KITTY HAWK INC, S-1/A, 1996-10-08

KITTY HAWK INC
S-1/A, 1996-10-08
AIR TRANSPORTATION, NONSCHEDULED

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996

REGISTRATION NO. 333-8307
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 4

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

KITTY HAWK, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 4522 75-2564006
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
</TABLE>

1515 WEST 20TH STREET
P.O. BOX 612787
DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TEXAS 75261
(214) 456-2200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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

M. TOM CHRISTOPHER
CHIEF EXECUTIVE OFFICER
1515 WEST 20TH STREET
P.O. BOX 612787
DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TEXAS 75261
(214) 456-2200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

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

Copies of communications to:

<TABLE>
<S> <C>
MICHAEL M. BOONE STEPHEN A. OPLER
GREG R. SAMUEL JOEL J. HUGHEY
HAYNES AND BOONE, LLP ALSTON & BIRD
3100 NATIONSBANK PLAZA ONE ATLANTIC CENTER
901 MAIN STREET 1201 WEST PEACHTREE STREET
DALLAS, TEXAS 75202-3789 ATLANTA, GEORGIA 30309-3424
(214) 651-5000 (404) 881-7000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

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

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

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

If delivery of the prospectus is to be made pursuant to Rule 434, please
check the following box. / /

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2

KITTY HAWK, INC.

CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
FORM S-1 REGISTRATION STATEMENT
(PART I) ITEM NO. AND CAPTION LOCATION IN PROSPECTUS BY CAPTION
---------------------------------------------------- -----------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Forepart of Registration Statement;
Outside Front Cover Page of
Prospectus

2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front and Outside Back Cover
Pages of Prospectus

3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges......................... Prospectus Summary; The Company;
Risk Factors

4. Use of Proceeds..................................... Prospectus Summary; Use of
Proceeds; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations

5. Determination of Offering Price..................... Outside Front Cover Page of
Prospectus; Underwriting

6. Dilution............................................ Risk Factors; Dilution

7. Selling Security Holders............................ Management; Principal Stockholders
and Selling Stockholder; Certain
Transactions

8. Plan of Distribution................................ Outside Front Cover Page of
Prospectus; Underwriting

9. Description of Securities to be Registered.......... Description of Capital Stock

10. Interests of Named Experts and Counsel.............. *

11. Information with Respect to Registrant.............. Prospectus Summary; The Company;
Risk Factors; Use of Proceeds;
Dividend Policy; Dilution;
Capitalization; Selected
Consolidated Financial and
Operating Data; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Business;
Management; Certain Transactions;
Principal Stockholders and
Selling Stockholder; Description
of Capital Stock; Shares Eligible
for Future Sale; Additional
Information

12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... *
</TABLE>

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

* Such item is inapplicable, or the answer thereto is in the negative and is
omitted from the Prospectus.
<PAGE> 3
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996

PROSPECTUS

3,000,000 SHARES

[KITTY HAWK, INC. LOGO]

KITTY HAWK(R), INC.

COMMON STOCK

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

Of the 3,000,000 shares offered hereby, 2,700,000 shares are being sold by
the Company and 300,000 shares are being sold by a stockholder (the "Selling
Stockholder"). See "Principal Stockholders and Selling Stockholder." The Company
will not receive any of the proceeds from the sale of shares by the Selling
Stockholder.

Prior to this offering, there has not been a public market for the common
stock (the "Common Stock") of the Company. It is currently estimated that the
initial public offering price will be between $12.00 and $14.00 per share. See
"Underwriting" for information relating to the factors to be considered in
determining the initial public offering price. The Common Stock has been
approved for listing on The Nasdaq Stock Market's National Market under the
symbol "KTTY."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $ $ $ $
- --------------------------------------------------------------------------------------------------
Total(3) $ $ $ $
==================================================================================================
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses payable solely by the Company estimated to be
$ .

(3) The Selling Stockholder has granted the Underwriters a 30-day option to
purchase up to 450,000 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Selling Stockholder will be $ ,
$ , and $ , respectively.

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

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1996 at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.

SMITH BARNEY INC.
ALEX. BROWN & SONS
INCORPORATED
FIELDSTONE
FPCG SERVICES, L.P.
, 1996
<PAGE> 4

[MAP OF
SCHEDULED KITTY
HAWK U.S. ROUTES]

[PICTURE OF KITTY HAWK
CONTROL ROOM]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus: (i) does not give
effect to the exercise of the Underwriters' over-allotment option and (ii) gives
effect to the consummation during June 1996 of a 0.2285391 share dividend for
each share of Common Stock then outstanding. As used in this Prospectus, the
terms "Kitty Hawk" and "Company" refer to Kitty Hawk, Inc., a Delaware
corporation, and its subsidiaries and predecessors, unless the context indicates
otherwise. A reference to a fiscal year by date refers to the Company's fiscal
year ending on August 31 of that calendar year.

THE COMPANY

Kitty Hawk is one of the leading providers of air freight charter services
in the United States, emphasizing highly-reliable, time-sensitive services. The
Company's air freight carrier owns 24 aircraft, 18 of which are currently used
in scheduled airport-to-airport freight service under contracts primarily with
major freight forwarders in North America and the Pacific Rim. These contracts
generally require the Company to supply aircraft, crew, maintenance, and
insurance ("ACMI") and to meet certain on-time performance standards, while its
customers are responsible for substantially all other operating expenses,
including fuel. Additionally, Kitty Hawk is the leading provider of same-day air
logistics charter services in the United States. Through use of its advanced,
proprietary computer software, the Company manages delivery of extremely
time-sensitive freight utilizing the on-demand charter services of both
third-party air freight carriers and planes from the Company's fleet that are
not then committed to ACMI service. The Company's total revenues have increased
to $103.7 million in fiscal year 1995 from $33.4 million in fiscal year 1991.
During the same period, the Company's owned aircraft fleet grew to 21 aircraft
from 9 aircraft. Kitty Hawk has been profitable in every fiscal year since its
inception in 1985.

Air Freight Carrier. Kitty Hawk believes it operates one of the three
largest fleets of Boeing 727-200F (freighter) aircraft dedicated to ACMI
contract charters. Under ACMI contracts the air freight carrier operates
designated aircraft on scheduled routes typically for either certificated air
freight carriers that desire the operational flexibility of supplementing their
existing fleet with additional airlift capacity provided by the Company or
uncertificated entities that prefer to outsource the air freight carrier
function of their operations. The Company believes it met the scheduled
departure and/or arrival times (as applicable under the subject ACMI contract)
of its ACMI contract charter customers 98.9% of the time during the nine months
ended May 31, 1996, not including delays beyond the Company's control (such as
weather and customer-related delays). In addition, the Company's air freight
carrier flew approximately 8.8% of the on-demand charters managed by the Company
in the nine months ended May 31, 1996. By deploying aircraft owned by the air
freight carrier not then operating under an ACMI contract to service on-demand
charters for its air logistics business, Kitty Hawk is able to moderate
fluctuations in its asset utilization and thereby maintain higher utilization
rates in its air freight carrier business. During the nine months ended May 31,
1996, the Company's air freight carrier customers included the U.S. Postal
Service and air freight companies such as Burlington Air Express, Inc., DHL
Airways, Inc., Emery Worldwide Airlines, Inc. and Federal Express Corporation.
The Company's air freight carrier business accounted for $9.8 million (56.3%) of
the Company's gross profit in the nine months ended May 31, 1996.

Air Logistics. Kitty Hawk's expedited, same-day air charter services
primarily support the "just-in-time" inventory management systems and emergency
repair and replacement part requirements of major industrial companies.
Utilizing a proprietary computerized database, the Company coordinates
"door-to-door" transportation services by arranging for ground pickup, loading,
air transportation, unloading, and ground delivery of freight. On-demand air
logistics services are generally used to transport manufacturing and replacement
parts and products when expedited, same-day delivery is critical to avoid costly
inventory shortages or work stoppages. For the nine months ended May 31, 1996,
the time elapsed between the customer's initial estimate of freight availability
and the delivery of that freight was typically less than six hours at an average
charge per shipment of $5,803. In the nine months ended May 31, 1996, the
Company's air logistics business arranged 11,209 on-demand charters for more
than 500 customers such as Eagle USA Airfreight Inc., General Motors Corporation
("GM"), International Business Machines Corp., Ryder System, Inc., the U.S.
Postal Service,

3
<PAGE> 6

and TRW Inc. In the nine months ended May 31, 1996, the Company's air logistics
business accounted for $7.6 million (43.7%) of the Company's gross profit.

Most Significant Customers. Since 1990, Kitty Hawk has managed virtually
all of GM's North American on-demand air freight charters. In the nine months
ended May 31, 1996, GM accounted for approximately $42.1 million (39.3%) of the
Company's total revenues. Additionally, Kitty Hawk is a significant provider of
services to the U.S. Postal Service and Burlington Air Express, Inc. In the nine
months ended May 31, 1996, the U.S. Postal Service and Burlington Air Express,
Inc. accounted for approximately $21.3 million (19.8%) and approximately $10.0
million (9.3%), respectively of the Company's total revenues.

THE FLEET

The Company's air freight fleet is comprised of ten Boeing 727-200Fs
(including two recently purchased Boeing 727-200 aircraft that are in the
process of cargo reconfiguration), five Douglas DC-9-15Fs and nine turbo-prop
Convairs. During fiscal year 1997, the Company intends to use the proceeds of
the offering to add five Boeing 727-200Fs to its fleet, three of which the
Company anticipates will be initially dedicated to ACMI contract charter use and
two to on-demand charters, and for general corporate purposes. With these
additional aircraft, the Company believes that its air freight carrier will be
able to obtain a greater number of ACMI contract and on-demand charters flown on
Company aircraft, which generally produce a higher gross profit margin than
charters subcontracted to third-party carriers.

COMPETITIVE STRENGTHS

Kitty Hawk believes that its principal competitive strengths are its:

- Customer Focus. Kitty Hawk's commitment to customer service and
satisfaction is a significant factor in its ability to attract and
retain customers. In an independent survey of certain of the Company's
customers performed by Dun & Bradstreet, Inc. dated May 18, 1995, the
Company received an overall rating of 1.00 (on a performance scale of:
1.00 = "Exceeds Expectations" to 5.00 = "Below Expectations"). The
Company believes that its profit sharing compensation structure
motivates its employees to provide excellent customer service and
reduces employee turnover.

- Boeing 727-200F Fleet. The Company believes that its fleet of Boeing
727-200Fs enables it to offer its customers a desirable aircraft type
for the shipment of freight and to attract and retain customers who
desire a single source of Boeing 727-200F aircraft. Kitty Hawk believes
the popularity of the 727-200F aircraft stems from its range and payload
characteristics, which the Company believes are well suited for flights
of up to 2,500 miles that are typical of the intra-American and
intra-Asian routes of its integrated freight customers. According to the
April 1996 issue of FedEx Aviation Services' Commercial Jet Fleet, more
Boeing 727 (-100 and -200) aircraft are currently utilized in freighter
configuration than are any other aircraft type.

- Advanced Technology. The Company believes that its computerized database,
information software, and tracking systems enable it to increase its
aircraft utilization and provide better service to customers. These
systems enable the Company to provide a level of service which the
Company believes is not otherwise currently available in the market for
on-demand air logistics.

- Economies of Scale. As the leading provider of same-day air logistics
charter services in the United States, the Company believes it enjoys
significant pricing advantages in arranging third-party air freight
charters, which results in lower charges to its customers and increased
profitability for Kitty Hawk.

BUSINESS STRATEGY

The Company's strategy is to continue its rapid growth by: (i) acquiring
additional Boeing 727-200F aircraft primarily for its ACMI contract business to
meet expected growth in air freight transportation demand in both the North
American and Pacific Rim markets, (ii) increasing its focus on marketing to
firms reducing inventory and shortening product cycle times through direct air
shipments from manufacturer to end user, (iii) continuing to provide high
quality service through the ongoing development and enhancement of its
computerized database, information software, and tracking systems, and (iv)
pursuing the acquisition of domestic and international strategic suppliers of
on-demand air and related ground transportation services.

4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...................... 2,700,000 shares
Common Stock offered by the Selling Stockholder.......... 300,000 shares
Common Stock to be outstanding after the offering........ 10,450,000 shares (1)
Use of proceeds.......................................... For the acquisition and modification of
five additional Boeing 727-200 aircraft
and for general corporate purposes.
Proposed Nasdaq National Market Symbol................... KTTY
</TABLE>

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

(1) Does not include: (i) 300,000 shares of Common Stock available for the
future grant of stock options under the Company's Omnibus Securities Plan
and for matching contributions by the Company under its 401(k) Savings Plan,
(ii) 200,000 shares of Common Stock available for issuance under the
Company's Annual Incentive Compensation Plan and (iii) 100,000 shares of
Common Stock available for issuance under the Company's Employee Stock
Purchase Plan. See "Management -- Employee Compensation Plans and
Arrangements."

RECENT DEVELOPMENTS

Set forth below is preliminary unaudited revenue data for the Company for
the three months ended August 31, 1995, and 1996 and the fiscal year ended
August 31, 1996. In the opinion of management of the Company, this preliminary
unaudited revenue data includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such data. As
compared to the preliminary unaudited revenue data, as of the date of this
Prospectus, the Company has not yet completed the steps necessary for
determining net income or other financial statement line items for the three
months ended August 31, 1996 or assets or liabilities of the Company or
stockholders' equity at August 31, 1996.

THREE MONTHS FISCAL YEAR
ENDED AUGUST 31, ENDED
--------------- AUGUST 31,
1995 1996 1996
----- ----- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues:
Air freight carrier.................................... $10.3 $15.9 $ 52.9
Air logistics.......................................... 15.2 19.4 89.5
----- ----- -------
Total revenues................................. $25.5 $35.3 $ 142.4
===== ===== =======
</TABLE>

The Company has entered into an agreement to purchase from Intrepid
Aviation Partners, LLC for an aggregate purchase price of $7.0 million two
Boeing 727-200 aircraft, which aircraft represent two of the five Boeing 727-200
aircraft the Company intends to purchase with the proceeds of this offering.
Both aircraft are currently utilized in passenger service, and the Company
intends to commence noise suppression and cargo conversion modifications
immediately upon their delivery. Subject to fulfillment of customary final
inspections and closing conditions, both aircraft are to be delivered in January
1997.

A strike by certain auto workers at GM's Canadian plants commenced on or
about October 2, 1996. Although Kitty Hawk is unable currently to predict the
effects of such strike on the Company, such strike could reduce production at or
shut down certain GM assembly plants in North America for an indefinite period
of time, which could have a material adverse effect on the Company's revenues
and profitability.

5
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, NINE MONTHS
------------------------------------------------- ENDED
1991 1992 1993 1994 1995 MAY 31, 1996
------- ------- ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Air freight carrier................ $ 6,121 $ 6,760 $12,939 $ 28,285 $ 41,117 $ 37,042
Air logistics...................... 27,260 45,893 52,840 79,415 62,593 70,084
------- ------- ------- -------- -------- --------
Total revenues....................... 33,381 52,653 65,779 107,700 103,710 107,126
Gross profit......................... 5,281 4,188 10,578 14,749 18,178 17,392
Stock option grant to executive...... -- -- -- -- -- 2,907(1)
Operating income..................... 1,454 1,258 5,934 8,004 9,345 6,908
Net income........................... 846 1,013 4,105 5,261 4,416 3,411(1)
Net income per share................. $ 0.08 $ 0.12 $ 0.52 $ 0.66 $ 0.55 $ 0.43(1)
======= ======= ======= ======== ======== ========
Weighted average common and common
equivalent shares outstanding...... 10,089 8,671 7,968 7,968 7,968 7,968

OPERATING DATA:
Air Freight Carrier
Revenue aircraft owned (at end of
period)......................... 9 11 10 15 21 23
Flight hours flown(2).............. 3,615 3,567 7,030 11,795 15,183 14,168
Number of on-demand charters
flown........................... 377 292 752 1,182 1,238 987
Number of ACMI contract charters
flown........................... 257 655 1,314 1,734 2,601 2,530
Air Logistics
Number of on-demand charters
managed(3)...................... 6,514 8,708 9,748 16,713 14,198 11,209
</TABLE>

<TABLE>
<CAPTION>
AS OF MAY 31, 1996
------------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................... $ 4,450 $ 5,150
Total assets.......................................................... 61,977 93,955
Long-term debt, including current maturities.......................... 25,739 25,739
Stockholder's equity.................................................. 23,284 55,262
</TABLE>

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

(1) Results for the nine months ended May 31, 1996, lack comparability to prior
periods because such period includes one of two nonrecurring grants to an
executive officer of stock options that resulted in a charge to earnings of
approximately $2,907,000. Had this grant of stock options not occurred, net
income for the nine months ended May 31, 1996 would have been $5,141,000 and
net income per share would have been $0.69. See "Management -- Employee
Compensation Plans and Arrangements."

(2) As reported by the Company to the Federal Aviation Administration (the
"FAA").

(3) Includes on-demand charters flown by the Company's air freight carrier.

(4) Adjusted to reflect the sale of the shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $13.00 per
share and the application by the Company of the estimated net proceeds
therefrom. See "Use of Proceeds."

6
<PAGE> 9

THE COMPANY

The Company conducts its operations primarily through two wholly-owned
subsidiaries, Kitty Hawk Aircargo, Inc. and Kitty Hawk Charters, Inc. Kitty Hawk
Aircargo, Inc. was formed in 1989 and operates as the Company's air freight
carrier. Kitty Hawk Charters, Inc. was formed in 1980 and operates the Company's
air logistics business.

In 1980, Mr. M. Tom Christopher, the Selling Stockholder, founded
Christopher Charters, Inc. which arranged on-demand air charters using
third-party air freight carriers. In 1985, Mr. Christopher formed the Company to
acquire Kitty Hawk Airways, Inc., an FAA certificated Part 135 (small aircraft)
operator and to acquire Christopher Charters, Inc. (whose name was later changed
to Kitty Hawk Charters, Inc.). Kitty Hawk Airways, Inc. was an independent
on-demand air freight carrier used frequently by Christopher Charters, Inc. The
Company obtained FAA Part 121 certification (transport category aircraft) in
1987 through the acquisition of a small independent air freight carrier.

Kitty Hawk was reincorporated in Delaware in October 1994. The Company's
principal executive offices are located at 1515 West 20th Street, P.O. Box
612787, Dallas/Fort Worth International Airport, Texas 75261 and its telephone
number is (214) 456-2200.

7
<PAGE> 10

RISK FACTORS

An investment in the Common Stock involves a high degree of risk. In
addition to the other information in this Prospectus, prospective investors
should carefully consider the following risk factors relating to the Company and
its Common Stock before making an investment.

CAPITAL INTENSIVE NATURE OF AIRCRAFT OWNERSHIP AND OPERATION

Capital Investment. The air freight carrier business is a highly
capital-intensive business. The Company's balance sheet as of May 31, 1996,
reflected an increase in its ownership of aircraft to $53.0 million from $18.6
million at August 31, 1994, primarily reflecting the acquisition of five Boeing
727-200s and two Douglas DC-9-15Fs. Since May 31, 1996, the Company has acquired
and will modify two additional aircraft for an estimated cost of approximately
$15.0 million. In order to further expand the Company's air freight carrier
business, the Company intends to purchase used jet aircraft (including the five
Boeing 727-200s the Company intends to purchase with the proceeds of the
offering) that typically require certain modifications including reconfiguring
the aircraft from passenger to cargo use and installing equipment to comply with
noise abatement regulations. The market for used jet aircraft and parts required
for such modifications is volatile and can be negatively affected by limited
supply, increased demand, and other market factors and recently has experienced
significant price increases. Therefore, there can be no assurance that Kitty
Hawk will be able to purchase and modify additional aircraft at favorable prices
or that the Company will have or be able to obtain sufficient resources with
which to make such purchases and modifications. See "Business -- Business
Strategy," "Business -- Government Regulation," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Operating Costs. The operation of the Company's air freight carrier
business incurs considerable operational, maintenance, fuel, and personnel
expenses. In addition, the Company's financial results can be adversely affected
by unexpected engine or airframe repairs to the extent uninsured. In fiscal
years 1993, 1994, and 1995 and the nine months ended May 31, 1996, the costs of
revenues attributable to the air freight carrier were $8.9 million, $19.5
million, $28.1 million and $27.2 million, respectively, principally reflecting
an expansion of the Company's air freight carrier fleet.

Kitty Hawk's operation of aircraft requires compliance with maintenance
directives and regulations of the FAA. Spare or replacement parts and components
may not be readily available in the marketplace. If the Company is unable to
obtain necessary parts or components in a timely manner, the Company's air
freight carrier business could be adversely affected. In addition, even if such
parts or components are available, a shortage of supply could result in an
increase in procurement costs that may adversely affect the Company's
profitability.

Fuel is a cost component in the operation of the Company's aircraft for
on-demand services and the aircraft of third-party providers of charter
services. Both the cost and availability of fuel are subject to many economic
and political factors and events occurring throughout the world and recently the
cost of fuel has increased markedly. Kitty Hawk has no agreement with any fuel
supplier assuring the availability or price stability of fuel and such
agreements are generally not available in the industry. The Company is unable to
pass on increased fuel costs to GM without GM's consent, pursuant to the terms
of the GM Agreement, and the Company may have similar restrictions with respect
to fuel cost increases under other customer agreements in the future.
Accordingly, the future cost and availability of fuel to Kitty Hawk cannot be
predicted, and substantial price increases in, or the unavailability of adequate
supplies of, fuel may have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Maintenance," and "Business -- Government Regulation."

DEPENDENCE ON SIGNIFICANT CUSTOMERS

Kitty Hawk's largest three customers, General Motors Corporation, the U.S.
Postal Service, and Burlington Air Express, Inc., directly accounted for 68.4%
of total revenues in the nine months ended May 31, 1996.

General Motors Corporation. Of the Company's total revenues in fiscal years
1993, 1994, and 1995 and in the nine months ended May 31, 1996, GM accounted for
$36.0 million (54.7%), $67.9 million (63.1%),

8
<PAGE> 11

$48.9 million (47.1%), and $42.1 million (39.3%), respectively. GM accounted for
70.7%, 77.4%, 59.9%, and 59.1% of the total number of on-demand charters that
were flown by the air freight carrier in 1993, 1994, and 1995 and in the nine
months ended May 31, 1996, respectively. In addition to GM, the Company believes
approximately 16.3% of its total revenues in the nine months ended May 31, 1996
were generated from services provided to other participants in the U.S.
automotive industry, a substantial portion of which the Company believes were GM
suppliers. See "Business -- Relationship with GM."

Kitty Hawk provides on-demand logistics services to GM pursuant to a
non-exclusive agreement executed in June 1990 for a term ending May 1997 (the
"GM Agreement"). Pursuant to the GM Agreement, the Company is the primary
manager of on-demand cargo charters for GM in North America. The GM Agreement
limits the Company's utilization of its air freight carrier to a maximum of 30%
of the charter revenue or charter volume in the performance of on-demand
charters for GM. In the nine months ended May 31, 1996, the air freight carrier
accounted for approximately 18.8% of the charter revenue from, and 8.1% of the
charter volume of, the GM on-demand charters managed by the Company. These
limitations could prevent Kitty Hawk from directing GM on-demand charters to its
air freight carrier, thereby precluding the Company from realizing the higher
gross profit margins generated by the air freight carrier as compared to
charters subcontracted to third-party carriers. In addition, this limitation may
restrict the flexibility of Kitty Hawk in shifting aircraft dedicated or
expected to be dedicated to ACMI contract charter service to on-demand charter
service, which in turn results in a greater dependence by the Company on its
ACMI contract charter customers.

The GM Agreement also provides that either party may, with or without
cause, terminate the agreement following a quarterly review by giving the other
party at least 30 days' prior written notice thereof. Therefore, there can be no
assurance that the GM Agreement will remain in effect for its scheduled term or
that it will be extended beyond May 1997. A change in, or renewal of, the GM
Agreement on terms less favorable to the Company could have a material adverse
effect on the Company. Kitty Hawk believes GM has attempted (including on at
least two occasions issuing system-wide pronouncements to significantly reduce
use of expedited transportation, including Kitty Hawk's air logistics services),
and in the future will continue to attempt, to reduce its premium transportation
expenses including amounts paid to the Company under the GM Agreement. A strike
of GM workers at various plants during the third quarter of fiscal 1996 resulted
in GM temporarily ceasing to use the Company's air logistics services. Any
development that precipitates a reduction in GM's or its suppliers' usage of air
freight charters or any decision by GM to terminate or not extend its
relationship with the Company could have a material adverse effect on the
Company. A strike by certain auto workers at GM's Canadian plants commenced on
or about October 2, 1996. Although Kitty Hawk is unable currently to predict the
effects of such strike on the Company, such strike could reduce production at or
shut down certain GM assembly plants in North America for an indefinite period
of time, which could have a material adverse effect on the Company's revenues
and profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Relationship with GM."

