

This letter agreement (LETTER AGREEMENT) is entered into on the date below and amends and supplements the CSGTA. All capitalized terms used but not defined in this Letter Agreement have the same meaning as in the CSGTA, except for "Aircraft" which will have the meaning as defined in the Purchase Agreement.

In order to define the process by which Boeing and Customer will (i) identify those Spare Parts and Standards critical to Customer's successful introduction of the Aircraft into service and its continued operation, (ii) place Orders under the provisions of the CSGTA as supplemented by the provisions of this Letter Agreement for those Spare Parts and Standards, and (iii) manage the return of certain of those Spare Parts which Customer does not use, the parties agree as follows.

1. DEFINITIONS.

"PROVISIONING DATA" means the documentation provided by Boeing to Customer, including but not limited to the Recommended Spare Parts List (RSPL), identifying all Boeing initial provisioning requirements for the Aircraft.

"PROVISIONING ITEMS" means the Spare Parts and Standards identified by Boeing as initial provisioning requirements in support of the Aircraft, excluding special tools, ground support equipment (GSE), engines and engine parts.

"PROVISIONING PRODUCTS GUIDE" means the Boeing Manual D6-81834 entitled "Spares Provisioning Products Guide".

2. PHASED PROVISIONING.

2.1 PROVISIONING PRODUCTS GUIDE. One year prior to the initial provisioning meeting Boeing will furnish to Customer a copy of the Provisioning Products Guide.

2.2 INITIAL PROVISIONING MEETING. On or about twelve (12) months prior to delivery of the first Aircraft the parties will conduct an initial provisioning meeting, where the procedures, schedules, and requirements for training will be established to accomplish phased provisioning of Spare Parts and Standards for the Aircraft in accordance with the Provisioning Products Guide

2.3 PROVISIONING DATA. During the initial provisioning meeting Customer will provide to Boeing the operational parameter information described in Chapter 6 of the Provisioning Products Guide. After review and acceptance by Boeing of such Customer information, Boeing will prepare the Provisioning Data. Such Provisioning Data will be furnished to Customer on or about ninety (90) days after Boeing finalizes the engineering drawings for the Aircraft. The Provisioning Data will be as complete as possible and will cover Provisioning Items selected by Boeing for review by Customer for initial provisioning of Spare Parts and Standards for the Aircraft. Boeing will furnish to Customer revisions to the Provisioning Data until approximately ninety (90) days following delivery of the last Aircraft or until the delivery configuration of each of the Aircraft is reflected in the Provisioning Data, whichever is later.

2.4 BUYER FURNISHED EQUIPMENT (BFE) PROVISIONING DATA. Unless otherwise advised by Boeing, Customer will provide or ensure its BFE suppliers provide to Boeing the BFE data in scope and format acceptable to Boeing, in accordance with the schedule established during the initial provisioning meeting.

3. PURCHASE FROM BOEING OF SPARE PARTS AND STANDARDS AS INITIAL PROVISIONING FOR THE AIRCRAFT.

3.1 SCHEDULE. In accordance with schedules established during the initial provisioning meeting, Customer may place Orders for Provisioning Items and any ground support equipment (GSE), special tools or engine spare parts which Customer determines it will initially require for maintenance, overhaul and servicing of the Aircraft and/or engines.

3.2 PRICES OF INITIAL PROVISIONING SPARE PARTS.

3.2.1 BOEING SPARE PARTS. The Provisioning Data will set forth the prices for those Provisioning Items other than items listed in Article 3.3, below, that are Boeing Spare Parts, and such prices will be firm and remain in effect for ninety (90) days from the date the price is first quoted to Customer in the Provisioning Data.

3.2.2 SUPPLIER SPARE PARTS. Boeing will provide estimated prices in the Provisioning Data for Provisioning Items other than items listed in Article 3.3,

below, that are Supplier Spare Parts. The price to Customer for any Supplier Spare Parts that are Provisioning Items or for any items ordered for initial provisioning of GSE, special tools manufactured by suppliers, or engine spare parts will be [ * ] of the supplier's list price for such items.

3.3 QEC KITS, STANDARDS KITS, RAW MATERIAL KITS, BULK MATERIALS KITS AND SERVICE BULLETIN KITS. In accordance with schedules established during the initial provisioning meeting, Boeing will furnish to Customer a listing of all components which could be included in the quick engine change (QEC) kits, Standards kits, raw material kits, bulk materials kits and service bulletin kits which may be purchased by Customer from Boeing. Customer will select, and provide to Boeing its desired content for the kits. Boeing will furnish to Customer as soon as practicable thereafter a statement setting forth a firm price for such kits. Customer will place Orders with Boeing for the kits in accordance with schedules established during the initial provisioning meeting.

4. DELIVERY.

For Spare Parts and Standards ordered by Customer in accordance with Article 3 of this Letter Agreement, Boeing will, insofar as reasonably possible, deliver to Customer such Spare Parts and Standards on dates reasonably calculated to conform to Customer's anticipated needs in view of the scheduled deliveries of the Aircraft. Customer and Boeing will agree upon the date to begin delivery of the provisioning Spare Parts and Standards ordered in accordance with this Letter Agreement. Where appropriate, Boeing will arrange for shipment of such Spare Parts and Standards which are manufactured by suppliers directly to Customer from the applicable supplier's facility. The routing and method of shipment for initial deliveries and all subsequent deliveries of such Spare Parts and Standards will be as established at the initial provisioning meeting and thereafter by mutual agreement.

5. SUBSTITUTION FOR OBSOLETE SPARE PARTS.

5.1 OBLIGATION TO SUBSTITUTE PRE-DELIVERY. In the event that, prior to delivery of the first Aircraft, any Spare Part purchased by Customer from Boeing in accordance with this Letter Agreement as initial provisioning for the Aircraft is rendered obsolete or unusable due to the redesign of the Aircraft or of any accessory, equipment or part thereof (other than a redesign at Customer's request) Boeing will deliver to Customer at no charge new and usable Spare Parts in substitution for such obsolete or unusable Spare Parts and, upon such delivery, Customer will return the obsolete or unusable Spare Parts to Boeing.

5.2 DELIVERY OF OBSOLETE SPARE PARTS AND SUBSTITUTES. Obsolete or unusable Spare Parts returned by Customer pursuant to this Article 5 will be delivered to Boeing at its Seattle Distribution Center or such other U.S. destination as Boeing may reasonably designate. Spare Parts substituted for such returned obsolete or unusable Spare Parts will be delivered to Customer in accordance with the CSGTA. Boeing will pay the freight charges for the shipment from Customer to Boeing of any such obsolete or unusable Spare Part and for the shipment from Boeing to Customer of any such substitute Spare Part.

6. REPURCHASE OF PROVISIONING ITEMS.

6.1 OBLIGATION TO REPURCHASE. During a period commencing [ * ] after delivery of the first Aircraft, and ending [ * ] after such delivery, Boeing will, upon receipt of Customer's written request and subject to the exceptions in Article 6.2, repurchase unused and undamaged Provisioning Items which (i) were recommended by Boeing in the Provisioning Data as initial provisioning for the Aircraft, (ii) were purchased by Customer from Boeing, and (iii) are surplus to Customer's needs.

6.2 EXCEPTIONS. Boeing will not be obligated under Article 6.1 to repurchase any of the following: (i) quantities of Provisioning Items in excess of those quantities recommended by Boeing in the Provisioning Data for the Aircraft, (ii) QEC kits, bulk material kits, raw material kits, service bulletin kits, Standards kits and components thereof (except those components listed separately in the Provisioning Data), (iii) Provisioning Items for which an Order was received by Boeing more than five (5) months after delivery of the last Aircraft, (iv) Provisioning Items which have become obsolete or have been replaced by other Provisioning Items as a result of Customer's modification of the Aircraft, and (v) Provisioning Items which become excess as a result of a material change in Customer's operating parameters, as provided to Boeing pursuant to the initial provisioning meeting and which were the basis of Boeing's initial provisioning recommendations for the Aircraft.

6.3 NOTIFICATION AND FORMAT. Customer will notify Boeing, in writing when Customer desires to return Provisioning Items under the provisions of this Article 6. Customer's notification will include a detailed summary, in part number sequence, of the Provisioning Items Customer desires to return. Such summary will be in the form of listings, tapes, diskettes or other media as may be mutually agreed between Boeing and Customer and will include part number, nomenclature, purchase order number, purchase order date and quantity to be returned. Within five (5) business days after receipt of Customer's notification, Boeing will advise Customer in writing when Boeing's review of such summary will be completed, but such review must in any event be completed within 30 business days after receipt of such notification.

6.4 REVIEW AND ACCEPTANCE BY BOEING. Upon completion of Boeing's review of any detailed summary submitted by Customer pursuant to Article 6.3, Boeing will issue to Customer a Material Return Authorization (MRA) for those Provisioning Items Customer and Boeing agree are eligible for repurchase in accordance with this Article 6. Boeing will advise Customer of the reason that any Provisioning Item included in Customer's detailed summary is not eligible for return. Boeing's MRA will state the date by which Provisioning Items listed in the MRA must be redelivered to Boeing, and Customer will arrange for shipment of such Provisioning Items accordingly.

6.5 PRICE AND PAYMENT. The price of each Provisioning Item repurchased by Boeing pursuant to this Article 6 will be an amount equal to 100% of the original

invoice price thereof except that the repurchase price of Provisioning Items purchased pursuant to Article 3.2.2 will not include Boeing's [ * ] handling charge. Boeing will pay the repurchase price by issuing a credit memorandum in favor of Customer which may be applied against amounts due Boeing for the purchase of Spare Parts or Standards.

6.6 DELIVERY OF REPURCHASED PROVISIONING ITEMS. Provisioning Items repurchased by Boeing pursuant to this Article 6 will be delivered to Boeing F.O.B. at its Seattle Distribution Center or such other U.S. destination as Boeing may reasonably designate.

7. TITLE AND RISK OF LOSS.

Title and risk of loss of any Spare Parts or Standards delivered to Customer by Boeing in accordance with this Letter Agreement will pass from Boeing to Customer in accordance with the applicable provisions of the CSGTA. Title to and risk of loss of any Spare Parts or Standards returned to Boeing by Customer in accordance with this Letter Agreement will pass to Boeing upon delivery of such Spare Parts or Standards to Boeing in accordance with the provisions of Article 5.2 or Article 6.6, herein, as appropriate.

8. TERMINATION FOR EXCUSABLE DELAY.

In the event of termination of the Purchase Agreement pursuant to Article 7 of the AGTA with respect to any Aircraft, such termination will, if Customer so requests by written notice received by Boeing within fifteen (15) days after such termination, also discharge and terminate all obligations and liabilities of the parties as to any Spare Parts or Standards which Customer had ordered pursuant to the provisions of this Letter Agreement as initial provisioning for such Aircraft and which are undelivered on the date Boeing receives such written notice.

9. ORDER OF PRECEDENCE.

In the event of any inconsistency between the terms of this Letter Agreement and the terms of any other provisions of the CSGTA, the terms of this Letter Agreement will control.

Very truly yours,

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

     /s/ Mr. William J. Flynn
--------------------------------------------

By:  Mr. William J. Flynn
     ---------------------------------------

Its: President and Chief Executive Officer

Atlas Air, Inc. 2000 Westchester Avenue Purchase, NY 10577-2543

Subject: Special Matters Letter: 747-8 Freighter Aircraft

Purchase Agreement No. 3134 (the PURCHASE AGREEMENT) between The Boeing Company (BOEING) and Atlas Air, Inc.
[GRAPHIC OMITTED] (CUSTOMER) relating to Model 747-ADVF aircraft consisting of twelve (12) firm Boeing Model 747-8 Freighter Aircraft (FIRM AIRCRAFT), [ * ] to purchase Boeing Model 747-8 Freighter Aircraft (OPTION AIRCRAFT) and [ * ] to purchase Boeing Model 747-8 Freighter Aircraft (PURCHASE RIGHT AIRCRAFT), collectively (AIRCRAFT)

This letter agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1 BASIC CREDIT MEMORANDUM.

Boeing will provide the Customer, concurrently with the delivery of each of the Aircraft, a credit memorandum equal to [ * ] of the Airframe Price as set forth in Table 1 of the Purchase Agreement, escalated to the month of delivery in the same manner as the Airframe Price as described in Supplemental Exhibit AE-1 and in conformance with terms and conditions of paragraph 19 of this Letter Agreement (BASIC CREDIT MEMORANDUM). Customer may apply the Basic Credit Memorandum to the balance of the Aircraft Price due at the time of delivery of each Aircraft or in payment for Boeing proprietary spare parts or other Boeing goods and services, but not for advance payments on Aircraft.

2 [ * ]

                              3        [ * ]



[GRAPHIC OMITTED]


                              4        [ * ]

5 [ * ]

                              6        [ * ]


[GRAPHIC OMITTED]

                              7        [ * ]

8 [ * ]

[GRAPHIC OMITTED]

9 [ * ]

[ * ]

[GRAPHIC OMITTED]

10 [ * ]
[GRAPHIC OMITTED]

11 [ * ]

12 [ * ]

[GRAPHIC OMITTED]

13 [ * ]

If Customer accepts as part of Customer's configuration the [ * ] for the Aircraft, Boeing will provide the Customer, concurrently with the delivery of each Aircraft, a credit memorandum equal to the [ * ]. Specifics for this option are being finalized for the 747-8F aircraft and Customer will be provided with details on the specifics [ * ]) as soon as Boeing has such information available. The parties intend that the credit memorandum shall include the [ * ] and [ * ]. The parties shall document the effect of any Customer [ * ] be made so that appropriate letter agreements and other documents under the Purchase Agreement through a supplemental agreement.

14 DEFERRED ADVANCE PAYMENT SCHEDULES.

14.1 In lieu of the standard advance payment schedule set forth in Article 4.2 of the Purchase Agreement, Boeing hereby offers Customer the [ * ] advance payment schedule, as follows:

                                                                                                Standard
                                                                                                Schedule
                                                                                               Amount Due
                                    Due Date of Payment               Amount Due per          per Aircraft
                                 Unless otherwise stated:                Aircraft            (percentage of
                              The convention is the number of         (percentage of           Aircraft's
                           months prior to the first day of the         Aircraft's               Advance
                              scheduled delivery month of the         Advance Payment         Payment Base        Cumulative
                                         Aircraft                       Base Price)              Price)              Delta
[GRAPHIC OMITTED]
                           Two days after the execution of                 [ * ]                    [ * ]               [ * ]
                           definitive agreement for the Aircraft
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                       [ * ] months                        [ * ]                    [ * ]               [ * ]
                                  Total Advance Payments                   [ * ]                    [ * ]

14.2 Customer agrees to pay interest on the difference between the payments made pursuant to the [ * ] Advance Payment Schedule to amounts otherwise due under the Standard Advance Payment Schedule set forth in Table 1 of the Purchase Agreement and those paid pursuant to subparagraph 14.1. The interest rate will be the three-month London Interbank Rate (LIBOR) plus [ * ] per annum (DEFERRED INTEREST RATE). Interest will compound quarterly and will be due and payable to Boeing each calendar quarter, in arrears. For payments by Customer exceeding the Standard Schedule (including interest accrued thereon at the Deferred Interest Rate as described in the last sentence of this subparagraph 14.2, the Accelerated Payment) and until the date on which the cumulative Accelerated Payment total is exceeded by the cumulative Standard Payment total, Boeing shall credit (as a reduction of interest that is otherwise payable by the Customer) the Customer with interest accruing on the net Accelerated Payments from the date of receipt by Boeing at the Deferred Interest Rate.

14.3 Boeing agrees, pursuant to the terms of this subparagraph 14.3, to [ * ] the aggregate amount of advance payments paid by or on behalf of Customer to Boeing (noting that Option Aircraft deposits for unexercised options are not considered advance payments for the purposes of this [ * ] commitment) with respect to this Letter Agreement (including all successor definitive agreements) at [ * ] (the [
* ]). This [ * ] applies to the Firm Aircraft. Boeing will further agree to

maintain this [ * ] at [ * ] for exercised Purchase Rights Aircraft and/or Option Aircraft either of which become firm pursuant to a supplemental agreement.

15 DEFAULT AND UTILIZATION OF ADVANCE PAYMENTS.

                                      In  the  event  of a  default  of any of
                              Customer's  obligations under any agreement with
                              Boeing or its  affiliates  with  respect  to the
                              Aircraft (OBLIGATIONS),  Boeing may, in addition
                              to  exercising  any rights it may have under any
                              such  agreement  or  applicable  law  (including
                              rights of set off or  recoupment),  apply any or
[GRAPHIC OMITTED]             all payments made by Customer with respect to an
                              Aircraft  to  cure,  in  part or in  whole,  any
                              default with  respect to any of the  Obligations
                              without    prior   notice   to   Customer   (any
                              requirement   of  prior   Boeing   notice  being
                              expressly  waived  by  Customer  to  the  extent
                              permitted by applicable  law).  Immediately upon
                              Boeing   application,   the  amount  of  advance
                              payments  received by Boeing for purposes of the
                              applicable  purchase  agreement shall be reduced
                              by an amount equal to the amount so applied (the
                              APPLIED AMOUNT).  Customer shall be obligated to
                              pay to  Boeing an  amount  equal to the  Applied
                              Amount  and  shall  make  its  payment  by  wire
                              transfer  within  ten (10) days  after  Customer
                              receives  notice  from  Boeing  of  the  Applied
                              Amount.

                              16       INTRODUCTORY SUPPORT.

                                      For   avoidance   of   doubt,   "[  *  ]
                              Entitlement"   is  set  forth  in   Supplemental
                              Exhibit  CS1.  Customer  and Boeing will conduct
                              planning  conferences  approximately  12  months
                              before delivery of the first  Aircraft,  or on a
                              basis  as  otherwise   agreed,  to  develop  and
                              schedule a customized Boeing furnished  Customer
                              Support  Program in support of the Aircraft.  In
                              consideration  of  Customer's  purchase  of  the
                              Aircraft,   Boeing  shall   provide   customized
                              Customer  Services  Program  that  will be based
                              upon  and  equivalent  to [ * ]  (versus  [ * ])
                              entitlements  without  cost to the  Customer for
                              the upgrade to [ * ] entitlement.

                              17       AIRCRAFT MODEL SUBSTITUTION.

                                      Customer may  substitute the purchase of
                              Boeing  Model 747-8  Intercontinental  passenger
                              aircraft  (SUBSTITUTE   AIRCRAFT)  described  in
                              Attachment  1 in place  of any of the  Aircraft,
                              subject to the following terms and conditions:

                                      17.1  Customer   will  provide   written
                              notice  of  its  intention  to  substitute   the
                              purchase of an Aircraft  with the  purchase of a
                              Substitute Aircraft, no later than the first day
                              of the month that is twenty four months prior to
                              the scheduled  month of delivery of the Aircraft
                              for  which  it will be  substituted  (NOTICE  OF
                              SUBSTITUTION);

                                      17.2  Customer's  substitution  right is
                              conditioned  upon  Boeing's  having   production
                              capability  for the  Substitute  Aircraft in the
                              scheduled  delivery  month of the  Aircraft  for
                              which it will be substituted.

                                      17.3 If Boeing is unable to  manufacture
                              the Substitute  Aircraft described in the Notice
                              of Substitution in the scheduled  delivery month
                              of  the   Aircraft   for   which   it   will  be
                              substituted,  then Boeing shall  promptly make a
                              written offer of an alternate

                              delivery month for Customer's  consideration and
                              written  acceptance  within  thirty  days of its
                              receipt of such offer.

                                      17.4 Customer and Boeing shall execute a
                              definitive  agreement  for the  purchase  of the
                              Substitute  Aircraft  within thirty (30) days of
                              Customer's   Notice   of   Substitution   or  of
                              Customer's  acceptance of an alternate  delivery
                              month  in  accordance  with   subparagraph  17.3
                              above.

                                      17.5  In no  event  shall  a  Substitute
                              Aircraft be available for delivery prior to July
                              of 2010.

[GRAPHIC OMITTED]                     17.6  Customer  will allow Boeing to use
                              each  Substitute  Aircraft  for  first  of model
                              testing   relating   to  the   development   and
                              certification     of     the     Model     747-8
                              Intercontinental  passenger aircraft. Details of
                              flight tests, schedules and applicable terms and
                              conditions   will  be  the   subject  of  mutual
                              agreement.

                                      17.7 The  offer of  Substitute  Aircraft
                              hereunder  is  contingent   upon  Boeing  having
                              reached  a  final   agreement  with  the  engine
                              manufacturer for the engines on the Boeing Model
                              747-8 Intercontinental passenger aircraft.

                                      17.8 The Airframe  Base Price,  Optional
                              Features Prices, Engine Price and Aircraft Basic
                              Price  will  be   established   using   Boeing's
                              then-current  prices for such elements as of the
                              date of  execution  of the  definitive  purchase
                              agreement for the Substitute Aircraft. Excluding
                              the Enhanced Incentive Credit Memorandum and the
                              Firm  Order  Increase  Credit  Memorandum,   all
                              elements of the Letter Agreement  related herein
                              that apply to the Firm Aircraft shall also apply
                              to the Substitute Aircraft. For the avoidance of
                              doubt,  neither the  Enhanced  Incentive  Credit
                              Memorandum  nor the Firm Order  Increase  Credit
                              Memorandum   shall   apply  to  any   Substitute
                              Aircraft.

