ITEM 2. PROPERTIES

        In June 2003, we placed an order for 100 new EMBRAER 190 jet aircraft, with options for an additional 100 new aircraft, with Empresa Brasileira de Aeronautica S.A., or Embraer. This new order is intended to supplement our existing fleet of Airbus A320 aircraft, which in April 2003 we agreed to expand through our order for 65 additional aircraft through an amendment with AVSA, S.A.R.L., an affiliate of Airbus Industrie, or Airbus.

        Our aircraft leases expire as follows: one in 2009, one in 2010, two in 2012, four in 2013, one in 2015, two in 2018, two in 2019, one in 2020, three in 2022 and seven in 2023. All 29 owned aircraft are subject to secured debt financing. We have taken delivery of three aircraft in 2004, two of which have begun scheduled service. Two were financed through debt and one was leased under a 12-year operating lease.

        As of December 31, 2003, we had on order 99 Airbus A320 aircraft and 100 EMBRAER 190 aircraft with options to acquire 50 additional Airbus A320 aircraft and 100 additional EMBRAER 190

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aircraft, which are scheduled for delivery through 2016 (on a relatively even basis during each year) as follows:

(1)

Assumes all options are exercised and includes one aircraft we leased in January 2004.

Facilities

        We lease all of our facilities at each of the airports we serve. Our leases for our terminal passenger service facilities, which include ticket counter and gate space, operations support area and baggage service offices, generally have a term ranging from less than one year to five years, and contain provisions for periodic adjustments of lease rates. We also are responsible for maintenance, insurance and other facility-related expenses and services. We have entered into use agreements at each of the airports we serve that provide for the non-exclusive use of runways, taxiways and other facilities. Landing fees under these agreements are based on the number of landings and weight of the aircraft.

        Our principal base of operations is Terminal 6 at JFK, which is operated under an expired permit with the Port Authority of New York and New Jersey that can be terminated at any time upon 30 days' notice. During September 2003, we reached agreement on the terms of a lease through November 2006. We are awaiting final execution by the Port Authority. In addition, discussions are on-going with the Port Authority and the FAA regarding the construction of a new terminal at JFK. If an agreement is reached, we plan to build a new terminal with occupancy projected in late 2007.

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        In August 2003, we began construction at JFK of a 70,000 square foot aircraft maintenance hangar and an adjacent 32,000 square foot office facility to accommodate technical support operations personnel. This construction is expected to be completed in the first quarter of 2005. We recently executed a ground lease with the Port Authority for this site through December 2015. In addition, we lease one building at JFK where we store aircraft spare parts and passenger supplies and we currently rent, on a month-to-month permit, a hangar at JFK to perform overnight maintenance on our aircraft.

        We also announced in August 2003 that Orlando International Airport will be the location of our first flight training center as well as a new hangar for installation and maintenance of our LiveTV in-flight satellite television system and aircraft maintenance. The training center will encompass 80,000 square feet with capacity for eight flight simulators and two cabin simulators, plus classrooms, a training pool and administration areas. This facility, which is expected to be completed in late 2005, will be used for the initial and continuous training of all our pilots and in flight crew, as well as support training for our technical operations and customer service crew. The new Orlando hangar will encompass 70,000 square feet and is expected to be completed by early 2005.

        In connection with the commencement of our operations at Long Beach Municipal Airport, we have made a significant investment, along with the City of Long Beach, to improve roadways, parking, ticket counters, gate facilities, concessions and support space.

        Our primary corporate offices are located in Forest Hills, New York, where we lease space under a lease that expires in 2012. Our operations staff is based primarily at JFK and our finance and scheduling departments are based in Darien, Connecticut.

        Our office in Salt Lake City, Utah contains a core team of employees who are responsible for group sales, customer service and at-home reservation agent supervision as well as revenue management and credit card fraud investigation. In keeping with our commitment to innovation, the majority of our reservation agents work out of their homes and are linked to our reservations system through personal computers.