U.S. Postal Service. Of the Company's total revenues in fiscal years 1993,
1994, and 1995 and the nine months ended May 31, 1996, the U.S. Postal Service
accounted for $17.3 million (26.3%), $11.1 million (10.3%), $10.0 million
(9.7%), and $21.3 million (19.8%), respectively. Of the Company's gross profits
from air logistics in fiscal years 1993, 1994, and 1995 and in the nine months
ended May 31, 1996, the U.S. Postal Service accounted for $4.0 million (61.5%),
$2.0 million (33.8%), $1.0 million (18.9%), and $3.8 million (50.0%),
respectively. See "Business -- Air Logistics -- United States Postal Service."

The U.S. Postal Service awards contracts periodically pursuant to a public
bidding process which considers quality of service and other factors, including
price to a lesser extent. Bids for contracts to provide Christmas season
charters generally are submitted in the summer of each year and are typically
awarded during the following fall. These contracts are typically for one year or
less. The inability of Kitty Hawk to remain competitive with respect to price
and quality of service would have a material adverse effect on the Company's
ability to obtain such contracts. The inability of Kitty Hawk to obtain such
contracts in the future and replace them with new business could have a material
adverse effect on the Company's total revenues and profitability. Kitty Hawk's
contracts with the U.S. Postal Service are subject to termination at the
convenience

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<PAGE> 12

of the U.S. Postal Service. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Air Logistics."

Burlington Air Express, Inc. Recently, Burlington Air Express, Inc. has
developed into a significant customer, accounting for $10.0 million (9.3%) of
the Company's total revenues for the nine months ended May 31, 1996. Burlington
Air Express, Inc. currently leases under one ACMI contract five of the Company's
Boeing 727-200Fs and under a separate ACMI contract two of the Company's
Convairs and one of the Company's Douglas DC-9-15Fs. The Boeing 727-200F ACMI
contract is for a term expiring on March 1, 1999, but pursuant to the terms of
this contract, either party may terminate upon thirty days' written notice the
services of one Boeing 727-200F aircraft immediately and one additional Boeing
727-200F aircraft on or after each of March 1, 1997, March 1, 1998, and
September 1, 1998. In addition, Burlington Air Express, Inc. may earlier
terminate this contract if, among other reasons, the Company fails to meet
certain performance standards. The loss of this customer, or a reduction in this
customer's use of the Company's services, could have a material adverse effect
on the Company. See "Business -- Air Freight Carrier."

CYCLICALITY OF CUSTOMERS' BUSINESSES

Kitty Hawk's air logistics services are provided to numerous industries and
customers that experience significant fluctuations in demand based on economic
conditions and other factors beyond the control of the Company and, therefore,
the demand for the Company's services could be materially adversely affected by
downturns in the businesses of the Company's customers. Of the Company's total
revenues for the nine months ended May 31, 1996, the Company believes
approximately 55.5% were generated from services provided to the U.S. automotive
industry, which has historically been a cyclical industry. A contraction in the
U.S. automotive industry, a prolonged work stoppage or other significant labor
dispute involving that industry, or a change in policy reducing the usage of air
freight charters in that industry, could have a material adverse effect on the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

GOVERNMENT REGULATION

Domestic Regulation. The Company's air freight carrier is subject to Title
49 of the United States Code (formerly the Federal Aviation Act of 1958, as
amended), under which the Department of Transportation ("DOT") and the FAA
exercise regulatory authority over air carriers.

The DOT regulates the economic aspects of the airline industry, while the
FAA regulates air safety and flight operations. The DOT is primarily responsible
for regulating economic issues affecting air service, including, among other
things, air carrier certification and fitness, insurance, consumer protection,
unfair methods of competition and transportation of hazardous materials.

The FAA is primarily responsible for regulating air safety and flight
operations, including, among other things, airworthiness requirements for each
type of aircraft the Company's air freight carrier operates, pilot and crew
certification, aircraft maintenance and operational standards, noise abatement,
airport slots and other safety-related factors.

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<PAGE> 13

Act of 1934, as amended, because of their extensive use of radio and other
communication facilities. Additional laws and regulations have been imposed from
time to time by federal, state, and local governments that have increased
significantly the cost of operations by imposing additional requirements or
restrictions on operations. For example, certain cities, states, and local
airport authorities prohibit flights in and out of their airports with Stage II
aircraft (as defined by the FAA) or between certain hours. The FAA has proposed
amendments to its flight and rest time regulations which, if adopted as
proposed, could restrict the ability of the Company to respond to a shipper's
request for same day delivery and/or would require the Company to hire and train
additional qualified pilots to perform the Company's flight operations.

The adoption of new laws, policies, or regulations, or changes in the
interpretation or application of existing laws, policies or regulations, whether
by the FAA, the DOT, the Federal Communications Commission, the United States
government, or any foreign, state, or local government, could have a material
adverse impact on Kitty Hawk and its operations.

The Company's revenue fleet is comprised of ten Boeing 727-200 aircraft
manufactured between 1969 and 1978, five Douglas DC-9-15 aircraft manufactured
during 1967 and 1968, and nine turbo-prop Convairs manufactured between 1948 and
1957. Manufacturer's Service Bulletins ("Service Bulletins") and FAA
Airworthiness Directives ("Directives") issued under the FAA's "Aging Aircraft"
program or issued on an ad hoc basis cause certain of these aircraft to be
subject to extensive aircraft examinations and may require certain of these
aircraft to undergo structural inspections and modifications to address problems
of corrosion and structural fatigue at specified times. It is possible that
additional Service Bulletins or Directives applicable to the types of aircraft
included in the Company's fleet could be issued in the future. The cost of
compliance with Directives and Service Bulletins cannot currently be estimated,
but could be substantial.

The DOT and the FAA have the authority to modify, amend, suspend, or revoke
the authority and licenses issued to the Company for failure to comply with the
provisions of law or applicable regulation. In addition, the DOT and the FAA may
impose civil or criminal penalties for violations of applicable rules and
regulations. Such actions by the FAA or the DOT, if taken, could have a material
adverse effect on Kitty Hawk.

The DOT and the Environmental Protection Agency exercise regulatory
jurisdiction over the transportation of hazardous materials. The Company may
from time to time transport articles that are subject to these regulations.
Shippers of hazardous materials share responsibility for compliance with these
regulations and are responsible for proper packaging and labeling. Substantial
civil monetary penalties can be imposed on both shippers and air carriers for
infractions of these regulations.

Foreign Regulation. Certain of the Company's air freight carrier operations
are conducted wholly between two or more points that are all located outside of
the United States. To the extent required to do so, the Company obtains
authority to operate such foreign operations from the aeronautical authorities
of the countries in which such operations are conducted. As with the
certificates and license obtained from U.S. authorities, the Company must comply
with all applicable rules and regulations imposed by these foreign aeronautical
authorities or be subject to the suspension, amendment or modification of its
operating authorities.

Excise Tax. On August 27, 1996, a 6.25% federal transportation excise tax
applicable to air freight transportation was reinstated. Reinstatement of the
tax by the government will result in higher costs to shippers of air freight and
air freight carriers, which may have a material adverse effect on the Company's
freight traffic, yields, revenue, and margins.

Restrictions on Foreign Ownership and Control. Under current federal
aviation law, the Company's air freight carrier could cease to be eligible to
operate as an air freight carrier if more than 25% of the voting stock of the
Company were owned or controlled by non-U.S. citizens. Moreover, in order to
hold an air freight carrier certificate, the president and two-thirds of the
directors and officers of an air carrier must be U.S. citizens. All of the
Company's directors and officers are U.S. citizens. Furthermore, (i) the
Certificate of Incorporation limits the aggregate voting power of non-U.S.
persons to 22 1/2% of the votes voting on or

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<PAGE> 14

consenting to any matter and (ii) the Bylaws do not permit non-U.S. citizens to
serve as directors or officers of the Company. See "Business -- Government
Regulation" and "Description of Capital Stock."

COMPETITION

The market for air freight carrier services has been and is expected to
remain highly competitive. Kitty Hawk competes with other air freight carriers
with regard to furnishing on-demand charters and ACMI contract charters. The
Company believes that the basis for such competition is price, quality of
service, and the location and performance characteristics of aircraft. The
Company's air freight carrier is also subject to competition from other modes of
transportation, including, but not limited to, railroads and trucking.

Numerous competitors of Kitty Hawk provide or coordinate door-to-door air
freight charters on an expedited basis. The market for air logistics also has
been and is expected to remain highly competitive. The Company's principal
competitors for on-demand air logistics services are other air logistics
companies, air freight carriers which seek to book charters directly with
customers, and air freight companies that offer expedited service. During the
last fourteen months, each of Emery Worldwide Airlines Inc., Federal Express
Corporation, and United Parcel Service have entered the expedited air freight
business by offering "next-flight-out" service. There can be no assurance that
the Company will be able to compete successfully with existing or new
competitors.

The Company's ability to attract and retain business also is affected by
the decisions of the transportation departments of commercial and industrial
businesses whether, and to what extent, to coordinate their own transportation
needs. Prior to 1990, GM conducted its air logistics business in-house. GM and
certain other customers maintain transportation departments that could be
expanded to manage charters in-house which could have a material adverse effect
on Kitty Hawk. With respect to the Company's ACMI contract charter business, the
Company could be adversely affected by the decision of certain of its
certificated customers to acquire additional aircraft, or by its uncertificated
customers to acquire and operate their own aircraft, to service routes currently
serviced by Company aircraft. Many of the Company's competitors and customers
have substantially greater financial resources than the Company.

POSSIBILITY THAT HISTORICAL RATES OF GROWTH WILL NOT CONTINUE; CHALLENGES
PRESENTED BY MANAGEMENT OF EXPANDED OPERATIONS

From August 31, 1990 to May 31, 1996, Kitty Hawk experienced substantial
growth. If Kitty Hawk continues to grow, the Company's ability to manage growth
successfully will require it to continue to improve its operations and financial
management; to develop the management skills of its account managers and
supervisors; and to train, motivate, and effectively manage its employees. The
Company's failure to manage growth successfully could have a material adverse
effect on the Company's business. The Company's future success also depends on
its continuing ability to attract and retain highly qualified mechanical,
technical and managerial personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will retain its key mechanical,
managerial and technical employees or that it will be successful in attracting,
assimilating or retaining other highly qualified mechanical, technical and
managerial personnel in the future.

A significant factor in the growth of the Company and its air logistics
business has been the utilization by certain manufacturers (particularly GM) of
"just-in-time" inventory management systems that rely on the use of same-day air
freight delivery service. Because many manufacturers have already adopted
"just-in-time" inventory management programs, much of the growth in the
expedited, same-day air logistics business associated with the conversion to
such inventory control systems may already have occurred and, therefore, the
rates of growth historically experienced by the Company's air logistics business
may not continue. See "Business -- Overview of Expedited Air Freight
Transportation Industry."

The Company's future success is dependent to a significant degree on its
ability to manage and integrate profitably seven Boeing 727-200Fs that the
Company has either recently acquired or intends to acquire and place in service
during fiscal year 1997, five of which the Company anticipates will be initially
dedicated to ACMI contract charter use. Kitty Hawk is seeking to obtain new ACMI
contracts with additional and existing

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<PAGE> 15

customers, to which the Company anticipates such aircraft would be dedicated
when placed in service. The Company intends to have new ACMI contracts in place
for these aircraft by the time they are placed in service. However, to the
extent arrangements for such new ACMI contracts have not been made at such time,
Kitty Hawk would seek other revenue opportunities for such aircraft although
there can be no assurance that such opportunities will be available at such
time. The failure to generate adequate revenue from such Boeing 727-200Fs
pending the entering into of ACMI contracts, or the failure to secure ACMI
contracts for such aircraft, could have a material adverse effect on the
Company. Furthermore, there also can be no assurance that Kitty Hawk will be
able to achieve profitable results from these aircraft or any other aircraft
acquired in the future. See "Business."

RISKS RELATED TO GROWTH THROUGH ACQUISITIONS

One of Kitty Hawk's business strategies is to continue its growth by
pursuing the acquisition of both domestic and international strategic suppliers
of on-demand air and related ground transportation services. Growth through
acquisition involves substantial risks, including improper valuation and
inadequate or unsuccessful integration of acquired businesses. There can be no
assurance that suitable acquisition candidates will be available, that the
Company will be able to acquire, profitably manage, or successfully integrate
such additional companies, or that any such future acquisitions will produce
returns justifying the investment by Kitty Hawk. In addition, the Company may
compete for acquisition candidates with its competitors or other companies that
have significantly greater resources than the Company. Additionally, Kitty
Hawk's existing Amended and Restated Credit Agreement dated August 14, 1996 with
Wells Fargo Bank (Texas), N.A. and Bank One, Texas, N.A. (the "Credit
Agreement") restricts the Company's ability to make certain types of
acquisitions. See "Business -- Business Strategy" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Kitty Hawk currently intends to finance future acquisitions by issuing
shares of Common Stock to sellers of such businesses as all or a portion of the
consideration to be paid. Any future such issuance may result in substantial
dilution to purchasers of the shares of Common Stock offered hereby. In the
event that sellers of potential acquisition candidates are unwilling to accept
shares of Common Stock as part of the consideration for the sale of their
businesses, Kitty Hawk may be required to utilize its available cash resources
or to pursue other types of financing to complete any acquisitions.

DEPENDENCE ON KEY PERSONNEL

The Company believes that its continued success depends, and will continue
to depend, on the services of: (i) M. Tom Christopher, the founder, Chairman of
the Board of Directors, Chief Executive Officer, and, until recently, the sole
stockholder of the Company and (ii) Tilmon J. Reeves, the President and Chief
Operating Officer of the Company who is primarily responsible for the day-to-day
operations of the Company. The loss of services of either Mr. Christopher or Mr.
Reeves could have a material adverse effect on the Company. The GM Agreement
provides that GM may terminate the GM Agreement in the event of a change in
management of Kitty Hawk Charters, Inc. In addition, the Credit Agreement is
terminable if Mr. Christopher ceases to be the Chief Executive Officer of Kitty
Hawk or active in the management of the Company. Mr. Christopher, Mr. Reeves,
and Mr. Richard R. Wadsworth, Senior Vice President -- Finance, Chief Financial
Officer, and Secretary have entered into employment agreements with the Company.
See "Management -- Employment Agreements."

OPERATIONS DEPENDENT UPON LIMITED FLEET

Because 20 of the Company's 24 aircraft are or are expected to be dedicated
to service under ACMI contracts (and the Company anticipates three of the five
aircraft to be purchased with the proceeds of the offering also will be so
dedicated), in the event one or more of the Company's aircraft were destroyed or
out of service for an extended period of time, the Company's ability to fulfill
its obligations under one or more of its ACMI contracts could be impaired. While
Kitty Hawk believes that its insurance coverage is sufficient to cover the
replacement cost of an aircraft, there can be no assurance that suitable
replacement aircraft could be purchased or leased or that, if purchased, the
Company could utilize such an aircraft without incurring substantial costs or
delays.

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SEASONALITY

The Company's air logistics business is seasonal, with its highest revenues
historically occurring in the Company's first, second and fourth fiscal quarters
due to the services provided to the U.S. Postal Service during the Christmas
holiday season in the Company's second fiscal quarter and to increased
production schedules of GM and its suppliers in the Company's first and fourth
fiscal quarters. The Company's results of operations would be adversely and
disproportionately affected if the Company's air logistics revenues were
substantially lower than those normally expected during such three fiscal
quarters. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality" and "Business."

CONTROL BY MR. CHRISTOPHER

Immediately after completion of this offering, Mr. Christopher will own
7,123,436 shares, or approximately 68.2% (63.9% if the Underwriters'
over-allotment option is exercised in full), of the Common Stock. Consequently,
Mr. Christopher will have the ability to elect all of the directors of the
Company and to effect or prevent certain corporate transactions that require
majority approval, including mergers and other business combinations.
Furthermore, Mr. Christopher will be able to reject proposed transactions
favored by a majority of the independent stockholders pursuant to voting
decisions made by Mr. Christopher in his capacity as a stockholder, which
decisions may be made independent of his fiduciary duty to stockholders in his
capacity as a director of the Company. See "Principal Stockholders and Selling
Stockholder."

BENEFITS TO SELLING STOCKHOLDER AND OTHER AFFILIATES OF THE COMPANY

Benefits to the Selling Stockholder, Mr. Christopher, as a result of the
offering include the increased marketability of his shares of Common Stock and
the sale of certain of his shares of Common Stock in the offering. The original
aggregate purchase price of Mr. Christopher's shares in a predecessor
corporation, which shares he ultimately exchanged for his shares of Common
Stock, was approximately $1,000. Messrs. Reeves and Wadsworth recently were
granted, and exercised, options to purchase 390,707 and 153,567 shares of Common
Stock respectively for a purchase price of $.01 per share. Pursuant to a
provision in such options, the Company withheld 40% of the shares of Common
Stock to be issued to Messrs. Reeves and Wadsworth in order to satisfy income
tax withholding obligations. Messrs. Reeves and Wadsworth also will benefit from
the increased marketability of their shares. The shares of Common Stock held by
Messrs. Christopher, Reeves and Wadsworth will have a market value (based upon
an assumed initial offering price of $13.00 per share) immediately following the
offering of $92,604,668 ($86,754,668 if the Underwriters' over-allotment option
is exercised in full), $3,047,512 and $1,197,820, respectively. See "Management"
and "Principal Stockholders and Selling Stockholder."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this offering. Accordingly, no assurance can be given as
to the liquidity of the market for the Common Stock or the price at which any
sales may occur. The future market price of the Common Stock could be subject to
wide fluctuations in response to a variety of events, including
quarter-to-quarter variations in operating results, news announcements, trading
volume, general market trends, and other factors. The initial public offering
price of the Common Stock will be determined by negotiations among the Company,
the Selling Stockholder, and the representatives of the Underwriters and may not
be indicative of the market price of the Common Stock after this offering. See
"Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market following
this offering could adversely affect prevailing market prices for the Common
Stock. Upon completion of this offering, 10,450,000 shares of Common Stock will
be outstanding. The 3,000,000 shares (or 3,450,000 shares, if the Underwriters'
over-allotment option is exercised in full) offered hereby will be freely
tradable by persons that are not "affiliates" of Kitty Hawk without restriction
under the Securities Act of 1933, as amended (the "Securities Act"). All of the
remaining 7,450,000 shares of Common Stock (7,000,000 shares if the
Underwriters' over-

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<PAGE> 17

allotment option is exercised in full) of Common Stock are deemed "restricted
securities" pursuant to Rule 144 under the Securities Act and may be resold to
the extent permitted by Rule 144 and Rule 701 of the Securities Act or any
exemption under the Securities Act.

The Company intends to file a registration statement under the Securities
Act covering the 600,000 shares of Common Stock reserved for issuance under the
Company's Omnibus Securities Plan, 401(k) Savings Plan, Annual Incentive
Compensation Plan and Employee Stock Purchase Plan (collectively, the "Plans").
See "Management -- Employee Compensation Plans and Arrangements." As of the date
hereof, no options or shares had been issued under any of these Plans. Such
registration statement is expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market
when issued pursuant to the Plans, subject to provisions of the Plans, including
vesting, and the lock-up agreements described herein.

The Selling Stockholder, as well as Messrs. Reeves and Wadsworth, will
hold, in the aggregate, 7,450,000 shares of Common Stock after this offering
(7,000,000 shares if the Underwriters' over-allotment option is exercised in
full). The Company, its directors and executive officers (other than the Selling
Stockholder, who has agreed to a period of 360 days) have agreed that, for a
period of 180 days from the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock of the Company or
any securities convertible into, or exercisable or exchangeable for, Common
Stock of the Company, except for the grant of options or other rights under the
Company's Omnibus Securities Plan so long as such options do not vest within
such 180 day period. Such consent of Smith Barney Inc. may be provided without
notice to purchasers of the Common Stock or to officials of the Nasdaq National
Market System. See "Management -- Employee Compensation Plans and Arrangements"
and "Shares Eligible for Future Sale."

POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS, GM AGREEMENT AND CREDIT AGREEMENT

The Certificate of Incorporation and Bylaws of Kitty Hawk include certain
provisions that may be deemed to have anti-takeover effects and may delay,
defer, or prevent a takeover attempt that a stockholder of the Company might
consider to be in the best interests of the Company or its stockholders. These
provisions: (i) classify the Company's Board of Directors into three classes,
each of which will serve for different three year periods, (ii) provide that
only the Board of Directors, the Chairman of the Board of Directors, or the
beneficial owners of 25% or more of the outstanding voting capital stock may
call special stockholders' meetings, (iii) require the vote of the holders of at
least two-thirds of the outstanding shares of each class of the Company's
capital stock then entitled to vote thereon for the stockholders to amend or
repeal the Bylaws or certain provisions of the Certificate of Incorporation,
(iv) require the vote of at least two-thirds of the members of the Board of
Directors who are elected by the holders of Common Stock for the Board of
Directors to amend or repeal the Bylaws, (v) establish certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at stockholders' meetings, (vi) subject
the Company to a provision of Delaware law that restricts certain "business
combinations" involving a stockholder who owns 15% or more of the Company's
outstanding voting stock, (vii) limit the aggregate voting power of non-U.S.
persons to 22 1/2% of the votes voting on or consenting to any matter, and
(viii) prohibit non-U.S. citizens from serving as directors or officers of the
Company. See "Description of Capital Stock -- Special Provisions of the
Certificate of Incorporation and Bylaws" and "Business -- Government
Regulation." In addition, the requirement that the vote of the holders of at
least two-thirds of the outstanding shares of each class of the Company's
capital stock is necessary for the stockholders to amend or repeal the Bylaws or
certain provisions of the Certificate of Incorporation may adversely affect the
extent to which stockholders, other than Mr. M. Tom Christopher, exercise
control over the Company.

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<PAGE> 18

GM may terminate the GM Agreement in the event Mr. Christopher no longer
holds majority ownership of the Company or if a major automobile manufacturer
acquires more than 20% of the outstanding Common Stock of the Company.

In addition, the Credit Agreement is terminable in the event: (i) Mr.
Christopher ceases to own a majority of the Company's outstanding voting stock,
(ii) if Mr. Christopher ceases to be the Chief Executive Officer of Kitty Hawk
or active in its management or (iii) a "group" within the meaning of Section
13(d)(3) of the Securities and Exchange Act of 1934, as amended, acquires
beneficial ownership of 25% or more of the outstanding voting stock of Kitty
Hawk.

ABILITY TO ISSUE PREFERRED STOCK

The authorized capital stock of the Company includes 1,000,000 shares of
preferred stock (the "Preferred Stock"). The Board of Directors, in its sole
discretion, may designate and issue one or more series of Preferred Stock from
the authorized and unissued shares of Preferred Stock. Subject to limitations
imposed by law or the Company's Certificate of Incorporation, the Board of
Directors is empowered to determine: (i) the designation of and the number of
shares constituting each series of Preferred Stock, (ii) the dividend rate for
each series, (iii) the terms and conditions of any voting, conversion, and
exchange rights for each series, (iv) the amounts payable on each series upon
redemption or the Company's liquidation, dissolution or winding-up, (v) the
provisions of any sinking fund for the redemption or purchase of shares of any
series, and (vi) the preferences and the relative rights among the series of
Preferred Stock. At the discretion of the Board of Directors, and subject to its
fiduciary duties, the Preferred Stock could be used to deter any takeover
attempt, by tender offer or otherwise. In addition, Preferred Stock could be
issued with voting and conversion rights that could adversely affect the voting
power of holders of Common Stock. The issuance of Preferred Stock could also
result in a series of securities outstanding that would have preferences over
the Common Stock with respect to dividends and in liquidation. The Board of
Directors has no current intention to issue shares of Preferred Stock.

IMMEDIATE SUBSTANTIAL DILUTION

The initial public offering price is substantially higher than the net
tangible book value per share of the Common Stock. Accordingly, investors
purchasing shares of Common Stock in this offering will incur immediate and
substantial dilution of $7.54 per share based upon an assumed initial offering
price of $13.00 per share. See "Dilution."

USE OF PROCEEDS

The net proceeds to be received by Kitty Hawk from this offering, after
deducting the estimated underwriting discount and offering expenses payable by
the Company, are estimated to be approximately $32.0 million, based on an
assumed initial public offering price of $13.00 per share. The Company will not
receive any proceeds from the sale of shares of Common Stock offered by the
Selling Stockholder.