18 OPTION AIRCRAFT [ * ] FLEXIBILITY.

Boeing will offer the following flexibility regarding the [ * ] for the Option Aircraft: [ * ] will be due at time of execution of the Purchase Agreement, and the [ * ] will be
[ * ] from the anniversary of the execution of the Purchase Agreement.

19 [ * ].

Boeing will facilitate Aircraft purchase for the Customer by [ * ] for the Airframe Price of [ * ] through the period ending [ * ] for each Firm Aircraft and up to four other Aircraft (Additional Aircraft). For each Additional Aircraft, [ * ] be in accordance with Boeing's standard [ * ] for the period beginning with [ * ]. The Purchase Agreement utilizes the [ * ]; however, the parties agree that Customer may in its sole discretion elect the [ * ] to replace the [ * ] in the Purchase Agreement if written notice is provided by Customer to Boeing no later than [ * ]. The parties shall

document the effect of any Customer decision to select the [ * ] so that appropriate letter agreements and other documents under the Purchase Agreement can be added through a supplemental agreement.

20 PURCHASE RIGHTS AIRCRAFT.

                                      The  business   consideration  for  each
                              Purchase  Rights  Aircraft [ * ],  expressed  in
                              current base year dollars in effect at the time,
[GRAPHIC OMITTED]             subject  to the same  escalation  as is  applied
                              against  the  Airframe  Price  as  described  in
                              Supplemental  Exhibit  AE-1  and in  conformance
                              with the terms and conditions of paragraph 19 of
                              this Letter Agreement.

                              21      CREDIT MEMO REIMBURSEMENT.

                                      Exhibit C to  AGTA-TLS,  Part 2, Article
                              4.4,  CREDIT MEMO  REIMBURSEMENT,  is amended to
                              read as follows:

                                      Boeing  will  make   reimbursements   by
                              credit memoranda which may be applied toward the
                              purchase of Boeing  goods and  services.  Boeing
                              shall make such  reimbursements by wire transfer
                              in lieu of credits up to once per  quarter.  Any
                              reimbursement  will be in an amount equal to the
                              current  net  balance  of  outstanding  approved
                              warranty claims less any outstanding  balance on
                              Customer's account.

                              22      PERFORMANCE REVIEW REQUIREMENT.

                                      A  performance  review  meeting  will be
                              held at a  mutually  agreeable  location  in the
                              United States of America  between  senior levels
                              of Boeing and the Customer (vice president level
                              or the  equivalent for each party) at minimum on
                              an  annual  basis   (quarterly  if   performance
                              guarantees  are not being  achieved) to begin no
                              later than three months after the month in which
                              the first Aircraft under this Purchase Agreement
                              shall be delivered.

                              23       ASSIGNMENT.

                                      Any   assignment   by  Customer  of  any
                              benefits, entitlements, or services described in
                              this Agreement  requires  Boeing's prior written
                              consent.  Further,  Customer  will not reveal to
                              any  third   party  the  amount  of  the  credit
                              memoranda provided to Customer by Boeing without
                              Boeing's  prior  written  consent and subject to
                              such  circumstances  as  Boeing  may  reasonably
                              require.

                                      Boeing  will not  unreasonably  withhold
                              consent to  Customer's  request  to  assign,  as
                              security,  rights in the  Purchase  Agreement if
                              done for purposes of obtaining  financing or for
                              such other purpose  consistent  with  fulfilling
                              its  obligations  under the Purchase  Agreement.
                              Boeing's  consent  will  be  conditioned  on all
                              parties accepting Boeing's customary  conditions
                              for consenting to an assignment,  including, but
                              not  limited  to, the  following:  assignor  and
                              assignee   indemnification  of  Boeing  for  any
                              actions   taken  by  an   assignee   under   any
                              assignment agreement; Boeing's right to exercise
                              the manufacturer's

                             option to  assume  Customer's  rights  under the
                             Purchase  Agreement  in the  event of a  default
                             under    an    assignment     agreement;     and
                             confidentiality. A Party that is

                                            (i)      bound  by  a   customary
                                                     confidentiality
                                                     agreement;

                                            (ii)     neither   an    airplane
                                                     manufacturer    nor   an
                                                     airline; and

                                            (iii)    responding to a Customer
                                                     request for proposals to
                                                     provide   financing   of
                                                     Aircraft pursuant to the
                                                     Purchase      Agreement,
                                                     including   pre-delivery
                                                     payment financing

                                   shall be deemed a "Financing Party".

[GRAPHIC OMITTED]                    Without Boeing's  consent,  Customer may
                             represent  to any  Financing  Party that  Boeing
                             will   provide   to   that   Financing    Party,
                             concurrently  with the  delivery  of each of the
                             Aircraft to that  Financing  Party,  a financier
                             credit memorandum equal to 41.5% of the Airframe
                             Price as set  forth  in Table 1 of the  Purchase
                             Agreement, escalated to the month of delivery in
                             the  same  manner  as  the  Airframe   Price  as
                             described  in  Supplemental  Exhibit AE-1 and in
                             conformance   with  terms  and   conditions   of
                             paragraph 23 of this Letter Agreement (Financier
                             Credit  Memorandum).  Insofar as such  Financing
                             Party is concerned,  Article 14.1,  14.2 and the
                             Financier Credit  Memorandum shall be in lieu of
                             any other  provision  in the  Letter  Agreement.
                             When the Customer  identifies a Financing  Party
                             and the preliminary terms of an assignment under
                             which  predelivery  payment  financing  (PDP) or
                             aircraft  purchase  financing could be provided,
                             at  Customer's  request,  Boeing agrees to enter
                             into  discussions  with the Customer to consider
                             whether an additional  credit  memorandum can be
                             assigned,  with  the  goal of  helping  Customer
                             obtain third-party financing.

                                     Boeing  will  consent to any  reasonable
                             request  by  Customer  to  assign  the  Purchase
                             Agreement to an affiliate  provided  that Boeing
                             is  provided  with  an  adequate   guarantee  of
                             performance  of  all   obligations   under  this
                             Purchase  Agreement  and  in a  form  reasonably
                             satisfactory to Boeing.

                                     Customer  understands that Boeing is not
                             required under any  circumstances  to consent to
                             an assignment that would constitute a novation.

                                     The foregoing provisions are intended to
                             supplement, and not to supersede, the assignment
                             provisions of the AGTA,  which address  delivery
                             date and post-delivery assignments,  merger-type
                             assignments, and other matters.

                             24      [ * ] OPTION.

                                     Customer  may elect an option which will
                             be  offered  by  Boeing  to add  up to  two  (2)
                             alternate [ * ] and two (2) alternate [ * ]. The
                             Operational  Weight   Modification  Option  will
                             include applicable changes to all associated [ *
                             ] including  but not limited to the [ * ], the [

* ], as well as the software necessary for Customer to own or operate the Aircraft in revenue service with such Aircraft pursuant to the airworthiness requirements of the FAA.

Should the [ * ]

[ * ] be elected by the Customer, a credit memorandum equal to the cost of the provisions, equipment and [ * ] comprising the [ * ] will be provided by Boeing to the Customer.

25 [ * ] OPTION.

                                      Solely  to  the  extent   certified   or
                              otherwise  available,   Customer  may  elect  an
                              option  which  will be  offered  by [ * ] at any
                              point in time  prior to that date that is twelve
                              months  prior to the  delivery of an Aircraft to
                              select  [ * ].  The [ * ]  Option  will  include
                              applicable  changes  to  all  associated  [  * ]
[GRAPHIC OMITTED]             including  but not limited to the [ * ], as well
                              as the software necessary for Customer to own or
                              operate  the  Aircraft in revenue  service  with
                              such  Aircraft  pursuant  to  the  airworthiness
                              requirements of the FAA. Should the [ * ] Option
                              be elected by the Customer,  a credit memorandum
                              equal to the cost of the  provisions,  equipment
                              and technical publications  comprising the [ * ]
                              Option   will  be  provided  by  Boeing  to  the
                              Customer.

                              26      PAYMENT DUE AT SIGNING OF PURCHASE
                                      AGREEMENT.

                                      Notwithstanding  any payment requirement
                              set forth in the  Purchase  Agreement,  Customer
                              may defer the payment(s) that would otherwise be
                              required  at  signing  to any date on or  before
                              OCTOBER 2,  2006;  HOWEVER,  ALL MONIES  PAID IN
                              CONNECTION  WITH  THE  PROPOSAL   ACCEPTANCE  BY
                              CUSTOMER TO BOEING SHALL BECOME NON-  REFUNDABLE
                              AS OF THE  DATE  OF  EXECUTION  OF  THIS  LETTER
                              AGREEMENT.

27 CONFIDENTIAL TREATMENT.

Customer understands that certain commercial and financial information contained in this Letter Agreement is considered by Boeing as confidential. Customer agrees that it will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of Boeing, disclose this Letter Agreement or any information contained herein to any other person or entity. In the event that Customer in good faith concludes (based upon an opinion of counsel) that disclosure of information contained in this Letter Agreement may be required by applicable law or governmental regulations, Customer shall advise Boeing in writing prior to such disclosure, if possible, or, if not possible, then promptly upon receiving such order or upon identifying such need to comply, in order to enable Boeing to take whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible in the circumstances.

Very truly yours,

THE BOEING COMPANY

By: [ * ]

Its: ATTORNEY IN FACT

Accepted and agreed to this 8TH day of SEPTEMBER of 2006.

ATLAS AIR, INC.

   /s/ William J. Flynn
-------------------------------------------

By: /s/ Mr. William J. Flynn
    ---------------------------------------

Its: President and Chief Executive Officer
    ---------------------------------------

1. Substitute Aircraft Description and Changes.

1.1 Substitute Aircraft Description.

For the purpose of Customer's evaluation of this Proposal, the Substitute Aircraft is described by Boeing 747-8 Intercontinental Airplane Description, Document No. D019U019, Rev. D, dated July 18, 2006, (AIRCRAFT DESCRIPTION). The Detail Specification to be included in the definitive purchase agreement will be derived from the Aircraft Description.

For this Proposal, the Aircraft Description and the prices shown in Attachment B include:

Model 747-8 Intercontinental passenger aircraft

1.2 Changes.

The Boeing Detail Specification will be revised to include:

(1) Changes applicable to the Model 747-8 Intercontinental passenger aircraft which are developed by Boeing between the date of the Aircraft Description and the signing of the definitive purchase agreement;

(2) Selections mutually agreed upon; and

(3) Selections required to obtain a Standard or Export Certificate of Airworthiness.

2. Foreign Regulatory Requirements.

The Aircraft Price includes the administrative effort required to obtain type certification from the FAA and EASA and either a standard airworthiness certificate or an export certificate of airworthiness, as applicable, from the FAA. The Aircraft Price also includes an amount that Boeing has determined to be typical of costs incurred by Boeing in achieving certification by other regulatory authorities (STANDARD COSTS) but (i) does not include any amount relating to changes to the configuration of the Aircraft required by a country of import which varies from or is in addition to the airworthiness requirements of the FAA for the issuance of a Standard Airworthiness Certificate and (ii) does not include any costs in excess of Standard Costs such as special fees or costs of special activities (such as Aircraft testing, flight time, simulator time, or lengthy technical reviews) which might be required by a particular aviation authority as a condition of achieving certification.

Accordingly, the Aircraft price may be adjusted for Boeing's price for any configuration change to any Aircraft required by a country of import which varies from or is in addition to the airworthiness requirements of the FAA for the issuance of a Standard Airworthiness Certificate and for any costs in excess of Standard Costs which are incurred by Boeing in achieving certification.

Exclusively as pursuant to the requirements of Article 9, [ * ] Credit Memorandum: the Manufacturer shall offer to provide to the Purchaser with the following [ * ]:

o [ * ]

[ * ]:

o [ * ]

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207

Atlas Air, Inc.
2000 Westchester Ave
PURCHASE NY 10577-2543
U.S.A.

[GRAPHIC OMITTED]
Subject: 747-8 Freighter Performance Retention
Commitment

Reference: Purchase Agreement No. 3134 (the
PURCHASE AGREEMENT) between The
Boeing Company (BOEING) and Atlas
Air, Inc. (CUSTOMER) relating to
Boeing Model 747-8 Freighter Aircraft
(AIRCRAFT).

This Letter Agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Boeing recognizes that performance retention within reasonable limits is essential to maintain the economy of operation of the Aircraft. Therefore the parties hereto agree as follows with respect to performance retention.

1. AIRCRAFT COMMITMENT.

For the purposes of this Letter Agreement, the Covered Aircraft shall be defined as a fleet of not less than twelve (12) new Aircraft equipped with GEnx-2B67 engines delivered by Boeing to Customer.

Boeing commits to Customer that, for the Covered Aircraft, the Cumulative Fleet Average Fuel Mileage Deterioration, as defined in Attachment A, during the Performance Retention Term, as defined in paragraph 2.2 below, will not exceed the levels shown in the table below (AIRCRAFT COMMITMENT).

----------------------------------------------------------------------------------------------------
  Time After Delivery of First Covered Aircraft                         Cumulative Fleet Average
                                                                              Fuel Mileage
                                                                              Deterioration
                                                                                   (%)
----------------------------------------------------------------------------------------------------

                               [ * ]                                              [ * ]
----------------------------------------------------------------------------------------------------
                               [ * ]                                              [ * ]
                               [ * ]                                              [ * ]
----------------------------------------------------------------------------------------------------
                               [ * ]                                              [ * ]
                               [ * ]                                              [ * ]
----------------------------------------------------------------------------------------------------
                               [ * ]                                              [ * ]
                               [ * ]                                              [ * ]
----------------------------------------------------------------------------------------------------
                               [ * ]                                              [ * ]
                               [ * ]                                              [ * ]
----------------------------------------------------------------------------------------------------

If the Cumulative Fleet Average Fuel Mileage Deterioration of the Covered Aircraft is determined to have increased to anextent greater than the

Aircraft Commitment set forth above, Customer's remedies and Boeing's obligations and liabilities shall be as set forth in this Letter Agreement.

2. APPLICABILITY AND PERFORMANCE RETENTION TERM.
[GRAPHIC OMITTED]
This Letter Agreement shall be applicable to the Covered Aircraft, including the engines installed on the Covered Aircraft, whether purchased from Boeing as installed engines or purchased directly from the engine manufacturer (ENGINE MANUFACTURER) as new spare engines for support of the Covered Aircraft during the Performance Retention Term of this Letter Agreement.

2.1 DELIVERY SCHEDULE FOR COVERED AIRCRAFT.

         For  the   purposes   of  this   Letter
Agreement,  it is anticipated  that Boeing shall
deliver  the  Covered  Aircraft  to  Customer in
accordance with the delivery  schedule set forth
in the  table  below.  If  the  fleet  size  and
delivery  schedule is  significantly  different,
the  Aircraft  Commitment  may be  appropriately
adjusted to reflect such changes.

        ----------------------------------
            Aircraft      Delivery Date
        ----------------------------------
               1             2/2010
        ----------------------------------
               2              [ * ]
        ----------------------------------
               3              [ * ]
        ----------------------------------
               4              [ * ]
        ----------------------------------
               5              [ * ]
        ----------------------------------
               6              [ * ]
        ----------------------------------
               7              [ * ]
        ----------------------------------
               8              [ * ]
        ----------------------------------
               9              [ * ]
        ----------------------------------
               10             [ * ]
        ----------------------------------
               11             [ * ]
        ----------------------------------
               12            10/2011
        ----------------------------------

2.2 PERFORMANCE RETENTION TERM.

Boeing's and Customer's rights and obligations pursuant to this Letter Agreement for the Covered Aircraft shall commence on the date the first such Covered Aircraft is delivered to Customer and shall expire [ * ] (PERFORMANCE RETENTION TERM).

3. CONDITIONS.

3.1 OPERATION AND MAINTENANCE.

Customer shall operate and maintain the Covered Aircraft in accordance with Customer's FAA-approved operations and maintenance

programs. Customer shall operate and maintain the engines in accordance with the Operation and Maintenance Manuals and Customer's Maintenance Program as mutually agreed to by Boeing, Customer and Engine Manufacturer.

3.2 POWERBACK.
[GRAPHIC OMITTED]
It is specifically agreed that reverse thrust will not be used for normal ground maneuvering (POWERBACK) of the Covered Aircraft, unless required for exceptional operational situations. Customer will promptly notify Boeing of any use of Powerback under such situations. Boeing and Customer mutually agree to determine, through good faith technical negotiation, the impact of such uses of Powerback on a Covered Aircraft's cruise fuel mileage and to apply the appropriate adjustments in the calculations of performance levels and/or remedies under this Letter Agreement.

3.3 FLIGHT CYCLE UTILIZATION AND DERATE.

The parties agree that the Aircraft Commitment, as set forth in Paragraph 1 above, is predicated upon Customer's planned utilization of not more than [ * ] flight cycles per Covered Aircraft per year, whichever is less, during the Performance Retention Term, and where the engines are operated with an average minimum derate of at least [ * ]. In the event Customer employs a Covered Aircraft during the Performance Retention Term of this Letter Agreement within the Customer's system such that the utilization is greater than [ * ] flight cycles per Covered Aircraft per year, and/or the average engine derate is less than [ * ], the parties agree to make adjustments to the Basic Data, defined in Paragraph 4 below, solely with respect to such Covered Aircraft, as a consequence of such greater utilization and/or reduced derate, if appropriate.

4. DETERMINATION OF FUEL MILEAGE DETERIORATION.

For the purposes of this Letter Agreement, fue1 mileage deterioration shall be determined on the basis of the cruise fuel mileage performance of each Covered Aircraft in accordance with Attachment A.

Following the delivery of each Covered Aircraft to Customer by Boeing, and continuing until expiration of the Performance Retention Term, Customer shall record, analyze, and forward to Boeing cruise fuel mileage data obtained on such Covered Aircraft as specified in Attachment B (BASIC DATA).

5. NOTICE OF PERFORMANCE DETERIORATION.

Following evaluation of the Basic Data by Customer, if Customer believes the Cumulative Fleet Average Fuel Mileage Deterioration exceeds the Aircraft Commitment, Customer shall give Boeing prompt written notice thereof.

6. ELECTION OF ACTIONS.

Upon Boeing's receipt of any notice that the Cumulative Fleet Average Fuel Mileage Deterioration exceeds the Aircraft Commitment, Boeing and Customer, as appropriate, will take the following actions:

6.1 DATA.
[GRAPHIC OMITTED]
Boeing will evaluate the Basic Data. At its option, Boeing may accomplish such evaluation by analysis of Customer's raw ACMS data or by obtaining additional performance data on such Covered Aircraft in accordance with Attachment B. Such additional data may include data acquired during revenue service with Boeing personnel aboard as observers. The Basic Data and any additional data obtained by Boeing in its evaluation shall be appropriately adjusted to reflect any material changes elected by Customer to the Covered Aircraft or engines which have occurred subsequent to delivery of the Covered Aircraft. Additionally, adjustments will be applied for any relevant factors as agreed by Customer and Boeing (e.g., inaccuracies in flight deck instrumentation, a sudden increase in deterioration that is attributed to a foreign object damage event such as severe hail and the additional rate of deterioration for Aircraft used for pilot training.) If Boeing and Customer are in disagreement as to such evaluation of the Basic Data, such disagreement shall be resolved by good faith technical negotiation between the parties.

6.2 SURVEYS.

If Customer's cruise fuel mileage data is confirmed as correctly indicating that the Cumulative Fleet Average Fuel Mileage Deterioration exceeds the Aircraft Commitment, Boeing shall, at its option, perform or cause the Engine Manufacturer to perform (1) a survey of Customer's operating procedures for such Covered Aircraft and engines, and (2) a conformity survey of the airframe and engines of such Covered Aircraft. If the surveys confirm that one or more of the engines have been operated for more than [ * ] since new or for more than [ * ] since performance refurbishment. Boeing and/or Engine Manufacturer shall address the benefit of refurbishment of such engine(s) in its recommended corrective actions. Boeing agrees that it will only perform such inspections at reasonable times and upon reasonable notice and shall not interfere with Customer's normal day-to-day operations.

6.3 WEIGHT.

Boeing may request that Customer weigh such Covered Aircraft, in which event Customer agrees to weigh such Covered Aircraft in conjunction with its normally scheduled maintenance and will report its findings to Boeing.

6.4 CORRECTIVE ACTIONS.

Boeing shall promptly make such recommendations to Customer that Boeing believes would result in improvement of the cruise fuel mileage performance of such Covered Aircraft based on analysis of the surveys and available data pursuant to Paragraphs 6.1 - 6.3. Boeing, Engine Manufacturer and Customer shall thereafter mutually agree on the appropriate corrective action to

be taken based on any such recommendations. Corrective actions, which involve maintenance due to operations or maintenance not in accordance with paragraph 3.1 and/or refurbishment outside of the limits outlined in paragraphs 6.2 and 6.5, both on-wing and off-wing, shall be performed at no cost to Boeing and/or Engine Manufacturer.

6.5 IMPROVEMENT PARTS AND ENGINE REFURBISHMENT.
[GRAPHIC OMITTED]
Following the completion of any corrective action pursuant to Paragraph 6.4, if subsequent Basic Data show that the Cumulative Fleet Average Fuel Mileage Deterioration exceeds the applicable Aircraft Commitment, Boeing shall have the option to provide or cause to be provided to Customer, at no charge, (except life used on engine parts or parts utilized for maintenance) any airplane drag improvement parts and/or engine TSFC improvement parts [GRAPHIC (IMPROVEMENT PARTS) which, when installed in such Covered Aircraft or engines, would result in an improvement in the cruise fuel mileage performance. Boeing shall provide and/or shall cause Engine Manufacturer to provide, as appropriate, reimbursement for Customer's incorporation of such improvements, corrections, or changes at the warranty labor rate then in effect between Boeing and Customer or Engine Manufacturer and Customer, as applicable. Boeing and/or Engine Manufacturer shall give Customer reasonable advance written notice of the estimated on-dock date at Customer's maintenance base for any such Improvement Parts.

If Boeing elects to provide or causes to be provided Improvement Parts for such Covered Aircraft or engines, then Customer and Boeing shall mutually agree upon the details of such an Improvement Parts program. To the extent Boeing and/or Engine Manufacturer are required to support such a program, such support shall be provided at no charge to Customer.

If Customer elects to incorporate Improvement Parts in such Covered Aircraft and/or engines, they shall be incorporated in a timely manner and in accordance with Boeing and Engine Manufacturer instructions.

If Customer elects not to incorporate Improvement Parts in such Covered Aircraft and/or engines, or if Customer elects not to refurbish an engine which has exceeded [ * ] cycles since new or [ * ] cycles since performance refurbishment, and for which Engine Manufacturer has recommended refurbishment as part of its recommended corrective actions, subsequent Basic Data shall be appropriately adjusted by an amount consistent with the improvement in cruise fuel mileage performance which would have been realized had such Improvement Parts been incorporated or had such engine refurbishment been performed; provided, however, any such improvement in cruise fuel mileage performance shall be reasonably substantiated by Boeing to Customer.

7. PAYMENTS.

In the event that the Basic Data shows that Cumulative Fleet Average Fuel Mileage Deterioration exceeds the Aircraft Commitment, and Boeing has failed to design or cause the Engine Manufacturer to design, Improvement Parts to correct such failure and deliver same to Customer, such failure will result in the

economic remedies as described below. No payment shall be made for any portion of the deficiency corrected for by Improvement Parts that have not been incorporated in the Covered Aircraft (i) within ninety (90) days after the delivery of such Improvement Parts to Customer for modifications that can be accomplished during line maintenance or (ii) within a mutually agreed upon period of time for more extensive modifications.

7.1 FLEET COMPENSATION.
[GRAPHIC OMITTED]
Boeing will pay to Customer annually for a period not exceeding [ * ] after the delivery of the first Covered Aircraft, an amount equal to the Fleet Annual Compensation for the immediately preceding Annual Period. The "FLEET ANNUAL COMPENSATION" is the sum of each [ * ].

[GRAPHIC The "MONTHLY [ * ] AMOUNT" is defined
as and shall be calculated for any month (y) in
a given calendar year when the Current
Cumulative Fleet Average [ * ], as defined in
Paragraph 6 of Attachment A, of the Covered
Aircraft exceeds the Aircraft Commitment in
accordance with the following formula:

[ * ]

7.2 CREDIT MEMORANDUM.

Payments to Customer pursuant to Paragraph 7.1 above shall be by credit memorandum issued by Boeing and/or Engine Manufacturer. Any payments made under this Letter Agreement shall be as a result of operation of the Aircraft by Customer.

7.3. CREDIT ADJUSTMENTS.

engineering interpretations and calculations based on the data furnished pursuant to Article 5.4 of AGTA-TLS and the data furnished pursuant to this Paragraph 7.3

7.4 ANNUAL LIMITATION ON AMOUNT OF CREDITS.

The total Annual Excess Fuel Burn Amount credits Boeing and/or Engine Manufacturer is obligated to issue pursuant to this Letter Agreement shall not exceed [ * ] in an Annual Period per Covered Aircraft, or as adjusted by Boeing for changes in the price of Kerosene Base, Commercial Jet Fuel in accordance with the formula set forth in the Attachment C hereto for each Aircraft in any Annual Period.

8. DUPLICATION OF BENEFITS
[GRAPHIC OMITTED] Boeing and Customer agree that it is not the intent of the parties under this Letter Agreement to cause Boeing and/or Engine Manufacturer to provide duplicate benefits to Customer for the same event which results in Customer's unjust enrichment, provided that, in the case of any such duplicate benefits, Customer shall be entitled to elect to receive the benefit which is most favorable to Customer.

9. ASSIGNMENT PROHIBITED.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer's becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

10. EXCLUSIVE REMEDY.

Performance of the commitments made in this Letter Agreement by Boeing in accordance with the terms and conditions of this Letter Agreement is in substitution for all other damages and remedies recoverable by Customer from Boeing and shall constitute complete, full and final settlement and satisfaction of all Boeing's obligations and liabilities to Customer arising out of failure of a Covered Aircraft to comply with the Aircraft Commitment. Customer hereby waives and releases all other rights, remedies, claims and causes of action against Boeing relating to the failure of any Covered Aircraft to comply with the Aircraft Commitment.

11. CONFIDENTIAL TREATMENT.

disclosure, if possible, or, if not possible, then promptly upon receiving such order or upon identifying such need to comply, in order to enable Boeing to take whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible in the circumstances.
[GRAPHIC OMITTED]
If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate pour acceptance and approval below.

Very truly yours,

THE BOEING COMPAY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

    /s/ William J. Flynn
-----------------------------------------

By: /s/ Mr. William J. Flynn
    -------------------------------------

Its:President and Chief Executive
    Officer
    -------------------------------------

[ * ]

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207

                              Atlas Air, Inc.
                              2000 Westchester Avenue
                              Purchase, NY 10577-2543

                              Subject:    Airworthiness Directive Cost
                                          Participation Program

                              Reference:  Purchase  Agreement  No.  3134  (the
                                          PURCHASE   AGREEMENT)   between  The
                                          Boeing Company  (Boeing)   and Atlas
                                          Air,  Inc. (CUSTOMER)  relating   to
                                          Model   747-8   Freighter   aircraft
                                          (the AIRCRAFT)
[GRAPHIC OMITTED]

This letter agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. It grants to Customer the Airworthiness Directive Cost Participation Program described herein (the PROGRAM). All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1. SCOPE.

This Program applies to any Boeing Product installed in the Aircraft at the time of delivery that is modified or replaced with Boeing-designed corrective materials to comply with terminating actions specified in FAA Airworthiness Directives when the defects are of the type covered by the material and workmanship or design warranties set forth in Exhibit C, Product Assurance Document, of the AGTA.

2. TERM.

The term of the Program is [ * ] after delivery of each Aircraft.

3. BOEING PARTICIPATION.

3.1 MATERIALS. If any corrective materials are required as described under paragraph 1 above during the term of this Program, Boeing will promptly furnish such materials to Customer (including Boeing-designed standard parts but excluding industry standard parts such as MS and NAS standards) at a price determined in accordance with the following formula:

P = CT

[ * ]

P = Price to Customer.

C = The Boeing then-current sales
price for such materials

T = Total age in months (to the nearest month) of the Aircraft in which such materials are installed from the date of delivery of such Aircraft to the date of completion of such installation. H 3.2 LABOR. Any labor reimbursement for Customer's installation of materials in
[GRAPHIC the Aircraft that Boeing is required to provide to Customer pursuant to the provisions of paragraph 1 above, will be provided to Customer in an amount as determined by the following formula:

R = L [1 - (T/[ * ])]
[GRAPHIC OMITTED]

R = Reimbursement amount provided to
Customer.

L = The product of Customer's direct labor
man-hours expended in actual
installation of corrective materials in
the Aircraft, but not to exceed Boeing's
reasonable estimate of the man-hours
required for the performance thereof by
Customer, multiplied by the then-current
Warranty Labor Rate.

T = Total age in months (to the nearest
month) of the Aircraft in which such
materials are installed from the date of
delivery of such Aircraft to the date of
completion of such installation.

4. GENERAL CONDITIONS AND LIMITATIONS.

4.1 Customer's written notice of claim (for the avoidance of doubt, this is a notice of Customer's intent to file a detailed claim) under this Program must be received by Boeing's Warranties Regional Manager within 3 months from the date of issuance of any applicable Airworthiness Directive.

4.2 THE DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions stated in Article 11 of Part 2 of Exhibit C of the AGTA apply to this Program.

5. CONFIDENTIAL TREATMENT.

take

whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible in the circumstances.

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.

Very truly yours,
[GRAPHIC OMITTED]

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

    /s/ William J. Flynn
-------------------------------------------

By: Mr. William J. Flynn
-------------------------------------------

Its: President and Chief Executive Officer

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA
98124-2207

Atlas Air, Inc.
2000 Westchester Avenue
Purchase, NY 10577-2543

Subject: Maintenance Cost Protection

Reference: Purchase Agreement 3134 (the PURCHASE
AGREEMENT) between The Boeing
Company (BOEING) and Atlas Air, Inc.
(CUSTOMER) relating to Model 747-8
Freighter aircraft (the AIRCRAFT)
[GRAPHIC OMITTED]
This letter agreement including without
limitation all attachments and amendments hereto
(LETTER AGREEMENT) amends and supplements the
Purchase Agreement. All terms used but not
defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.

RECITALS

A. Customer has requested a program which will either demonstrate the projected maintenance costs for the Aircraft or, if such projected costs are not demonstrated, provide Customer specific remedies.

B. In response to Customer's request Boeing offers the following maintenance cost program (PROGRAM) for estimating and validating the maintenance costs incurred by Customer in the operation of the Aircraft and providing specific remedies to Customer in the event maintenance costs for the Aircraft as defined in this Letter Agreement exceed specified values.

AGREEMENT

1.0 COVERED AIRCRAFT.

The Program shall apply to each of the Aircraft operated by Customer on Customer's routes during the Program Term (COVERED AIRCRAFT).

2.0 PROGRAM TERM.

The Program shall begin on the first day of the month in which the first Covered Aircraft is delivered by Boeing to Customer, continue [ * ] and consist of [ * ] beginning on the date the Program Term commences and thereafter on the yearly anniversary thereof (REPORTING PERIOD(S)).

3.0 COVERED MAINTENANCE.

The maintenance costs covered by the Program shall be the costs (as more fully defined herein) of labor performed and materials used in the airframe, airframe component and engine line maintenance of the Covered Aircraft where the maintenance is performed as part of a maintenance program approved by Customer's regulatory authority (COVERED MAINTENANCE).

4.0 PROGRAM COMMITMENT.
[GRAPHIC OMITTED]
The Cumulative Actual Maintenance Cost shall not exceed the Cumulative Target Maintenance Cost as these terms are defined in this Article 4 (PROGRAM COMMITMENT). If the performance of the Covered Aircraft does not comply with the Program Commitment (NON COMPLIANCE), Customer shall have the remedies specified in Article 8, below.

4.1 CUMULATIVE ACTUAL MAINTENANCE COST means the aggregate Actual Maintenance Cost of Covered Maintenance for all then-completed Reporting Periods divided by the Fleet Flight Hours for all such completed Reporting Periods.

4.2 ACTUAL MAINTENANCE COST means the
sum of (i) the Direct Material Cost, (ii) the Direct Labor Cost, (iii) the Subcontracted Maintenance Labor Cost, and (iv) the Subcontracted Maintenance Material Cost incurred by Customer during a Reporting Period for Covered Maintenance, where:

4.2.1 DIRECT MATERIAL COST means the actual cost paid by Customer for materials required to perform the Covered Maintenance in a Reporting Period, as reported by Customer and adjusted by Boeing pursuant to the provisions of this Letter Agreement and exclusive of those costs and other charges as set forth in Article 9; and

4.2.2 DIRECT LABOR COST means the product of Direct Labor Hours and Labor Rate, where:

4.2.2.1 DIRECT LABOR HOURS means the hours actually expended by Customer in performing the Covered Maintenance during a Reporting Period, as reported by Customer and adjusted by Boeing pursuant to the provisions of this Letter Agreement exclusive of time consumed by employees while waiting for work, traveling to or from work, training, vacation, sick leave, or in any other similar absences from the actual maintenance work; and

4.2.2.2 LABOR RATE means the average direct hourly labor rate during such Reporting Period, as reported by Customer and adjusted by Boeing pursuant to the provisions of this Letter Agreement exclusive of fringe benefits, premium time allowances, social charges and

business taxes paid to Customer's employees who actually perform the Covered Maintenance; and

4.2.3 SUBCONTRACTED MAINTENANCE LABOR COST means the cost as reported by Customer and adjusted by Boeing pursuant to the provisions of this Letter Agreement incurred by Customer for labor for Covered Maintenance performed for Customer during a Reporting Period by either a third party certified to perform such Covered Maintenance pursuant to 14 United States Code of Federal Regulations, Part 145, or European Union Commission Regulation EC 2042/2003, Part 145.

4.2.4 SUBCONTRACTED MAINTENANCE MATERIAL COST means the cost as reported by Customer and adjusted by Boeing pursuant to the provisions of this Letter Agreement incurred by Customer for materials for Covered Maintenance performed for Customer during a Reporting Period by either a third party certified to perform such Covered Maintenance pursuant to 14 United States Code of Federal Regulations, Part 145, or European Union Commission Regulation EC 2042/2003, Part 145.

4.3 FLEET FLIGHT HOURS means the total airborne time (aircraft takeoff-to-touchdown) accumulated by all of the Covered Aircraft during a Reporting Period.
[GRAPHIC OMITTED]
4.4 FLEET LANDINGS means the total number of landings accumulated by all the Covered Aircraft during a Reporting Period.

4.5 CUMULATIVE TARGET MAINTENANCE COST means the value calculated at the end of each completed Reporting Period by multiplying the Target Maintenance Cost for each completed Reporting Period by the Fleet Flight Hours reported by Customer for each such completed Reporting Period, adding the products together and dividing the sum by the total Fleet Flight Hours for all completed Reporting Periods.

4.6 TARGET MAINTENANCE COST means the sum of the target Direct Material Cost, target Direct Labor Cost, target Subcontracted Maintenance Labor Cost and target Subcontracted Maintenance Material Cost for a Reporting Period, determined or recalculated by Boeing as appropriate pursuant to the provisions of this Letter Agreement and provided to Customer pursuant Attachments C and F to this Letter Agreement, as applicable.

5.0 CALCULATION OF TARGET MAINTENANCE COST.

5.1 No later than six (6) months prior to delivery of the first Covered Aircraft, Customer will provide to Boeing the maintenance cost data and operational assumptions described on Attachment A for Customer's model 747-400F fleet covering the most recent [ * ] continuous years of operation (MAINTENANCE COST BENCHMARK DATA).

5.2 Using the methodology set forth in Attachment B, Boeing will adjust the Maintenance Cost Benchmark Data to a mature maintenance level for Customer's model 747-400F fleet (MATURE BENCHMARK FLEET VALUE).

Boeing will then decrease the Mature Benchmark Fleet Value by [ * ] to establish the mature equivalent maintenance cost for the Covered Aircraft (MATURE EQUIVALENT MAINTENANCE COST).
[GRAPHIC OMITTED]
Using the methodology in Attachment B, Boeing will derive from the Mature Equivalent Maintenance Cost the baseline cost elements described in Table 1 of Attachment B (COVERED AIRCRAFT MAINTENANCE COST BASELINE VALUES).

Using the operational assumptions provided by Customer in Attachment A for the Covered Aircraft, the Covered Aircraft Maintenance Cost Baseline Values and the methodology set forth in Attachment B, Boeing will then derive the target mature maintenance cost for the Covered Aircraft (TARGET MATURE
MAINTENANCE COST).

Finally, Boeing will apply the age adjustment methodology set forth in Attachment B to the Target Mature Maintenance Cost to establish Target Maintenance Costs for the Covered Aircraft for each Reporting Period and will report such values to Customer in the form specified in Attachment C.

5.3 Boeing will recalculate the Target Maintenance Costs in the circumstances and using the methodology provided in Attachment B and will report any recalculated Target Maintenance Costs to Customer in the form specified in Attachment F.

6.0 REPORTING OF ACTUAL MAINTENANCE DATA.

6.1 Within 90 days after the last day of each Reporting Period Customer will complete and return to Boeing Attachment D to provide to Boeing the data specified therein for that Reporting Period. Customer will report costs in Customer's currency.

6.2 Failure to provide the data specified in Article 6.1 to Boeing within the specified 90 day period shall constitute Customer's acknowledgment that the performance of the Covered Aircraft complies with the Program Commitment. If the Covered Aircraft subsequently should fail to perform in a manner consistent with the Program Commitment, however, Customer will, within 90 days after the last day of the Reporting Period in which such Noncompliance occurs, report to Boeing the data specified on Attachment D for all then-completed Reporting Periods of the Program Term.

7.0 CALCULATION OF ACTUAL MAINTENANCE COSTS AND COMPLIANCE WITH THE PROGRAM COMMITMENT.

7.1 Subject to the limitations described in Article 9. within 30 days after receiving Customer's report pursuant to Article 6.0 for each Reporting Period, Boeing will use the data provided by the Customer in such report and the methodology in Attachment B to calculate the Cumulative Actual Maintenance Cost for the Covered Aircraft as of the end of such Reporting Period and will provide to Customer a report in content and form as shown in Attachment E. Boeing will convert values expressed in Customer's currency to U.S. Dollars as described in Attachment B in order to perform the computations and comparisons contemplated by this Letter Agreement. Monetary amounts determined and reported by Boeing will be expressed in U.S. dollars.
[GRAPHIC OMITTED]
7.2 If the data determined pursuant to Article 7.1 indicates that the performance of the Covered Aircraft for the applicable Reporting Periods does not comply with the Program Commitment, Customer will, upon request, submit to Boeing sufficient information to allow Boeing to verify:

7.2.1 the data reported by Customer pursuant to Article 6,

7.2.2 the data does not reflect assumptions other than those relied upon in developing the Target Maintenance Costs, and

7.2.3 the data is consistent with all provisions of this Letter Agreement

7.3 If after completing the verification and analysis described in Article 7.2, the data indicates that the performance of the Covered Aircraft for the applicable Reporting Periods does not comply with the Program Commitment, Boeing will take corrective action as defined in Article 8.0; provided that throughout the period of such Noncompliance, Customer, upon request, submits to Boeing such information as is necessary for Boeing to:

7.3.1 analyze the problems causing such Noncompliance, and

7.3.2 develop, when required, appropriate corrective action.

7.4 At Customer's request, Boeing will provide Customer sufficient information to verify the data described in Article 7.1 and 7.3 and the calculations used to produce that data.

8.0 CORRECTIVE ACTION.

Should corrective action pursuant to Article 7.3 be appropriate, Boeing will:

8.1.1 investigate the circumstances and possible causes of the Noncompliance

8.1.2. provide technical assistance to Customer in the form of analysis and recommendations for reducing Actual Maintenance Cost

8.1.3 If necessary, Boeing will initiate a design review of the systems, accessories, equipment or parts determined by Boeing to be the primary cause of the Noncompliance and, when in Boeing's judgment a redesign is indicated as a technically and economically practicable means of complying with the Program Commitment, Boeing will redesign or cause the redesign of such items, and
[GRAPHIC OMITTED]
8.1.4. If such redesign results in retrofit kits being offered by Boeing or Boeing's suppliers, Boeing will provide such kits or cause such kits to be provided at no charge to Customer. Boeing will also reimburse, at Boeing's then existing warranty labor rate Customer's reasonable Direct Labor Costs for incorporation of any such kit manufactured to Boeing's or Boeing's supplier's detailed design. Such reimbursement will be provided pursuant to Exhibit C, "Product Assurance Document." of the
AGTA.

8.2 At Boeing's request, Customer will assign to Boeing, any of Customer's rights against the manufacturer of any equipment, accessory or part installed in the Covered Aircraft as Boeing may reasonably require to fulfill its obligations with respect to any corrective action provided by Boeing hereunder.

9.0 CONDITIONS AND LIMITATIONS.

9.1 If, with the intent of reducing the cost of Covered Maintenance, Boeing or any supplier issues service bulletins, service letters or other written instructions or offers no-charge retrofit kits, Customer and its subcontractors will comply with such instructions or install such kits (COMPLY) within a period of two hundred forty (240) days after issuance of such instructions or receipt of such kits at Customer's facility, or such longer period as may be mutually agreed by the parties (RESPONSE PERIOD). If Customer or any of its subcontractors does not Comply within the Response Period, after expiration of such Response Period all maintenance costs which Boeing determines would have been eliminated if such instructions or kits had been incorporated will be subtracted from the Actual Maintenance Costs reported.

9.2 Customer will promptly notify Boeing in writing of any variations in its maintenance cost accounting system or procedures or those of its subcontractors which would affect the proper reporting of Actual Maintenance Costs. Boeing will make adjustments to the Cumulative Target Maintenance Cost to reflect the effect of any such variations.