Kitty Hawk intends to use the proceeds to acquire and modify five
additional Boeing 727-200F aircraft for an estimated total cost of approximately
$31.3 million, three of which the Company anticipates will be initially
dedicated to ACMI contract charter use and two of which will be dedicated to
on-demand charters. The Company, however, periodically evaluates the utilization
of its owned aircraft and, therefore, the Company's actual aircraft use may vary
materially from the current plans. Kitty Hawk intends to use the remaining net
proceeds of approximately $700,000 for working capital and other general
corporate purposes.

16
<PAGE> 19

The following table illustrates the Company's intended use of the proceeds
of the offering:

<TABLE>
<CAPTION>
ESTIMATED
INTENDED USE OF PROCEEDS REQUIRED AMOUNT
---------------------------------------------------------------------- ---------------
<S> <C>
Purchase and Modify Five Additional Boeing 727-200F Aircraft.......... $31.3 million
Working Capital and Other General Corporate Purposes.................. 0.7 million
---------------
Total Estimated Proceeds.................................... $32.0 million
============
</TABLE>

DIVIDEND POLICY

Kitty Hawk has never declared or paid any cash dividends on the Common
Stock. The Company presently intends to retain earnings for development and
growth of its business and does not anticipate paying cash dividends on the
Common Stock in the foreseeable future. The terms of the Company's Credit
Agreement with Wells Fargo Bank, National Association and Bank One, Texas, N.A.
restrict Kitty Hawk's ability to declare and pay dividends to its stockholders
during any fiscal year to an amount not to exceed 25% of the Company's net
income during the immediately preceding fiscal year. Payment of future
dividends, if any, will be at the discretion of the Company's Board of
Directors, after taking into account various factors, including the Company's
earnings, capital requirements and surplus, financial position, contractual
restrictions, and other relevant business conditions and there can be no
assurance that dividends will be paid. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

17
<PAGE> 20

DILUTION

As of May 31, 1996, the net tangible book value of Kitty Hawk was $23.3
million, or $3.14 per share of Common Stock. Net tangible book value per share
is defined as the book value of all tangible assets of the Company, less its
total liabilities, divided by the total number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of the 2,700,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $13.00 per share and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Company as of May 31,
1996 would have been approximately $55.3 million, or $5.46 per share of Common
Stock. This represents an immediate increase in pro forma net tangible book
value of $2.32 per share to the existing stockholders and an immediate dilution
to new stockholders of $7.54 per share. The following table illustrates this
dilution on a per share basis:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $13.00
Net tangible book value per share before the offering......... $3.14
Increase per share attributable to new investors.............. 2.32
-----
Pro forma net tangible book value per share after the
offering.................................................... 5.46
------
Dilution per share to new investors........................... $ 7.54(1)
======
</TABLE>

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

(1) Excludes the effect of 326,564 shares issued to Messrs. Reeves and Wadsworth
on June 26, 1996, upon the exercise of outstanding options. See
"Management -- Employee Compensation Plans and Arrangements."

The following table sets forth on a pro forma basis as of June 28, 1996 the
difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid, and the average price per share paid by
the existing stockholders and by the new investors (before deduction of
underwriting discounts and commissions and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 7,750,000 74.16% $ 5,430 .01% *
New investors................ 2,700,000 25.84 35,100,000 99.99 $ 13.00
---------- ------ ----------- ------
Total........................ 10,450,000 100.00% $35,105,430 100.00%
========== ====== =========== ======
</TABLE>

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

* Less than $0.01 per share.

The foregoing table (i) includes 326,564 shares issued to Messrs. Reeves
and Wadsworth on June 26, 1996 and (ii) assumes no exercise of the Underwriters'
over-allotment option. Under Kitty Hawk's Omnibus Securities Plan and 401(k)
Savings Plan, Annual Incentive Compensation Plan and Employee Stock Purchase
Plan, Kitty Hawk has reserved for issuance 300,000, 200,000 and 100,000 shares
of Common Stock, respectively. As of June 28, 1996, no options or shares had
been issued under any of these plans. To the extent that any options or shares
are issued under these plans, there will be further dilution to new investors.

18
<PAGE> 21

CAPITALIZATION

The following table sets forth the capitalization of Kitty Hawk at May 31,
1996, and as adjusted to give effect to the sale of the 2,700,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $13.00 per share and the application of the estimated net proceeds
therefrom as described in "Use of Proceeds."

<TABLE>
<CAPTION>
MAY 31, 1996
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt............................. $ 4,347 $ 4,347
======= =======
Long-term debt................................................... $21,392 $21,392
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized;
no shares issued............................................ -- --
Common stock, $.01 par value; 25,000,000 shares authorized;
7,423,436 shares issued and outstanding; 10,123,436 shares
issued
and outstanding as adjusted(1).............................. 74 101
Paid-in capital................................................ 2,907 34,858
Retained earnings.............................................. 20,303 20,303
------- -------
Total stockholders' equity....................................... 23,284 55,262
------- -------
Total capitalization............................................. $44,676 $76,654
======= =======
</TABLE>

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

(1) Does not include: (i) 326,564 shares issued to Messrs. Reeves and Wadsworth
on June 26, 1996, upon the exercise of outstanding options, (ii) 300,000
shares of Common Stock available for the future grant of stock options under
the Company's Omnibus Securities Plan and for matching contributions by the
Company under its 401(k) Savings Plan, (iii) 200,000 shares of Common Stock
available for issuance under the Company's Annual Incentive Compensation
Plan, and (iv) 100,000 shares of Common Stock available for issuance under
the Company's Employee Stock Purchase Plan. See "Management -- Employee
Compensation Plans and Arrangements."

19
<PAGE> 22

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

The following table sets forth selected financial and operating data with
respect to Kitty Hawk for each of the fiscal years indicated and the nine months
ended May 31, 1995 and May 31, 1996. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements, including
the Notes thereto, appearing elsewhere in this Prospectus. The selected
financial data as of and for each of the fiscal years ended August 31, 1991
through 1995 and as of and for the nine months ended May 31, 1996 has been
derived from audited consolidated financial statements of the Company. In the
opinion of management of the Company, the data presented for the nine months
ended May 31, 1995, which are derived from the Company's unaudited consolidated
financial statements, reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations for such period. Results for the nine months ended May 31,
1996 are not necessarily indicative of results for the entire fiscal year.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED AUGUST 31, MAY 31,
----------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:

Revenues:
Air freight carrier.......................... $ 6,121 $ 6,760 $12,939 $ 28,285 $ 41,117 $30,768 $ 37,042
Air logistics................................ 27,260 45,893 52,840 79,415 62,593 47,404 70,084
------- ------- ------- -------- -------- ------- --------
Total revenues................................. 33,381 52,653 65,779 107,700 103,710 78,172 107,126
Total costs of revenues........................ 28,100 48,465 55,201 92,951 85,532 64,362 89,734
------- ------- ------- -------- -------- ------- --------
Gross profit................................... 5,281 4,188 10,578 14,749 18,178 13,810 17,392
General and administrative expenses............ 3,827 2,930 4,394 6,013 7,832 5,156 6,676
Non-qualified profit sharing expense........... -- -- 250 732 1,001 772 901
Stock option grant to executive................ -- -- -- -- -- -- 2,907(1)
------- ------- ------- -------- -------- ------- --------
Operating income............................... 1,454 1,258 5,934 8,004 9,345 7,882 6,908
Interest expense............................... (132) (157) (134) (343) (1,185) (783) (1,344)
Contract settlement income, net(2)............. -- -- 725 1,178 -- -- --
Other income (expense)......................... (49) 287 193 (432) (601) 87 169
------- ------- ------- -------- -------- ------- --------
Income before income taxes..................... 1,273 1,388 6,718 8,407 7,559 7,186 5,733
Income taxes................................... 427 375 2,613 3,146 3,143 2,736 2,322
------- ------- ------- -------- -------- ------- --------
Net income..................................... $ 846 $ 1,013 $ 4,105 $ 5,261 $ 4,416 $ 4,450 $ 3,411(1)
======= ======= ======= ======== ======== ======= ========
Net income per share........................... $ 0.08 $ 0.12 $ 0.52 $ 0.66 $ 0.55 $ 0.56 $ 0.43(1)
======= ======= ======= ======== ======== ======= ========
Weighted average common and common equivalent
shares outstanding........................... 10,089 8,671 7,968 7,968 7,968 7,968 7,968

OPERATING DATA:

Air Freight Carrier
Revenue aircraft owned (at end of period).... 9 11 10 15 21 21 23
Flight hours flown(3)........................ 3,615 3,567 7,030 11,795 15,183 11,253 14,168
Number of on-demand charters flown........... 377 292 752 1,182 1,238 951 987
Number of ACMI contract charters flown....... 257 655 1,314 1,734 2,601 1,811 2,530
Air Logistics
Number of on-demand charters managed(4)...... 6,514 8,708 9,748 16,713 14,198 10,458 11,209

BALANCE SHEET DATA:

Working capital................................ $ 913 $ 895 $ 4,679 $ 4,223 $ 1,747 $ 727 $ 4,450
Total assets................................... 9,699 9,874 18,598 37,911 47,954 45,382 61,977
Long-term debt, including current maturities... 1,085 2,367 976 9,145 16,981 17,209 25,739
Stockholder's equity........................... 2,226 3,184 7,289 12,550 16,966 17,000 23,284
</TABLE>

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

(1) Results for the nine months ended May 31, 1996, lack comparability to prior
periods because such period includes one of two nonrecurring grants to an
executive officer of stock options that resulted in a charge to earnings of
approximately $2,907,000. Had this grant of stock options not occurred, net
income for the nine months ended May 31, 1996 would have been $5,141,000
and net income per share would have been $0.69. See "Management -- Employee
Compensation Plans and Arrangements."

(2) Reflects sums received in settlement of litigation. See "Business -- Legal
Proceedings -- Litigation and Arbitration Related to Postal Contract" and
Note 5 of Notes to Consolidated Financial Statements.

(3) As reported by the Company to the FAA.

(4) Includes on-demand charters flown by the Company's air freight carrier.

20
<PAGE> 23

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

OVERVIEW

Revenues. The Company's revenues are derived from two related businesses:
(i) air freight carrier and (ii) air logistics. Air freight carrier revenues are
derived substantially from ACMI contract and on-demand charters flown with
Company aircraft. Air logistics revenues are derived substantially from
on-demand air freight charters arranged by Kitty Hawk for its customers
utilizing the flight services of third-party air freight carriers. With respect
to on-demand charters that are arranged by the Company and flown by its air
freight carrier, charges to the customer for air transportation are accounted
for as air freight carrier revenues and charges for ground handling and
transportation are accounted for as air logistics revenues.

GM and the U.S. Postal Service have accounted for a substantial majority of
the Company's revenues for the last three fiscal years and the nine months ended
May 31, 1996. A contract with GM for on-demand charters produced revenues of
$36.0 million, $67.9 million, $48.9 million, and $42.1 million in fiscal years
1993, 1994, and 1995 and in the nine months ended May 31, 1996, respectively,
which represented 54.7%, 63.1%, 47.1%, and 39.3% of the Company's total revenues
for such periods. Of the revenues derived from GM for fiscal years 1993, 1994,
and 1995 and in the nine months ended May 31, 1996, 10.8%, 15.4%, 20.8%, and
18.8%, respectively, were attributable to the air freight carrier and 89.2%,
84.6%, 79.2%, and 81.2%, respectively, were attributable to air logistics.
Revenues derived from GM for fiscal years 1993, 1994, and 1995 and the nine
months ended May 31, 1996, constituted 30.0%, 36.9%, 24.7%, and 21.4%,
respectively, of the revenues derived from the air freight carrier business and
60.8%, 72.4%, 61.9%, and 48.7%, respectively, of the revenues derived from the
air logistics business. Of the Company's gross profits from air logistics in
fiscal years 1993, 1994, and 1995 and in the nine months ended May 31, 1996, GM
accounted for $2.1 million (32.2%), $3.0 million (50.4%), $1.4 million (27.1%),
and $2.8 million (37.1%), respectively.

The U.S. Postal Service accounted for revenues of $17.3 million, $11.1
million, $10.0 million, and $21.3 million in fiscal years 1993, 1994, and 1995
and the nine months ended May 31, 1996, respectively, which represented 26.3%,
10.3%, 9.7%, and 19.8% of the Company's total revenues for such periods,
respectively. Of the revenues derived from the U.S. Postal Service for fiscal
years 1993, 1994, and 1995 and the nine months ended May 31, 1996, 83.0%, 74.5%,
59.6%, and 92.5%, respectively, were attributable to air logistics for seasonal
Christmas charters flown by third-party air freight carriers and 17.0%, 25.5%,
40.4%, and 7.5%, respectively, were attributable to the air freight carrier for
ACMI contract charters. Revenues derived from the U.S. Postal Service for fiscal
years 1993, 1994, and 1995 and the nine months ended May 31, 1996, constituted
22.7%, 10.0%, 9.9%, and 4.3%, respectively, of the revenues derived from the air
freight carrier business and 27.2%, 10.4%, 9.6%, and 28.1%, respectively, of the
revenues derived from the air logistics business. Of the Company's gross profits
from air logistics in fiscal years 1993, 1994, and 1995 and in the nine months
ended May 31, 1996, the U.S. Postal Service accounted for $4.0 million (61.5%),
$2.0 million (33.8%), $1.0 million (18.9%), and $3.8 million (50.0%),
respectively.

Burlington Air Express, Inc. accounted for revenues of $10.0 million in the
nine months ended May 31, 1996, which represented 9.3% of the total revenues for
such period and constituted 25.9% of the revenues derived from the air freight
carrier business and 0.5% of the revenues derived from the air logistics
business. Of these revenues, 96.2% were attributable to the air freight carrier
for ACMI contract charters and 3.8% were attributable to air logistics. See
"Risk Factors -- Dependence on Significant Customers."

Costs of Revenues. The principal components of the costs of revenues
attributable to the air freight carrier consist of the costs for the maintenance
and operation of its aircraft including the salaries of pilots and maintenance
personnel, charges for fuel, insurance and maintenance, and depreciation of
engines and airframes. Generally, charges for fuel are only applicable for the
on-demand charters flown by the air freight carrier because fuel for the ACMI
contract charters is generally provided by the customer or billed to them on a
direct pass-through basis. The principal components of the costs of revenues
attributable to air logistics consist of subcharter costs paid to third-party
air freight carriers and costs paid for ground handling and transportation. With
respect to on-demand charters that are flown by the air freight carrier, all
related air

21
<PAGE> 24

transportation expenses are allocated to the air freight carrier and all related
cargo ground handling and transportation expenses are allocated to air
logistics.

Under an earlier version of the Company's Annual Incentive Compensation
Plan, the Company awarded semiannual cash bonuses to its employees. See
"Management -- Employee Compensation Plans and Arrangements." The aggregate
amount of the bonuses for each of the fiscal years 1993, 1994, and 1995 and the
nine months ended May 31, 1996, have equaled 3.6%, 8.0%, 11.7%, and 13.6% of the
Company's income before the deduction of income taxes and the bonuses that were
paid under the Annual Incentive Compensation Plan.

Significant Events Affecting Comparability of Results of Operations. Since
September 1, 1992, several events have affected the comparability of results of
operations for each of the last three fiscal years and the nine months ended May
31, 1995 and 1996, and will affect the comparability of the results of
operations for fiscal year 1996. First, on December 31, 1995, the Company
granted Mr. Reeves options to purchase 390,707 shares of Common Stock for an
exercise price of $.01 per share, that resulted in a charge to earnings of
approximately $2,907,000. Second, on June 12, 1996, the Company granted Mr.
Wadsworth options to purchase 153,567 shares of Common Stock for an exercise
price of $.01 per share, which will result in a charge to earnings in the fourth
quarter of fiscal 1996 of approximately $1,324,000. Third, fiscal years 1993 and
1994 included contract settlement income amounting to $725,000 and $1,178,000,
respectively. See Note 5 of Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following table sets forth, on a comparative basis for the periods
indicated, the components of the Company's gross profit (in thousands) and the
gross profit margin by revenue type:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, NINE MONTHS ENDED MAY 31,
-------------------------------------------------------- ------------------------------------
1993 1994 1995 1995 1996
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Air freight carrier:
Revenues................... $12,939 100.0% $28,285 100.0% $41,117 100.0% $30,768 100.0% $37,042 100.0%
Costs of revenues.......... 8,912 68.9 19,550 69.1 28,104 68.4 20,795 67.6 27,246 73.6
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit............... $ 4,027 31.1% $ 8,735 30.9% $13,013 31.6% $ 9,973 32.4% $ 9,796 26.4%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Air logistics:
Revenues................... $52,840 100.0% $79,415 100.0% $62,593 100.0% $47,404 100.0% $70,084 100.0%
Costs of revenues.......... 46,288 87.6 73,402 92.4 57,428 91.7 43,567 91.9 62,488 89.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit............... $ 6,552 12.4% $ 6,013 7.6% $ 5,165 8.3% $ 3,837 8.1% $ 7,596 10.8%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

22
<PAGE> 25

The following table presents, for the periods indicated, consolidated
income statement data expressed as a percentage of total revenues:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST NINE MONTHS
31, ENDED MAY 31,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Air freight carrier.............................. 19.7% 26.3% 39.6% 39.4% 34.6%
Air logistics.................................... 80.3 73.7 60.4 60.6 65.4
----- ----- ----- ----- -----
Total revenues..................................... 100.0 100.0 100.0 100.0 100.0
Total costs of revenues............................ 83.9 86.3 82.5 82.3 83.8
----- ----- ----- ----- -----
Gross profit....................................... 16.1 13.7 17.5 17.7 16.2
General and administrative expenses................ 6.7 5.6 7.6 6.6 6.2
Non-qualified profit sharing expense............... 0.4 0.7 0.9 1.0 0.8
Stock option grant to executive.................... -- -- -- -- 2.7
----- ----- ----- ----- -----
Operating income................................... 9.0 7.4 9.0 10.1 6.5
Interest expense................................... (0.2) (0.3) (1.1) (1.0) (1.3)
Contract settlement income, net.................... 1.1 1.1 -- -- --
Other income (expense)............................. 0.3 (0.4) (0.6) 0.1 0.2
----- ----- ----- ----- -----
Income before income taxes......................... 10.2 7.8 7.3 9.2 5.4
Income taxes....................................... 4.0 2.9 3.0 3.5 2.2
----- ----- ----- ----- -----
Net income......................................... 6.2% 4.9% 4.3% 5.7% 3.2%
===== ===== ===== ===== =====
</TABLE>

NINE MONTHS ENDED MAY 31, 1996 COMPARED TO NINE MONTHS ENDED MAY 31, 1995

Revenues -- Air Freight Carrier. Air freight carrier on-demand and ACMI
contract charter revenues were $14.6 million and $20.8 million, or 39.5% and
56.3%, respectively, of total air freight carrier revenues for the nine months
ended May 31, 1996, as compared to $14.5 million and $14.9 million, or 47.2% and
48.4%, respectively, for the nine months ended May 31, 1995. ACMI contract
charter revenues for the nine months ended May 31, 1996, increased 40.0% over
the nine months ended May 31, 1995, primarily as the result of additional Boeing
727-200F ACMI contract charters. Revenues from on-demand charters flown by
Company aircraft for the nine months ended May 31, 1996, increased 0.7% from the
comparable prior year period. For the nine months ended May 31, 1996, as
compared to the nine months ended May 31, 1995, prices for the Company's
on-demand and ACMI contract charters remained relatively constant.

Revenues -- Air Logistics. Air logistics revenues increased $22.7 million,
or 47.8%, to $70.1 million in the nine months ended May 31, 1996, from $47.4
million in the nine months ended May 31, 1995. This increase was primarily due
to increased demand for on-demand charters from the automobile industry in the
fourth quarter of calendar year 1995 and a substantial increase in the number of
managed charters for the U.S. Postal Service during December 1995. For the nine
months ended May 31, 1996, as compared to the nine months ended May 31, 1995,
prices for the Company's air logistics services remained relatively constant.

Costs of Revenues -- Air Freight Carrier. Air freight carrier costs of
revenues increased $6.5 million, or 31.0%, to $27.2 million in the nine months
ended May 31, 1996, from $20.8 million in the nine months ended May 31, 1995,
reflecting the increased volume of business from Boeing 727-200F ACMI contract
charters. Gross profit margin from the air freight carrier decreased to 26.4% in
the nine months ended May 31, 1996, from 32.4% in the comparable prior year
period. This decrease reflects the increase in ACMI contract charters, which
produce lower gross margins than on-demand charters.

As reported to the FAA, overall aircraft utilization increased to 14,168
flight hours for the nine months ended May 31, 1996, from 11,253 in the nine
months ended May 31, 1995, a 25.9% increase. This increase was primarily due to
the increased hours flown for ACMI contract charters.

23
<PAGE> 26

Costs of Revenues -- Air Logistics. Air logistics costs of revenues
increased $18.9 million, or 43.4%, to $62.5 million in the nine months ended May
31, 1996, from $43.6 million in the nine months ended May 31, 1995, reflecting
the increased volume of business. The gross profit margin from air logistics
increased to 10.8% in the nine months ended May 31, 1996, from 8.1% in the
comparable prior year period, a 33.3% increase. This increase was primarily due
to the Company's success in reducing its costs paid to third-party air freight
carriers and ground service providers and increased gross profit margin from the
Company's U.S. Postal Service Christmas contract in December 1995.

General and Administrative Expenses. General and administrative expenses
increased $1.5 million, or 29.5%, to $6.7 million in the nine months ended May
31, 1996, from $5.2 million in the nine months ended May 31, 1995. This increase
was primarily due to an increase in support functions and administrative costs
associated with the growth in the aircraft fleet and the increased revenue
volume for the air freight carrier in the nine months ended May 31, 1996. As a
percentage of total revenues, general and administrative expenses decreased to
6.2% in the nine months ended May 31, 1996, from 6.6% in the nine months ended
May 31, 1995.

Non-qualified Employee Profit Sharing Expense. Employee profit sharing
expense increased $129,000, or 16.7%, to $901,000 in the nine months ended May
31, 1996, from $772,000 in the nine months ended May 31, 1995, reflecting the
increased profitability from operating activities of Kitty Hawk in the nine
months ended May 31, 1996.

Stock Option Grant to Executive. During the nine months ended May 31, 1996,
the Company granted an executive officer options to purchase 390,707 shares of
Common Stock that resulted in a charge to earnings of approximately $2,907,000.

Operating Income. Operating income decreased $1.0 million, or 12.4%, to
$6.9 million in the nine months ended May 31, 1996, from $7.9 million in the
nine months ended May 31, 1995. Operating income margin decreased to 6.5% from
10.1%, for the nine month periods ended May 31, 1996, and 1995, respectively.

Interest Expense. Interest expense increased to $1.3 million for the nine
months ended May 31, 1996 from $783,000 in the nine months ended May 31, 1995, a
71.7% increase. The increase was primarily the result of the incurrence of
additional long-term debt to finance the acquisition of two Boeing 727-200F
aircraft in the second half of fiscal year 1995 and two additional Boeing
727-200F aircraft in the nine months ended May 31, 1996.

Other Income (Expense). Other income increased to $169,000 in the nine
months ended May 31, 1996, from $87,000 in the comparable prior year period,
primarily due to increased interest income.

Income Taxes. Income taxes as a percentage of income before income taxes
increased to 40.5% for the nine months ended May 31, 1996, from 38.1% for the
comparable prior year period. The increase was primarily due to increased state
income taxes.

Net Income. As a result of the above, net income decreased to $3.4 million
in the nine months ended May 31, 1996, from $4.5 million in the nine months
ended May 31, 1995, a 23.3% decrease. Net income as a percentage of total
revenues decreased to 3.2% in the nine months ended May 31, 1996, from 5.7% in
the comparable prior year period.

FISCAL YEAR ENDED AUGUST 31, 1995 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1994

Revenues -- Air Freight Carrier. Air freight carrier on-demand and ACMI
contract charter revenues were $18.1 million and $20.9 million, or 44.2% and
50.8%, respectively, of total air freight carrier revenues for fiscal year 1995,
as compared to $15.4 million and $10.6 million, or 54.5% and 37.4%,
respectively, for fiscal year 1994. The increase in on-demand and ACMI contract
charter revenues for fiscal year 1995 over fiscal year 1994, was 17.9% and
97.1%, respectively. These increases were primarily the result of additional
Boeing 727-200F ACMI contract charters and increased on-demand charters flown by
the Company's jet aircraft. For fiscal year 1995 as compared to fiscal year
1994, prices for the Company's ACMI contract charter services and U.S. Postal
Service Christmas contracts remained relatively constant.