9.3 Upon reasonable notice to Customer, Boeing will have the right to audit all Actual Maintenance Cost Data reported by Customer during the Program Term, as well as the maintenance practices and procedures related thereto. Customer will also obtain from its subcontractors permission for Boeing to audit from time to time and upon reasonable notice such subcontractors' maintenance records and practices during the Program as they pertain to the Covered Aircraft. Boeing will have the right to disapprove costs it deems improperly reported or for

which it does  not  receive  sufficient  data to
verify  either the Direct Labor Hours  performed
or  the  Direct   Material   Costs  incurred  in
performing such maintenance. Boeing will provide
Customer written notification of its disapproval
of any such costs,  and,  if  Customer  does not
provide   proof   within  60  days   after  such
notification   that  such  costs  are   properly
chargeable,  Boeing's disapproval will be deemed
final and conclusive and Boeing will deduct such
costs from the computation of Actual Maintenance
Costs.

        9.4 Upon reasonable  notice to Customer,
Boeing  may   inspect   Customer's   maintenance
facilities,  programs and procedures.  If Boeing
recommends  in  writing  reasonable  changes  to
Customer's  or its  subcontractors'  maintenance
programs  and  procedures   which  would  reduce
Actual  Maintenance  Costs and  Customer  or its
subcontractors  do not implement such changes or
delay   implementing  such  changes  beyond  the
Response   Period  set  forth  in  Article  9.1,
Boeing, will adjust the Actual Maintenance Costs
that have been  reported to deduct the increased
maintenance   costs   which   Boeing   estimates
resulted   from   the   failure   or   delay  in
implementing such changes.

9.5  Actual  Maintenance  Cost  will not include
     any of the following costs:

     (a)      Costs  arising  from  loss of,  or
              damage to, any  Covered  Aircraft,
              or    any    system,    accessory,
              equipment or part thereof.

     (b)      Any   taxes,   duties,    tariffs,
              surcharges,        transportation,
              insurance, interest or overhead.

     (c)      The costs of initial or sustaining
              spare  parts   inventory   or  the
              depreciation  of such spare parts;
              costs     resulting    from    any
              modification    to   the   Covered
              Aircraft or any system, equipment,
              accessory  or part  thereof  other
              than modifications described under
              Articles 8.1.4 and 9.1 herein.

     (d)      Costs resulting from the negligent
              acts or omissions of Customer.

     (e)      Costs  resulting  from the failure
              to   comply   with   Boeing's   or
              Boeing's   suppliers'   applicable
              written   instructions   for   the
              operation, service, maintenance or
              overhaul of any Covered  Aircraft,
              or    any    system,    accessory,
              equipment or part thereof.

     (f)      Costs attributable to loss of use,
              revenue or profit.

     (g)      Costs   of   consumable    fluids,
              including fuel.

(h) Costs due to acts of God, war, armed hostilities, riots, fires, floods, earthquakes or serious accidents, governmental acts

or failure to act affecting materials, facilities or aircraft needed for the maintenance of Covered Aircraft.

(i) Costs due to strikes or labor troubles causing cessation, slowdown or interruption of work related to the maintenance of Covered Aircraft.

[GRAPHIC OMITTED]

(j) Costs resulting from failure of or delay in transportation or inability, after due and timely diligence, to procure materials, systems, accessories, equipment or parts needed for the maintenance of Covered Aircraft.

(k) Amounts for any part provided by Boeing or Boeing's suppliers to Customer at no charge.

(1) Amounts equal to the difference between the reported price for any part and the reduced price for such part as provided by Boeing or Boeing's suppliers to Customer.

(m) Amounts related to any warranty, maintenance cost guarantee or similar agreement, for which there is a credit memorandum or other payment scheme established in Customer's favor and issued by Boeing or Boeing's suppliers to Customer.

9.6 The Program will be suspended if during any Reporting Period the average utilization for the Covered Aircraft is less than the flight hour amounts shown in the table below:

AIRCRAFT MODEL FLIGHT HOURS

747 3,000

The Program will resume on the first day of any subsequent Reporting Period during which the average utilization for the Covered Aircraft exceeds that set forth above. The Actual Maintenance Cost, Cumulative Actual Maintenance cost, and the Cumulative Target Maintenance Cost as of the end of any Reporting Period during the Program Term will exclude all Actual Maintenance Cost and Fleet Flight Hours accumulated during any Reporting Period in which the Program was suspended as provided above. The Program will not be extended to reflect any period wherein it was suspended.

10.0 NOTICE.

10.1 All reports submitted to Boeing will be addressed to the attention of:

Director - BCA Warranty and Supplier Support Contracts

Boeing Commercial Airplanes P.O. Box 3707 Mail Code 2L-46 Fax: 425-237-1706 Seattle, Washington 98124-2207

10.2 All reports submitted to Customer will be addressed to the attention of:

Vice President Technical Operations Atlas Air, Inc. 2000 Westchester Avenue Purchase, NY 10577-2543

11.0 CONFIDENTIAL TREATMENT.
[GRAPHIC OMITTED]
Customer understands that certain commercial and financial information contained in this Letter Agreement is considered by Boeing as confidential. Customer agrees that it will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of Boeing, disclose this Letter Agreement or any information contained herein to any other person or entity. In the event that Customer in good faith concludes (based upon an opinion of counsel) that disclosure of information contained in this Letter Agreement may be required by applicable law or governmental regulations. Customer shall advise Boeing in writing prior to such disclosure, if possible, or, if not possible, then promptly upon receiving such order or upon identifying such need to comply, in order to enable Boeing to take whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible under the circumstances.

12.0 EXCLUSIVE REMEDY.

The remedies provided in Article 8 of this Letter Agreement are Customer's exclusive remedies in the event of Noncompliance and are in lieu of all other damages, claims, and remedies of Customer arising at law or otherwise for Noncompliance, Customer hereby waives and renounces all other claims and remedies arising at law or otherwise for any such Noncompliance.

13.0 ASSIGNMENT PROHIBITED.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

14.0 DISCLAIMER, RELEASE AND EXCLUSION.

THIS LETTER AGREEMENT AND THE RIGHTS AND REMEDIES OF CUSTOMER AND OBLIGATIONS OF BOEING HEREIN ARE SUBJECT TO THE DISCLAIMER AND RELEASE, AND EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES PROVISIONS OF EXHIBIT C, PRODUCT ASSURANCE DOCUMENT, OF THE AGTA.

[GRAPHIC OMITTED]

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.

Very truly yours,

THE BOEING COMPANY

By: [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

/s/ William J. Flynn
------------------------------------------

By: /s/ Mr. William J. Flynn
    --------------------------------------

Its: President and Chief Executive Officer
     -------------------------------------

ATTACHMENT A: MAINTENANCE COST BENCHMARK DATA AND COVERED AIRCRAFT
OPERATIONAL ASSUMPTIONS

------------------------------------------------------------------------------------------------------------------------------------
                        AIRLINE'S HISTORIC BENCHMARK DATA
------------------------------------------------------------------------------------------------------------------------------------
                                                            YEAR             YEAR             YEAR           YEAR           YEAR
                                                          1:____           2:____           3:____         4:____         5:____
------------------------------------------------------------------------------------------------------------------------------------
   Direct Labor Cost
   ($ per Flight Hour)
------------------------------------------------------------------------------------------------------------------------------------
   Direct Material Cost
   ($ per Flight Hour)
------------------------------------------------------------------------------------------------------------------------------------
   Subcontract Maintenance
   Cost ($ per Flight Hour)
------------------------------------------------------------------------------------------------------------------------------------
   Direct Labor Rate
   ($ per Labor Hour)
------------------------------------------------------------------------------------------------------------------------------------
   Maintenance
   Subcontracted. %
------------------------------------------------------------------------------------------------------------------------------------
   Subcontract Labor Rate
   ($ per Labor Hour)
------------------------------------------------------------------------------------------------------------------------------------
   Annual Fleet Landings
   (Total for Year)
------------------------------------------------------------------------------------------------------------------------------------
   Annual Fleet Fight Hours
   (Total for Year)
------------------------------------------------------------------------------------------------------------------------------------
   Average. Fleet Size for
   Year (Number of Airplanes)
------------------------------------------------------------------------------------------------------------------------------------
   Average Fleet Age:
   o     In Flight Hours
   o     In Landings
   o     In Years
------------------------------------------------------------------------------------------------------------------------------------

OPERATIONAL ASSUMPTIONS FOR COVERED AIRCRAFT

Direct Labor Rate
($ per Labor Hour)

Maintenance
Subcontracted.%

Subcontract Labor Rate
($ per Labor Hour)
Annual Fleet Landings
(Total for Year)
Annual Fleet Fight Hours
(Total for Year)

ATTACHMENT-B - ADJUSTMENTS

Boeing will adjust as described in this Attachment B the Maintenance Cost Benchmark Data submitted in Attachment A, the Target Maintenance Costs reported in Attachment C and Actual Maintenance Cost Data reported in Attachment D.

1.0 CURRENCY EXCHANGE RATE.

Boeing will convert maintenance cost data submitted in the Customer's currency to U. S. Dollars by multiplying such reported costs by the applicable exchange rate published in the U.S. edition of the Wall Street Journal on the day (not including weekends or U. S. national holidays) nearest to the midpoint of the applicable Reporting Period.

2.0 ESCALATION INDICES.

2.1 MATERIAL PRICE INFLATION.

The measure of material price inflation will be the Producer Price Index for "Other Aircraft Parts and Auxiliary Equipment Mfg" ((North American Industry Classification System (NAICS) code 336413, BLS Series ID = PCU336413)) obtained from the publication "Producer Prices and Price Indexes" published monthly by the U.S. Department of Labor, Bureau of Labor Statistics (BLS) or any comparable successor publication published by the U.S. Department of Labor Bureau of Labor Statistics or any comparable successor agency (Material Index).

2.2 LABOR PRICE INFLATION.

The measure of labor price inflation will be the "Employment Cost Index for workers in aircraft manufacturing - Wages and Salaries" (ECI code 3721) obtained from the publication published quarterly by the U.S. Department of Labor, Bureau of Labor Statistics or any comparable successor publication published by the U.S. Department of Labor Bureau of Labor Statistics or any comparable successor agency (Labor Index). As the Labor Index values are only released on a quarterly basis, the value released for the month of March will be used for the months of January and February, the value for the month of June will be used for the months of April and May; the value for the month of September will be used for the months of July and August; and the value for the month of December will be used for the months of October and November.

3.0 BENCHMARK METHOD FOR DETERMINING TARGET MAINTENANCE COSTS.

3.1 The Target Maintenance Costs will be determined for the Covered Aircraft as specified in subparagraphs 3.l (a) through 3.1 (g) of this Attachment B.

(a) The Direct Material Costs reported in the maintenance Cost Benchmark Data will be revised to values expressed in base year 2006 (Base Year) by multiplying such costs by the ratio of the average of the values for the Material Index published during the twelve months of the Base Year to the average of the values for the Material Index published for the months in which such Direct Material Costs were incurred.

(b) The Direct Labor Costs reported in the Maintenance Cost Benchmark Data will be revised to values expressed in the Base Year by multiplying such costs by the ratio of the average of the values for the Labor Index published during the twelve months of the Base Year to the average of the values for the Labor Index published for the months in which the Benchmark Direct Material Costs were incurred.

(c) The methodology and the applicable factors will be used as set forth in paragraph 5.6 of this Attachment B to convert the Benchmark Maintenance Cost Data to a Mature Benchmark Fleet Value, which reflects a maturity factor equal to 1.00.

(d) Next Boeing will decrease the Mature Benchmark Fleet Value by the percentage specified in Article 5.2 of the Letter Agreement to determine the Mature Equivalent Maintenance Cost for the Covered Aircraft.

(e) From the Mature Equivalent Maintenance Cost Boeing will derive the Covered Aircraft Maintenance Cost Baseline Values for the elements described in Table 1 of this Attachment:

TABLE 1: Covered Aircraft Maintenance Cost Baseline

                                          ------------------------------------------------------------------------
                                                                                    Labor            Labor
                                              Material $        Material $        Hours per        Hours per
                                                per FH          per Cycle            FH              Cycle
                                          ------------------------------------------------------------------------
                                                  AA                BB               CC                DD
------------------------------------------------------------------------------------------------------------------
   Line
   A Check
   C or 1 C-3C Check
   D/SI or 4C/SI Check
     Brakes
     Wheels/Tires
     Landing Gear
     APU
     Other Components
   QEC Line
==================================================================================================================

(f) The following formulas, the Covered Aircraft Maintenance Cost Baseline Values and the operational assumptions for the Covered Aircraft

provided by Customer in Attachment A to the Letter Agreement will be used to generate the Target Mature Maintenance Cost for the Covered Aircraft, where the Target Mature Maintenance Cost is the sum of the values derived in the following formulas:

Target Mature Material Cost (or TMC) = ((BB + (Average Flight Time * AA))/Average Flight Time) * (1 - Subcontract %) * In-house Material Factor

Target Mature Labor Cost (or TLC) = (((DD + (Average Flight Time * CC)) * In-house Labor Rate)/Average Flight Time) * ( 1
- Subcontract %) * In-house Labor Factor

Target Mature Subcontract Material Cost (or TSMC) = ((BB + (Average Flight Time * AA))/Average Flight Time) * (Subcontract %) * Contract Material Factor

Target Mature Subcontract Labor Cost (or TSLC) = (((DD + (Average Flight Time * CC)) * Subcontract Labor Rate)/Average Flight Time) * (Subcontract %) * Contract Labor Factor

Where: In-house Material Factor, In-house Labor Factor, Contracted Material Factor, and Contracted Labor Factor will have values (1) determined by Boeing and provided to the Customer on Attachment C and, if applicable, Attachment F and
(2) are derived by dividing the Direct Material Cost, Direct Labor Cost, and Subcontracted Maintenance Cost reported in Attachment A (or subsequently in Attachment D) by fleet wide industry averages which Boeing derives from published industry sources and data collected from airlines.

(g) Then the methodology and the applicable factors set forth in paragraph 5.6 of this Attachment B will be applied to the Target Mature Maintenance Cost to determine the Target Maintenance Cost for the Covered Aircraft for each Reporting Period.

4.0 REPORTING PERIOD ADJUSTMENTS.

The reported Direct Material Cost for a Reporting Period and the reported Subcontracted Maintenance Material Cost for a Reporting Period will be revised to values express in the Base Year by multiplying such costs by the ratio of the average of the values of the Material Index published for the twelve months of the Base Year to the average of the values for the Material Index published during twelve months of the applicable Reporting Period.

The reported Direct Labor Cost for a Reporting Period and the reported Subcontracted Maintenance Labor Cost for a Reporting Period will be revised (1) by multiplying the reported Direct Labor Cost by the ratio of the Labor Rate specified in the operational assumptions section of Attachment A to the Customer's then-current Labor Rate, as reported in Attachment D, and (2) by multiplying the reported Subcontracted Maintenance Labor Cost by the ratio of the Subcontracted Maintenance Labor Rate specified in the operational assumptions section of Attachment A to the Subcontracted Maintenance Labor Rate as reported in Attachment D.

5.0 RECALCULATION OF TARGET MAINTENANCE COST.

5.1 AIRFRAME MAINTENANCE PERFORMED BY OTHERS.

If during any Reporting Period, the operational assumptions reported in Attachment A and subsequently reported in Attachment D with regard to airframe maintenance performed by others (Subcontracted Maintenance) are different by more than +/- 10% (absolute value), the In-house Material Factor, In-house Labor Factor, Contracted Material Factor, and Contracted Labor Factor, as applicable, will be revised by Boeing by dividing the reported maintenance costs in Attachment D by fleet wide industry averages which Boeing derives from published industry sources and data collected from airlines. Using such revised factors the Target Maintenance Cost for that Reporting Period will then be adjusted as specified in paragraph 5.3 below.

5.2 AVERAGE FLIGHT TIME.

If the Actual Average Flight Time (AAFT) for any Reporting Period differs from the Projected Average Flight Time (PAFT) of _______ hours by more than +/- 0.5 Flight Hours, the target Direct Material Cost (TMC) and target Direct Labor Cost for that Reporting Period will be adjusted using the methodology as specified in paragraph 5.3 below to reflect the AAFT, where:

5.2.1 ACTUAL AVERAGE FLIGHT TIME (AAFT) is obtained by dividing Total Fleet Flight Hours reported in Attachment D by Total Fleet Landings reported in Attachment D, and

5.2.2 PROJECTED AVERAGE FLIGHT TIME (PAFT) is obtained by dividing Total Fleet Flight Hours reported in the Operational Assumptions section of Attachment A by Total Fleet Landings reported in the Operational Assumptions section of Attachment A.

5.3 METHOD FOR RECALCULATING TARGET MAINTENANCE COST.

As permitted by paragraph 5.1 or 5.2 of this Attachment B, the Target Maintenance Cost for a Reporting Period will be recalculated using the following formulas and using the operational assumptions provided by the Customer for the Reporting Period in Attachment D to the Letter Agreement:

Recalculated Target Material Cost (or RTMC) = ((BB + (Average Flight Time * AA))/Average Flight Time) * (1 - Subcontract %) * In-house Material Factor

Recalculated Target Labor Cost (or RTLC) = (((DD + (Average Flight Time
* CC)) * In-house Labor Rate)/Average Flight Time) * (1- Subcontract %)
* In- house Labor Factor

Recalculated Target Subcontract Material Cost (or RTSMC) = ((BB + (Average Flight Time * AA))/Average Flight Time) * (Subcontract %) * Contract Material Factor

Recalculated Target Subcontract Labor Cost (or RTSLC) = (((DD + (Average Flight Time * CC)) * Subcontract Labor Rate)/Average Flight Time) * (Subcontract %) * Contract Labor Factor

WHERE: AA, BB, CC and DD have the values reported for those elements on Attachment C to the Letter Agreement.

5.4 COVERED AIRCRAFT.

The Target Maintenance Cost is based on the number of Covered Aircraft. If the number of Covered Aircraft changes during any Reporting Period, the Target Maintenance Cost will be recalculated for that Reporting Period to address any change to the average fleet age by using the methodology specified in paragraph 5.6, below.

5.5 DELIVERY SCHEDULE.

The Target Maintenance Cost is based on the delivery schedule of Covered Aircraft as described in Table 1 of the Purchase Agreement. If the delivery schedule for the Covered Aircraft changes during any Reporting Period, the Target Maintenance Cost will be recalculated for that Reporting Period and subsequent Reporting Periods to address any resulting changes to the average fleet age using the methodology specified in paragraph 5.6, below.

5.6 AGE ADJUSTMENT.

Age Adjustments will be based on the average fleet age during a Reporting Period and the factors set forth in the table below.. Maintenance Cost Benchmark Data will be adjusted to Maturity by dividing the cost for a given period by the Maturity Factor which corresponds to the average fleet age. The Target Maintenance Cost will be calculated by multiplying the Target Mature Maintenance Cost by the maturity factor corresponding to the average age of the Covered Aircraft at the time of the Reporting Period.

5.7 COVERED AIRCRAFT CONFIGURATION.

Target Maintenance Costs set forth in this Program are based on the configuration for the Covered Aircraft as set forth in Exhibit A to the Purchase Agreement as of the date of signing of the Purchase Agreement. Such Target Maintenance Costs may be recalculated as appropriate to reflect the configuration of the Covered Aircraft at the time of delivery to Customer and to reflect any changes to the configuration occurring during the Program Term.

------------------------------------------------------------------------------------------------------------------------------------
                                                                   MATURITY FACTORS
                                                                    MSG-3 AIRPLANES
------------------------------------------------------------------------------------------------------------------------------------
    FLT HRS/YR       1,500       2,000       2,500      3,000       3,500       4,000        4,500      5,000      5,500      6,000
------------------------------------------------------------------------------------------------------------------------------------
                   MATURITY FACTOR
                   -----------------------------------------------------------------------------------------------------------------
        0             0.250       0.250       0.250      0.250       0.250       0.250        0.250      0.250      0.250      0.250
        1             0.380       0.380       0.380      0.380       0.380       0.380        0.380      0.380      0.380      0.380
        2             0.650       0.650       0.650      0.650       0.650       0.650        0.650      0.650      0.650      0.650
        3             0.840       0.840       0.840      0.840       0.840       0.840        0.840      0.840      0.840      0.840
        4             0.920       0.920       0.920      0.920       0.920       0.920        0.920      0.920      0.920      0.920
        5             0.965       0.965       0.965      0.965       0.965       0.965        0.965      0.965      0.965      0.965
        6             0.980       0.980       0.980      0.980       0.980       0.980        0.980      0.980      0.980      0.980
        7             1.000       1.000       1.000      1.000       1.000       1.000        1.000      1.000      1.000      1.000
        8                 1           1           1          1           1           1            1          1          1          1
        9                 1           1           1          1           1           1            1          1          1          1
       10                 1           1           1          1           1           1            1          1          1          1
       11                 1           1           1          1           1           1            1          1          1          1
       12                 1           1           1          1           1           1            1          1          1          1
       13                 1           1           1          1           1           1            1          1          1          1
       14                 1           1           1          1           1           1            1          1          1          1
       15             1.015       1.020       1.025      1.030       1.035       1.040        1.045      1.050      1.055      1.060
       16             1.030       1.040       1.050      1.060       1.070       1.080        1.090      1.100      1.110      1.120
       17             1.045       1.060       1.075      1.090       1.105       1.120        1.135      1.150      1.165      1.180
       18             1.060       1.080       1.100      1.120       1.140       1.160        1.180      1.200      1.220      1.240
       19             1.075       1.100       1.125      1.150       1.175       1.200        1.225      1.250      1.275      1.300
       20             1.090       1.120       1.150      1.180       1.210       1.240        1.270      1.300      1.330      1.360
       21             1.105       1.140       1.175      1.210       1.245       1.280        1.315      1.350      1.385      1.420
       22             1.120       1.160       1.200      1.240       1.280       1.320        1.360      1.400      1.440      1.480
       23             1.135       1.180       1.225      1.270       1.315       1.360        1.405      1.450      1.495      1.540
       24             1.150       1.200       1.250      1.300       1.350       1.400        1.450      1.500      1.550      1.600
       25             1.165       1.220       1.275      1.330       1.385       1.440        1.495      1.550      1.605      1.660
       26             1.180       1.240       1.300      1.360       1.420       1.480        1.540      1.600      1.660      1.720
       27             1.195       1.260       1.325      1.390       1.455       1.520        1.585      1.650      1.715      1.780
       28             1.210       1.280       1.350      1.420       1.490       1.560        1.630      1.700      1.770      1.840
       29             1.233       1.310       1.388      1.465       1.543       1.620        1.698      1.775      1.853      1.930
       30             1.255       1.340       1.425      1.510       1.595       1.680        1.765      1.850      1.935      2.020
       31             1.278       1.370       1.463      1.555       1.648       1.740        1.833      1.925      2.018      2.110
       32             1.300       1.400       1.500      1.600       1.700       1.800        1.900      2.000      2.100      2.200
       33             1.323       1.430       1.538      1.645       1.753       1.860        1.968      2.075      2.183      2.290
       34             1.345       1.460       1.575      1.690       1.805       1.920        2.035      2.150      2.265      2.380
       35             1.368       1.490       1.613      1.735       1.858       1.980        2.103      2.225      2.348      2.470
       36             1.390       1.520       1.650      1.780       1.910       2.040        2.170      2.300      2.430      2.560
       37             1.413       1.550       1.688      1.825       1.963       2.100        2.238      2.375      2.513      2.650
       38             1.435       1.580       1.725      1.870       2.015       2.160        2.305      2.450      2.595      2.740
       39             1.458       1.610       1.763      1.915       2.068       2.220        2.373      2.525      2.678      2.830
       40             1.480       1.640       1.800      1.960       2.120       2.280        2.440      2.600      2.760      2.920
------------------------------------------------------------------------------------------------------------------------------------

Note: For all intermediate utilization, interpolate between factors Maturity is defined as a maturity factor of one (1).

ATTACHMENT C - TARGET MAINTENANCE COST FOR COVERED AIRCRAFT AND COVERED AIRCRAFT

MAINTENANCE BASELINE

To:           Atlas Air, Inc.

Reference:    Letter Agreement No. 6-1162-ILK-0206 to Purchase Agreement
              No. 3134

              Airframe Maintenance Cost Protection Program

Subject:     Target Maintenance Cost reported pursuant to Article 5.2 of
             the referenced Letter Agreement

------------------------------------------------------------------------------------------------------------------------------------
                                        Target             Target              Target               Target
                                        Direct             Direct           Subcontracted        Subcontracted        Projected
                          Average        Labor            Material           Maintenance          Maintenance           Target
  Reporting     Fleet     Fleet          Cost       +       Cost       +     Labor Cost          Material Cost   =   Maint. Cost
    PERIOD       Size      Age      ($ PER FLT HR)     ($ PER FLT HR)      ($ PER FLT HR)       ($ PER FLT HR)      ($ PER FLT HR)
------------------------------------------------------------------------------------------------------------------------------------
     One                                $            +    $             +                         $               =
------------------------------------------------------------------------------------------------------------------------------------
     Two                                $            +    $             +                         $               =
------------------------------------------------------------------------------------------------------------------------------------
    Three                               $            +    $             +                         $               =
------------------------------------------------------------------------------------------------------------------------------------
     Four                               $            +    $             +                         $               =
------------------------------------------------------------------------------------------------------------------------------------
     Five                               $            +    $             +                         $               =
------------------------------------------------------------------------------------------------------------------------------------

COVERED AIRCRAFT MAINTENANCE COST BASELINE VALUES

                                              -------------------------------------------------------
                                                Material $   Material $      Labor        Labor
                                                                           Hours per    Hours per
                                                  per FH      per Cycle       FH          Cycle
                                              -------------------------------------------------------
                                                    AA           BB           CC            DD
-----------------------------------------------------------------------------------------------------
   Line
   A Check
   C or 1C-3C Check
   D/SI or 4C/SI Check
     Brakes
     Wheels/Tires
     Landing Gear
     APU
     Other Components
   QEC Line
=====================================================================================================

To:               Director - BCA Warranty and Supplier Suport
                  Boeing Commercial Airplanes
                  P.O. Box 3707     Mail Stop 76-02
                  Fax: 206-544-9171
                  Seattle, Washington 98124-2207

Reference:        Letter Agreement No. 6-1162-ILK-0206 to Purchase Agreement No.
                  3134 Airframe Maintenance Cost Protection Program

Subject:          Data reported pursuant to Article 6.0 of the referenced Letter
                  Agreement.

Reporting Period No. ______
Beginning date __________ ending date __________

Currency of the costs shown below: _________

------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Subcontracted             Subcontracted
                                     Direct                    Direct               Maintenance Labor        Maintenance Material
          Actual                   Labor Cost               Material Cost                 Costs                     Costs
     Maintenance Costs            (total cost)              (total cost)               (total cost)              (total cost)
------------------------------------------------------------------------------------------------------------------------------------
   Total
------------------------------------------------------------------------------------------------------------------------------------

Note: The above labor costs have been calculated in accordance with Article 4.2. of the referenced Letter Agreement and are exclusive of time consumed by employees while waiting for work, traveling to or from work, training, vacation, sick leave, or in any other similar absences from the actual maintenance work. The above material costs have been calculated in accordance with Article 4.2 of the referenced Letter Agreement and exclude all costs described in Article 9.0 therein.

Direct Labor Rate
($ per Labor Hour)

Maintenance
Subcontracted. %

Subcontract Labor Rate
($ per Labor Hour)
Annual Fleet Landings
(Total for Year)
Annual Fleet Fight Hours
(Total for Year)

Average Number of
Covered Aircraft

The above labor rate has been calculated in accordance with Article 4.2 of the Letter Agreement and excludes, without limitation, all fringe benefits, premium time allowances, social charges and business taxes.

By                                                 Date
    --------------------------------------              ------------------------

Its
    --------------------------------

To:               Atlas Air, Inc.

Reference:        Letter Agreement No 6-1162-ILK-0206 to Purchase Agreement No.
                  3134 Airframe Maintenance Guarantee

Subject:          Data reported pursuant to Article 7.0 of the referenced Letter
                  Agreement.

Reporting Period No. ______
Beginning date _________ ending date _________

Actual Maintenance Costs as reported by Customer expressed in U.S. Dollars:

------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Subcontracted             Subcontracted
                                     Direct                    Direct               Maintenance Labor        Maintenance Material
          Actual                   Labor Cost               Material Cost                 Costs                     Costs
     Maintenance Costs            (total cost)              (total cost)               (total cost)              (total cost)
------------------------------------------------------------------------------------------------------------------------------------
   Total
------------------------------------------------------------------------------------------------------------------------------------

Actual Maintenance Costs and Target Maintenance Costs as determined by Boeing expressed in U.S. dollars.

------------------------------------------------------------------------------------------------------------------------------------
                                                   Reporting         Reporting        Reporting       Reporting        Reporting
                                                    Period 1         Period 2         Period 3         Period 4        Period 5
------------------------------------------------------------------------------------------------------------------------------------
   Year
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
   Year dollars
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
   Direct Labor Cost
------------------------------------------------------------------------------------------------------------------------------------
   Direct Material Cost
------------------------------------------------------------------------------------------------------------------------------------
   Subcontracted Maintenance Labor Cost
------------------------------------------------------------------------------------------------------------------------------------
   Subcontracted Maintenance Material Cost
------------------------------------------------------------------------------------------------------------------------------------
   Total Actual Maintenance Cost
------------------------------------------------------------------------------------------------------------------------------------
   Cumulative Actual Maintenance Cost
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
   Total Fleet Flight Hours
------------------------------------------------------------------------------------------------------------------------------------
   Total Fleet Landings
------------------------------------------------------------------------------------------------------------------------------------
   Number of Covered Aircraft
------------------------------------------------------------------------------------------------------------------------------------
   Per man-hour Labor Rate
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
   Material Inflation factor
------------------------------------------------------------------------------------------------------------------------------------
   Currency Exchange factor
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
   Target Labor Cost
------------------------------------------------------------------------------------------------------------------------------------
   Target Material Cost
------------------------------------------------------------------------------------------------------------------------------------
   Target Maintenance Cost
------------------------------------------------------------------------------------------------------------------------------------

Cumulative Target
Maintenance Cost

Very truly yours,

THE BOEING COMPANY

Reported by

Its

Date

ATTACHMENT F - RECALCULATED AND ADJUSTED TARGET
MAINTENANCE COST FOR COVERED AIRCRAFT

To:            Atlas Air, Inc.

Reference:     Letter Agreement No. 6-1162-ILK-0206 to Purchase
               Agreement No. 3134

               Airframe Maintenance Cost Protection Program

Subject:      Data reported pursuant to Article 5.3 of the referenced
              Letter Agreement.

------------------------------------------------------------------------------------------------------------------------------------
                                  Average       Target      +      Target      +     Target             Target      =   Projected
                                   Fleet        Direct             Direct         Subcontracted     Subcontracted         Target
                                    Age          Labor            Material         Maintenance       Maintenance       Maintenance
     Reporting         Fleet                     Cost               Cost           Labor Cost       Material Cost          Cost
       PERIOD           Size                ($ PER FLT HR)     ($ PER FLT HR)    ($ PER FLT HR)     ($ PER FLT HR)    ($ PER FLT HR)
------------------------------------------------------------------------------------------------------------------------------------
        One                                    $            +     $            +                      $             =
------------------------------------------------------------------------------------------------------------------------------------
        Two                                    $            +     $            +                      $             =
------------------------------------------------------------------------------------------------------------------------------------
       Three                                   $            +     $            +                      $             =
------------------------------------------------------------------------------------------------------------------------------------
        Four                                   $            +     $            +                      $             =
------------------------------------------------------------------------------------------------------------------------------------
        Five                                   $            +     $            +                      $             =
------------------------------------------------------------------------------------------------------------------------------------

Atlas Air, Inc. 2000 Westchester Avenue Purchase, NY 10577-2543
[GRAPHIC OMITTED]

Subject:     Special Matters relating to [ * ]

Reference:   Purchase   Agreement  No. 3134 (the
             PURCHASE   AGREEMENT)  between  The
             Boeing  Company  (Boeing) and Atlas
             Air,  Inc.  (CUSTOMER)  relating to

Model 747-8 Freighter aircraft

(AIRCRAFT)

This letter agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. All terns used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

RECITALS

[ * ]

AGREEMENT

[ * ]

Very truly yours,

THE BOEING COMPANY

By: [ * ]
[GRAPHIC OMITTED]
Its: Attorney In Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

      /s/ William J. Flynn
----------------------------------------------

By:   Mr. William J. Flynn
      ----------------------------------------

Its: President and Chief Executive Officer

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207

                              Atlas Air, Inc.
                              2000 Westchester Avenue
                              Purchase, NY 10577-2543

                              Subject:     Promotional Support Agreement


                              Reference:   Purchase  Agreement  No. 3134  (the
                                           PURCHASE  AGREEMENT)  between   The
                                           Boeing Company (Boeing)  and  Atlas
                                           Air, Inc.  (CUSTOMER)  relating  to
                                           Model   747-8   Freighter  aircraft
                                           (Aircraft).
[GRAPHIC OMITTED]

This letter agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

RECITAL.

Boeing and Customer wish to enter into an agreement pursuant to which each party will contribute equally to promotional programs in support of the entry into service of the Aircraft as more specifically provided below.

AGREEMENT.

1. DEFINITIONS.

1.1 "Covered Aircraft" shall mean those Aircraft identified on Table 1 to the Purchase Agreement as of the date of signing of this Letter Agreement.

1.2 "Promotional Support" shall mean marketing and promotion programs in support of the entry into service of the Covered Aircraft such as marketing research, tourism development, corporate identity, direct marketing, video tape or still photography, planning, design and production of collateral materials, management of promotion programs, advertising campaigns or such other marketing and promotional activities as the parties may mutually agree.

1.3 "Commitment Limit" shall have the meaning set forth in Article 2, below.

1.4 "Performance Period" shall mean the period beginning one (1) year before and ending one (1) year after delivery of the first Covered Aircraft; however, up to [ * ] of the co-branding matching fund will be made available to the airlines for announcement/marketing purposes as the North American Launch airline for the 747-8 between the [ * ] and [ * ].

1.5 "Qualifying Third Party Fees" shall mean fees paid by Customer during the Performance Period to third party providers for Promotional Support provided to Customer during the Performance Period.

2. COMMITMENT.

As more particularly set forth in this Letter Agreement Boeing agrees to provide Promotional Support to Customer at a value not to exceed [ * ] for the first Covered Aircraft delivered to Customer and not to exceed [ * ] per Covered Aircraft for each Covered Aircraft delivered to Customer thereafter (COMMITMENT LIMIT).
[GRAPHIC OMITTED]
3. METHODS OF PERFORMANCE.

Subject to the Commitment Limit, Customer may elect to receive the Promotional Support in either or any combination of the following ways:

3.1 At Customer's request and with respect to a mutually agreed project, Boeing will provide Promotional Support during the Performance Period directly to Customer in value equivalent to Qualifying Third Party Fees.

3.2 Boeing will reimburse [ * ] of Customer's payments of Qualifying Third Party Fees provided that Customer provides Boeing copies of paid invoices for such Qualifying Third Party Fees no later than [ * ] months after the delivery of the first Covered Aircraft. There will be no cash payments or other support in lieu thereof.

4. COMMENCEMENT DATE.

Boeing's obligation to provide Promotional Support will commence when the purchase of the Covered Aircraft becomes firm (not subject to cancellation by either party). For the avoidance of doubt, the commencement date shall be the later of the date on which the Purchase Agreement is executed by the Customer and the corporate resolution authorizing the purchase is effective.

5. PROJECT APPROVAL.

Following the execution of this Letter Agreement, a Boeing Airline Marketing Services representative will meet with Customer's designated representative to review and approve the extent, selection, scheduling, and funds disbursement process for the Promotional Support to be provided pursuant to this Letter Agreement.

6. CONFIDENTIALITY.

Very truly yours,

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.
[GRAPHIC OMITTED]

      /s/ William J. Flynn
--------------------------------------------

By:   Mr. William J. Flynn
      --------------------------------------

Its: President and Chief Executive Officer

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207

                              Atlas Air, Inc.
                              2000 Westchester Avenue
                              Purchase, NY 10577-2543

                              Subject:         Aircraft Performance Guarantees

                              Reference:       Purchase   Agreement  No.  3134
                                               (the   PURCHASE   AGREEMENT)  I
                                               between  The   Boeing   Company
                                              (BOEING)  and  Atlas  Air,  Inc.
                                              (CUSTOMER)   relating to  Boeing
                                               Model  747-8 Freighter aircraft
                                               (the AIRCRAFT)
[GRAPHIC OMITTED]

This letter agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment. These guarantees are exclusive and expire upon delivery of the Aircraft to Customer.

Very truly yours,

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

[GRAPHIC OMITTED]                 /s/ William J. Flynn
                                  ------------------------------------------

                              By:  Mr.William J. Flynn
                                   ------------------------------------------

Its: President and Chief Executive Officer

                 BOEING PROPRIETARY
         MODEL 747-8F PERFORMANCE GUARANTEES
                 FOR ATLAS AIR, INC.

SECTION                 CONTENTS

     1         AIRCRAFT MODEL APPLICABILITY

     2         FLIGHT PERFORMANCE

     3         MANUFACTURER'S EMPTY WEIGHT

     4         SOUND LEVELS

     5         RUNWAY LOADING

     6         AIRCRAFT CONFIGURATION

     7         GUARANTEE CONDITIONS

     8         GUARANTEE COMPLIANCE

     9         EXCLUSIVE GUARANTEES

1              AIRCRAFT MODEL APPLICABILITY

               [ * ]

2              FLIGHT PERFORMANCE

2.1            MISSION

                  [ * ]

2.1.1          MISSION PAYLOAD

                  [ * ]

[ * ]

2.1.2 MISSION BLOCK FUEL

[ * ]

2.1.3 MISSION PAYLOAD

[ * ]

2.1.4 MISSION BLOCK FUEL

[ * ]

2.1.5 MISSION PAYLOAD

[ * ]

2.1.6 MISSION BLOCK FUEL

[ * ]

2.1.7 MISSION PAYLOAD

[ * ]

2.1.8 MISSION BLOCK FUEL

[ * ]

2.1.9 CUSTOMER WEIGHT CHANGES

[ * ]

2.1.10 STANDARD AND OPERATIONAL ITEMS ALLOWANCES

[ * ]

3 MANUFACTURER'S EMPTY WEIGHT

[ * ]

4                 SOUND LEVELS

4.1               CERTIFICATION

                  [ * ]

4.2               FLYOVER CONDITION

                  [ * ]

4.3 LATERAL CONDITION

[ * ]

4.4 APPROACH CONDITION

[ * ]

4.5 DEPARTURE CONDITION

[ * ]

4.6 CUMULATIVE NOISE CERTIFICATION MARGIN TO CHAPTER 4 / STAGE 4 RULE

[ * ]

5        RUNWAY LOADING

5.1      MAXIMUM ACN VALUE - FLEXIBLE PAVEMENT - PRELIMINARY

         The Aircraft Classification Number (ACN) for flexible pavement
         having  subgrade Codes A through D, at the maximum taxi weight
         of 441,345  kilograms  (973,000 pounds) with 94.6% of the load
         on the  main  gear and  with  the  main  gear  tires at a tire
         pressure of 220 pounds per square  inch,  shall not exceed the
         following guarantee value:


         [ * ]


5.2      MAXIMUM ACN VALUE - RIGID PAVEMENT

         The Aircraft  Classification  Number (ACN) for rigid  pavement
         having  subgrade Codes A through D, at the maximum taxi weight
         of 441,345  kilograms  (973,000 pounds) with 94.6% of the load
         on the  main  gear and  with  the  main  gear  tires at a tire
         pressure of 220 pounds per square  inch,  shall not exceed the
         following guarantee value:


         [ * ]

6        AIRCRAFT CONFIGURATION

6.1      The guarantees  contained in this  Attachment arc based on the
         Aircraft  configuration  as defined in the original release of
         Detail  Specification  TBD  (hereinafter  referred  to as  the
         Detail  Specification).  Appropriate  adjustment shall be made
         for  changes  in such  Detail  Specification  approved  by the
         Customer  and  Boeing or  otherwise  allowed  by the  Purchase
         Agreement which cause changes to the flight performance and/or
         weight and balance of the Aircraft.  Such adjustment  shall be
         accounted for by Boeing in its evidence of compliance with the
         guarantees.

6.2 The guarantee payloads of Paragraph 2.1.1, 2.1.3, 2.1.5, and 2.1.7 and the specified payloads of the guarantee block fuels of Paragraphs 2.1.2, 2.1.4, 2.1.6, and 2.1.8 will be adjusted

         by Boeing for the effect of the  following  in its evidence of
         compliance with the guarantees:

         (1) Changes to the Detail  Specification  or any other changes
         mutually  agreed  upon  between  the  Customer  and  Boeing or
         otherwise allowed by the Purchase Agreement.

         (2) The  difference  between the component  weight  allowances
         given  in  Appendix  IV of the  Detail  Specification  and the
         actual weights.

7        GUARANTEE CONDITIONS

7.1      [ * ].

7.2      The FAA Regulations  (FAR) referred to in this Attachment are,
         unless otherwise  specified,  Code of Federal  Regulations 14,
         Part 25, amended by Amendments 25-1 through 25-117, subject to
         the approval of the Federal Aviation Administration.

7.3      In the  event  a  change  is  made  to any  law,  governmental
         regulation or  requirement,  or in the  interpretation  of any
         such law, governmental  regulation or requirement that affects
         the  certification  basis for the  Aircraft  as  described  in
         Paragraph  4.1 or 7.2,  and as a result  thereof,  a change is
         made  to  the  configuration  and/or  the  performance  of the
         Aircraft in order to obtain certification,  the guarantees set
         forth in this Attachment  shall be  appropriately  modified to
         reflect any such change.

7.4      [ * ].

7.5      [ * ].

7.6      [ * ].

7.7      [ * ].

7.8      [ * ].

8        GUARANTEE COMPLIANCE

8.1      Compliance with the guarantees of Sections 2, 3, 4 and 5 shall
         be based on the conditions  specified in those  sections,  the
         Aircraft   configuration   of  Section  6  and  the  guarantee
         conditions of Section 7.

8.2      Compliance with the takeoff portion of the mission  guarantees
         and the  community  sound level  guarantees  of  Sections  4.1
         through 4.6 shall be based on the FAA approved Airplane Flight
         Manual for the Model 747- 8F.