24
<PAGE> 27

Revenues -- Air Logistics. Air logistics revenues decreased $16.8 million,
or 21.2%, to $62.6 million in fiscal year 1995 from $79.4 million in fiscal year
1994 primarily due to the substantial decline in volume of on-demand charters
for the automobile industry in the first half of calendar 1995 as compared to
the same period in 1994. This decline was primarily the result of the temporary
decision by GM to significantly reduce use of expedited transportation,
including Kitty Hawk's air logistics services, as part of a cost containment
initiative. Prices for the Company's on-demand charters decreased slightly due
to a revenue rate reduction in the GM Agreement which took effect on May 1,
1994.

Costs of Revenues -- Air Freight Carrier. Air freight carrier costs of
revenues increased $8.6 million, or 43.8%, to $28.1 million in fiscal year 1995
from $19.5 million in fiscal year 1994, reflecting the increased volume of
business from ACMI contract and on-demand charters flown by the Company's jet
aircraft. Gross profit margin from the air freight carrier increased slightly to
31.6% in fiscal year 1995 from 30.9% in fiscal year 1994, a 2.3% increase.

As reported to the FAA, overall aircraft utilization increased to 15,183
flight hours for fiscal year 1995 from 11,795 flight hours in fiscal year 1994,
a 28.7% increase. This increase was primarily the result of the inclusion of an
additional four Boeing 727-200Fs, and two Douglas DC-9-15F aircraft into the
Company's operations during fiscal year 1995.

Costs of Revenues -- Air Logistics. Air logistics costs of revenues
decreased $16.0 million, or 21.8%, to $57.4 million in fiscal year 1995 from
$73.4 million in fiscal year 1994, reflecting the decrease in the volume of
business. The gross profit margin from air logistics increased to 8.3% in fiscal
year 1995 from 7.6% in fiscal year 1994, a 9.2% increase. This increase was
primarily due to the Company's success in reducing its costs paid to third-party
air freight carriers and ground service providers in the second half of fiscal
year 1995.

General and Administrative Expenses. General and administrative expenses
increased $1.8 million, or 30.3%, to $7.8 million in fiscal year 1995 from $6.0
million in fiscal year 1994. As a percentage of total revenues, general and
administrative expenses increased to 7.6% in fiscal year 1995 from 5.6% in
fiscal year 1994. This increase was primarily due to an increase in support
functions and number of personnel associated with the growth in the aircraft
fleet and the revenue volume for the air freight carrier in fiscal year 1995.

Non-qualified Employee Profit Sharing Expense. Employee profit sharing
expense increased to $1.0 million in fiscal year 1995 from $732,000 in fiscal
year 1994, a 36.8% increase, reflecting the increased profitability from
operating activities of Kitty Hawk in fiscal year 1995.

Operating Income. Operating income increased $1.3 million, or 16.8%, to
$9.3 million in fiscal year 1995 from $8.0 million in fiscal year 1994.
Operating income margin increased to 9.0% from 7.4% for fiscal year 1995 and
1994, respectively.

Interest Expense. Interest expense increased to $1.2 million for fiscal
year 1995 from $343,000 in fiscal year 1994, a 246.0% increase. The increase was
primarily the result of the incurrence of additional long-term debt to finance
the acquisition of two Boeing 727-200 aircraft in the second half of fiscal year
1994 and two Douglas DC-9-15F aircraft and two Boeing 727-200 aircraft in fiscal
year 1995.

Other Income (Expense). Other expense increased to $601,000 in fiscal year
1995 from $432,000 in fiscal year 1994, a 39.1% increase. This increase was
primarily due to the write off of costs associated with the Company's attempted
initial public offering.

Income Taxes. Income taxes as a percentage of income before income taxes
increased to 41.6% for fiscal year 1995 from 37.4% in fiscal year 1994. The
increase was primarily due to higher state income taxes.

Net Income. As a result of the above, net income decreased to $4.4 million
for fiscal year 1995 from $5.3 million in fiscal year 1994, a 16.0% decrease.
Net income as a percentage of total revenues was 4.3% in fiscal year 1995
compared to 4.9% for fiscal year 1994.

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<PAGE> 28

FISCAL YEAR ENDED AUGUST 31, 1994 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1993

Revenues -- Air Freight Carrier. Air freight carrier revenues increased
$15.3 million, or 118.6%, to $28.3 million from $12.9 million as a result of new
ACMI contract charters with two air freight companies.

Revenues -- Air Logistics. Air logistics revenues increased $26.6 million,
or 50.3%, to $79.4 million from $52.8 million. This increase was attributable
almost exclusively to the increased volume of business from a strong automotive
industry for on-demand charters. Prices for the Company's services generally
were slightly lower for fiscal year 1994 as compared to fiscal year 1993.

Costs of Revenues -- Air Freight Carrier. Air freight carrier costs of
revenues increased $10.6 million, or 119.4%, to $19.5 million in fiscal year
1994 from $8.9 million in fiscal year 1993 reflecting the increased volume of
business. As reported to the FAA, overall aircraft utilization increased to
11,795 flight hours in fiscal year 1994 as compared to 7,030 flight hours in
fiscal year 1993, a 67.8% increase. Gross profit margin from the air freight
carrier decreased slightly to 30.9% in fiscal year 1994 from 31.1% in fiscal
year 1993.

Kitty Hawk experienced a decrease in fuel costs as a percentage of air
freight carrier revenues to 16.5% in fiscal year 1994 compared to 19.6% in
fiscal year 1993. The Company attributes this decrease to slightly lower market
fuel costs and the Company's negotiation of lower into-plane fuel charges in
fiscal year 1994. Generally, the Company's air freight carrier only incurs net
fuel costs in connection with the on-demand charters flown by it.

Costs of Revenues -- Air Logistics. Air logistics costs of revenues
increased $27.1 million, or 58.6%, to $73.4 million in fiscal year 1994 from
$46.3 million in fiscal year 1993, reflecting the increased volume of business.
Gross profit margin from air logistics decreased to 7.6% in fiscal year 1994
from 12.4% in fiscal year 1993, due primarily to a $6.1 million decrease in
revenues derived from the Christmas charters managed for the U.S. Postal
Service.

General and Administrative Expenses. General and administrative expenses
increased $1.6 million, or 36.8%, to $6.0 million in fiscal year 1994 from $4.4
million in fiscal year 1993. This increase was primarily due to increased
administrative expenditures to support the Company's 63.7% increase in revenues
in fiscal year 1994 as compared to fiscal year 1993. As a percentage of total
revenues, general and administrative expenses decreased to 5.6% in fiscal year
1994 from 6.7% in fiscal year 1993. This decrease was primarily due to the
increase in total revenues which more than offset the increase in costs
associated with the additional expenditures.

Operating Income. Operating income increased $2.1 million, or 34.9%, to
$8.0 million in fiscal year 1994 from $5.9 million in fiscal year 1993.
Operating income margin decreased to 7.4% from 9.0%.

Interest Expense. Interest expense increased to $343,000 in fiscal year
1994 from $134,000 in fiscal year 1993. This increase in interest expense was
due primarily to a net increase in debt of approximately $8.2 million
attributable to financing of aircraft acquired in fiscal year 1994.

Contract Settlement Income, Net. Contract settlement income was $1.2
million in fiscal year 1994 as compared to $725,000 in fiscal year 1993. Kitty
Hawk recorded contract settlement income (net of expenses) for fiscal year 1993
based upon its best estimate at that time of the ultimate outcome of the matter.
In fiscal year 1994, the final, more favorable resolution resulted in the
Company's recording additional contract settlement income. The settlement income
resulted from the division and allocation of the benefits to the Company, Mr.
Christopher, and other parties resulting from a settlement of litigation among
Emery Worldwide Airlines, Inc., Express One International, Inc., the U.S. Postal
Service, and the Company. See "Business -- Legal Proceedings -- Litigation and
Arbitration Related to Postal Contract."

Other Income (Expense). Other expense in fiscal year 1994 was $432,000
primarily reflecting charges associated with certain current litigation. See
"Business -- Legal Proceedings -- Litigation about Charter Agreement." Other
income for fiscal year 1993 relates primarily to gains on the disposal of
property and equipment.

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<PAGE> 29

Net Income. As a result of the above, net income increased $1.2 million, or
28.2%, to $5.3 million in fiscal year 1994 from $4.1 million in fiscal year
1993. Net income margin decreased to 4.9% from 6.2%.

LIQUIDITY AND CAPITAL RESOURCES

The Company's capital requirements are primarily for the acquisition and
modification of aircraft and working capital. In addition, Kitty Hawk has, and
will continue to have, capital requirements for the requisite periodic and major
overhaul maintenance checks for its air freight carrier fleet. The Company's
funding of its capital requirements historically has been from a combination of
internally generated funds and bank borrowings.

Cash provided by operating activities was $4.3 million, $7.6 million, $9.1
million, and $8.8 million in fiscal years 1993, 1994, and 1995 and in the nine
months ended May 31, 1996, respectively. At the end of fiscal years 1993, 1994,
and 1995 and the nine months ended May 31, 1996, the Company had working capital
of $4.7 million, $4.2 million, $1.7 million, and $4.5 million, respectively.

On August 14, 1996 Kitty Hawk entered into the Credit Agreement with Wells
Fargo Bank (Texas), National Association ("WFB"), successor in interest to First
Interstate Bank of Texas, N.A., and Bank One, Texas, N.A. ("BOT") for a $15
million Revolving Credit Loans Facility (the "Revolving Credit Facility"), an
approximately $12.7 million Term Loans A Facility (the "Term Loans A"), an
approximately $11.2 million Term Loans B Facility (the "Term Loans B") and a $10
million Term Loans C Facility (the "Term Loans C") (collectively, the
"Commitments"). As of August 28, 1996 approximately $11.9 million was
outstanding under the Revolving Credit Facility, approximately $12.7 million was
outstanding under the Term Loans A, approximately $11.2 million was outstanding
under the Term Loans B and $0 was outstanding under the Term Loans C. The
Commitments bear interest at WFB's prime rate or, at Kitty Hawk's option, a
Eurodollar rate plus 1.5% to 2.0% based upon a debt-to-cash flow ratio of Kitty
Hawk.

Under the Credit Agreement, $10 million of proceeds of the Revolving Credit
Facility are restricted to use from time to time for interim financing of up to
$6.5 million per aircraft for aircraft acquisitions by the Company; the
remaining $5 million of the Facility may be used for general corporate purposes,
including interim financing for acquired aircraft that exceeds the limits that
apply to the restricted portion. The outstanding balance of the Revolving Credit
Facility results from borrowing to pay revolving credit indebtedness to WFB
which was recently incurred by Kitty Hawk in connection with purchasing two
Boeing 727-200s that are being converted to freighter configuration, and to fund
such cargo conversion, noise abatement modifications and maintenance on those
two aircraft.

The Revolving Credit Facility expires on December 31, 1998. Any advance
under the portion of the Revolving Credit Facility that is restricted to interim
financing for aircraft acquisition must be repaid in full within 150 days of
first advance for the acquired aircraft. All advances under the commitment for
Term Loans C must be made by April 29, 1998. The Term Loans A matures on March
31, 2002 and the Term Loans B and C mature on March 31, 2003.

The Commitments are cross-collateralized and are secured by certain
aircraft owned by the Company, all aircraft acquired with advances under the
restricted portion of the Revolving Credit Facility while those advances are
outstanding, certain leases of aircraft and engines, accounts, chattel paper,
general intangibles and other personal property.

The Credit Agreement prohibits (i) the redemption or repurchase of the
Company's securities, (ii) the payment of dividends to Kitty Hawk's stockholders
in an amount over 25% of the Company's net income of the immediately preceding
fiscal year, (iii) certain investments, acquisitions of stock, acquisitions of
assets to the extent that the business acquired is not in the present lines of
business of the Company, and other business combinations, (iv) certain
transactions with affiliates and (v) the Company to incur any additional
indebtedness, liabilities or obligations other than debt incurred (a) with the
prior written consent of certain lenders, (b) with WFB or BOT or (c) in the
ordinary course of business not to exceed $25 million.

The Credit Agreement also contains certain other covenants, including
limitations on the ability of the Company to change its lines of business. If a
"Change of Control" occurs, WFB and BOT may accelerate or

27
<PAGE> 30

terminate the Commitments. "Change of Control" includes (a) the failure of Kitty
Hawk to own all of the outstanding stock of certain of its subsidiaries, (b) Mr.
Christopher failing to own at least 51% of the outstanding stock of Kitty Hawk,
(c) Mr. Christopher ceasing to be Chief Executive Officer of Kitty Hawk or
active in the management of the Company or (d) if, after the consummation of a
public offering, any person (or two or more persons acting as a group) acquiring
beneficial ownership of 25% or more of the outstanding shares of Common Stock.
During fiscal years 1994 and 1995 and the nine months ended May 31, 1996,
similar restrictions and prohibitions under the Company's other credit
facilities did not have a material impact on the Company's ability to meet its
cash obligations and the Company does not believe that the restrictions under
the Credit Agreement will have any such impact in the future.

In addition, the Company has a loan with 1st Source Bank. As of August 1,
1996, the outstanding balance of this loan was approximately $1 million. The
loan bears interest at 9.7%, is secured by a DC9-15-F and matures in May 2000.
The 1st Source loan contains certain aircraft maintenance covenants and provides
that a change in the Company's business is a event of default upon which 1st
Source may declare all or any part of the remaining unpaid principal.

Capital expenditures were $1.3 million, $13.9 million, $17.9 million, and
$17.2 million for fiscal years 1993, 1994, and 1995 and for the nine months
ended May 31, 1996, respectively. The $17.2 million in capital expenditures for
the nine months ended May 31, 1996 were primarily for the purchase of: (i) three
Boeing 727-200 aircraft and the cargo and noise abatement modification of two of
these aircraft and (ii) three used JT8D-7/-9 jet engines. The $17.9 million in
capital expenditures for fiscal year 1995 were due primarily to the purchase of:
(i) two Boeing 727-200 aircraft and their cargo modification, (ii) three JT8D-15
jet engines for installation on one of the Boeing 727-200 aircraft, (iii) two
Douglas DC-9-15F aircraft in cargo configuration, (iv) noise abatement equipment
with respect to one of the Douglas DC-9-15F aircraft, (v) five used/overhauled
Rolls Royce Dart Convair engines, (vi) two used JT8D-7/-9 jet engines, (vii) a
Westwind 1124 jet aircraft to be used for corporate purposes only, and (viii)
the cargo modification of one Boeing 727-200 aircraft acquired at the end of
fiscal year 1994. The $13.9 million in capital expenditures for fiscal year 1994
were primarily for the purchase of: (i) two Boeing 727-200 aircraft and the
cargo modification of these aircraft, (ii) two Douglas DC-9-15F aircraft in
cargo configuration, (iii) three Convair 600/640 turbo-prop aircraft, and (iv)
ground handling equipment. Capital expenditures in fiscal year 1993 were
primarily for cargo containers and ground handling equipment. The acquisitions
of all of the Boeing 727-200 aircraft and subsequent cargo conversions, the
Douglas DC-9-15F aircraft and the JT8D-15 engines in the past three years were
financed by bank borrowings and internally generated funds, except for one
Boeing 727-200 aircraft received in the settlement of the ANET litigation
described in "Business -- Legal Proceedings." All other capital acquisitions
were financed from internally generated funds.

Kitty Hawk anticipates purchasing and modifying to cargo configuration five
727-200s (including modifying two of these 727-200s with noise abatement
equipment for approximately $5.0 million) for an aggregate capital expenditure
of approximately $31.3 million in fiscal year 1997. The Company believes, based
upon its knowledge of the market for ACMI contract charters of jet and
turbo-prop aircraft, that recent and planned changes to the composition of its
fleet towards jet aircraft will afford the Company the opportunity to expand its
ACMI contract charter business and direct to its air freight carrier additional
on-demand charters that require jet service. The Company further believes the
$5.0 million amount for noise abatement modifications proposed for fiscal year
1997 for two of these five aircraft proposed to be purchased, together with an
additional $6.8 million to modify currently owned aircraft with noise abatement
equipment during fiscal 1997, represents the total capital expenditures that
would currently be necessary to comply with the requirements of existing
applicable environmental regulations for such fiscal year. See
"Business -- Government Regulation."

The Company historically has followed, and currently intends to follow, a
policy of retiring Convairs at the time of their next scheduled major overhaul
maintenance checks rather than expending the amounts necessary for such checks.
The Company believes that revenue lost from retiring its Convair turbo-prop
aircraft from service will be offset by revenue gains from recent additions of
Boeing 727-200Fs and Douglas DC-9-15Fs. The Company further believes increased
maintenance costs resulting from the addition of these jet aircraft will be
exceeded by corresponding increased revenues. Schedule disruptions caused by
periodic

28
<PAGE> 31

maintenance checks for these jet aircraft generally will be less frequent than
for the Company's turbo-prop aircraft; however, schedule disruptions resulting
from such periodic maintenance checks will generally be considerably longer for
these jets (during which time the jets will be unavailable for revenue service)
than for the Company's turbo-prop aircraft. During such periodic maintenance
checks, the Company intends to avoid a disruption of service by substituting
another aircraft that otherwise would be dedicated to on-demand service.

Kitty Hawk presently intends to either exercise its option to purchase for
approximately $2.0 million the facility it currently occupies at Dallas/Ft.
Worth International Airport on or before March 1, 1997 or attempt to negotiate
an extension of the lease.

The Company believes that the net proceeds from this offering, together
with available funds, bank borrowings, and cash flows expected to be generated
by operations, will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. Thereafter, if
cash generated by operations is insufficient to satisfy the Company's liquidity
requirements, the Company may sell additional equity or debt securities or
obtain additional credit facilities. The sale of additional equity or
convertible debt securities will result in additional dilution to the Company's
stockholders. There can be no assurance that additional equity or debt financing
will be available at all or that, if available, such financing will be
obtainable on terms favorable to the Company.

In March 1995, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. SFAS
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company will adopt SFAS 121 in the first quarter of fiscal year
1997 and, based on current circumstances, does not believe that adopting SFAS
No. 121 will affect materially its financial statements.

The Company accounts for stock-based compensation utilizing the provisions
of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock Based Compensation". The Company is
not required to adopt the provisions of SFAS No. 123 until fiscal 1997. Under
SFAS 123, companies are allowed to continue to apply the provisions of APB
Opinion No. 25 to their stock-based compensation arrangements. As such, the
Company will only be required to supplement its financial statements with
additional disclosures in fiscal 1997.

SEASONALITY

Certain customers of the Company engage in seasonal businesses, especially
the U.S. Postal Service, GM, and other customers in the automotive industry. As
a result, Kitty Hawk's air logistics business has historically experienced its
highest quarterly revenues and profitability in its second fiscal quarter due to
the peak activity of the U.S. Postal Service during the Christmas season and in
its first and fourth fiscal quarters when production schedules of the automotive
industry typically increase.

The following table reflects certain selected quarterly operating results,
which have not been audited or reviewed, for each quarter since the fiscal
quarter ended May 31, 1994. The information has been prepared on the same basis
as the audited Consolidated Financial Statements appearing elsewhere in this
Prospectus and includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the information shown. The
Company's results vary significantly from quarter to quarter and the operating
results for any quarter are not necessarily indicative of the results that may
be expected for any future period.

<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------------------------------------------------------------------
AUGUST 31 NOVEMBER 30 FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 28 MAY 31
1994 1994 1995 1995 1995 1995 1996 1996
--------- ----------- ----------- ------- --------- ----------- ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues........... $31,122 $29,593 $31,743 $16,835 $25,539 $36,045 $48,577 $22,504
Gross profit............. 4,275 5,210 6,290 2,310 4,368 5,936 8,190 3,265
Operating income
(loss)................. 2,022 3,310 3,912 660 1,463 3,564 2,447 897
Net income (loss)........ 1,623 1,960 2,298 192 (34) 1,956 1,273 182
Net income (loss) per
share.................. $ 0.20 $ 0.25 $ 0.29 $ 0.02 $ (0.01) $ 0.25 $ 0.16 $ 0.02
</TABLE>

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<PAGE> 32

BUSINESS

GENERAL

Kitty Hawk is one of the leading providers of air freight charter services
in the United States, emphasizing highly-reliable, time-sensitive services. The
Company's air freight carrier owns 24 aircraft, 18 of which are currently used
in scheduled airport-to-airport freight service under contracts primarily with
major freight forwarders in North America and the Pacific Rim. These contracts
generally require the Company to supply aircraft, crew, maintenance, and
insurance ("ACMI") and to meet certain on-time performance standards, while its
customers are responsible for substantially all other operating expenses,
including fuel. Additionally, Kitty Hawk is the leading provider of same-day air
logistics charter services in the United States. Through its advanced,
proprietary computer software, the Company manages delivery of extremely time-
sensitive freight utilizing the on-demand charter services of both third-party
air freight carriers and planes from the Company's fleet that are not then
committed to ACMI service. The Company's total revenues have increased to $103.7
million in fiscal year 1995 from $33.4 million in fiscal year 1991. During the
same period, the Company's owned aircraft fleet grew to 21 aircraft from 9
aircraft. Kitty Hawk has been profitable in every fiscal year since its
inception in 1985.

OVERVIEW OF EXPEDITED AIR FREIGHT TRANSPORTATION INDUSTRY

The expedited air freight transportation industry is composed largely of
same-day, next-day, and two-day services for the delivery of heavy-weight
freight (as distinguished from packages). The Company directly participates in
the same-day service segment of this industry by coordinating on-demand air
charters and ancillary services through third-parties and by providing on-demand
air charters through its own air freight carrier. Kitty Hawk also indirectly
participates in the next-day and two-day delivery segment of this industry by
providing ACMI contract charters for air freight companies.

ACMI Contract Charters. The next-day and two-day freight delivery business
for heavy-weight freight is dominated by large nationally known companies such
as Burlington Air Express, Inc., DHL Airways, Inc., and Emery Worldwide
Airlines, Inc. The Company's air freight carrier indirectly participates in
these businesses by providing primary and additional lift capacity through ACMI
contract charters for airfreight companies on designated routes for specific
time periods. The Company's air freight carrier has also historically provided
contract charters for mail delivery for the U.S. Postal Service. Most contracts
with these customers are for periods varying from thirty days to three years.
Kitty Hawk does not engage directly in the next-day or two-day delivery
business, and, therefore, does not compete directly with its customers in this
segment.

According to the "McDonnell Douglas World Economic and Traffic Outlook
1995," the growth rate in overall world cargo traffic growth was 5.7% during
1994. The "Boeing 1995 World Air Cargo Forecast," predicts the world air freight
(non-mail) market will increase at an average rate of 6.7% per year through, and
triple by, 2014. During this time period, the intra-Asia air freight market is
predicted by the same source to grow by over 8% per year and the U.S. domestic
air freight market is expected to grow approximately 5% per year. Consequently,
Boeing projects a corresponding increase in the world air cargo fleet to
approximately 2,080 dedicated freighter aircraft in 2014 from approximately
1,003 dedicated freighter aircraft in 1994. In the "Boeing 1996 Current Market
Outlook," Boeing updated this forecast to 2,260 dedicated freighter aircraft in
2015. Of this increase in the number of dedicated air freighter aircraft, Boeing
expects the small freighter aircraft class, which includes the Boeing 727-200,
to account for approximately 26% of this increase. Each of the foregoing
projected growth rates are estimates only and there can be no assurance that
such rates of growth will be achieved.

As the Stage III noise control standards are phased into effect by January
1, 2000, the Company believes the supply of Boeing 727-200 aircraft available
for freighter reconfiguration will increase as commercial airlines retire all or
portions of their passenger-equipped 727-200s rather than bringing them into
compliance with the Stage III noise control regulations. Stage III noise control
standards require noncomplying aircraft to be modified with a noise suppression
kit (or "hushkit") designed to meet certain noise level limits (which are
significantly stricter than Stage II standards) during various phases of an
aircraft's operation and flight. With

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<PAGE> 33

over 180 Boeing 707s and certain "short" Douglas DC-8s facing likely retirement
from use in the U.S. market because of the costs of equipping these aircraft to
comply with the Stage III noise control standards, which the Company believes is
not economically feasible, the Company also believes that in many cases freight
traditionally shipped on such aircraft will be shipped in the future on Boeing
727-200F aircraft. See "Government Regulation." There can be no assurance,
however, of the future availability of Boeing 727-200 aircraft or the status of
the Boeing 727-200F as an aircraft type favored for freighter use in replacement
of retired freighter aircraft types. See "Risk Factors -- Aircraft Ownership and
Operation."

On-Demand Air Logistics. In contrast to the market for next-day and two-day
delivery services of heavy-weight freight, the Company believes that the market
in North America for on-demand air logistics is served by hundreds of air
freight carriers, the vast majority of which are privately held, operate from
only one location, and do not coordinate "door-to-door" charter delivery
services to the extent provided by the Company. Of these air charter companies
in the Company's database, the Company believes approximately 40 are operated
under Part 121 of the FAA regulations and are therefore licensed to operate
aircraft certificated to transport in excess of 7,500 pounds of freight. The
Company's air freight carrier also operates under Part 121 of the FAA
regulations.