8.3      Compliance with the climb,  cruise and descent portions of the
         mission  guarantees shall be established by calculations based
         on  flight   test  data   obtained   from  an  aircraft  in  a
         configuration   similar   to  that   defined   by  the  Detail
         Specification.

8.4      [ * ].

8.5      [ * ].

8.6      The data  derived  from tests shall be adjusted as required by
         conventional   methods   of   correction,   interpolation   or
         extrapolation  in  accordance  with  established   engineering
         practices  to  show  compliance  with  these   guarantees.   A
         compliance  report  and  cruise  fuel  mileage  substantiation
         document will be provided. More information can be provided as
         necessary at customer's request.

8.7      Compliance  shall be based on the  performance of the airframe
         and engines in combination, and shall not be contingent on the
         engine meeting its manufacturer's performance specification.

9        EXCLUSIVE GUARANTEES

         The only performance guarantees applicable to the Aircraft are

those set forth in this Attachment.

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207

Atlas Air, Inc.
2000 Westchester Ave

PURCHASE NY 10577-2543
U.S.A.

                                Subject:        Remedy for Deviation  from Block
                                                Fuel Guarantees

                                Reference:      Purchase Agreement No. 3134 (the
                                                PURCHASE  AGREEMENT) between The
                                                Boeing   Company   (BOEING)  and
                                                Atlas   Air,   Inc.   (CUSTOMER)
                                                relating    to    Model    747-8
                                                Freighter  Aircraft   (AIRCRAFT)

[GRAPHIC  OMITTED]                              This  Letter Agreement   (LETTER

AGREEMENT) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

The attachment to Letter Agreement 6-1162-ILK-0209 contains performance guarantees (the PERFORMANCE GUARANTEES) applicable to the Aircraft in accordance with such Letter Agreement, which includes Mission Block Fuel guarantees. Customer has requested that Boeing provide an assurance that fuel burn performance, as indicated by the Mission Block Fuel guarantees, of the Aircraft is not worse than the applicable guarantee level.

In response to Customer's request, Boeing offers the following program and economic remedies in the event that the guarantee compliance report furnished to Customer for the Aircraft pursuant to Article 5.4 of the AGTA shows demonstrated values for the Mission Block Fuel guarantees which are worse than the guarantee values.

1. DEMONSTRATION OF COMPLIANCE.

1.1 STANDARD METHOD.

Article 5.4 of the AGTA provides a procedure for demonstration of compliance with the Performance Guarantees prior to delivery. That method will be used to demonstrate compliance with the Mission Block Fuel guarantees which, if not met, will result in the economic remedies as described beginning in paragraph 2.

1.2 POST-DELIVERY RECOURSE.

If, during the first thirty (30) days after each Covered Aircraft begins revenue service (Initial Monitoring Period), as Customer acquires cruise fuel mileage data using the methodology described in Attachment B of Letter Agreement 6-1162-ILK-0204 (747-8 Freighter Performance Retention Commitment) on such Aircraft, Customer is concerned the fuel mileage level of such Aircraft when combined with the delivered MEW of that airplane would not have met the

                                Performance  Guarantees,  Customer  may  request
                                that Boeing perform the following actions:

                                                1) Investigate  the fuel mileage
                                of   that   airplane   using   Paragraphs   6.1,
                                Attachment  A  and  Attachment  B of  the  747-8
                                Freighter  Performance  Retention  Commitment as
                                guidelines.

                                                2)  Review   airplane   weighing
                                information   for   reconciliation    with   the
                                Performance Guarantees.

                                        3) If the fuel mileage data  obtained in
                                the Initial  Monitoring Period is not sufficient
                                to  determine  the  fuel  mileage  level  of the
                                airplane  within  adequate  accuracy,  it may be
[GRAPHIC OMITTED]               necessary that Customer support participation in
                                revenue   service   flight   survey   by  Boeing
                                observers or support  limited  dedicated  flight
                                testing on their  aircraft  for the  purposes of
                                acquiring  cruise fuel mileage  performance data
                                to be used in  further  evaluation  of the  Fuel
                                Mileage   Performance  Level  of  the  airplane.
                                Boeing may  provide  the  services  of up to two
                                performance  engineers  at no charge to Customer
                                to accompany such revenue or test flights.

                                        If these actions  determine the airplane
                                would  not  have  been in  compliance  with  the
                                Performance  Guarantees at the time of delivery,
                                then  such  non-compliance  will  result  in the
                                economic  remedies  as  described  beginning  in
                                paragraph 2.

                                2.      RIGHTS AND  OBLIGATIONS IN THE EVENT THE
                                        AIRCRAFT FAILS TO MEET THE MISSION BLOCK
                                        FUEL GUARANTEES.

                                2.1     AIRCRAFT DELIVERY.

                                        In the event any  Aircraft,  at the time
                                of tender by Boeing  for  delivery  to  Customer
                                fails to  comply  with the  Mission  Block  Fuel
                                guarantees,  Customer shall not refuse to accept
                                delivery  of  such  Aircraft   because  of  such
                                noncompliance,   subject   to  the   terms   and
                                conditions hereinafter set forth.

                                2.2     CORRECTION  OF  NONCOMPLIANCE  WITH  THE
                                        MISSION BLOCK FUEL GUARANTEES.

                                                2.2.1 To the extent economically
                                and technically practicable, Boeing will use its
                                best reasonable  efforts to design,  or cause to
                                be designed by the Engine Manufacturer, airplane
                                drag   improvement   parts  and/or  engine  TSFC
                                improvement  parts  (IMPROVEMENT  PARTS)  which,
                                when  installed  in such  Aircraft  or  engines,
                                would  result in an  improvement  in the  cruise
                                fuel mileage  performance.  Boeing shall provide
                                and/or  shall  cause  Engine   Manufacturer   to
                                provide,   as  appropriate,   reimbursement  for
                                Customer's  incorporation of such  improvements,
                                corrections,  or changes at the  warranty  labor
                                rate then in effect  between Boeing and Customer
                                or  Engine   Manufacturer   and   Customer,   as
                                applicable.  Changes  related to  Engines  shall
                                apply  also to spare  Engines  on terms not less
                                favorable  to  Customer.  Boeing  and/or  Engine
                                Manufacturer  shall  give  Customer   reasonable
                                advance written notice of the

estimated on-dock date at Customer's maintenance base for any such Improvement Parts.
[GRAPHIC OMITTED]
2.2.2 If Boeing elects to provide or causes to be provided Improvement Parts for such Aircraft or engines, then Customer and Boeing shall mutually agree upon the details of such an Improvement Parts program. To the extent Boeing and/or Engine Manufacturer are required to support such a program, such support shall be provided at no charge to Customer.

2.2.3 If Customer elects to incorporate Improvement Parts in such Aircraft and/or engines, they shall be incorporated within a mutually agreed upon period of time, but in no event to exceed ninety (90) days after the delivery of such Improvement Parts to Customer for modifications that can be accomplished on the line. Improvement Parts with more extensive modifications requiring a shop visit shall be installed within the mutually agreed period of time. All Improvement Parts shall be incorporated in accordance with Boeing and Engine Manufacturer instructions.

2.2.4 Boeing shall not be obligated to furnish any Improvement Parts in addition to those necessary to cause the Aircraft to comply with the Mission Block Fuel guarantees.

3. PAYMENTS.

In the event that Boeing has not designed (or caused to be designed by the Engine Manufacturer) and delivered to Customer. Improvement Parts to correct the failure of the Aircraft to meet the Mission Block Fuel guarantees within 60 days from delivery of the Aircraft, such failure will result in the economic remedies as described below. No payment shall be made for any portion of the deficiency corrected for by Improvement Parts that have not been incorporated (i) within ninety (90) days after the delivery of such Improvement Parts to Customer for modifications that can be accomplished on the line or (ii) for more extensive modifications requiring a shop visit within the mutually agreed upon period of time.

3.1 ANNUAL EXCESS FUEL BURN AMOUNT.

Boeing will pay to Customer annually for a period not exceeding [ * ] after the delivery of each such Aircraft, an amount equal to the Annual [ * ] Amount for the immediately preceding calendar year. The "ANNUAL [ * ] AMOUNT" is the sum of each Monthly [ * ] Amount (as defined below) for all months in such Annual Period. The "MONTHLY [ * ] AMOUNT" is defined as and shall be calculated in accordance with the following formula:

[ * ]

[GRAPHIC OMITTED]

[ * ]

[GRAPHIC OMITTED]

3.2 LIMITATION ON CREDITS FOR FUEL COMPENSATION.

3.2.1 Payments to Customer pursuant to Paragraph 3.1 above shall be by credit memorandum issued by Boeing and/or Engine Manufacturer.

3.2.2 In no event shall the total aggregate amount paid by Boeing and/or Engine Manufacturer to Customer pursuant to Paragraph 3.1 above exceed [ * ] in an Annual Period per Aircraft, or as adjusted by Boeing for changes in the price of Kerosene Base, Commercial Jet Fuel in accordance with the formula set forth in the Attachment A hereto for each Aircraft in any Annual Period. Any payments made under this Letter Agreement shall be as a result of operation of the Aircraft by Customer.

3.3 CREDIT ADJUSTMENTS.

The amount of performance improvement attributable to any Improvement Parts shall be determined by analysis based on data supplied by Boeing and certified to be correct by Boeing. The amount of such improvement shall be deemed to be the amount of improvement as calculated using reasonable engineering interpretations and calculations based on the data furnished pursuant to Article 5.4 of AGTA-TLS and the data furnished pursuant to this Paragraph 3.3.

4. DUPLICATION OF BENEFITS.

Boeing and Customer agree that it is not the intent of the parties under this Letter Agreement to cause Boeing and/or engine manufacturer to provide duplicate benefits to Customer for the same event which results in Customer's unjust enrichment, provided that, in the case of any such duplicate benefits, Customer shall be entitled to elect to receive the benefit which is most favorable to Customer.

5. ASSIGNMENT PROHIBITED.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to

Customer in consideration of Customer's becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

6. EXCLUSIVE REMEDY.

Performance of the commitments made in this letter agreement by Boeing in accordance with the terms and conditions of this letter agreement is in substitution for all other damages and remedies recoverable by Customer from Boeing and shall constitute complete, full and final settlement and satisfaction of all Boeing's obligation and liabilities to Customer arising out of failure of the Aircraft to meet the Mission Block Fuel guarantees. Customer hereby waives and releases all other rights, remedies, claims and causes of action against Boeing relating to the failure of the Aircraft to meet the Mission Block Fuel guarantees.

7. CONFIDENTIAL TREATMENT.

[GRAPHIC OMITTED]
Customer understands that certain
commercial and financial information contained
in this Letter Agreement is considered by Boeing
as confidential. Customer agrees that it will
treat this Letter Agreement and the information
contained herein as confidential and will not,
without the prior written consent of Boeing,
disclose this Letter Agreement or any
information contained herein to any other person
or entity. In the event that Customer in good
faith concludes (based upon an opinion of
counsel) that disclosure of information
contained in this Letter Agreement may be
required by applicable law or governmental
regulations, Customer shall advise Boeing in
writing prior to such disclosure, if possible,
or, if not possible, then promptly upon
receiving such order or upon identifying such
need to comply, in order to enable Boeing to
take whatever steps it deems necessary to
protect its interests in this regard, and
Customer will, in any event, disclose only that
portion of the information which it is legally
required to disclose and Customer will use its
reasonable endeavors to protect the
confidentiality of such information to the
widest extent possible in the circumstances.

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.

Very truly yours,

[GRAPHIC OMITTED]
THE BOEING COMPANY

By [ * ]

Its ATTORNEY IN FACT

ACCEPTED AND AGREED TO:

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

By    /s/ William J. Flynn
     ----------------------------------------

Its   President and Chief Executive Officer
     ----------------------------------------

[ * ]

BOEING COMMERCIAL AIRPLANES
P.O. Box 3707
Seattle, WA 98124-2207

                                Atlas Air, Inc.
                                2000 Westchester Avenue
                                Purchase, NY 10577-2543

                                Subject: Demonstration Flight Waiver

                                Reference:  Purchase  Agreement  No.  3134  (the
                                        PURCHASE  AGREEMENT)  between The Boeing
                                        Company  (BOEING)  and Atlas  Air,  Inc.
                                        (CUSTOMER)   relating   to  Model  747-8
                                        freighter aircraft  consisting of twelve
                                        (12) firm Boeing  Model 747-8  Freighter
                                        Aircraft (FIRM Aircraft), one (1) option
                                        to purchase Boeing Model 747-8 Freighter
[GRAPHIC OMITTED]                       Aircraft (OPTION  AIRCRAFT) and thirteen
                                        (13)  rights to  purchase  Boeing  Model
                                        747-8   Freighter   Aircraft   (PURCHASE
                                        RIGHTS      AIRCRAFT),      collectively
                                        (AIRCRAFT)

                                This letter agreement (LETTER  AGREEMENT) amends
                                and  supplements  the  Purchase  Agreement.  All
                                terms  used  but  not  defined  in  this  Letter
                                Agreement  shall have the same meaning as in the
                                Purchase Agreement.

                                DEFINITION OF TERMS:

                                CORRECTION COSTS:  Customer's direct labor costs
                                and the cost of any material required to correct
                                a Flight  Discrepancy  where  direct labor costs
                                are equal to the  warranty  labor rate in effect
                                between  the  parties  at the time such labor is
                                expended.

                                FLIGHT DISCREPANCY:  A failure or malfunction of
                                an Aircraft,  or the  accessories,  equipment or
                                parts  installed on the Aircraft  which  results
                                from a defect in the Aircraft,  Boeing  Product,
                                engine or Supplier  Product or a  nonconformance
                                to the Detail Specification for the Aircraft.

                                The AGTA  provides  that each  aircraft  will be
                                test flown prior to delivery  for the purpose of
                                demonstrating  the  functioning of such Aircraft
                                and its equipment to Customer; however, Customer
                                may elect to waive  this test  flight.  For each
                                test  flight  waived,  Boeing  agrees to provide
                                Customer an amount of jet fuel at delivery that,
                                including the standard fuel entitlement,  totals
                                the following amount of fuel:

                        --------------------------------------------------------
                                 AIRCRAFT            TOTAL FUEL ENTITLEMENT
                                   MODEL                  (U.S. GALLONS)
                        --------------------------------------------------------
                                  747-8                       [ * ]
                        --------------------------------------------------------

Further, Boeing agrees to reimburse Customer for any Correction Costs incurred as a result of the discovery of a Flight Discrepancy during the first flight of the aircraft by Customer following delivery to the extent such Correction Costs are

not covered under a warranty provided by Boeing, the engine manufacturer or any of Boeing's suppliers. Any rectifications of such Flight Discrepancy performed will carry at least the original Aircraft or, as applicable, the Engine Manufacturer or Supplier warranty.
[GRAPHIC OMITTED]
Should a Flight Discrepancy be detected by Customer which requires the return of the Aircraft to Boeing's facilities at Seattle (a FLIGHT DISCREPANCY RETURN), Washington, so that Boeing may correct such Flight Discrepancy, Boeing and Customer agree that title to and risk of loss of such Aircraft will remain with Customer. In addition to costs reflected in Exhibit C, Part 2, Article 10,2 of the AGTA, Boeing shall reimburse Customer for [ * ] not to exceed [ * ] per each occurrence of a Flight Discrepancy Return. In addition, it is agreed that Boeing will have responsibility for the Aircraft while it is on the ground at Boeing's facilities in Seattle, Washington, as is chargeable by law to a bailee for mutual benefit, but Boeing shall not be chargeable for loss of use.

To be reimbursed for Correction Costs, Customer shall submit a written itemized statement describing any flight discrepancies and indicating the Correction Cost incurred by Customer for each discrepancy. This request must be submitted to Boeing's Contracts Regional Director at Renton, Washington within ninety
(90) days after the first flight by Customer.

CONFIDENTIAL TREATMENT.

Customer understands that certain commercial and financial information contained in this Letter Agreement is considered by Boeing as confidential. Customer agrees that it will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of Boeing, disclose this Letter Agreement or any information contained herein to any other person or entity. In the event that Customer in good faith concludes (based upon an opinion of counsel) that disclosure of information contained in this Letter Agreement may be required by applicable law or governmental regulations, Customer shall advise Boeing in writing prior to such disclosure, if possible, or. if not possible, then promptly upon receiving such order or upon identifying such need to comply, in order to enable Boeing to take whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible in the circumstances.

Very truly yours,

THE BOEING COMPANY

By: [ * ]

Its: Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

      /s/ William J. Flynn
     ----------------------------------------

By:   Mr. William J. Flynn
     ----------------------------------------

Its: President and Chief Executive Officer

THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207

Atlas Air, Inc.
2000 Westchester Avenue
Purchase, NY 10577-2543

Subject: Right to Purchase Additional Aircraft

References: (a) Purchase Agreement No. 3134 (the
                PURCHASE  AGREEMENT) between The
                Boeing  Company  (BOEING)    and
                Atlas  Air,  Inc. (CUSTOMER)
                relating   to  Model  747-8
                Freighter aircraft; and

(b) Special Matters Letter: 747-8 Freighter Aircraft, Letter Agreement 6-1162-ILK-0203
(the SPECIAL MATTERS LETTER).

This letter agreement (LETTER AGREEMENT) amends and supplements the Purchase Agreement. All capitalized terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. The Special Matters Letter contains the business considerations which may be applicable to aircraft acquired through the exercise of a purchase right.

1.0 RIGHT TO PURCHASE INCREMENTAL AIRCRAFT.

Subject to the terms and conditions contained herein, in addition to the Aircraft described in Table 1 to the Purchase Agreement as of the date of execution of this Letter Agreement, Customer will have the right to purchase (PURCHASE RIGHT) THIRTEEN (13) additional Boeing Model 747-8 FREIGHTER aircraft on the terms and conditions described in this Letter Agreement (PURCHASE RIGHTS AIRCRAFT).

2.0 DELIVERY.

The Purchase Rights Aircraft are offered subject to available position for delivery during the period [ * ].

3.0 NOTICE OF EXERCISE AND PAYMENT OF DEPOSIT.

Customer shall give written notice to Boeing (NOTICE OF EXERCISE) of its desire to exercise a Purchase Right. Such notice shall be accompanied by payment by electronic transfer to the account specified below of Boeing's then standard proposal deposit for 747-8 Freighter aircraft (DEPOSIT) for each Purchase Rights Aircraft subject to the Notice of Exercise. The Deposit will be applied against the first advance payment due for each such Purchase Rights Aircraft.

[ * ]

At the time of its receipt of each Notice of Exercise and related Deposit(s), Boeing will advise Customer as to the availability of the delivery month(s) requested.

4.0 [ * ]

[ * ]

[GRAPHIC OMITTED]

5.0 CONFIGURATION.

5.1 Subject to the provisions of Article 5.2, below, the configuration for the Purchase Rights Aircraft will be the detail specification for Boeing Model 747-8 Freighter aircraft at the revision level in effect at the time of the Notice of Exercise. Such detail specification will be revised to include

(i) changes applicable to such detail specification that are developed by Boeing between the date of the Notice of Exercise and the signing of the definitive agreement to purchase the Purchase Rights Aircraft,
(ii) changes required to obtain required regulatory certificates, and
(iii) other changes as mutually agreed.

5.2 Boeing reserves the right to configure the Purchase Rights Aircraft starting from a different configuration specification, provided that it can achieve the same configuration which would result pursuant to the provisions of Article 5.1.

6.0 PRICE.

The Aircraft Price of each Purchase Rights Aircraft shall be determined in accordance with the provisions of the Purchase Agreement using [ * ] at the time of signing of the definitive agreement [ * ], except that the airframe price for such Purchase Rights Aircraft shall be the sum of

(i) the price quoted for such airframe (including engine) in Table 1 to the Purchase Agreement at the date of signing of this Letter Agreement and

[GRAPHIC OMITTED]

(ii) Boeing's [ * ] associated with any changes to the airframe from that described in the detail specification identified in Table 1 to the Purchase Agreement at the date of signing of the Letter Agreement after giving effect to all credit memos.

Advance payments are required for each Purchase Rights Aircraft. The remainder of the Aircraft Price will be due at delivery of each Purchase Rights Aircraft. The methodology used to estimate the Advance Payment Base Prices will be that specified in the Purchase Agreement at the date of signing of this Letter Agreement, and the escalation indices used to estimate the Advance Payment Base Prices will be adjusted to Boeing's then current forecasts for such elements as of the date of signing of the definitive agreement for the Purchase Rights Aircraft and shall be escalated in the same manner as the Airframe Price as described in Supplemental Exhibit AE-1 and in conformance with the terms and conditions of paragraph 19 of the Special Matters Letter.

7.0 DEFINITIVE PURCHASE AGREEMENT.

Following Customer's exercise of a Purchase Right in accordance with the terms and conditions stated herein and Boeing's identification of an available delivery position acceptable to Customer, the parties will sign a definitive agreement for the purchase of such Purchase Rights Aircraft within 60 calendar days of such exercise. Such definitive agreement will include the provisions then contained in the Purchase Agreement as modified to reflect the provisions of this Letter Agreement and any additional mutually agreed terms and conditions.

8.0 GENERAL EXPIRATION OF RIGHTS.

8.1 Each Purchase Right shall expire at the time of execution of the purchase agreement for the applicable Purchase Rights Aircraft, or, if no such purchase agreement is executed, at 11:59 pm (Seattle time) on [ * ].

9.0 ASSIGNMENT.

The Purchase Rights described in this Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing.

10.0 CONFIDENTIAL TREATMENT.

Very truly yours,

THE BOEING COMPANY

By [ * ]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

      /s/ William J. Flynn
---------------------------------------------

By:   Mr. William J. Flynn
      ----------------------------------------

Its: President and Chief Executive Officer

                              Atlas Air, Inc.
                              2000 Westchester Avenue
                              Purchase, NY 10577-2543

                              Subject:     Option Aircraft

                              Reference:  (a)  Purchase  Agreement  3134  (the
                                      PURCHASE  AGREEMENT)  between The Boeing
                                      Company  (BOEING)  and Atlas  Air,  Inc.
                                      (CUSTOMER)   relating   to  Model  747-8
                                      Freighter aircraft (the AIRCRAFT): and
[GRAPHIC OMITTED]
                                         (b) Special  Matters  Letter:   747-8

Freighter Aircraft, Letter Agreement 6-1162-ILK-0203 (the
SPECIAL MATTERS LETTER).

This Letter Agreement amends the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. The Special Matters Letter contains the business considerations which may be applicable to aircraft acquired through the exercise of an option. If Customer exercises its option, Boeing agrees to manufacture and sell to Customer additional Model 747-8 Freighter aircraft as OPTION AIRCRAFT. The delivery months, number of aircraft, Advance Payment Base Price per aircraft and advance payment schedule are listed in the Attachment to this Letter Agreement. The Airframe Price shown includes the Engine Price.

1.0 AIRCRAFT DESCRIPTION AND CHANGES.

1.1 AIRCRAFT DESCRIPTION: The Option Aircraft is described by the Detail Specification listed in the Attachment.

1.2 CHANGES: The Detail Specification will be revised to include:

(i) Changes applicable to the basic Model 747-8 Freighter aircraft which are developed by Boeing between the date of the Detail Specification and the signing of the definitive agreement to purchase the Option Aircraft;

(ii) Changes required to obtain required regulatory certificates; and

(iii) Changes mutually agreed upon.

2.0 PRICE.

2.1 The pricing elements of the Option Aircraft are listed in the Attachment.

2.2 PRICE ADJUSTMENTS.

                                        2.2.1 OPTIONAL  FEATURES.  The price for
                                Optional   Features   selected  for  the  Option
                                Aircraft  will be adjusted  to Boeing's  current
                                prices  as of  the  date  of  execution  of  the
                                definitive agreement for the Option Aircraft.

                                        2.2.2   ESCALATION   ADJUSTMENTS.    The
                                Airframe   Price  and  the  price  of   Optional
                                Features for Option  Aircraft  will be escalated
                                in the  same  manner  as the  Airframe  Price as
[GRAPHIC OMITTED]               described  in  Supplemental  Exhibit AE-1 and in
                                conformance  with the  terms and  conditions  of
                                paragraph  19  of  the  Special  Matters  Letter
                                Agreement.

                                        2.2.3   BASE  PRICE   ADJUSTMENTS.   The
                                Airframe  Price of the Option  Aircraft shall be
                                as set forth in the  Attachment  to this  Letter
                                Agreement.

                                3.0     PAYMENT.

                                        3.1  Customer  will  pay  a  deposit  to
                                Boeing in the amount shown in the Attachment for
                                each Option Aircraft  (Deposit),  on the date of
                                this Letter Agreement.  If Customer exercises an
                                option, the Deposit will be credited against the
                                first advance  payment due. If Customer does not
                                exercise  an  option,  Boeing  will  retain  the
                                Deposit for that Option Aircraft.

                                        3.2 Following option  exercise,  advance
                                payments in the amounts and at the times  listed
                                in the Attachment will be payable for the Option
                                Aircraft.  The  remainder of the Aircraft  Price
                                for the Option Aircraft will be paid at the time
                                of delivery.

                                        3.3  Notwithstanding  sub-paragraph  3.1
                                and 3.2 above,  in accordance  with paragraph 18
                                of the  Special  Matters  Letter,  Customer  may
                                elect to [ * ].

                                4.0     Option Exercise.

                                        4.1  Customer  may exercise an option by
                                giving written notice to Boeing on or before the
                                date [ * ] prior to the delivery dates listed in
                                the Attachment (Option Exercise Date).

                                        4.2  [ * ] at  September  11,  2006:  If
                                Boeing must make production  decisions which are
                                dependent  on  Customer's  exercising  an option
                                earlier than the Option  Exercise  Date,  Boeing
                                may accelerate the Option  Exercise Date subject
                                to Customer's agreement.  If Boeing and Customer
                                fail to agree to a revised Option Exercise Date,
                                either party may terminate the option and Boeing
                                will refund to Customer,  without interest,  any
                                Deposit and advance payments received by Boeing

                               with respect to the terminated  Option Aircraft.
                               In the  event of an  exercise  pursuant  to this
                               Article 4.2:

                                   4.2.1       From  the  date of  exercise  by
                                               Customer    pursuant   to   this
                                               Article  4.2  until  the date of
                                               exercise  set  forth by  Article
                                               4.1 herein,  Boeing shall credit
                                               (as a reduction of interest that
[GRAPHIC OMITTED]                              is  otherwise   payable  by  the
                                               Customer)   the  Customer   with
                                               interest    at   the    Deferred
                                               Interest   Rate  set   forth  in
                                               Article   14.2  of  the  Special
                                               Matters  Letter to accrue on the
                                               difference between

                                               4.2.1.1  [ * ]  of  the  Advance
                                               Payment Base Price and

                                               4.2.1.2    the    non-refundable
                                               Option Deposit;

                                   4.2.2       Notwithstanding  any requirement
                                               set forth by the Special Matters
                                               Letter,  Customer  shall have no
                                               requirement for advance payments
                                               until  twenty four months  prior
                                               to the scheduled  delivery month
                                               (provided by Boeing  pursuant to
                                               Article  4.3.  herein)  at which
                                               point  advance  payments  in the
                                               amounts and at the times  listed
                                               in  the   Attachment   will   be
                                               payable for the Option Aircraft.
                                               Such advance payment amounts are
                                               eligible for  deferral  pursuant
                                               to the Article 14 of the Special
                                               Matters Letter. The remainder of
                                               the   Aircraft   Price  for  the
                                               Option  Aircraft will be paid at
                                               the time of delivery.

4.3 Boeing shall provide Customer with the scheduled delivery month at the time of option exercise pursuant to either Article 4.1 or 4.2 herein.

5.0 CONTRACT TERMS.

Boeing and Customer will document the exercise of the option for the purchase of an Option Aircraft, in accordance with the terms and conditions contained in this Letter Agreement, in the Purchase Agreement, and any other terms and conditions as may be agreed upon, by executing a Supplemental Agreement with respect to the Purchase Agreement, within 30 days following option exercise.

6.0 CONFIDENTIAL TREATMENT.

                                        Boeing  and  Customer   understand  that
                                certain  information  contained  in this  Letter
                                Agreement,  including any attachments hereto, is
                                considered  by both parties to be  confidential.
                                Boeing and  Customer  agree that each party will
                                treat this Letter  Agreement and the information
                                contained  herein as confidential  and will not,
                                without the other party's prior written consent,
                                disclose   this   Letter    Agreement   or   any
                                information   contained   herein  to  any  other
                                person. In the event that Customer in good faith
                                concludes  (based  upon an opinion  of  counsel)
                                that disclosure of information contained in this
[GRAPHIC OMITTED]               Letter  Agreement  may be required by applicable
                                law or governmental regulations,  Customer shall
                                advise   Boeing   in   writing   prior  to  such
                                disclosure,  if possible,  or, if not  possible,
                                then promptly upon  receiving such order or upon
                                identifying  such  need to  comply,  in order to
                                enable  Boeing to take  whatever  steps it deems
                                necessary  to  protect  its  interests  in  this
                                regard,   and  Customer   will,  in  any  event,
                                disclose  only that  portion of the  information
                                which it is legally  required  to  disclose  and
                                Customer  will use its  reasonable  endeavors to
                                protect the  confidentiality of such information
                                to   the   widest   extent   possible   in   the
                                circumstances.

                                Very truly yours,

                                THE BOEING COMPANY

                                By  [ * ]
                                    -------------------------------------

                                Its           Attorney-In-Fact
                                    -------------------------------------

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

    /S/ William J. Flynn
------------------------------------------------

By:  Mr. William J. Flynn
     -------------------------------------------

Its: President and Chief Executive Officer

Attachment

AIRFRAME MODEL/MTOW:                      747-8F      970,000 pounds

ENGINE MODEL/THRUST:                   GENX-2B67       66,500 pounds


AIRFRAME PRICE:                                   $            [ * ]


OPTIONAL FEATURES:                                $            [ * ]
                                                  -------------------

SUB-TOTAL OF AIRFRAME AND FEATURES:               $            [ * ]


ENGINE PRICE (PER AIRCRAFT):                      $            [ * ]

AIRCRAFT BASIC PRICE (EXCLUDING BFE/SPE):         $            [ * ]
                                                  ===================

BUYER FURNISHED EQUIPMENT (BFE) ESTIMATE:         $                0

SELLER PURCHASED EQUIPMENT (SPE) ESTIMATE:        $                0


NON-REFUNDABLE DEPOSIT/AIRCRAFT AT DEF AGREEMT:   $            [ * ]

DETAIL SPECIFICATION:          D019U020 (7/31/2006)

AIRFRAME PRICE BASE                      * ]
   YEAR/ESCALATION FORMULA:      [ * ]  [

ENGINE PRICE BASE                        /A
   YEAR/ESCALATION FORMULA:       N/A   N

AIRFRAME ESCALATION DATA:
------------------------------

BASE YEAR INDEX (ECI):           [ * ]

BASE YEAR INDEX (CPI):           [ * ]

------------------------------------------------------------------------------------------------------------------------------------
                                                                               ADVANCE PAYMENT PER AIRCRAFT (AMTS. DUE/MOS. PRIOR TO
                                   ESCALATION             SCALATION ESTIMATE                           DELIVERY):
   DELIVERY      NUMBER OF          FACTOR                ADV PAYMENT BASE     -----------------------------------------------------
     DATE        AIRCRAFT          (AIRFRAME)               PRICE PER A/P                                                    * ]
                                                                                 [ * ]       [ * ]            [ * ]
------------------------------------------------------------------------------------------------------------------------------------
     [ * ]        [ * ]              [ * ]                      [ * ]            [ * ]       [ * ]            [ * ]        [ * ]
------------------------------------------------------------------------------------------------------------------------------------

TOTAL: [ * ]

Atlas Air, Inc.
2000 Westchester Avenue
Purchase, NY 10577-2543

Subject: Aircraft Schedule Reliability Program
[GRAPHIC OMITTED]

Reference: Purchase Agreement No. 3134 (the
Purchase Agreement) between The Boeing
Company (Boeing) and Atlas Air, Inc.
(Customer) relating to Model 747-8
Freighter aircraft (the Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1.0 DEFINITION OF TERMS.

1.1 "ACHIEVED MECHANICAL SCHEDULE RELIABILITY" shall mean a number calculated pursuant to the following formula:

100 X (1 - INT/RevFlights)

where: INT equals the number of Chargeable Schedule Interruptions occurring during an Analysis Period, and RevFlights equals the number of Scheduled Revenue Departures occurring during the same Analysis Period.

1.2 "ANALYSIS PERIOD" shall mean any four consecutive calendar months of Scheduled Revenue Departures.

1.3 "AVERAGE FLIGHT LENGTH" shall mean the flight hours during an Analysis Period divided by the number of Scheduled Revenue Departures during the same Analysis Period.

1.4 "CHARGEABLE SCHEDULE INTERRUPTION" OR "INTERRUPTION" shall mean a cancellation, turn-back, diverted landing or delayed departure of any scheduled revenue flight of a Covered Aircraft which is greater than 15 minutes, other than as provided in Section 4, below, and results directly from a mechanical malfunction of such Covered Aircraft, or any system, accessory, equipment or part (including engines) installed thereon.

1.5 "COVERED AIRCRAFT" shall mean those Aircraft operated by Customer on Customer's routes during the Program Term.

1.6 "PROGRAM" shall mean the rights and obligations defined in this Letter Agreement.

1.7 "PROGRAM TERM" shall mean the eight consecutive years commencing on the delivery date of the first Covered Aircraft.
[GRAPHIC OMITTED]
1.8 "SCHEDULED REVENUE DEPARTURE" shall mean any departure of a Covered Aircraft for a scheduled revenue flight segment; including, but not limited to, (i) any departure of a Covered Aircraft for a charter flight or extra section flight; or (ii) any canceled departure of a flight segment (iii) a positioning flight needed to initiate a revenue flight.

2. PROGRAM DESCRIPTION.

Mechanical schedule reliability targets for the Covered Aircraft (Mechanical Schedule Reliability Target(s)) during the Program Term are as follows:

------------------------------------------------
                            Mechanical Schedule
     Program Term           Reliability Target
------------------------------------------------
        [ * ]                     [ * ]
------------------------------------------------
        [ * ]                     [ * ]
------------------------------------------------
        [ * ]                     [ * ]
------------------------------------------------

These Mechanical Schedule Reliability Targets are based on an average flight length of [ * ] flight hours per Scheduled Revenue Departure for Covered Aircraft in revenue service operations. The Mechanical Schedule Reliability Targets are subject to change based on changes in the Customer's actual Average Flight Length and other factors under Customer's control.

3. REMEDIAL ACTION.

3.1 Following the first four months of Scheduled Revenue Departures, if Customer notifies Boeing that the Achieved Mechanical Schedule Reliability for the Analysis Period is more than [ * ] percentage point below the Mechanical Schedule Reliability Target (Agreed Threshold Value) for such Analysis Period, Boeing will:

3.1.1 Investigate the circumstances and possible causes for an Achieved Mechanical Schedule Reliability lower than the Agreed Threshold Value;

3.1.2 Provide technical assistance to Customer in the form of analysis and recommendations of a kind and nature which Boeing determines to be best suited for improving the Achieved Mechanical Schedule Reliability;

3.1.3 Initiate a design review of the system, accessory, equipment or part (other than engines and engine parts) which are determined by Boeing to be the primary cause of an Achieved Mechanical Schedule Reliability lower than the Agreed Threshold Value;

3.1.4 When in Boeing's judgment a redesign is indicated as a technically and economically practical means of improving the Achieved Mechanical Schedule Reliability, redesign or cause the redesign of such system, accessory, equipment or part;
[GRAPHIC OMITTED]
3.1.5 If such redesign results in retrofit kits being offered by Boeing or Boeing's suppliers, provide such kits or cause such kits to be provided, at Customer's request, at no charge to Customer and reimburse Customer's reasonable direct labor costs for incorporation of any such kit manufactured to Boeing's detailed design. Such reimbursement will be provided pursuant to Boeing Warranty (Article 11 of Part 2 of Exhibit C, Product Assurance Document, of the AGTA); and

3.1.6 If Boeing determines that the design of engines or engine parts is the primary cause of an Achieved Mechanical Schedule Reliability lower than the Agreed Threshold Value, Boeing will, if requested by Customer, take whatever reasonable action is permitted under Boeing's contracts with the engine manufacturer in an effort to obtain correction of such design.

4. INTERRUPTION EXCLUSIONS.

An Interruption does not include any cancellation, turn-back, diverted landing or delayed departure of any scheduled revenue flight of any Covered Aircraft which is caused by any of the following events:

(i) Late arrival of an inbound flight;

(ii) Late return from out-of-service status;

(iii) Operation, service, maintenance or overhaul of such Covered Aircraft or any system, accessory, equipment or part (including engines) installed thereon, in a manner other than in accordance with Customer's approved instructions and requirements;

(iv) Logistics problems such as lack of spare parts at stations where spares could reasonably be expected to be available, as determined in accordance with industry standard provisioning practices, or inordinate delays in the availability of spares, unless such delays are caused by Boeing or other appropriately trained personnel at any location where any maintenance of the Covered Aircraft is performed;

(v) A malfunction caused by any extrinsic force such as foreign object damage;

(vi) Failure to utilize the FAA approved minimum equipment list (MEL) to defer corrective maintenance, or failure to correct any deferred item within the time period specified in such MEL;

(vii) Buyer Furnished Equipment;

(viii) Tires;

(ix) Normal brake wear;

(x) Acts or omissions of Customer or any strikes or labor troubles causing cessation, slowdown or interruption of work related to the operation or maintenance of the Covered Aircraft; or
[GRAPHIC OMITTED]
(xi) Any other cancellation, turn-back, diverted landing or delayed departure which cannot fairly be attributed to mechanical malfunction of the Covered Aircraft, or any system, accessory, equipment or part (including engines) installed on the Covered Aircraft.

If a Covered Aircraft is used as a substitute for some other aircraft or some other aircraft is used as a substitute for a Covered Aircraft and the revenue flight affected by such substitution departs without a cancellation, turn-back, diverted landing or delay greater than 15 minutes, then no Chargeable Schedule Interruption will be deemed to have occurred. If an Interruption occurs as a result of a malfunction of the substitute aircraft/Covered Aircraft, such Interruption will be charged against the aircraft/Covered Aircraft initially scheduled for the flight rather than its substitute. An Interruption, which affects a subsequent segment or flight for a Covered Aircraft, will count as only one Interruption unless such Interruption is separate from and unrelated to the initial Interruption.

5. ADMINISTRATIVE REQUIREMENTS.

5.1 Customer will provide status reports every month (Reporting Period).
[GRAPHIC OMITTED]
5.2 The Customer's status reports shall include the data required to calculate the Achieved Mechanical Schedule Reliability for each month of the Reporting Period using the formulas described in Section 1.0, above, and a list of the Chargeable Schedule Interruptions for the Reporting Period. Customer shall submit such data to Boeing electronically in accordance with the provisions of Boeing Document D6-81692.

All data submitted pursuant to Subsection 5.2 will be addressed to the attention of:

MANAGER - [ * ] Boeing Commercial Airplanes P.O. Box 3707 Seattle, Washington 98124-2207

5.3 Customer claim reports will include the data described in Subsection 5.2 above and sufficient data to substantiate any claimed Chargeable Schedule

Interruption. Customer will submit to Boeing reasonable proof that any claimed Chargeable Schedule Interruption does in fact constitute a Chargeable Schedule Interruption. In addition, Customer will maintain and submit to Boeing such data as may reasonably be required to:

(i) determine Achieved Mechanical Schedule Reliability,
(ii) analyze the problems causing any claimed Chargeable Schedule Interruption, and
(iii) when required, develop appropriate remedial action.
[GRAPHIC OMITTED]
5.4 Failure to file the status reports or provide the information as specified in Subsections 5.1 through 5.3, above, will constitute an acknowledgment by Customer that the Achieved Mechanical Schedule Reliability is equal to or greater than the Agreed Threshold Value for such Analysis Period, and Boeing will not be obligated to provide any of the remedies arising under this Program for such Analysis Period.

5.5 All reports submitted to Boeing will be addressed to the attention of:

Director - Warranty & Supplier Product Support Boeing Commercial Airplanes P.O. Box 3707 Seattle, Washington 98124-2207

6. CONDITIONS AND LIMITATIONS.

6.1 If, to improve schedule reliability, Boeing or any Boeing supplier issues service bulletins, service letters or other written instructions (Instructions) or offers no-charge retrofit kits, Customer will accomplish such Instructions or install such kits within a period of [ * ] after availability of such Instructions or kits at Customer's facility or such longer period as may be established by mutual agreement of the parties (the IMPLEMENTATION PERIOD). If Customer does not accomplish the Instructions or install the kits within the Implementation Period, Chargeable Schedule Interruptions relating to the systems, accessories, equipment or parts affected by such Instructions or kits will be excluded from this Program from the end of the Implementation Period until such time as Customer notifies Boeing that Customer has incorporated such Instructions or kits on all affected Aircraft.

6.2 Boeing may inspect at all reasonable times Customer's maintenance facilities and review its maintenance programs and procedures. If Boeing recommends in writing reasonable changes in Customer's maintenance programs and procedures which would improve the Achieved Mechanical Schedule Reliability and Customer does not effect such changes within the Implementation Period, Boeing will have the right to redefine the Chargeable Schedule Interruptions after the end of the Implementation Period so as to eliminate interruptions which Boeing estimates result from Customer's failure to effect the recommended changes within such time period.

6.3 If, for any Analysis Period, the actual Average Flight Length or other factors affecting schedule reliability of the Covered Aircraft change significantly, the Mechanical Schedule Reliability Target for such Analysis Period will be appropriately adjusted by the parties.

6.4 At Boeing's request, Customer will assign to Boeing any of Customer's rights against any manufacturer of any system, equipment, accessory or part installed in the Covered Aircraft as Boeing may reasonably require to fulfill its obligations with respect to any remedy provided by Boeing hereunder.
[GRAPHIC OMITTED]
6.5 THE DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions stated in Article 11 of Exhibit C of the AGTA apply to this Program.