Kitty Hawk believes that future demand for expedited, same-day air
logistics services from commercial and industrial customers will depend upon a
number of factors, including: (i) outsourcing -- more companies, seeking to
outsource non-core activities, determine that air freight delivery operations
can be outsourced effectively; (ii) enhanced inventory management -- more
companies determine to emphasize or place greater emphasis on "just-in-time"
deliveries and other methods to improve the management of inventory through the
use of reliable, same-day air freight delivery services; and (iii) increased
customer expectations -- more companies experience a need for expedited,
same-day delivery service as their expectations for the timeliness of deliveries
increases.

BUSINESS STRATEGY

The Company's strategy is to continue its rapid growth by: (i) acquiring
additional Boeing 727-200 aircraft primarily for its ACMI contract business to
meet expected growth in air freight transportation demand in both the North
American and Pacific Rim markets, (ii) increasing its focus on marketing to
firms reducing inventory and shortening product cycle times through direct air
shipments from manufacturer to end user, (iii) continuing to provide high
quality service through the ongoing development and enhancement of its
computerized database, information software, and tracking systems, and (iv)
pursuing the acquisition of domestic and international strategic suppliers of
on-demand air and related ground transportation services.

Acquiring Additional Aircraft to Meet Expected Growth in the Air Freight
Industry. Kitty Hawk intends to acquire additional Boeing 727-200 aircraft to
capitalize upon the projected demand for small freighters in the world air cargo
market. See "Overview of Expedited Air Freight Transportation Industry -- ACMI
Contract Charters."

Increase Marketing to Firms Reducing Inventory and Shortening Product Cycle
Times. The Company believes that many manufacturing and non-manufacturing firms
are adopting inventory management systems that reduce inventory and shorten
product cycle times. To avoid costly inventory shortages or work stoppages, such
inventory management systems often require on-demand air charters to supply
inventory directly from the manufacturer to the end users. Kitty Hawk has
recently expanded, and will continue to expand, its marketing efforts,
particularly its logistics and air freight carrier services, to potential and
existing customers outside of the automotive industry. See "Business -- Sales
and Marketing."

Continuing to Provide High Quality Services Through Enhanced Technology.
The Company's full-time staff of five computer programmers intends to continue
developing systems and software to enhance productivity, knowledge, and customer
service. The Company has developed and is testing an Internet system to provide
its account managers with real-time updates on available third party on-demand
air charter aircraft across North America. The Company believes that this system
will enable it to meet customer demands more efficiently and quickly in the
future. In addition, Kitty Hawk is working to enhance communication between its
flight managers and flight crews by utilizing laptop computers with
communications software that will

31
<PAGE> 34

enable the Company to quickly exchange operating data between Company
headquarters and an aircraft, including while such aircraft is airborne. By
increasing speed and reliability of communications through the use of these
laptop computers, the Company believes it can reduce telecommunications and
labor costs. Finally, Kitty Hawk intends to provide its maintenance and flight
crews with on-line access to the latest operating and maintenance manuals stored
on CD-ROMs.

Acquire Strategic Suppliers of On-Demand Transportation Services. The
Company intends to acquire third party suppliers of on-demand air and related
ground transportation services. As the leading provider of expedited, same-day
air logistics charter services in a highly fragmented industry, the Company
believes such acquisitions should provide strategic and operational benefits,
including the reduction of costs that result from centralizing finance,
administration, and information technology functions. Additionally, because the
Company's gross profit margin on flights flown by third party air freight
carriers is generally lower than on flights flown by the Company's air freight
carrier, Kitty Hawk believes that such acquisitions will increase its average
gross profit margin. However, the Company is not presently engaged in any
negotiations and has no present understandings, agreements, or commitments with
respect to any business acquisition.

AIR FREIGHT CARRIER

General

Kitty Hawk has owned and operated aircraft for on-demand air freight
charter services since 1985. In 1987, the Company's air freight carrier was
expanded to include ACMI contract charter service. Pursuant to ACMI contracts,
the Company's air freight carrier provides scheduled charters carrying
heavy-weight freight and mail for entities that engage primarily in next-day and
two-day delivery service to their customers. The Company's air freight carrier
monitors its on-time performance for its ACMI contract charter and on-demand
functions.

Aircraft Fleet

The Company owns and operates 22 aircraft in revenue service and has
recently purchased two additional Boeing 727-200 aircraft that the Company
expects to place into revenue service in January 1997. The following table
contains certain information about the Company's revenue fleet:

<TABLE>
<CAPTION>
MAXIMUM
TAKE-OFF YEAR CURRENT
AIRCRAFT TYPE WEIGHT (LBS) MANUFACTURED ENGINE MODEL USE CURRENT BASE
- ----------------------------------------------- ------------ ----------------- ---------- -------------------------
<S> <C> <C> <C> <C> <C>
Boeing 727-200..................... 194,800 1978 P&W JT8D-15 * *
Boeing 727-200..................... 194,800 1978 P&W JT8D-15 * *
Boeing 727-200F.................... 178,000 1976 P&W JT8D-9A ACMI Phoenix, AZ
Boeing 727-200F.................... 178,000 1976 P&W JT8D-15 ACMI Saipan, CNMI
Boeing 727-200F.................... 194,800 1975 P&W JT8D-15 ACMI San Jose, CA
Boeing 727-200F.................... 194,800 1975 P&W JT8D-15 ACMI Brownsville, TX
Boeing 727-200F.................... 175,500 1975 P&W JT8D-9A ACMI Cologne, Germany
Boeing 727-200F.................... 178,000 1969 P&W JT8D-9A ACMI Austin, TX
Boeing 727-200F.................... 178,000 1969 P&W JT8D-9A ACMI Minneapolis/St. Paul, MN
Boeing 727-200F.................... 178,000 1968 P&W JT8D-9A ACMI Manila, Philippines
Douglas DC-9-15F................... 90,700 1968 P&W JT8D-7B ACMI Syracuse, NY
Douglas DC-9-15F................... 90,700 1968 P&W JT8D-7B On-Demand Ypsilanti, MI
Douglas DC-9-15F................... 90,700 1967 P&W JT8D-7B On-Demand Dallas/Ft. Worth, TX
Douglas DC-9-15F................... 90,700 1967 P&W JT8D-7B ACMI Caracas, Venezuela
Douglas DC-9-15F................... 90,700 1967 P&W JT8D-7B ACMI Laredo, TX
Convair 640........................ 55,000 1957 Rolls Royce Dart ACMI Milwaukee, WI
Convair 640........................ 55,000 1957 Rolls Royce Dart ACMI El Paso, TX
Convair 640........................ 55,000 1952 Rolls Royce Dart On-Demand Laredo, TX
Convair 640........................ 55,000 1952 Rolls Royce Dart On-Demand El Paso, TX
Convair 600........................ 46,200 1949 Rolls Royce Dart ACMI Memphis, TN
Convair 600........................ 46,200 1948 Rolls Royce Dart ACMI Pittsburgh, PA
Convair 600........................ 46,200 1948 Rolls Royce Dart ACMI Cleveland, OH
Convair 600........................ 46,200 1948 Rolls Royce Dart ACMI El Paso, TX
Convair 600........................ 46,200 1948 Rolls Royce Dart ACMI Albuquerque, NM
</TABLE>

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

* These aircraft, acquired in July 1996, will undergo certain maintenance and
modification procedures, including cargo reconfiguration and noise abatement
modifications, prior to operating in revenue service for the Company. The
Company anticipates that these aircraft will initially be dedicated to ACMI
contract service.

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<PAGE> 35

The aircraft described above do not include (i) a Westwind 1124 jet
aircraft owned by the Company and utilized solely for the transport of Company
personnel, (ii) the two Boeing 727-200 aircraft the Company recently entered
into an agreement to purchase from Intrepid Aviation Partners, LLC, and (iii)
the Company's undivided one-third interest in two Falcon 20C jet aircraft to be
leased to a third-party operator. See "Summary -- Recent Developments" and
"Management -- Compensation Committee Interlocks and Insider Participation."

ACMI Contracts

As an FAA Part 121 certificated carrier, the Company's air freight carrier
provides primary lift capacity as well as additional lift capacity for overflow
and seasonal freight transportation needs on an ACMI contract basis. In the nine
months ended May 31, 1996, ACMI contracts accounted for approximately 19.5% of
the Company's total revenues.

As of the date of this Prospectus, Kitty Hawk was operating seven Boeing
727-200Fs, seven Convairs and two Douglas DC-9-15Fs under ACMI contracts with
Burlington Air Express, Inc., Ting Hong Oceanic Enterprises Co., Ltd., Pacific
East Asia Cargo Airlines, Inc., DHL Airways, Inc., and Emery Worldwide Airlines,
Inc. The Company believes that its relationships with its ACMI customers are
mutually satisfactory. However, there can be no assurance that such contracts
will not be canceled in accordance with their terms. See "Risk
Factors -- Dependence on Significant Customers." On July 15, 1996, the Company
entered into an ACMI contract with Pan Air Lineas Aereas S.A. ("Pan Air") to
lease one Boeing 727-200F aircraft to Pan Air in scheduled service from a GD
Express Worldwide, N.V. hub in Cologne, Germany. The lease is scheduled to
commence on September 15, 1996 and terminate on November 29, 1996.

The Company's ACMI contracts typically require the Company to supply
aircraft, crew, maintenance, and insurance, while its customers are responsible
for substantially all other aircraft operating expenses, including fuel, fuel
servicing, airport freight handling fees, landing and parking fees, ground
handling expenses, and aircraft push-back costs. These ACMI contracts also
typically require the Company to operate specific aircraft and/or provide
minimum air freight capacity, and generally are terminable if the Company (i)
fails to meet certain minimum performance levels, (ii) otherwise breaches the
contract, or (iii) becomes subject to other customary events of default.

The ACMI contracts also provide that the Company has exclusive operating
control and direction of each aircraft the Company operates and that certain
foreign-based customers must obtain any government authorizations and permits
required to service the designated routes. See "Risk Factors -- Government
Regulation." Therefore, the Company's route structure is limited to areas in
which customers gain access from the relevant governments. The Company is
permitted under its ACMI Contracts to utilize, and, in fact often does utilize,
its aircraft in on-demand service in the periods between ACMI contract flights.

Burlington Air Express, Inc. Burlington Air Express, Inc. ("Burlington")
currently leases under one ACMI contract five of the Company's Boeing 727-200Fs
and under a separate ACMI contract two of the Company's Convairs and one of the
Company's Douglas DC-9-15Fs. Under each contract, Burlington pays the Company a
fixed fee for each scheduled round-trip flown by the Company and a per hour
charge for any non-scheduled flight requested by Burlington. At present, each of
the five Boeing 727-200Fs leased by Burlington is scheduled to fly five
round-trips per non-holiday week.

The Boeing 727-200F ACMI contract is for a term expiring on March 1, 1999,
but pursuant to the terms of the contract, either party may upon thirty days'
written notice terminate the services of one Boeing 727-200F aircraft
immediately and one additional Boeing 727-200F aircraft on or after each of
March 1, 1997, March 1, 1998 and September 1, 1998. In addition, Burlington may
earlier terminate the contract if, among other reasons, the Company fails to
meet certain performance standards or if majority ownership or control of the
Company is acquired by a competitor of Burlington. The Company operates two
Convairs and one Douglas DC-9-15F on behalf of Burlington pursuant to a contract
between the parties on terms substantially similar to those set forth in the
Boeing 727-200F ACMI contract between the parties.

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<PAGE> 36

Pacific East Asia Cargo Airlines, Inc. Pacific East Asia Cargo Airlines,
Inc. ("PEACA"), an affiliate of TNT Express Worldwide, Inc., currently leases
one of the Company's Boeing 727-200F aircraft in scheduled service from Manila,
Philippines under an ACMI contract that expires on April 26, 1998. PEACA may
earlier terminate the contract if the Company fails to meet certain performance
standards. Under the terms of the contract, PEACA pays the Company a guaranteed
fixed monthly fee and an additional fixed charge per flight hour per month in
excess of a certain threshold. The contract provides that prior to September 30,
1996, PEACA may give notice to require the Company, within six months of such
notice, to upgrade the current Boeing 727-200F Stage II aircraft to a Boeing
727-200F Stage III aircraft with certain specified engines and hushkit. See
"Business -- Government Regulation." In the event PEACA exercises its option,
the charges under the contract will automatically increase to certain specified
levels. Because all of the Company's revenues from this ACMI contract, and many
of its costs, are in U.S. dollars, the Company is able to minimize currency
risks normally associated with doing business overseas.

Ting Hong Oceanic Enterprises, Ltd. Ting Hong Oceanic Enterprises Co., Ltd.
("Ting Hong") currently leases one of the Company's Boeing 727-200F aircraft in
scheduled service from Saipan, CNMI under an ACMI contract that expires on
August 31, 1997. Ting Hong may earlier terminate the contract if the Company
fails to meet certain performance standards. Under the terms of the contract,
Ting Hong pays the Company in U.S. dollars a guaranteed fixed monthly fee and an
additional fixed charge per flight hour per month in excess of a certain
threshold. In connection with a recent extension of the contract's term, Ting
Hong granted the Company certain rights of first refusal to match third parties'
rates and terms with respect to new operating leases or renewals or extensions
of existing operating leases for services similar to those provided under the
contract.

DHL Airways, Inc. DHL Airways, Inc. ("DHL") currently leases four Convairs
and one Douglas DC-9-15F from the Company under an ACMI contract that is
terminable upon thirty days' prior written notice. For use of the aircraft, DHL
pays the Company a fixed charge per scheduled round-trip less certain penalties
for late departures or arrivals, other than as a result of delays beyond the
Company's control or caused by DHL's fault or negligence. Currently, each
aircraft leased by DHL under this contract is scheduled to fly five round-trips
per non-holiday week. DHL may earlier terminate the contract if the Company
fails to meet certain performance standards.

On-Demand Charter Service

The air freight carrier provides on-demand charter service for customers of
the Company's air logistics business. Approximately 7.7%, 7.1%, 8.7%, and 8.8%
of the on-demand charters managed by the Company during fiscal years 1993, 1994,
and 1995 and the nine months ended May 31, 1996, respectively, were flown by the
air freight carrier. These charters were flown mostly for GM. The Company also
has flown its own aircraft on certain of the seasonal charters it has managed
for the U.S. Postal Service. See "Business -- Air Logistics -- Seasonal Charters
for the United States Postal Service."

The Company intends to direct a higher percentage of on-demand charters to
its air freight carrier as its fleet size increases. On-demand contract charters
flown by the air freight carrier generate a higher gross margin to the Company
than charters subcontracted to third-party carriers.

Acquisition Program

Kitty Hawk has embarked on a program of selective aircraft acquisitions
because it believes certain aircraft can be profitably deployed to increase its
ACMI contract charter business as well as on-demand charter services. In fiscal
year 1997, the Company intends to add five Boeing 727-200F aircraft to its
airline fleet, three of which the Company anticipates initially will be
dedicated to ACMI contract charter use and two initially dedicated to on-demand
charters. See "Use of Proceeds." Although Kitty Hawk has not entered into any
contracts to utilize the aircraft to be purchased with the proceeds of the
offering and no such contract is imminent, the Company currently is negotiating
with a number of existing and potential customers for ACMI contract charters.
The Company believes, based upon its knowledge of the on-demand market, that it
can utilize two of the additional Boeing 727-200Fs to be acquired with the
proceeds of the offering for the foreseeable future in on-demand service without
violating the terms of the GM Agreement. The Company,

34
<PAGE> 37

however, periodically evaluates the utilization of its owned aircraft and,
therefore, the Company's actual aircraft use may vary materially from the
current plans. Any jet aircraft not in use on an ACMI contract charter route may
be employed in on-demand service. See "Risk Factors -- Dependence on Significant
Customers" and "Business -- Air Freight Carrier -- Aircraft Fleet."

The Company has recently acquired an undivided one-third interest in two
Falcon 20C jet aircraft and pursuant to an anticipated co-ownership agreement
will lease such aircraft to a third-party operator. The Company intends to
charter such jet aircraft in on-demand service. See "Management -- Compensation
Committee Interlocks and Insider Participation."

AIR LOGISTICS

General

On-demand air charters of heavy-weight freight generally are used when
"next-flight-out" delivery services of commercial airlines or the next-day
delivery services of air freight companies or other service providers cannot
meet the customer's delivery deadline. Utilizing a proprietary computerized
database, the Company's air logistics services involve coordinating
"door-to-door" transportation by arranging for ground pick-up, loading, air
transportation, unloading, and ground delivery of the freight. Kitty Hawk has
managed a broad variety of freight shipments including military equipment,
satellites, rescue/disaster recovery supplies, and exotic animals.

The most frequent use of on-demand charters is to deliver manufacturing or
replacement parts to avoid a work stoppage. Manufacturers who employ the
"just-in-time" methodology encourage the order and delivery of inventory just
before it is needed at the assembly plant. On-demand charters also are used to
transport replacement parts on an expedited basis so that critical equipment can
be kept operational or put back in service to avoid or minimize the length of a
shut-down. Firms that are reducing inventory and shortening product cycle times
through direct air shipments also use on-demand charters. For example, the
Company has transported goods for electronics and apparel concerns between their
domestic operations and their operations in Central or South America. The
Company intends to increase its marketing focus on such types of firms. See
"Business -- Sales and Marketing."

The customers of the Company's on-demand air logistics services include
companies that are engaged in industries such as automotive, chemical, computer,
mail and bulk package delivery, retail merchandising, and oil field service and
equipment. Typically, the premium costs incurred in utilizing on-demand charters
to achieve expedited same-day delivery are justified by the Company's customers
on the basis that greater costs would otherwise be incurred as a result of a
work stoppage or having to maintain greater inventory levels.

A significant portion of all on-demand, same-day air freight charters in
North America is accounted for by the automotive industry. The importance of the
automotive industry to on-demand air charters reflects the large number of
automobile parts, the complexity of an automotive manufacturer's supplier and
assembly plant network, and the high cost of shutting down production
facilities. Kitty Hawk believes that "just-in-time" inventory systems have
increased the use of on-demand air charters by the automotive industry and that
on-demand air charters are an integral cost of such "just-in-time" inventory
management systems. Because automotive manufacturers generally carry less
inventory than in the past, unanticipated parts shortages may occur more
frequently.

The Company has experienced rapid growth in the number of on-demand
charters managed for customers unrelated to the automotive industry. The Company
believes it managed 919 non-automotive on-demand charters for the nine months
ended May 31, 1996 as compared to 634 non-automotive on-demand charters for the
nine months ended May 31, 1995.

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<PAGE> 38

Delivery of Logistics Services

For the nine months ended May 31, 1996, Kitty Hawk arranged an average of
approximately 41 on-demand charters per day. Kitty Hawk has arranged as many as
208 charters in a single day. Each transaction originates from a customer's
telephonic request to arrange a charter answered by one of the Company's 16
full-time account managers who are on duty 24 hours per day, 365 days per year.
The information collected during the first few minutes after a request for a
charter is received is critical to the successful completion of the charter on a
timely basis. The Company believes it provides dependable service on a
cost-effective basis because of its computerized database, information software,
and tracking systems, its training of account managers, and its standardized
charter management procedures.

With respect to each freight shipment managed by the Company, the account
manager is required to input the following information in a computerized charter
work sheet: (i) contact information for both the shipper and the recipient; (ii)
the estimated time the freight will be available at the shipper's location and
the estimated time the recipient needs the shipment delivered; (iii) the
specifications of the freight to be shipped; and (iv) information concerning
needed ground transportation between the shipper's facility and the origin
airport as well as between the destination airport and the recipient's facility.

The account manager (subject to the review of a supervisor) selects the
proper type of aircraft to be used for the shipment. Once the most appropriate
aircraft meeting the charter requirements has been identified, the information
maintained by the Company concerning the charter operator is reviewed to ensure
that the chosen carrier meets all of the Company's requirements. The account
manager also is responsible for airport selection. Factors which affect airport
selection include proximity to shipper/receiver, runway lengths and weight
bearing capabilities, instrument approach and weather reporting facilities, fuel
availability, and loading and unloading capabilities. Any ground transportation
and handling also are typically arranged by the account manager.

Unless the customer requesting the logistics services is already subject to
a written agreement concerning pricing, the customer is quoted a price per mile
by aircraft type on a round trip basis plus charges for loading, unloading, and
ground transportation. The shipment size and speed requirements are taken into
account in selecting aircraft type. The Company's per mile prices are developed
based upon a schedule of tariffs by aircraft type provided by third-party air
carriers.

The procedure for account managers is to maintain periodic communication
with the customer throughout the charter. The Company's goal is to notify the
customer of all details of the charter within 15 minutes after receiving the
request for a charter, including aircraft type, carrier, the time the material
will be picked up at the shipper's location, the time the aircraft will be in
position at the origin airport, when the aircraft will be loaded and depart,
flight time, and the time the shipment will be delivered to the recipient. If
any of these details change significantly during the course of the charter, the
customer is notified promptly.

Because a significant amount of information concerning a charter is
required to be assimilated by the account manager within a very short time
frame, the training period typically necessary for an account manager is between
six and nine months. Kitty Hawk has access to experienced outside personnel who
work as account managers on a temporary basis during periods of peak demand. The
Company believes its existing number of account managers is adequate for the
foreseeable future. Upgrades to the Company's computer systems and related
technology have facilitated an increase in the productivity of each account
manager and the Company will seek further upgrades. See "Business -- Sales and
Marketing."

Database, Information Software, and Tracking Systems

Database System. Kitty Hawk believes that its database is critical to its
ability to arrange on-demand air charters in a timely and reliable manner. The
Company maintains in its database a carrier profile for over 500 air freight
carriers that provide on-demand charter service. A carrier profile generally
contains the following information that is pertinent to the Company's carrier
selection decision: (i) the carrier's location and aircraft list, including
physical descriptions, year, make and model, and engines; (ii) the most recent
certificate of insurance obtained with respect to the carrier; (iii) copies of
the carrier's current FAA Air

36
<PAGE> 39

Carrier Certificates and Operating Specifications and any other international
operating certificates; (iv) the carrier's 24-hour contact information; and (v)
copies of the tariff agreement with the carrier. The most utilized carriers are
visited by Company representatives at least annually to inspect the carrier's
facilities and equipment and to update the carrier database. The database also
contains information concerning ground transportation and aircraft loading
companies in North America that is similar to its information concerning air
carriers.

The Company has developed and is testing an Internet system to provide its
account managers with real-time updates on available third party on-demand air
charter aircraft across North America. The Company believes that this system
will enable it to meet customer demands more efficiently and quickly in the
future.

Information Software System. The Company's logistics system was developed
in 1990 to automate access to the Company's database and has been frequently
revised and improved. This system provides on-screen information regarding air
carriers, aircraft type and specifications, fuel suppliers, cargo handlers, and
surface carriers, along with relevant cost information.

In addition, Kitty Hawk is an on-line subscriber to Jeppesen's Flight
Planning and Kavouras Meteorological services. The flight planning services
provided by Jeppesen integrate airport analyses (comprised of runway lengths,
altitudes, hours of operation and noise abatement procedures) with the current
weather data and other information to provide an automated flight plan. This
flight planning service then transmits electronically the automated flight plan
to the pilot and to the FAA contemporaneously.

The Company is currently testing the feasibility of a wireless information
link between a laptop computer located on-board the Company's aircraft and a
computer located at the Company's headquarters. This computer link, if
successful, will allow the Company to transmit flight plans, weather packages
and flight releases directly to the pilot. This on-board laptop computer is
expected to permit the pilot to compute and transmit weight and balance,
payload, flight times, and fuel into-plane information directly to Company
headquarters. In addition, Kitty Hawk intends to provide its maintenance and
flight crews with on-line access to the latest operating and maintenance manuals
stored on CD-ROMs.

Tracking System. In December 1993, the Company began operation of its
HawkEye system, which was developed internally by its full time programming and
computer support staff. HawkEye allows account managers to track an aircraft's
progress from origin to destination on his or her computer screen and on the
main projection board of the control room. Aircraft icons show each flight, its
direction, and information about the flight including the type of aircraft, the
flight number, its current altitude, ground speed, distance to destination, and
times of departure and estimated arrival. The data supporting the HawkEye System
is a direct data feed obtained from the FAA's Air Traffic Control computer
system. Although the data obtained by the HawkEye system is readily available
for a fee, the Company is not aware of any other air logistics provider that
currently uses the FAA data feed with some form of programming similar to
HawkEye. This real-time information available from the HawkEye system enables
the Company's account managers to provide a level of service which the Company
believes is not otherwise currently available in the market for on-demand,
same-day air logistics.