7. CONFIDENTIAL TREATMENT.

Boeing and Customer understand that certain information contained in this Letter Agreement, including any attachments hereto, is considered by both parties to be confidential. Boeing and Customer agree that each party will treat this Letter Agreement and the information contained herein as confidential and will not, without the other party's prior written consent, disclose this Letter Agreement or any information contained herein to any other person. In the event that Customer in good faith concludes (based upon an opinion of counsel) that disclosure of information contained in this Letter Agreement may be required by applicable law or governmental regulations, Customer shall advise Boeing in writing prior to such disclosure, if possible, or, if not possible, then promptly upon receiving such order or upon identifying such need to comply, in order to enable Boeing to take whatever steps it deems necessary to protect its interests in this regard, and Customer will, in any event, disclose only that portion of the information which it is legally required to disclose and Customer will use its reasonable endeavors to protect the confidentiality of such information to the widest extent possible in the circumstances.

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.

Very truly yours,

THE BOEING COMPANY

By [ * ]

[GRAPHIC OMITTED]

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date: SEPTEMBER 8, 2006

ATLAS AIR, INC.

    /s/ William J. Flynn
--------------------------------------------

BY: Mr. William J. Flynn
    ----------------------------------------

Its:President and Chief Executive Officer

Exhibit 10.2

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (hereinafter referred to as the “Agreement”) is made and entered into as of the 8 ^th day of September, 2006 by and between John W. Dietrich (hereinafter referred to as “Employee”) and Atlas Air, Inc., a Delaware corporation (hereinafter referred to as “Atlas”). This Agreement amends and restates in its entirety that certain Employment Agreement between the parties dated as of April 1, 2005, as amended to date.

WHEREAS, Atlas believes that it is in the best interests of Atlas to retain the services of the Employee and the Employee desires an affiliation with Atlas, on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, Employee warrants that Employee is entering voluntarily into this Agreement, and that no promises or inducements for this Agreement have been made outside of the terms and conditions referred to herein, and Employee enters into this Agreement without reliance upon any statement or representation by Atlas or any other person, concerning any fact material hereto.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:

1. DEFINITIONS

1.1 For purposes of this Agreement, “ Cause ” as used herein means (i) any act or acts of material dishonesty taken by the Employee, (ii) the failure of the Employee to comply with any of the Employee’s material obligations within ten (10) days of written notice from

Atlas, (iii) any material violations by Employee of Atlas corporate policies as set forth in the Employee Compliance Manual, Employee Handbook or related corporate policies; provided that, if such violation is subject to cure, Employee shall have ten (10) days within which to cure such-violation, or (iv) the conviction of or “no contest” plea by the Employee to any misdemeanor of moral turpitude or any felony.

1.2 “ Employment Period” shall be defined as the period commencing on the date hereof and extending until this Agreement is terminated by either party in accordance with Section 4.

1.3 “ Permanent Disability ” as used herein shall be deemed to have been sustained by Employee if Employee shall have been continuously disabled from performing the duties assigned to Employee during the Employment Period for a period of six (6) consecutive calendar months, and such Permanent Disability shall be deemed to have commenced on the day following the end of such six (6) consecutive calendar months.

1.4 “ Change in Control ” means the acquisition by any person, entity or “group” within the meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934 (the “Exchange Act”) (excluding, for this purpose any employee benefit plan of Atlas or its affiliates) of beneficial ownership, within the meaning of Rule 13(d) (c) promulgated under the Exchange Act, of greater than fifty percent (50%) of the combined voting power of the outstanding voting securities of either Atlas or of Atlas Air Worldwide Holdings, Inc. (“Holdings”) entitled to vote generally in the election of directors.

1.5 “ Confidential or Proprietary ” as used herein shall refer to all information relative to the plans, structure and practices, including information relating to its customers, contracts and aircraft of Atlas, Holdings or any affiliate or subsidiary thereof, except:

(a) information that is or becomes a matter of public knowledge through no fault of the Employee; or

(b) information rightfully received by the Employee from a third party without a duty of confidentiality; or

1.6 “ Good Reason ” as used herein means either of (i) a reduction during the term of this Agreement in the Employee’s Base Annual Salary or eligibility to receive a bonus, and (ii) a reduction in the Employee’s then current title or job responsibilities.

2. EMPLOYMENT AND OBLIGATIONS OF EMPLOYEE

Atlas and Employee agree to the following rights, obligations and duties with respect to employment:

2.1 Employment . During the Employment Period, Atlas agrees to employ the Employee as Executive Vice President and Chief Operating Officer of Atlas and of Holdings. The scope of Employee’s responsibilities shall be as determined by the Boards of Directors of Atlas and/or Holdings, and/or the Chief Executive Officer of Atlas and/or Holdings. If the Board of Directors of Holdings requests Employee to serve in any capacity for Holdings, Employee agrees that Employee shall serve in such capacity, without any additional compensation. In addition, Employee shall not be entitled to any additional compensation for serving in any other office for Atlas, or Holdings or any subsidiary or affiliate of Atlas or Holdings.

2.2 Obligations of Employee . During the Employment Period, the Employee agrees, except when prevented by illness or Permanent Disability, or during a period of vacation, to devote substantially all of Employee’s business time and attention to the good faith performance of the duties contemplated.

2.3 Principal Residence of Employee . During the Employment Period, Employee shall maintain Employee’s principal residence in the Purchase, New York area.

3. COMPENSATION

During the Employment Period, Atlas will pay Employee as follows:

3.1 Base Annual Salary . Atlas will pay Employee a base annual salary (the “Base Annual Salary”) of USD $425,000 per annum, payable in semi-monthly installments. The Company shall review Base Annual Salary not less frequently than annually for increases, including among other considerations, Employee’s performance, it being understood that any increases shall be at the discretion of the Company.

3.2 Incentive Bonus Payments . Employee will be eligible to participate in Holdings’ Annual Incentive Plan. The level of the bonus available to Employee will be set forth in the Annual Incentive Plan and will be awarded in consideration of individual and corporate performance based on performance goals and objectives determined by the Holdings Compensation Committee. A fuller description of how corporate and individual performance operate in tandem to determine the calculation of bonuses will be described in the Annual Incentive Plan. The Annual Incentive Plan document will be developed by the Holdings Compensation Committee and is subject to amendment from time to time with changes as adopted by the Compensation Committee or full Board of Directors of Holdings. As further described in the Annual Incentive Plan, corporate and individual performance in combination may permit the Employee to earn a target bonus equal to 50% of Base Annual Salary. Lesser corporate or individual performance may cause bonus payments to be in an amount less than 50% of Base Annual Salary or result in no bonus being payable. Greater corporate and individual performances may result in the bonus being more than 50% of Base Annual Salary. When the bonus payment reaches more than 50% of Base Annual Salary,

Atlas reserves the right to pay some or all of the portion of the bonus that is above 50% of Base Annual Salary in Holdings unrestricted company stock payable under the Atlas Air Worldwide Holdings, Inc. 2004 Long Term Incentive and Share Award Plan. Any bonus paid under the Annual Incentive Plan will be paid no later than two weeks following the completion of the year-end audit for the applicable year. For calendar year 2006, Base Annual Salary shall be the weighted blend of the Base Annual Salary described above, and the base annual salary provided to the Employee immediately prior to the effective date of this Agreement.

3.3 Equity Grant . In recognition of Employee’s promotion to Executive Vice President and Chief Operating Officer, Employee will receive an equity grant from Holdings as determined by the Compensation Committee of the Holdings Board of Directors, in a form and in an amount determined by such Committee to be commensurate with Employee’s new position.

3.4 Benefits . Employee and Employee’s dependents shall be entitled to participate in the Atlas health insurance plan, provided that the Employee and Atlas will each contribute to Employee’s monthly premium as provided by such plan. Atlas reserves the right to discontinue participation in any health insurance plan at any time, provided that Atlas will reimburse Employee for Employee’s cost of obtaining comparable health care benefits for Employee and his dependents. Employee also shall be entitled, to the same extent and at a level commensurate with the corporate officers of Atlas, to participate in any other benefit plans or arrangements of Atlas. The Employee will be entitled to four (4) weeks of paid vacation per year.

4. TERMINATION OF EMPLOYMENT PERIOD

The Employment Period shall terminate under the following terms and conditions:

4.1 At Will Arrangement . Atlas and Employee expressly understand and agree that the employment relationship is at-will. Either party may terminate the Employment Period and the employment relationship upon written notice to the other at any time and for any reason. Employee will make every reasonable effort to give Atlas at least three months prior, written notice of Employee’s voluntary termination of employment for other than Good Reason.

4.2 Rights Following Termination .

(a) If the Employment Period is terminated by Atlas for reasons other than Cause or if the Employment Period is terminated by the Employee for Good Reason, and subject to Employee’s execution of a release upon terms and conditions mutually acceptable to the Employee and Atlas, the Employee shall be entitled to: (i) receive, in a single lump sum payment payable as soon as practicable without causing any penalties under Internal Revenue Code Section 409A, an amount equal to eighteen months (twenty-four months if such event occurs within six months before, or twelve months after a Change in Control) of Employee’s then monthly Base Salary; (ii) reimbursement of Employee’s relocation expenses back to the Chicago, Illinois area in accordance with the Company’s relocation policies and practices (including gross up for taxes); and (iii) continued coverage and rights and benefits available under the employee benefit programs of Atlas as provided in Section 3.3 above for a period of 12 months from the date of termination; provided , however , that any such continued coverage shall cease in the event Employee obtains comparable coverage in connection with subsequent employment, and to the extent Atlas is unable to continue such coverage, Atlas shall provide the Employee with economically equivalent benefits determined on an after-tax basis.

(b) Upon the death or Permanent Disability of the Employee, the Employment Period shall terminate and the Employee’s Base Annual Salary which is accrued for the current

pay period but unpaid as of the date of such death or Permanent Disability shall be paid to the Employee or Employee’s personal representative. In addition, upon the Permanent Disability of the Employee, Employee shall be entitled to the compensation and benefits set forth in Section 4.2 (a) (i), (ii) and (iii) above, and upon the death of Employee, Employee’s immediate family shall be entitled to the compensation and benefits set forth in Section 4.2 (a) (i), (ii) and (iii) above.

(c) If the Employment Period is terminated by Atlas for Cause or by the Employee for other than Good Reason, the Employee shall be entitled to receive Employee’s Base Annual Salary which is accrued for the current pay period but unpaid as of the date of termination.

(d) Benefits provided hereunder shall be subject to reduction as follows:

(i) Notwithstanding any other provision of this Agreement, and except as provided in subparagraph (ii) below, the payments or benefits to which Employee will be entitled under this Agreement will be reduced to the extent necessary so that Employee will not be liable for the federal excise tax levied on certain “excess parachute payments” under section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”).

(ii) The limitations of subparagraph (i) will not apply if:

(A) the difference between (x) the present value of all payments and benefits to which Employee is entitled under this Agreement, determined without regard to subparagraph (i), and (y) the present value of all federal, state and other income and excise taxes for which Employee is liable as a result of such payments exceeds

(B) the difference between (x) the present value of all payments and benefits to which Employee is entitled under this Agreement calculated as if the limitation of subparagraph (i) applies and (y) the present value of all federal, state and other income and excise taxes for which Employee is liable as a result of such reduced payments.

Present values will be determined using the interest rate specified in section 280G of the Code and will be the present values as of the date on which Employee’s employment terminates.

(iii) Whether payments to Employee are to be reduced pursuant to subparagraph (i), and the extent to which they are to be so reduced, will be determined by Atlas in good faith and Atlas will notify Employee in writing of its determination. Any such notice shall describe in reasonable detail the basis of Atlas’s determination. If Employee accepts Atlas’s determination, he shall so Atlas of his determination pursuant to subparagraph (iv) hereof within thirty (30) days of receipt of notice from Atlas. If Employee objects to such determination within 30 days of receipt of notice from Atlas, Atlas will retain, at its expense, a nationally recognized public accounting firm, employment consulting firm or law firm selected by Atlas and reasonably acceptable to Employee to review the matter. Such firm shall meet with Employee and Employee’s representatives and Atlas and its representatives and thereafter render its written opinion as to the extent, if any, that in such firm’s reasonable judgment the payments and benefits otherwise due to Employee hereunder must be reduced hereunder. The decision of such firm concerning the extent of any required reduction in such payments and benefits shall be final and binding on both Employee and Atlas.

4.3 Non-Competition Provision . (a) Employee covenants and agrees that except when required to do so in the ordinary course of his duties, Employee will not, at any time, reveal, divulge or make known to any third party any confidential or proprietary records, data, trade secrets, pricing policies, strategy, rate structure, personnel policy, management methods, financial reports, methods or practice of obtaining or doing business, or any other confidential, or proprietary information of Holdings, Atlas or any of their subsidiaries or affiliates (collectively the “Atlas Companies” and each, an “Atlas Company”) which is not in the public domain.

(b) In addition, Employee covenants and agrees that, at no time before the first anniversary of Employee’s termination of employment with Atlas, will Employee engage in

any of the following activities directly or indirectly, for any reason, whether for Employee’s own account or for the account of any other person, firm, corporation or other organization:

	(i)	solicit, employ or otherwise interfere with any of the Atlas Companies contracts or relationships with any client, employee, officer, director or any independent contractor whether the person is employed by or associated with an Atlas Company on the date of this Agreement or at any time thereafter; or

	(ii)	solicit, accept or otherwise interfere with any of the Atlas Companies’ contracts or relationships with any independent contractor, customer, client or supplier, or any person who is a bona fide prospective independent contractor, customer, client or supplier of an Atlas Company.

(c) In addition, Employee covenants and agrees that, in the event that immediately before his termination of employment with Atlas he is employed in an exclusively non-attorney position which he has undertaken voluntarily, at no time before the first anniversary of such termination of employment with Atlas, will Employee directly or indirectly, for any reason, whether for Employee’s own account or for the account of any other person, firm, corporation or other organization, accept employment in a non-attorney capacity with, or give non-legal advice to, Evergreen International, Gemini Air Cargo, World Airways, Air Atlanta, Kalitta Air or Southern Air. The parties agree and intend that breach of this non-competition clause shall subject Employee to the full measure of contract and equitable damages.

5. DISPUTE RESOLUTION AND CHOICE OF LAW

5.1 Negotiation . If a dispute between the parties arises under this Agreement, the parties shall negotiate in good faith in an attempt to resolve their differences. The obligation of the parties to negotiate in good faith shall commence immediately, and shall continue for a period of at least thirty (30) days (“Negotiation”).

If Negotiation fails to resolve a dispute between the parties within the first thirty (30) days, the parties may proceed to (“Mediation”).

5.2 Mediation . If a dispute between the parties arises under this Agreement and has not been resolved under the Negotiation procedures described herein, either party may request, by written notice to the other party, that Negotiation be facilitated by a single mediator, to be selected by the parties (the “Mediator”). The other party may, but is not required to, agree to such a process.

If the parties agree to pursue Mediation, The Parties shall select the Mediator within ten (10) days after receipt of notice. If the parties are unable to agree on the Mediator, the Mediator shall be selected by Atlas, but the selected Mediator shall be independent of Atlas and its affiliates. The fees of the Mediator shall be divided equally between the parties.

With the assistance of the Mediator, the Parties shall continue Negotiation in good faith for a period not to exceed thirty (30) days. If the parties are unable to reach agreement during this period, the Mediator shall be discharged.

5.3 Arbitration . All disputes, claims, or causes of action arising out of or relating to this Agreement or the validity, interpretation, breach, violation, or termination thereof not resolved by Mediation, may be determined and settled by arbitration, to be conducted in the State of New York, USA, in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) in effect at the date of arbitration (“Arbitration”). This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws.

Any Arbitration commenced pursuant to this Agreement ,shall be conducted by a single neutral arbitrator, who shall have a minimum of three (3) years of commercial experience

(the “Arbitrator”). The Parties shall meet within ten (1 0) days of failure to resolve by Mediation to attempt to agree on an Arbitrator. Absent agreement at this meeting, the Arbitrator shall be selected by AAA. Such Arbitrator shall be free of any conflicts with Atlas and shall hold a hearing within thirty (30) days of the notice to Employee.

If the terms and conditions of this, Agreement are inconsistent with the Commercial Arbitration Rules of the AAA, the terms and conditions of this Agreement shall control.

The Parties hereby consent to any process, notice, or other application to said courts and any document in connection with Arbitration may be served by (i) certified mail, return receipt requested; (ii) by personal service; or (iii) in such other manner as may be permissible under the rules of the applicable court or Arbitration tribunal; provided , however , a reasonable time for appearance is allowed. The Parties further agree that Arbitration proceedings must be instituted within one (1) year after the occurrence of any dispute, and failure to institute Arbitration proceedings within such time period shall constitute an absolute bar to the institution of any proceedings and a waiver of all claims. The Parties shall equally divide all costs and expenses incurred in such proceeding and related legal proceedings; provided, however, that Employee shall, if successful, be entitled to recover all his costs and expenses including attorneys fees. The Judgment of the Arbitrator shall be final and either Party may submit such decision to courts for enforcement thereof.

6. SEVERABILITY AND ENFORCEABILITY

It is expressly acknowledged and agreed that the covenants and provisions, hereof are separable; that the enforceability of one covenant or provision shall in no event affect the full enforceability of any other covenant or provision herein. Further, it is agreed that, in the event any covenant or provision of this Agreement is found by any court of competent jurisdiction or

Arbitrator to be unenforceable, illegal or invalid, such invalidity, illegality or unenforceability shall not affect the validity or enforceability of any other covenant or provision of this Agreement. In the event a court of competent jurisdiction or an Arbitrator would otherwise hold any part hereof unenforceable by reason of its geographic or business scope or duration, said part shall be construed as if its geographic or business, scope or duration had been more narrowly drafted so as not to be invalid or unenforceable.

7. MISCELLANEOUS

7.1 No Mitigation . The amounts to be paid to Employee are net to Employee, without any reduction or duty to mitigate, except for taxes, other governmental charges or amounts owed to Atlas by Employee, and all payments to be made hereunder shall be net of all applicable income and employment taxes required to be withheld therefrom.

7.2 Pro-Ration . In the event the Employment Period is terminated in the middle of any calendar month, the amount due for such month shall be pro-rated on a daily basis.

7.3 No Waiver Except in Writing . No waiver, or modification of this Agreement or any of the terms and conditions set forth herein shall be effective unless submitted to a writing duly executed by the parties.

7.4 Successors and Assigns . This Agreement shall be binding on Atlas and any successor thereto, whether by reason of merger, consolidation or otherwise. The duties and obligations of Employee may not be assigned by Employee.

7.5 Confidentiality of Terms . Atlas, and Employee agree that the terms and conditions of this Agreement are confidential and that they will not disclose the terms of this Agreement to any third parties, other than the Employee’s spouse, their attorneys, auditors, accountants or as required by law or as may be necessary to enforce this Agreement.

7.6 Full Understanding . Employee declares and represents that Employee has carefully read and fully understands the terms of this Agreement, has had the opportunity to obtain advice and assistance of counsel with respect thereto, and knowingly and of Employee’s own free will, without any duress, being fully informed and after due deliberation, voluntarily accepts the terms of this Agreement and represents that the execution, delivery and performance of this Agreement does not violate any agreement to which Employee is subject.

7.7 Entire Agreement . This Agreement sets forth the entire agreement and understanding between the parties with respect to the subject matter hereof and (except for any prior indemnity agreements, restricted stock agreements or stock option agreements) supersedes all prior agreements, arrangements, and understandings between the parties with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have executed this agreement the date, and year first above written.

EMPLOYEE		ATLAS AIR, INC.



/s/ John Dietrich		/s/ William J.[signature illegible]

John W. Dietrich

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer

I, William J. Flynn, President and Chief Executive Officer of Atlas Air Worldwide Holdings, Inc., certify that:

	1.	I have reviewed this Quarterly Report on Form 10-Q of Atlas Air Worldwide Holdings, Inc.;

	2.	Based on my knowledge, this 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 Report;

	3.	Based on my knowledge, the Financial Statements, and other financial information included in this 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 Report;

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

		a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 Report is being prepared;

		b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation;

		c) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

	5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

		a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

		b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 9, 2006		/s/ William J. Flynn
		William J. Flynn
		President and Chief Executive Officer

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer

I, Michael L. Barna, Senior Vice President and Chief Financial Officer of Atlas Air Worldwide Holdings, Inc., certify that:

	1.	I have reviewed this Quarterly Report on Form 10-Q of Atlas Air Worldwide Holdings, Inc.;

	2.	Based on my knowledge, this 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 Report;

	3.	Based on my knowledge, the Financial Statements, and other financial information included in this 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 Report;

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

		a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 Report is being prepared;

		b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation;

		c) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

	5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

		a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

		b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 9, 2006	/s/ Michael L. Barna
	Michael L. Barna
	Senior Vice President and Chief Financial Officer

EXHIBIT 32.1

Section 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Atlas Air Worldwide Holdings, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission (the “Report”), we, William J. Flynn and Michael L. Barna, Chief Executive Officer and Chief Financial Officer, respectively, of the Company certify that to our knowledge:

1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2006

	/s/ William J. Flynn
	William J. Flynn
	President and Chief Executive Officer




	/s/ Michael L. Barna
	Michael L. Barna
	Senior Vice President and Chief Financial Officer