U. S. Postal Service

Of the Company's total revenues in fiscal years 1993, 1994, and 1995 and
the nine months ended May 31, 1996, the U.S. Postal Service accounted for $17.3
million (26.3%), $11.1 million (10.3%), $10.0 million (9.7%), and $21.3 million
(19.8%), respectively. Of these revenues, $14.3 million (83.0%), $8.3 million
(74.5%), $6.0 million (59.6%), and $19.7 million (92.5%), respectively, were
attributable to the Company's air logistics business in connection with its
management of seasonal Christmas charters flown by third-party air cargo
carriers, and $3.0 million (17.0%), $2.8 million (25.5%), $4.0 million (40.4%),
and $1.6 million (7.5%), respectively, were attributable to the air freight
carrier for ACMI contract charters flown by the Company on designated routes. Of
the Company's gross profits from air logistics in fiscal years 1993, 1994, and
1995 and in the nine months ended May 31, 1996, the U.S. Postal Service
accounted for $4.0 million (61.5%), $2.0 million (33.8%), $1.0 million (18.9%),
and $3.8 million (50.0%), respectively.

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<PAGE> 40

Since 1986, Kitty Hawk has managed Christmas season charters for the U.S.
Postal Service utilizing third-party air freight carriers in order to provide
additional lift capacity for this peak period. Of the Company's total revenues
for fiscal years 1993, 1994, and 1995 and the nine months ended May 31, 1996,
these Christmas season managed charters accounted for $14.3 million (21.8%),
$8.3 million (7.7%), $6.0 million (5.8%), and $19.7 million (18.4%),
respectively. The U.S. Postal Service awards contracts periodically pursuant to
a public bidding process that considers quality of service and other factors,
including to a lesser extent price. Bids for contracts to provide these
Christmas season charters generally are submitted in the summer of each year and
are typically awarded during the following fall. The Company recently was
awarded a contract with the U.S. Postal Service for the 1996 Christmas season
peak mailing period. In the future, the air freight carrier may fulfill certain
Christmas season charters with the U.S. Postal Service. See "Risk
Factors -- Dependence on Significant Customers."

MAINTENANCE

The Company's aircraft require considerable maintenance in order to remain
in compliance with FAA regulations. The Company estimates that at current rates
of operation of its existing fleet, during the fiscal year 1997, the next
scheduled major overhaul maintenance checks for six Boeing 727-200Fs will be
completed and, during the fiscal year 1998, three will be completed. The Company
does not anticipate any of its aircraft, at current rates of operation,
requiring major overhaul maintenance checks during fiscal year 1999. The Company
estimates that the service life of each of its revenue aircraft extends beyond
the year 2000. Kitty Hawk historically has followed, and currently intends to
follow, a policy of retiring Convairs at the time of their next scheduled major
overhaul maintenance checks rather than expending the amounts necessary for such
checks.

Any equipment being placed on the Company's operating certificate is
inspected and repaired prior to being utilized by the Company for either
on-demand or ACMI contract charters. The Company's maintenance facilities enable
it to perform all required airframe maintenance and minor engine repairs on the
aircraft ranging from overnight "turnaround" checks to major airframe overhauls.
The Company performs all maintenance for its fleet, including line maintenance,
at its own maintenance facilities, except for repairs to avionics and overhauls
of engines and airframes. All contract maintenance is performed by subcontracted
FAA-approved maintenance facilities under the on-site supervision and/or
inspection of Company quality assurance personnel. Management currently
anticipates no difficulties in acquiring needed parts. See "Risk
Factors -- Aircraft Ownership and Operation."

The Company has engaged in accident-free operation of aircraft since its
inception in 1985 (the National Transportation Safety Board defines "accident"
as an aircraft occurrence involving death, injury, or substantial damage). The
Company has been fined by the FAA only once in its operating history, when in
1988, it was fined $5,000 for operating a Convair with one less than the
required number of engine fire suppression systems.

RELATIONSHIP WITH GM

From the mid-1980s through June 1990, Kitty Hawk used its own aircraft to
fly on-demand charters for GM assembly plants and suppliers that directly
acquired on-demand charters from the open market. In 1990, GM made the decision
to outsource its air logistics function. From among many bidders, including some
of the largest cargo airlines and air freight forwarders in the United States,
the Company was selected as GM's primary air logistics provider.

Under the terms of the GM Agreement, the Company's air logistics business
is encouraged to utilize the air freight carrier but is prohibited from (i)
placing with the Company's air freight carrier in excess of 30% of the total
number of air charters arranged for GM in any calendar year and (ii) placing
with the Company's air freight carrier charters producing revenue in excess of
30% of the total revenue derived from air charters arranged for GM in any
calendar year. In the nine months ended May 31, 1996, the Company's air freight
carrier flew 583 on-demand charters (or 8.1% of total charters arranged for GM
by the Company's air logistics business) resulting in $7.9 million of revenues
to the Company (or 18.8% of the total revenues derived by the Company from GM).
The GM Agreement does not provide for automatic fuel price adjustments. Since

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<PAGE> 41

execution of the GM Agreement in June 1990, however, the Company and GM have
agreed to seven fuel price adjustments reflecting both increases and decreases
in the price of aircraft fuel.

The term of the GM Agreement extends through May 1997 and thereafter from
month-to-month until terminated by thirty days' written notice. The GM
Agreement, however, stipulates that in the event of an irreconcilable
difference, either party may, with or without cause, terminate the agreement
following a quarterly review meeting by giving the other party at least 30 days'
prior written notice thereof. Furthermore, GM may terminate the GM Agreement on
ten days' written notice if there is a change in (i) management of Kitty Hawk
Charters, Inc., the Company's wholly-owned subsidiary, through which the
Company's air logistics business is conducted, or (ii) the stock ownership of
the Company such that (a) Mr. Christopher no longer holds a majority of the
outstanding Common Stock of the Company or (b) a major automobile manufacturer
acquires more than 20% of the outstanding Common Stock of the Company, unless
such changes are communicated to GM at least 60 days prior to the effective date
and GM concurs with the changes.

Due to its significant use of on-demand charters, GM could conceivably
determine that it is more economical to arrange charters in-house. For the
following reasons, Kitty Hawk believes it is unlikely that GM will re-establish
in-house air logistics operations: (i) the Company's performance under the GM
Agreement has resulted in what the Company believes is a good relationship with
GM; (ii) such re-establishment of in-house air logistics operations is contrary
to the prevailing trend in the automotive industry towards outsourcing and
reducing general liability exposure; (iii) GM would have to make a significant
investment in personnel and systems to replicate the Company's service
capabilities; and (iv) the Company believes that it provides service at a lower
total cost than GM can achieve by arranging air logistics in-house.

Of the Company's total revenues in fiscal years 1993, 1994, and 1995 and in
the nine months ended May 31, 1996, GM accounted for $36.0 million (54.7%),
$67.9 million (63.1%), $48.9 million (47.1%), and $42.1 million (39.3%),
respectively. Of the revenues from GM, $32.1 million (89.2%), $57.5 million
(84.6%), $38.7 million (79.2%), and $34.2 million (81.2%), respectively, were
attributable to air logistics primarily in connection with on-demand charters
flown by third-party air cargo carriers, and $3.9 million (10.8%), $10.4 million
(15.4%), $10.2 million (20.8%), and $7.9 million (18.8%), respectively, were
attributable to on-demand charters flown by the Company's air freight carrier.
Of the Company's gross profits from air logistics in fiscal years 1993, 1994,
and 1995 and in the nine months ended May 31, 1996, GM accounted for $2.1
million (32.2%), $3.0 million (50.4%), $1.4 million (27.1%), and $2.8 million
(37.1%), respectively. GM accounted for 70.7%, 77.4%, 59.9%, and 59.1% of the
total number of on-demand charters that were flown by the air freight carrier in
1993, 1994, and 1995 and in the nine months ended May 31, 1996, respectively. In
addition to GM, the Company believes approximately 16.3% of its total revenues
in the nine months ended May 31, 1996 were generated from services provided to
other participants in the U.S. automotive industry, a substantial portion of
which the Company believes were GM suppliers. "Risk Factors -- Dependence on
Significant Customers."

SALES AND MARKETING

The Company's primary marketing focus is on transportation executives,
financial officers, and purchasing directors of major users of air freight
transportation services and other logistics providers. In connection with the
Company's emphasis on developing and maintaining long-term relationships with
major customers, an individual from the Company is dedicated to particular
accounts. This individual is responsible for educating the client about the
Company's service capabilities, ensuring quality service, and determining how
the Company can best serve the customer. The Company's five dedicated sales and
marketing personnel, in addition to the Company's 16 account managers, typically
maintain close customer contact through weekly calls and periodic visits. Four
of the Company's five dedicated marketing personnel concentrate on developing
air logistics business outside of the automotive industry in keeping with the
Company's strategy of diversifying its air logistics customer base. These
efforts will include an increased focus on firms that are reducing inventory and
shortening product cycle times. The marketing effort on behalf of the air
freight carrier business is primarily focused on selected freight forwarders and
integrators and the existing customers of its air freight carrier business.
Customers also are encouraged to visit Kitty Hawk to meet with Company
executives, tour

39
<PAGE> 42

facilities, and learn more about the Company's services. The Company does not
engage in a significant amount of mass media advertising.

Kitty Hawk believes that retaining existing customers is equally as
important as generating new clients and is a direct result of customer
satisfaction. The Company will continue to upgrade its database, information
software, and tracking systems to maintain high quality service. The Company has
developed a feature that enables customers to access the Company's aircraft
tracking system on a "real time" basis to monitor their own freight. This
feature allows account managers to be more productive by reducing time spent
updating customers on the status of shipments.

EMPLOYEES

At May 31, 1996, Kitty Hawk employed approximately 281 full-time personnel,
of which 47 were involved in sales and administrative functions and 234 in
maintenance and flight operations (including 127 pilots). The Company is not
party to any collective bargaining agreement and considers its relations with
its employees to be satisfactory. The Company intends to motivate certain
employees through ownership of Common Stock and options to purchase Common Stock
and to encourage all employees to own Common Stock.

GROUND FACILITIES

Kitty Hawk occupies a 40,000 square foot facility located at Dallas/Fort
Worth International Airport. This facility includes administrative offices,
maintenance work areas, and hangar and parts storage facilities as well as
flight operations and training facilities. The Company has an option to purchase
the building, subject to the consent of the Dallas/Fort Worth Regional Airport
Board, with an exercise price of $2.0 million at June 30, 1996, which option
amount decreases by $5,000 per month, pursuant to a five-year lease agreement
that commenced March 1, 1993. The option to purchase the property will expire on
March 1, 1997. There is no stated renewal on the lease. The Company presently
intends to either exercise its option or to attempt to negotiate an extension of
the lease. See "Certain Transactions."

Management believes that its current facilities are adequate to support the
growth in operations that the Company believes will result from the purchase of
seven Boeing 727-200s. The Company maintains an approximately 20,000 square foot
secondary maintenance facility located in Ypsilanti, Michigan comprised of a
maintenance work area, hangar and an area for the storage of certain aircraft
repair parts and maintenance items. In addition, Kitty Hawk occupies
approximately 12 small rental parts storage spaces (aggregating approximately
2,000 square feet) at a number of origin airports around the country and in the
Pacific Rim, principally supporting the ACMI contract charter operations, and
approximately four apartments in various locations (aggregating approximately
7,500 square feet) for flight crew layovers. In conjunction with providing
warehouse services for IBM, the Company utilizes an aggregate of less than 2,000
square feet of warehouse space at approximately 13 locations throughout the
United States.

GOVERNMENT REGULATION

The Company's air freight carrier is subject to Title 49 of the United
States Code (formerly the Federal Aviation Act of 1958, as amended), under which
the DOT and the FAA exercise regulatory authority over air carriers.

40
<PAGE> 43

The Company's operations are subject to routine, and periodically more
intensive, inspections and oversight by the FAA. Following a review of safety
procedures at ValuJet, Inc., the FAA on June 19, 1996, announced it would
propose changes to the FAA's and air carriers' oversight of contract maintenance
and training procedures which, if implemented, would result in higher scrutiny
of such maintenance and training procedures and could result in the Company
incurring increased maintenance costs for its contract maintenance. See
"Business -- Maintenance." Because the Company conducts operations for the U.S.
military, it is also subject to inspections by the Department of Defense (the
"DOD"). The Company's air freight carrier is also subject to regulation by the
DOD in connection with operations to military airfields and, in connection with
international operations, to regulation by the Department of Commerce, the U.S.
Customs Service, the Immigration and Naturalization Service, and the Animal and
Plant Health Inspection Service of the Department of Agriculture. The
Environmental Protection Agency has jurisdiction to regulate aircraft engine
exhaust emissions. All air carriers are also subject to certain provisions of
the Federal Communications Act of 1934, as amended, because of their extensive
use of radio and other communication facilities. Additional laws and regulations
have been imposed from time to time by federal, state, and local governments
that have increased significantly the cost of operations by imposing additional
requirements or restrictions on operations. For example, certain cities, states,
and local airport authorities prohibit flights in and out of their airports with
Stage II aircraft (as defined by the FAA) or between certain hours. The FAA has
proposed amendments to its flight and rest time regulations which, if adopted as
proposed, could restrict the ability of the Company to respond to a shipper's
request for same day delivery and/or would require the Company to hire and train
additional qualified pilots to perform the Company's flight operations.

The adoption of new laws, policies, or regulations or changes in the
interpretation or application of existing laws, policies, or regulations,
whether by the FAA, the DOT, the Federal Communications Commission, the United
States government, or any foreign, state, or local government, could have a
material adverse impact on Kitty Hawk and its operations.

Airline operators must comply with FAA noise standard regulations
promulgated under Title 49 of the United States Code, the Noise Control Act of
1972, the Quiet Communities Act of 1978, the Airport Noise and Capacity Act of
1990, and the Environmental Protection Agency Engine Emission Regulations
promulgated under the Clean Air Act of 1970, as amended (collectively, the
"Noise Regulations"). The Noise Regulations affect the Company's five Douglas
DC-9-15Fs and its ten Boeing 727-200Fs (the "Jet Fleet"). Four of the aircraft
in the Jet Fleet are currently in compliance with Stage III noise control
standards. By the following deadlines, the Company must bring the Jet Fleet into
Stage III compliance to the extent indicated: December 31, 1996, 50%; December
31, 1998, 75%; and January 1, 2000, 100%. Kitty Hawk intends to comply with the
next deadline of December 31, 1996 by modifying one of its DC-9-15Fs and two of
its 727-200Fs with noise suppression kits during November and December of 1996
for a total cost of $6.8 million (FAA rules permit rounding down to the next
whole aircraft to determine 50% of fleet size). In addition to three firm orders
for noise suppression kits, the Company currently holds an option for six noise
suppression kits and their installation for Boeing 727-200Fs at a cost of $2.6
million for each aircraft modified. Certain airport operations have adopted
local regulations which, among other things, impose curfews and noise abatement
requirements. These local regulations currently have little effect on the
Company.

41
<PAGE> 44

addition, the DOT and the FAA may impose civil or criminal penalties for
violations of applicable rules and regulations. Such actions by the FAA or the
DOT, if taken, could have a material adverse effect on Kitty Hawk.

Certain of the Company's air freight carrier operations are conducted
wholly between two or more points that are all located outside of the United
States. As with the certificates and license obtained from U.S. authorities, the
Company must comply with all applicable rules and regulations imposed by these
foreign aeronautical authorities or be subject to the suspension, amendment or
modification of its operating authorities.

On August 27, 1996, a 6.25% federal transportation excise tax applicable to
air freight transportation was reinstated. Reinstatement of the tax by the
government will result in higher costs to shippers of air freight and air
freight carriers, which may have a material adverse effect on freight traffic,
yields, revenue, and margins.

Under current federal aviation law, the Company's air freight carrier could
cease to be eligible to operate as an air freight carrier if more than 25% of
the voting stock of the Company were owned or controlled by non-U.S. citizens.
Moreover, in order to hold an air freight carrier certificate, the president and
two-thirds of the directors and officers of an air carrier must be U.S.
citizens. All of the Company's directors and officers are U.S. citizens.
Furthermore, (i) the Certificate of Incorporation limits the aggregate voting
power of non-U.S. persons to 22 1/2% of the votes voting on or consenting to any
matter and (ii) the Bylaws do not permit non-U.S. citizens to serve as directors
or officers of the Company.

INSURANCE

The Company is vulnerable to potential losses which may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and its consequent temporary or permanent
loss from service, but also potential claims involving injury to persons or
property. The Company is required by the DOT to carry liability insurance on
each of its aircraft, and each of the Company's aircraft leases and ACMI
contracts also requires the Company to carry such insurance. Any extended
interruption of the Company's operations due to the loss of an aircraft could
have a material adverse effect on the Company. See "Risk Factors -- Operations
Dependent upon Limited Fleet." The Company currently maintains public liability
and property damage insurance and aircraft liability insurance for each of the
aircraft in the revenue fleet in amounts consistent with industry standards.
All-risk aircraft hull insurance is maintained for all aircraft in the revenue
fleet other than the Convairs. The Company maintains baggage and cargo liability
insurance if not provided by its customers under ACMI contracts. Although the
Company believes that its insurance coverage is adequate, there can be no
assurance that the amount of such coverage will not be changed upon renewal or
that the Company will not be forced to bear substantial losses from accidents.
Substantial claims resulting from an accident could have a material adverse
effect on the Company's financial condition and could affect the ability of the
Company to obtain insurance in the future.

The Company attempts to monitor the amount of liability insurance
maintained by the third-party carriers utilized in its air logistics business
through, among other things, the obtaining of certificates of insurance.

COMPETITION

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<PAGE> 45

the location and performance characteristics of aircraft. The Company's air
freight carrier is also subject to competition from other modes of
transportation including, but not limited to, railroads and trucking.

Numerous competitors of Kitty Hawk provide or coordinate door-to-door air
freight charters on an expedited basis. The market for air logistics also has
been and is expected to remain highly competitive. The Company's principal
competitors for on-demand air logistics services are other air logistics
companies, air freight carriers which seek to book charters directly with
customers, and air freight companies that offer expedited service. During the
last fourteen months, each of Emery Worldwide, FedEx, and the United Parcel
Service have entered the expedited freight business by offering
"next-flight-out" service.

LEGAL PROCEEDINGS

Litigation and Arbitration Related to Postal Contract

The U.S. Postal Service selected the Company's air freight carrier in
September 1992 as the successful bidder on a contract for a multi-city network
of air transportation services supporting the U.S. Postal Service's Express Mail
system. Another air freight carrier (the "Co-Bidder") was associated with the
Company in the successful bid (the "ANET bid"). Two unsuccessful bidders,
including Emery Worldwide Airlines, Inc. ("Emery") (the incumbent), sued to
enjoin the award. This litigation (the "ANET Litigation") was settled in April
1993 by agreements under which the U.S. Postal Service terminated the Company's
contract for convenience and awarded the contract to Emery. In lieu of damages
for the contract's termination, the U.S. Postal Service paid $10.0 million into
an escrow account to be divided between the Company and the Co-Bidder. Also
under the settlement, Emery delivered releases of the Company's contractual
obligations to purchase more than $40 million in aircraft and equipment, paid
$2.7 million into the escrow account, and agreed to pay $162,500 into the escrow
each quarter for up to 10 years so long as the Emery contract remained in
effect.

Before settling the ANET litigation, the Company, Mr. Christopher, the
Co-Bidder and the Co-Bidder's stockholder agreed, among other things, to hold
the escrowed funds in escrow until they had agreed upon an allocation and
distribution, or until the matter was resolved by binding arbitration.
Subsequent disagreements led to litigation and arbitration among the Company,
Mr. Christopher, the Co-Bidder and the Co-Bidder's stockholder that were
resolved pursuant to a comprehensive settlement reached in August 1994. Under
the comprehensive settlement, the Company received approximately $3.5 million in
cash from the escrowed funds, and obtained a Boeing 727-200. Also under the
comprehensive settlement agreement, Mr. Christopher received rights to one-half
of any future contingent quarterly payments from Emery.

Qui Tam Litigation

In March 1995, the Company was served with a complaint filed on behalf of
the U.S. government by a third-party plaintiff seeking to share a recovery under
the Federal False Claims Act (the "Act"). The suit, filed in May 1994 in the
federal district court for the District of Columbia, was filed under seal in
accordance with the Act, to enable the U.S. Government to review the claim
before its disclosure to the defendants. The U.S. Government declined to pursue
the claim, but the third-party plaintiff chose to continue. The suit claimed
that the Company and the Co-Bidder fraudulently failed to disclose to the U.S.
Postal Service, both in the ANET bid and in the settlement of the ANET
litigation, that some of aircraft the Company proposed to purchase and use to
perform the contract were aging aircraft with high use, and claimed that the
Company, the Co-Bidder and Emery similarly fraudulently conspired in connection
with the settlement of the ANET

43
<PAGE> 46

litigation. The suit sought to recover treble the $10 million settlement payment
made by the U.S. Postal Service in settling the ANET litigation, plus the
third-party plaintiff's costs and fees.

In May 1996, the court granted the Company its motion to dismiss the suit
and awarded the Company its attorneys' fees and costs. The plaintiff has asked
the court to reconsider its ruling.

The Company does not expect the outcome to have a material adverse effect
upon the Company's financial condition or results of operations.

Litigation about Charter Agreement

The Company filed suit in the 14th Judicial District Court of Dallas
County, Texas against Express One International, Inc. ("Express One") in July
1992 claiming under a one-year aircraft charter by Express One to the Company
that Express One breached its obligations and seeking actual damages of
approximately $60,000. Express One counterclaimed that the Company wrongfully
repudiated the charter and fraudulently induced Express One to provide services
not required by the charter. Express One claimed damages of $356,718 for
services allegedly performed, $1,140,000 for additional fees it would have
received under the charter, an unspecified amount of punitive damages, and
additional amounts for its attorneys' fees and costs.

In February 1995, a jury verdict awarded the Company $25,000 in damages
plus its attorneys' fees and denied Express One's counterclaims. In May 1995,
the court entered judgment in favor of the Company for $25,000 in damages, for
$148,115 in attorneys' fees through trial, and for additional attorneys' fees if
Express One appealed. Before the time for appeal expired, Express One filed a
petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the Eastern District of Texas (Sherman Division). The Company filed
its claim based on the judgment in the bankruptcy proceeding. In November 1995,
Express One filed an appeal, to which the Company responded.

Kitty Hawk does not expect the outcome to have a material adverse effect
upon the Company's financial condition or results of operations.

Routine Litigation

The Company from time to time is involved in various routine legal
proceedings incidental to the conduct of its business. As of the date of this
Prospectus, the Company was not engaged in any legal proceeding expected to have
a material adverse effect upon the Company.

44
<PAGE> 47

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, their ages, and
positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
-------------------------------- --- ------------------------------------------
<S> <C> <C>
M. Tom Christopher(1)........... 49 Chairman of the Board of Directors and
Chief Executive Officer
Tilmon J. Reeves................ 57 President, Chief Operating Officer, and
Director
Richard R. Wadsworth............ 49 Senior Vice President -- Finance, Chief
Financial Officer, Secretary, and Director
Theodore J. Coonfield(2)........ 48 Director
James R. Craig(2)............... 57 Director
Robert F. Grammer(1)(2)......... 60 Director
Lewis S. White(1)............... 56 Director
</TABLE>

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

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

The Board of Directors consists of seven members, including four
independent directors. Executive officers are elected by the Board of Directors
and serve at its discretion.

M. TOM CHRISTOPHER has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since its inception in 1985, and serves
in the class of directors whose terms expire at the 1997 annual meeting of
stockholders. Prior to assuming these positions, he formed and managed Kitty
Hawk Charters, Inc. He has over 18 years of experience in the air freight
industry, including serving as an account manager for Burlington Northern
Airfreight from 1976 to 1978.

TILMON J. REEVES has served as President and Chief Operating Officer of the
Company since May 1993 and has over 30 years of aviation experience. Prior to
assuming his current positions, he served as Vice President of the Company's air
freight carrier from March 1992 to May 1993. Prior to joining Kitty Hawk, Mr.
Reeves served as Vice President (Sales) of Express One from April 1991 to March
1992. Mr. Reeves served as the Managing Director -- Cargo Services for American
Airlines, Inc. from March 1989 to January 1991. Mr. Reeves became a director in
October 1994 and serves in the class of directors whose terms expire at the 1998
annual meeting of stockholders.

RICHARD R. WADSWORTH has served as Senior Vice President -- Finance since
October 1992, Chief Financial Officer since September 1994, and Secretary since
October 1994. Prior to his current role, he served in a consulting capacity to
Kitty Hawk in the preparation of various bids for the Company's contract air
freight service from December 1991 to September 1992. Mr. Wadsworth served as
Senior Underwriter in the Dallas office of Stephens Inc. from September 1989
until July 1991. Mr. Wadsworth filed for bankruptcy protection in his individual
capacity in February of 1992. Mr. Wadsworth became a director in October 1994
and serves in the class of directors whose terms expire at the 1999 annual
meeting of stockholders.

THEODORE J. COONFIELD became a director of the Company in October 1994 and
serves in the class of directors whose terms expire at the 1998 annual meeting
of stockholders. Since April 1996, Mr. Coonfield has been a consultant with
Performance Consulting Group, a firm specializing in change management
consulting primarily in the banking and insurance industry. From January 1993 to
April 1996, Mr. Coonfield was a consultant with the Richard-Rogers Group, a
consulting firm specializing in total quality issues, where he primarily engaged
in consulting for firms in the transportation industry. From 1990 to December
1992, Mr. Coonfield was the Special Assistant to the Director of the Department
of Human Resources for the State of Oregon. Since 1985, Mr. Coonfield has been
the President of Oregon Wine Designs, Inc., a wine production and marketing
firm.

45
<PAGE> 48

JAMES R. CRAIG became a director of the Company in October 1994 and serves
in the class of directors whose terms expire at the 1997 annual meeting of
stockholders. Mr. Craig is an attorney who has served of counsel to Burke,
Wright & Keiffer, P.C. since 1990. Prior to his affiliation with Burke, Wright &
Keiffer, P.C., Mr. Craig was in private law practice in Dallas since 1971, and
in 1989 served as President of Whitehall Development Company, a real estate
development firm, of which he is now a director.

ROBERT F. GRAMMER became a director of the Company in October 1994 and
serves in the class of directors whose terms expire at the 1997 annual meeting
of stockholders. From 1986 to October 1993, Mr. Grammer was Chairman, President
and owner of R.G. Aviation, a provider of aircraft-related services. Mr. Grammer
retired from this position in October of 1993 to manage his personal
investments.

LEWIS S. WHITE became a director of the Company in October 1994 and serves
in the class of directors whose terms expire at the 1999 annual meeting of
stockholders. From 1988 to April 1996, Mr. White was President of L. S. White &
Co., a management consulting firm. In April 1996, Mr. White became a partner in
Claymore Partners, Ltd., a firm specializing in business turnaround,
restructuring, and corporate finance. Prior to 1988, he held senior financial
positions with Paramount Communications Inc. and Union Carbide Corporation. Mr.
White is also a director of Whitehall Corporation, a New York Stock Exchange
company principally involved in aircraft maintenance.

DIRECTOR COMPENSATION

Pursuant to the Company's Bylaws, the members of the Board of Directors may
be compensated in a manner and at a rate determined from time to time by the
Board of Directors. Directors who are employees of Kitty Hawk do not receive
additional compensation for service as a director. Under the Company's Omnibus
Securities Plan, directors who are not employees of the Company shall receive
shares of Common Stock in an amount equal to their net annual retainer (which is
currently anticipated to be $10,000).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal year 1995, Mr. Christopher, the Chief Executive Officer of
the Company, determined executive officer compensation.

During the last three fiscal years, Martinaire East, Inc. ("Martinaire"), a
corporation 50% owned by Mr. Christopher, leased a Learjet (the "Learjet"), 50%
owned by Mr. Christopher, from the Company and provided the Company with
on-demand charter services utilizing the Learjet. During fiscal years 1993,
1994, and 1995, the Company paid Martinaire $1.8 million, $1.0 million and
$232,000, respectively, for on-demand charter services rendered, which amounts
Mr. Christopher believed represented market rates. The Company's charges to
Martinaire for leasing the Learjet and related operating expenses (at costs Mr.
Christopher believed represented market rates) went largely unpaid until October
1994. The balance owed to Kitty Hawk for the Learjet lease and related operating
expenses at fiscal year end 1993 and 1994 was $428,262 and $481,297,
respectively. In accordance with Company policy, no interest was accrued on
these amounts. On October 24, 1994, the owners of the Learjet, including Mr.
Christopher, agreed to sell the Learjet. In connection with this sale,
Martinaire repaid the Company approximately $636,000 representing all unpaid
amounts owed to the Company at that date for the Learjet lease and related
operating expenses.

On August 17, 1996, the Company acquired an undivided one-third interest in
two Falcon 20C jet aircraft together with two individuals unaffiliated with the
Company who will each hold a one-third interest in such aircraft. An interim
acquisition note (the "Note") in the amount of $1,700,000 covering the purchase
price and immediately necessary maintenance was executed by Mr. Christopher and
Bruce Martin. The Company anticipates that this Note will be extended for five
years, will be secured by the Falcon 20C jet aircraft, and will be amended to
provide for monthly installments of principal and interest. The Company further
anticipates that the Company and Tom Wachendorfer will execute such extended
Note, following which the Company and Messrs. Martin and Wachendorfer will be
jointly and severally liable for repayment of the Note. Concurrent with the
extension of the Note, Mr. Christopher will be released from liability therefor.

46
<PAGE> 49

The Company anticipates entering into a co-ownership and contribution
agreement (the "Co-Ownership Agreement") with Messrs. Martin and Wachendorfer
under which the parties will agree to lease the two Falcon 20C jet aircraft to
Martinaire. Currently, Messrs. Martin and Wachendorfer are the only shareholders
of Martinaire. The Company further anticipates that the Co-Ownership Agreement
will require the parties thereto to contribute equally to the payment of all
amounts due to the lender under the Note. The Company expects the lease with
Martinaire governing such aircraft will require Martinaire to (i) maintain hull
insurance on the aircraft in an amount at least equal to the fair market value
of the aircraft and liability insurance of at least $50 million combined single
limit coverage and (ii) name the co-owners, including the Company, as additional
insureds and as loss payees.

Beginning in March 1993, Mr. Christopher, in his individual capacity,
subleased the Company's present facility at Dallas/Fort Worth International
Airport for a guaranteed minimum rent of $21,000 per month from Robert F.
Grammer, a director of the Company. During October 1994, Mr. Christopher
transferred his entire interest in this sublease to the Company, and the Company
assumed Mr. Christopher's obligations and liabilities to Mr. Grammer under the
sublease, including environmental liabilities, if any. See "Business -- Ground
Facilities."

Other than the delay in collecting the Martinaire receivable, the Company
believes that the terms of each transaction discussed above were as favorable to
Kitty Hawk as would have been obtainable from unaffiliated parties under similar
circumstances.

Under the terms of the settlement allocating the benefits of the ANET
Litigation, Mr. Christopher received rights to certain contingent future
payments. See "Business -- Legal Proceedings -- Litigation and Arbitration
Related to Postal Contract."

EXECUTIVE COMPENSATION

The table below sets forth information concerning the annual and long-term
compensation for services in all capacities to Kitty Hawk for fiscal year 1994
and 1995, with respect to those persons who were, at August 31, 1994 and 1995,
(i) the Chief Executive Officer and (ii) the other two most highly compensated
executive officers of the Company (collectively, with the Chief Executive
Officer, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITIONS FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION
- ----------------------------------------------- ----------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
M. Tom Christopher 1994 $120,000 $512,000 -- $ 25,022(1)
Chairman of the Board of Directors and Chief 1995 120,000 898,731 -- 352,163(2)
Executive Officer
Tilmon J. Reeves 1994 101,000 225,000 -- 2,982(3)
President and Chief Operating Officer 1995 125,000 108,335 245,708(4) 2,310(3)
Richard R. Wadsworth 1994 110,000 96,000 -- 1,675(3)
Senior Vice President -- Finance, Chief 1995 110,000 70,000 92,140(5) 2,262(3)
Financial Officer, and Secretary
</TABLE>

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

(1) Consists of (i) matching contributions of $2,975 to the Company's 401(k)
Savings Plan for Mr. Christopher and (ii) life insurance premiums of $22,047
paid on Mr. Christopher's behalf. Does not include any contingent payments
to Mr. Christopher under the ANET litigation settlement made subsequent to
fiscal year 1994. These payments are contingent upon the Emery contract
remaining in effect. See "Business -- Legal Proceedings -- Litigation and
Arbitration Related to Postal Contract."

(2) Consists of (i) contingent payments in the amount of $325,000 received by
Mr. Christopher under the ANET litigation settlement during fiscal year 1995
(ii) life insurance premiums of $25,500 paid on Mr. Christopher's behalf,
and (iii) matching contributions of $1,663 to the Company's 401(k) Savings
Plan for Mr. Christopher.

47
<PAGE> 50

(3) Consists of matching contributions to the Company's 401(k) Savings Plan.

(4) The option covering these shares was rescinded on June 12, 1996. See
"Management -- Employee Compensation Plans and Arrangements."

(5) The option covering these shares was rescinded on June 12, 1996, when Mr.
Wadsworth was granted a new option. See "Management -- Employee Compensation
Plans and Arrangements."

STOCK OPTIONS

The following table sets forth certain information concerning options
granted in fiscal year 1995 to the Company's Named Executive Officers. The
Company has no outstanding stock appreciation rights and granted no stock
appreciation rights during fiscal year 1995. The options described in the tables
below were replaced with options having an exercise price of $.01 per share.
Messrs. Reeves and Wadsworth fully exercised these replacement options on June
26, 1996. See "Management -- Employee Compensation Plans and Arrangements." No
options for the purchase of Common Stock are currently outstanding.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------------
GRANTED IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------- -------------- ----------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tilmon J. Reeves........ 245,708(1) 72.7% $7.81 October 5, 2004 $1,206,836 $3,058,359
Richard R. Wadsworth.... 92,140(2) 27.3% $7.81 October 5, 2004 $ 425,561 $1,146,878
</TABLE>

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

(1) The option covering these shares was rescinded on June 12, 1996. See
"Management -- Employee Compensation Plans and Arrangements."

(2) The option covering these shares was rescinded on June 12, 1996 when Mr.
Wadsworth was granted a new option. See "Management -- Employee Compensation
Plans and Arrangements."

The following table sets forth certain information concerning the value of
unexercised options held at August 31, 1995 by the Company's Named Executive
Officers. None of the Named Executive Officers exercised options during fiscal
year 1995.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-
UNEXERCISED OPTIONS AT 8/31/95 MONEY OPTIONS AT 8/31/95(1)
------------------------------- ---------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------------------------------------------------------- ---------------------------
<S> <C> <C>
Tilmon J. Reeves.............................. 0/245,708(2) $0/$0
Richard R. Wadsworth.......................... 0/92,140(3) $0/$0
</TABLE>

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

(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at August 31, 1995 ($5.62 per share as
determined by the Board of Directors) and the exercise price of the Named
Executive Officer's option. In determining the fair market value of the
Company's Common Stock, the Board of Directors relied upon an independent
appraisal of an investment banking firm, which considered various factors,
including the Company's financial condition and business prospects, its
operating results, and the absence of a market for its Common Stock.

(2) The option covering these shares was rescinded on December 31, 1995, when
Mr. Reeves was granted a new option. See "Management -- Employee
Compensation Plans and Arrangements."

48
<PAGE> 51

(3) The option covering these shares was rescinded on June 12, 1996, when Mr.
Wadsworth was granted a new option. See "Management -- Employee Compensation
Plans and Arrangements."

EMPLOYEE COMPENSATION PLANS AND ARRANGEMENTS

The Company has adopted an Omnibus Securities Plan (the "Plan") for the
employees of the Company and its subsidiaries and the outside directors of the
Company. The number of shares of Common Stock reserved for issuance under the
Plan is 300,000 shares. The Plan will be administered by the Compensation
Committee of the Board of Directors. The Compensation Committee may grant stock
based and non-stock based compensation to Plan participants, including
nonqualified stock options, incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, stock appreciation
rights, other derivative securities, stock bonuses, restricted stock, awards
denominated in stock units, securities convertible into stock, phantom stock,
dividend equivalent rights, and performance awards that are contingent upon the
Company's performance or the performance of the Plan participant. Awards under
the Plan may contain provisions that, if a change in control of the Company
occurs, give the Compensation Committee discretion to offer to purchase awards
from Plan participants and make adjustments or modifications to outstanding
awards to protect and maintain the rights and interests of the Plan participants
or take any other action the award agreements may authorize. A change in control
of the Company is deemed to occur upon any of the following events: (i) a
consolidation or merger in which the Company does not survive, unless the
Company's stockholders retain the same proportionate common stock ownership in
the surviving company after the merger, (ii) a sale of all or substantially all
of the Company's assets, (iii) the approval by the Company's stockholders of a
plan to dissolve or liquidate the Company, (iv) a third party acquires 20% or
more of the Company's voting securities, or (v) during any two-year period,
persons who constituted a majority of the Company's Board of Directors at the
beginning of such period cease to serve as directors for any reason other than
death, unless each new director was approved by at least two-thirds of the
directors then still in office who were directors at the beginning of the
two-year period.

Under the Company's Annual Incentive Compensation Plan, the Compensation
Committee will determine and award semiannual bonuses to employees of the
Company. The aggregate amount of bonuses available for award by the Compensation
Committee is limited to 10% of the Company's income before the deduction of
income taxes and the bonuses that may be paid under the Annual Incentive
Compensation Plan. The Company may elect under the Annual Incentive Compensation
Plan to pay up to the full amount of the bonuses in Common Stock. Up to a
maximum of 200,000 shares may be awarded as bonuses under the Annual Incentive
Compensation Plan.

Kitty Hawk also intends to amend its 401(k) Savings Plan to provide that it
may elect to match employee contributions in cash or Common Stock and that
employees may elect to direct that their accounts be invested in Common Stock.
The Company intends to amend both the Plan and the 401(k) Savings Plan prior to
issuing any Common Stock thereunder to provide that the aggregate number of
shares of Common Stock to be issued pursuant to the 401(k) Savings Plan and the
Plan cannot exceed 300,000 shares.

Employees of the Company will be able to purchase an aggregate of 100,000
shares of Common Stock pursuant to an Employee Stock Purchase Plan under Section
423 of the Internal Revenue Code of 1986, as amended, at a price equal to 85% of
the market value of the Common Stock on certain specified dates effective upon
the later of April 1, 1997 or thirty days following the registration of shares
reserved under such Employee Stock Purchase Plan.

On October 5, 1994, the Company granted Mr. Reeves and Mr. Wadsworth
nonqualified options to purchase an aggregate of 245,708 shares and 92,140
shares, respectively, of Common Stock. These options had a term of 10 years, an
exercise price of $7.81 per share, and vested in five equal annual increments
commencing on August 31, 1995. Upon the occurrence of a change in control of the
Company, the death or disability of the optionee or the termination of the
optionee other than for cause, the vesting of these nonqualified options would
have automatically accelerated. In the event of a change in control of the
Company, the Compensation Committee could have, in its discretion, elected to
repurchase option shares at their market value or make adjustments or
modifications to outstanding options to protect and maintain the

49
<PAGE> 52

rights and interests of optionees. A change in control of the Company was deemed
to occur in the same manner as described above with respect to the Plan.

On December 31, 1995, the Company granted Mr. Reeves an option to purchase
390,707 shares of Common Stock and on June 12, 1996, rescinded all options
earlier granted to Mr. Reeves. The December 31, 1995 option would have
terminated upon the earliest of (i) the date at which all optioned shares had
been delivered, (ii) December 31, 2005, or (iii) the date 12 months after Mr.
Reeves' death. The option was fully vested and had an exercise price of $0.01
per share. During the term of the option, the Company agreed to pay life
insurance premiums required to maintain a term policy insuring Mr. Reeves up to
an amount not to exceed $1,600,000. If Kitty Hawk fulfilled its obligations
under the life insurance contract and Mr. Reeves died before all of the options
were exercised, the remaining options would have terminated automatically upon
Mr. Reeves' death.

On June 12, 1996, the Company granted Mr. Wadsworth an option to purchase
153,567 shares of Common Stock and rescinded all options earlier granted to Mr.
Wadsworth. The June 12, 1996 option would have terminated upon the earliest of
(i) the date at which all optioned shares had been delivered, (ii) December 31,
2015, or (iii) the date 12 months after Mr. Wadsworth's death. The option was
fully vested and had an exercise price of $0.01 per share.

On June 26, 1996, Messrs. Reeves and Wadsworth fully exercised their
options. In order to satisfy any income tax withholding obligations arising by
virtue of the exercise of their options, at the election of each of Messrs.
Reeves and Wadsworth pursuant to the terms of their respective options, the
Company withheld from the shares to be delivered to Mr. Reeves, 156,283 shares
and Mr. Wadsworth, 61,427 shares, the fair market value of which is anticipated
to equal to the Company's tax withholding obligation with respect thereto.
Pursuant to their respective option agreements, Messrs. Reeves and Wadsworth
have the right to have the Company register shares received upon exercise of
their options in at least the same ratio of ownership as the number of Mr.
Christopher's common shares included in a registration of Kitty Hawk's shares.
Messrs. Reeves and Wadsworth waived this right with respect to this offering.

The Company also has entered into split-dollar life insurance agreements
with a trust for the benefit of Mr. Christopher and his wife to provide the
trust with death benefits of an aggregate of $5 million under life insurance
policies. Under the split-dollar agreements, the Company pays the premiums under
the insurance policies. Upon Mr. Christopher's death or the termination of the
agreements, the Company is entitled to reimbursement of premiums it has paid to
the extent of the death benefits paid or the cash surrender value of the
policies, as applicable.

Pursuant to a salary continuation agreement, in the event that the Board of
Directors determines that Mr. Christopher has become disabled, the Company has
agreed to continue to pay Mr. Christopher the average monthly compensation he
received during the two years prior to the date of his disability until he dies
or is no longer disabled.

Kitty Hawk has adopted its employee compensation plans and arrangements to
motivate certain employees through ownership of Common Stock and options to
purchase Common Stock and to encourage all employees to own Common Stock.

EMPLOYMENT AGREEMENTS

Mr. Christopher has an employment agreement with Kitty Hawk that provides
for an initial annual base salary of at least $125,000 and bonuses determined by
the Compensation Committee pursuant to the Company's Annual Incentive
Compensation Plan and otherwise. Mr. Christopher's employment agreement contains
(i) a confidentiality provision that prohibits disclosure of the Company's
proprietary information and (ii) a covenant not to compete that provides upon
Mr. Christopher's termination of employment with the Company for any reason, Mr.
Christopher shall not engage, directly or indirectly, in the air logistics,
charter brokerage, on-demand, or scheduled carriage business under an FAA Part
121 or Part 135 certificate for five years following such termination. The
employment agreement may be terminated by either party with or without cause. If
the employment agreement is terminated by the Company without a material breach
by Mr. Christopher, he is entitled to six months of compensation at his
then-current salary.

50
<PAGE> 53

Messrs. Reeves and Wadsworth have employment agreements with Kitty Hawk
that provide for an initial annual base salary of at least $115,000 and
$110,000, respectively, and annual bonuses determined by the Compensation
Committee pursuant to the Company's Annual Incentive Compensation Plan and
otherwise. These employment agreements provide that Mr. Reeves and Mr. Wadsworth
are prohibited from engaging in the air logistics, charter brokerage, on-demand,
or scheduled carriage business under an FAA Part 121 or Part 135 certificate for
three and two years, respectively, following termination of employment. These
employment agreements also contain a confidentiality provision that prohibits
disclosure of the Company's proprietary information. These employment agreements
may be terminated by either party thereto with or without cause. Mr. Reeves'
employment agreement provides that if he is terminated by the Company without
material breach by Mr. Reeves, he shall be entitled to 100% of his then-current
salary in the year following termination and 50% of such annual compensation in
both the second and third year following termination and all rights under the
stock options and other benefits described above. Mr. Wadsworth's employment
agreement provides that if he is terminated by the Company without material
breach by Mr. Wadsworth, he shall be entitled to 100% of his then-current salary
in the year following termination and 50% of such annual compensation in the
second and third year following termination and all rights under the stock
options and other benefits described above.

CERTAIN TRANSACTIONS

Prior to being employed by the Company as an executive officer, Mr.
Wadsworth was paid fees aggregating $126,000 during fiscal years 1992 and 1993
for consulting services rendered to the Company in connection with its bid for
the postal contract that was the subject of the ANET Litigation.

Mr. Craig, a director of the Company, is of counsel to Burke, Wright &
Keiffer, P.C., counsel to the Company. During fiscal years 1993, 1994, and 1995,
the Company paid an aggregate of $533,786 to Burke, Wright & Keiffer, P.C. for
legal services rendered.

Although Kitty Hawk has no present intention to do so, it may in the future
enter into other transactions and agreements incidental to its business with its
directors, officers, and principal stockholders. The Company intends any such
transactions and agreements to be on terms no less favorable to the Company than
could be obtained from unaffiliated parties on an arms' length basis.
Accordingly, the Company has adopted a policy that any such transaction in which
the amount involved exceeds $50,000 or any such transactions in which the
aggregate amount per director, officer, or 10% stockholder exceeds $100,000 per
fiscal year must be approved by a majority of the Company's independent and
disinterested directors. See "Management -- Compensation Committee Interlocks
and Insider Participation."

51
<PAGE> 54

PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDER

The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock as of August 28, 1996 and as
adjusted to reflect the sale of the shares offered hereby from (i) each person
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) the Selling Stockholder, (iii) each director of the Company, (iv)
each executive officer of the Company, and (v) all of the directors and
executive officers of the Company as a group. See "Management" and "Certain
Transactions" for a description of the Selling Stockholder's position, office,
or other material relationship with the Company within the past three years.

All shares shown in the table below are held with sole voting and
investment power, subject to community property laws.

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BENEFICIALLY BEFORE BENEFICIALLY AFTER
OFFERING SHARES OFFERING
------------------- BEING -------------------
NAME NUMBER PERCENT SOLD NUMBER PERCENT
- -------------------------------------------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
M. Tom Christopher (1)...................... 7,423,436 95.8% 300,000 7,123,436 68.2%
Tilmon J. Reeves (1)........................ 234,424 3.0% 0 234,424 2.2%
Richard R. Wadsworth (1).................... 92,140 1.2% 0 92,140 0.9%
All directors and executive officers as a
group..................................... 7,750,000 100.0% 300,000 7,450,000 71.3%
</TABLE>

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

(1) The address for this stockholder is 1515 West 20th Street, P.O. Box 612787,
Dallas/Fort Worth International Airport, Texas 75261.

52
<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of Kitty Hawk consists of (i) 25,000,000
shares of Common Stock, par value $.01 per share and (ii) 1,000,000 shares of
preferred stock, par value $1.00 per share. On August 15, 1996, there were three
holders of record of Common Stock with 7,750,000 shares outstanding, and no
shares of Preferred Stock were outstanding.

COMMON STOCK

Holders of shares of Common Stock are entitled to share ratably in such
dividends as may be declared by the Board of Directors and paid by the Company
out of funds legally available therefor, subject to prior rights of any
outstanding shares of any preferred stock. See "Dividend Policy." In the event
of any dissolution, liquidation, or winding up of the Company, holders of shares
of Common Stock are entitled to share ratably in assets remaining after payment
of all liabilities and liquidation preferences, if any.

Except as otherwise required by law or the Certificate of Incorporation,
the holders of Common Stock are entitled to one vote per share on all matters
voted on by stockholders, including the election of directors. The Certificate
of Incorporation limits the aggregate voting power of non-U.S. persons to
22 1/2% of the votes voting on or consenting to any matter. See
"Business -- Government Regulation."

Holders of shares of Common Stock have no preemptive, cumulative voting,
subscription, redemption, or conversion rights. The rights, preferences, and
privileges of holders of Common Stock are subject to the rights, preferences,
and privileges granted to the holders of any series of preferred stock which the
Company may issue in the future.

PREFERRED STOCK

The Board of Directors may, without further action by the Company's
stockholders, from time to time, direct the issuance of fully authorized shares
of preferred stock in classes or series and may, at the time of issuance,
determine the powers, rights, preferences, and limitations of each class or
series. Satisfaction of any dividend preferences on outstanding shares of
preferred stock would reduce the amount of funds available for the payment of
dividends on Common Stock. Also, holders of preferred stock would be entitled to
receive a preference payment in the event of any liquidation, dissolution, or
winding up of the Company before any payment is made to the holders of Common
Stock. Under certain circumstances, the issuance of such preferred stock may
render more difficult or tend to discourage a merger, tender offer, or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities, or the removal of incumbent management.

SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS

The Certificate of Incorporation and Bylaws of Kitty Hawk include certain
provisions that could have anti-takeover effects. The provisions are intended to
enhance the likelihood of continuity and stability in the composition of, and in
the policies formulated by, the Board of Directors. These provisions also are
intended to help ensure that the Board of Directors, if confronted by a surprise
proposal from a third party that has acquired a block of Common Stock of the
Company, will have sufficient time to review the proposal, to develop
appropriate alternatives to the proposal, and to act in what the Board of
Directors believes to be the best interests of the Company and its stockholders.
These provisions of the Certificate of Incorporation may not be amended or
repealed by the stockholders of the Company except upon the vote of the holders
of at least two-thirds of the outstanding shares of each class of the Company's
capital stock then entitled to vote thereon.

The following is a summary of the provisions contained in the Company's
Certificate of Incorporation and Bylaws and is qualified in its entirety by
reference to such documents in the respective forms filed as exhibits to the
Registration Statement of which this Prospectus forms a part.

53
<PAGE> 56

Amendment of Bylaw Provisions

The Certificate of Incorporation provides that Bylaw provisions may be
adopted, altered, amended, or repealed only by the affirmative vote of (i) at
least two-thirds of the members of the Board of Directors who are elected by the
holders of Common Stock or (ii) the holders of at least two-thirds of the
outstanding shares of each class of the Company's capital stock then entitled to
vote thereon.

Classified Board of Directors

The Certificate of Incorporation provides for a Board of Directors divided
into three classes of directors serving staggered three-year terms. The
classification of directors has the effect of making it more difficult for
stockholders to change the composition of the Board of Directors in a short
period of time. At least two annual meetings of stockholders, instead of one,
will generally be required to effect a change in a majority of the Board of
Directors.

Number of Directors; Filling Vacancies; Removal

The Certificate of Incorporation provides that the Board of Directors will
fix the number of members of the Board of Directors to consist of at least one
member (plus such number of directors as may be elected from time to time
pursuant to the terms of any series of preferred stock that may be issued and
outstanding from time to time). The Company's Bylaws provide that the Board of
Directors, acting by majority vote of the directors then in office, may fill any
newly created directorship or vacancies on the Board of Directors.

Under the Delaware General Corporation Law (the "DGCL"), in the case of a
corporation having a classified board, stockholders may remove a director only
for cause (unless the certificate of incorporation provides otherwise). The
Company's Certificate of Incorporation provides that a director may only be
removed for cause. "Cause" is defined in the Certificate of Incorporation to
mean that a director (i) has been convicted of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal, (ii) has
missed 12 consecutive meetings of the Board of Directors, or (iii) has been
adjudged by a court of competent jurisdiction to be liable for gross negligence
or misconduct in the performance of his duties to the corporation in a matter of
substantial importance to the corporation, and such adjudication has become
final and non-appealable. These provisions will preclude a stockholder from
simultaneously removing incumbent directors without cause and gaining control of
the Board of Directors by filling the vacancies created by such removal with its
own nominees.

Special Meetings

The Bylaws and Certificate of Incorporation provide that special meetings
of stockholders may be called by a majority of the Board of Directors, the
Chairman of the Board of Directors, or by any holder or holders of at least 25%
of any class of the Company's outstanding capital stock then entitled to vote at
the meeting.

Advance Notice Requirements for Stockholder Proposals and Director Nominees

The Bylaws establish an advance notice procedure with regard to business
proposed to be submitted by a stockholder at any annual or special meeting of
stockholders of the Company, including the nomination of candidates for election
as directors. The procedure provides that a written notice of proposed
stockholder business at any annual meeting must be received by the Secretary of
the Company not more than 180 days nor less than 120 days before the first
anniversary of the prior year's annual meeting or, in the event of a special
meeting, not more than 10 days after the notice of the special meeting.

Notice to Kitty Hawk from a stockholder who proposes to nominate a person
at a meeting for election as a director must contain all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, including such
person's written consent to being named in a proxy statement as a nominee and to
serving as a director if elected.

54
<PAGE> 57

The chairman of a meeting of stockholders may determine that a person is
not nominated in accordance with the nominating procedure, in which case such
person's nomination will be disregarded. If the chairman of a meeting of
stockholders determines that other business has not been properly brought before
such meeting in accordance with the Bylaw procedures, such business will not be
conducted at the meeting. Nothing in the nomination procedure or the business
will preclude discussion by any stockholder of any nomination or business
properly made or brought before the annual or any other meeting in accordance
with the foregoing procedures.

Limitations on Directors' Liability

The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by Delaware law, no director shall be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director. The effect of this provision is to eliminate the rights of the Company
and its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of fiduciary
duty as a director (including breaches resulting from gross negligence), except
for liability (i) for any breach of his duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (unlawful payments of dividends or unlawful stock repurchases or
redemptions), or (iv) for any transaction from which the director derived an
improper personal benefit. This provision also will not limit the liability of
directors under federal securities laws for violations not involving a breach of
fiduciary duty. This elimination of liability for monetary damages permitted by
Delaware law does not alter the standard of conduct with which directors must
comply nor does it affect the availability of equitable relief to the Company
and its stockholders.

Restrictions on Foreign Directors, Officers and Voting

The Company's Certificate of Incorporation limits the aggregate voting
power of non-U.S. persons to 22 1/2% of the votes voting on or consenting to any
matter. Furthermore, the Bylaws do not permit non-U.S. citizens to serve as
directors or officers of the Company.

DELAWARE STATUTE

The Certificate of Incorporation of Kitty Hawk provides for the Company to
be subject to Section 203 of the DGCL ("Section 203"). Under Section 203,
certain transactions and business combinations between a corporation and an
"interested stockholder" owning 15% or more of the corporation's outstanding
voting stock are restricted, for a period of three years from the date the
stockholder becomes an interested stockholder. Generally, Section 203 prohibits
significant business transactions such as a merger with, disposition of assets
to, or receipt of disproportionate financial benefits by, the interested
stockholder, or any other transaction that would increase the interested
stockholder's proportionate ownership of any class or series of the Company's
capital stock unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination, has been approved by the
Board of Directors before the person becomes an interested stockholder; (ii) the
interested stockholder acquires 85% or more of the outstanding voting stock of
the Company in the same transaction that makes it an interested stockholder; or
(iii) on or after the date the person becomes an interested stockholder, the
business combination is approved by the Board of Directors and by the holders of
at least two-thirds of the Company's outstanding voting stock at an annual or
special meeting, excluding shares owned by the interested stockholder.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.

55
<PAGE> 58

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 10,450,000 shares of the Company's Common
Stock will be outstanding. The 3,000,000 shares (3,450,000 shares if the
Underwriters' over-allotment option is exercised in full) of Common Stock sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless acquired by "affiliates" of the
Company. All of the remaining 7,450,000 shares (7,000,000 shares if the
Underwriters' over-allotment option is exercised in full) of Common Stock are
deemed "restricted securities" within the meaning of Rule 144 under the
Securities Act (the "Restricted Shares") and may be resold only in compliance
with (i) Rule 701 of the Securities Act or (ii) Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an "affiliate," who has beneficially
owned his or her shares for at least two years from the later of the date such
Restricted Shares were acquired from the Company or (if applicable) the date
they were acquired from an "affiliate," is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the then outstanding shares of Common Stock (approximately 104,500 shares
upon consummation of this offering) or (ii) the average weekly trading volume of
the then outstanding shares during the four calendar weeks preceding each such
sale. Sales under Rule 144 also are subject to certain manner of sale
restrictions and notice requirements and to the availability of current public
information concerning the Company. A person (or persons whose shares are
aggregated) who is not deemed an "affiliate" of the Company and has not been an
affiliate of the Company for at least the prior three months, and who has owned
shares for at least three years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares under Rule 144 without
regard to the volume limitations and the other conditions described above. As
defined in Rule 144, an "affiliate" of an issuer is a person that directly or
indirectly, through the use of one or more intermediaries, controls, or is
controlled by, or is under the common control with, such issuer.

Any employee, officer, or director of Kitty Hawk who purchases his or her
shares pursuant to a written compensatory plan or contract is entitled to rely
on the resale provisions of Rule 701 under the Securities Act, which permits
non-affiliates, subject to the limitations and requirements of Rule 701, to sell
their Rule 701 shares without having to comply with the public information,
holding period, volume limitations, or notice provisions of Rule 144 and permits
affiliates, subject to the limitations and restrictions of Rule 701, to sell
their Rule 701 shares without having to comply with Rule 144's holding period
restrictions, in each case commencing 90 days from the date of this Prospectus.

The Company intends to file a registration statement under the Securities
Act covering the 600,000 shares of Common Stock reserved for issuance under the
Company's Omnibus Securities Plan, 401(k) Savings Plan, Annual Incentive
Compensation Plan and Employee Stock Purchase Plan (the "Plans"). See
"Management -- Employee Compensation Plans and Arrangements." As of the date
hereof, no options or shares had been issued under any of these Plans. Such
registration statement is expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market
when issued pursuant to the Plans, subject to provisions of the Plans, including
vesting, and the lock-up agreements described herein.

The Company, its directors and executive officers (other than the Selling
Stockholder, who has agreed to a period of 360 days) have agreed that for a
period of 180 days from the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right, or warrant to purchase, or otherwise transfer,
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, Common Stock of
the Company, except for the grant of options or other rights under the Company's
Omnibus Securities Plan so long as such options do not vest within such 180 day
period.

56
<PAGE> 59

UNDERWRITING

Upon the terms and subject to the conditions of the Underwriting Agreement
dated the date hereof, each Underwriter named below has severally agreed to
purchase, and the Company and the Selling Stockholder have agreed to sell to
such Underwriter, the number of shares of Common Stock set forth opposite the
name of such Underwriter.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
Smith Barney Inc. ...........................................
Alex. Brown & Sons Incorporated..............................
Fieldstone FPCG Services, L.P. ..............................

-------------
Total.............................................. 3,000,000
=============
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all Shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such Shares are taken.

The Underwriters, for whom Smith Barney Inc., Alex. Brown & Sons
Incorporated and Fieldstone FPCG Services, L.P. are acting as the
Representatives, propose to offer the Shares directly to the public at the
public offering price set forth on the cover page of this Prospectus and part of
the shares to certain dealers at a price which represents a concession not in
excess of $ per share under the public offering price. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of
$ per share to certain other dealers. After the initial offering of the
shares to the public, the public offering price and such concessions may be
changed by the Representatives. The Representatives of the Underwriters have
advised the Company that the Underwriters do not intend to confirm any Shares to
any accounts over which they exercise discretionary authority.

The Selling Stockholder has granted to the Underwriters an option,
exercisable for thirty days from the date of this Prospectus, to purchase up to
450,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with the offering of the Shares
offered hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of Shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
Shares listed in such table.

The Company, its directors and executive officers (other than the Selling
Stockholder who has agreed to a period of 360 days) have agreed that, for a
period of 180 days from the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right, or warrant to purchase, or

57
<PAGE> 60

otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
Common Stock of the Company, except for the grant of options or other rights
under the Company's Omnibus Securities Plan so long as such options do not vest
within such 180 day period.

Prior to this offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Shares of Common Stock included in this offering has been determined by
negotiations between the Company, the Selling Stockholder, and the
Representatives. Among the factors considered in determining such price were the
history of and prospects for the Company's business and the industry in which it
competes, an assessment of the Company's management and the present state of the
Company's development, the past and present revenues and earnings of the
Company, the prospects for growth of the Company's revenues and earnings, the
current state of the U.S. economy and the current level of economic activity in
the industry in which the Company competes and in related or comparable
industries, and currently prevailing conditions in the securities markets,
including current market valuations of publicly traded companies which are
comparable to the Company.

The Company, the Selling Stockholder, and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933.

Fieldstone FPCG Services, L.P., one of the Underwriters, and its affiliates
have provided investment banking services to the Company from time to time, for
which it has received customary fees, including acting as financial advisor and
placement agent in connection with the Company's issuance of senior secured
debt.

LEGAL MATTERS

The validity of the shares offered hereby and certain other legal matters
will be passed upon for the Company and the Selling Stockholder by Haynes and
Boone, LLP, Dallas, Texas. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Alston & Bird, Atlanta,
Georgia.

EXPERTS

The consolidated financial statements of Kitty Hawk, Inc., at August 31,
1994 and 1995 and at May 31, 1996, and for each of three years in the period
ended August 31, 1995 and for the nine months ended May 31, 1996, appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

58
<PAGE> 61

ADDITIONAL INFORMATION

Kitty Hawk has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Common Stock offered hereby. This Prospectus, which is
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain portions having been omitted pursuant to the rules and regulations of
the Commission. For further information with respect to the Company and the
Common Stock, reference is hereby made to such Registration Statement, including
the exhibits and schedules thereto. The Registration Statement (with exhibits
and schedules thereto) can be inspected and copied at the public reference
facilities maintained by the Commission at its principal offices at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 29549, at prescribed rates. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov.

Kitty Hawk intends to furnish to stockholders annual reports containing
audited consolidated financial statements and an opinion thereon expressed by
independent auditors and quarterly reports for each of the first three quarters
of each fiscal year containing unaudited condensed financial information.

59
<PAGE> 62

KITTY HAWK, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors......................................................... F-2

Consolidated Balance Sheets as of August 31, 1994 and 1995 and May 31, 1995 (unaudited)
and 1996............................................................................. F-3

Consolidated Statements of Income for the years ended August 31, 1993, 1994 and 1995
and the nine months ended May 31, 1995 (unaudited) and 1996.......................... F-4

Consolidated Statements of Stockholder's Equity for the years ended August 31, 1993,
1994 and 1995 and the nine months ended May 31, 1996................................. F-5

Consolidated Statements of Cash Flows for the years ended August 31, 1993, 1994 and
1995 and the nine months ended May 31, 1995 (unaudited) and 1996..................... F-6

Notes to Consolidated Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE> 63

REPORT OF INDEPENDENT AUDITORS

Stockholders
Kitty Hawk, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Kitty Hawk,
Inc. and subsidiaries as of August 31, 1994 and 1995, and May 31, 1996 and the
related consolidated statements of income, stockholder's equity and cash flows
for each of the three years in the period ended August 31, 1995 and the nine
months ended May 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kitty Hawk,
Inc. and subsidiaries at August 31, 1994 and 1995, and May 31, 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1995 and the nine months ended May
31, 1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Dallas, Texas
June 28, 1996

F-2
<PAGE> 64

KITTY HAWK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
-------------------------- --------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>

ASSETS

Current assets
Cash and cash equivalents............... $ 4,838,363 $ 3,801,378 $ 3,770,170 $ 4,249,314
Trade accounts receivable............... 15,640,873 12,967,734 7,892,621 12,662,398
Receivables from affiliates............. 481,297 -- 437,000 --
Deferred income taxes................... 159,732 50,410 159,732 1,218,272
Aircraft supplies....................... 121,671 98,386 293,615 36,163
Prepaid expenses and other assets....... 265,132 797,825 1,309,753 1,143,722
----------- ----------- ----------- -----------
Total current assets............ 21,507,068 17,715,733 13,862,891 19,309,869
Property and equipment
Aircraft................................ 18,565,277 36,179,455 36,179,455 52,994,099
Machinery and equipment................. 1,185,203 1,425,272 1,402,740 1,552,945
Furniture and fixtures.................. 240,922 251,349 251,349 252,601
Transportation equipment................ 111,625 176,057 144,182 222,259
----------- ----------- ----------- -----------
20,103,027 38,032,133 37,977,726 55,021,904
Less: accumulated depreciation and
amortization......................... (3,699,176) (7,794,332) (6,458,717) (12,355,097)
----------- ----------- ----------- -----------
Net property and equipment........... 16,403,851 30,237,801 31,519,009 42,666,807
----------- ----------- ----------- -----------
Total assets.............................. $37,910,919 $47,953,534 $45,381,900 $61,976,676
=========== =========== =========== ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
Accounts payable........................ $11,711,275 $ 9,327,109 $ 6,574,370 $ 7,274,750
Accrued expenses........................ 1,332,040 1,336,696 1,758,800 1,431,278
Accrued maintenance reserves............ 596,369 2,026,255 2,027,363 1,570,743
Income taxes payable.................... 1,883,898 -- 120,260 235,890
Current maturities of long-term debt.... 1,760,799 3,278,553 2,655,483 4,346,924
----------- ----------- ----------- -----------
Total current liabilities....... 17,284,381 15,968,613 13,136,276 14,859,585
Long-term debt............................ 7,384,136 13,702,652 14,553,099 21,392,393
Deferred income taxes..................... 692,892 1,316,365 692,892 2,440,569
Commitments and contingencies
Stockholder's equity
Preferred stock, $1 par value:
Authorized shares -- 1,000,000, none
issued............................... -- -- -- --
Common stock, $.01 par value: Authorized
shares -- 25,000,000, issued and
outstanding -- 7,423,436............. 74,234 74,234 74,234 74,234
Additional paid-in capital.............. -- -- -- 2,906,758
Retained earnings....................... 12,475,276 16,891,670 16,925,399 20,303,137
----------- ----------- ----------- -----------
Total stockholder's equity...... 12,549,510 16,965,904 16,999,633 23,284,129
----------- ----------- ----------- -----------
Total liabilities and stockholder's
equity.................................. $37,910,919 $47,953,534 $45,381,900 $61,976,676
=========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE> 65

KITTY HAWK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, NINE MONTHS ENDED MAY 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Air freight carrier.................. $12,938,780 $ 28,284,894 $ 41,117,564 $30,768,148 $ 37,042,033
Air logistics........................ 52,840,224 79,414,952 62,592,819 47,403,641 70,083,930
----------- ------------ ------------ ----------- ------------
Total revenues................ 65,779,004 107,699,846 103,710,383 78,171,789 107,125,963
Costs of revenues:
Air freight carrier.................. 8,912,348 19,549,833 28,104,280 20,795,051 27,245,989
Air logistics........................ 46,288,250 73,401,606 57,428,344 43,566,922 62,488,433
----------- ------------ ------------ ----------- ------------
Total costs of revenues....... 55,200,598 92,951,439 85,532,624 64,361,973 89,734,422
----------- ------------ ------------ ----------- ------------
Gross profit........................... 10,578,406 14,748,407 18,177,759 13,809,816 17,391,541
General and administrative expenses.... 4,393,876 6,012,975 7,832,167 5,155,901 6,675,633
Non-qualified employee profit sharing
expense.............................. 250,000 731,862 1,000,957 771,919 901,074
Stock option grant to executive........ -- -- -- -- 2,906,758
----------- ------------ ------------ ----------- ------------
Operating income....................... 5,934,530 8,003,570 9,344,635 7,881,996 6,908,076
Other income (expense):
Interest expense..................... (134,420) (342,502) (1,184,921) (782,951) (1,344,202)
Contract settlement income, net...... 724,683 1,177,742 -- -- --
Other, net........................... 192,789 (431,957) (600,667) 87,010 169,435
----------- ------------ ------------ ----------- ------------
Income before income taxes............. 6,717,582 8,406,853 7,559,047 7,186,055 5,733,309
Income taxes........................... 2,612,559 3,146,157 3,142,653 2,735,932 2,321,842
----------- ------------ ------------ ----------- ------------
Net income............................. $ 4,105,023 $ 5,260,696 $ 4,416,394 $ 4,450,123 $ 3,411,467
=========== ============ ============ =========== ============
Net income per share................... $ 0.52 $ 0.66 $ 0.55 $ 0.56 $ 0.43
=========== ============ ============ =========== ============
Weighted average common and common
equivalent shares outstanding........ 7,967,710 7,967,710 7,967,710 7,967,710 7,967,710
=========== ============ ============ =========== ============
</TABLE>

See accompanying notes.

F-4
<PAGE> 66

KITTY HAWK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
-------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at August 31, 1992........ $106,048 $ -- $ 3,138,743 $(61,000) $ 3,183,791
Net income...................... -- -- 4,105,023 -- 4,105,023
-------- ---------- ----------- -------- -----------
Balance at August 31, 1993........ 106,048 -- 7,243,766 (61,000) 7,288,814
Retirement of treasury stock in
connection with the Kitty
Hawk, Inc. merger............ (31,814) -- (29,186) 61,000 --
Net income...................... -- -- 5,260,696 -- 5,260,696
-------- ---------- ----------- -------- -----------
Balance at August 31, 1994........ 74,234 -- 12,475,276 -- 12,549,510
Net income...................... -- -- 4,416,394 -- 4,416,394
-------- ---------- ----------- -------- -----------
Balance at August 31, 1995........ 74,234 -- 16,891,670 -- 16,965,904
Stock option grant to
executive.................... -- 2,906,758 -- -- 2,906,758
Net income...................... -- -- 3,411,467 -- 3,411,467
-------- ---------- ----------- -------- -----------
Balance at May 31, 1996........... $ 74,234 $2,906,758 $20,303,137 $ -- $23,284,129
======== ========== =========== ======== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 67

KITTY HAWK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, NINE MONTHS ENDED MAY 31,
----------------------------------------- ---------------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income........................... $ 4,105,023 $ 5,260,696 $ 4,416,394 $ 4,450,123 $ 3,411,467
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 976,739 1,935,348 4,095,156 2,759,541 4,722,054
(Gain) loss disposal of property
and equipment.................... (41,860) 62,251 -- -- --
Aircraft received in contract
settlement....................... -- (750,000) -- -- --
Deferred income taxes.............. 1,186,728 (638,568) 732,795 -- (43,658)
Stock option grant to executive.... -- -- -- -- 2,906,758
Deferred income.................... (83,333) -- -- -- --
Changes in operating assets and
liabilities:
Trade accounts receivable........ (3,159,203) (8,036,613) 2,673,139 7,748,252 305,336
Contract settlement receivable... (3,500,000) 3,500,000 -- -- --
Receivables from affiliates...... (123,476) (53,035) 481,297 44,297 --
Aircraft supplies................ (16,179) (19,778) 23,285 (171,944) 62,223
Prepaid expenses and other
assets........................ (137,168) 283,342 (532,693) (1,044,621) (345,897)
Accounts payable and accrued
expenses...................... 4,659,023 4,063,034 (2,379,510) (4,710,145) (1,957,777)
Accrued maintenance reserves..... 190,333 379,535 1,429,886 1,430,994 (455,512)
Income taxes payable............. 269,377 1,614,521 (1,883,898) (1,763,638) 235,890
----------- ------------ ------------ ------------ ------------
Net cash provided by operating
activities........................... 4,326,004 7,600,733 9,055,851 8,742,859 8,840,884
Investing activities
Capital expenditures................. (1,317,619) (13,875,983) (17,929,106) (17,874,699) (17,151,060)
Proceeds from sale of property and
equipment.......................... 1,097,761 -- -- -- --
----------- ------------ ------------ ------------ ------------
Net cash used in investing
activities........................... (219,858) (13,875,983) (17,929,106) (17,874,699) (17,151,060)
Financing activities
Proceeds from issuance of long-term
debt............................... -- 10,916,656 9,911,240 9,401,826 11,225,000
Repayments of long-term debt......... (1,391,011) (2,747,533) (2,074,970) (1,338,179) (2,466,888)
----------- ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities................. (1,391,011) 8,169,123 7,836,270 8,063,647 8,758,112
----------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents..................... 2,715,135 1,893,873 (1,036,985) (1,068,193) 447,936
Cash and cash equivalents at beginning
of period............................ 229,355 2,944,490 4,838,363 4,838,363 3,801,378
----------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end
of period............................ $ 2,944,490 $ 4,838,363 $ 3,801,378 $ 3,770,170 $ 4,249,314
=========== ============ ============ ============ ============
</TABLE>

See accompanying notes.

F-6
<PAGE> 68

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Kitty Hawk, Inc. and its subsidiaries (the "Company") provide air freight
services through two related businesses: (i) an air freight carrier and (ii) an
air logistics service provider, all primarily in North America. The Company
provided air logistics services to one customer which accounted for
approximately 55%, 63%, 47% and 39% of its revenues in fiscal years 1993, 1994
and 1995 and the nine months ended May 31, 1996, respectively. Related accounts
receivable from this customer at August 31, 1994 and 1995 and May 31, 1996, were
approximately $7,743,000, $5,089,000 and $4,310,000, respectively. The contract
for these services is effective through May 31, 1997; however, such contract may
be canceled by either party with 30 days notice. Another customer accounted for
approximately 26%, 10%, 10% and 20% of the Company's revenues in fiscal years
1993, 1994 and 1995 and the nine months ended May 31, 1996, respectively. The
Company generally sells on open accounts with 30-day terms and does not require
collateral for credit sales.

Principles of Consolidation

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

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives ranging from three to ten
years. Convair and DC-9 airframes are depreciated over the period remaining to
the next major airframe overhaul since the Company does not expect to perform
major airframe overhauls on these aircraft. Boeing 727-200 airframes are
depreciated over an estimated useful life of ten years.

Costs relating to major airframe overhauls are capitalized as incurred and
amortized over the estimated number of flight hours until the next overhaul (the
deferral method). No major airframe overhauls have been performed to date.

Estimated costs relating to periodic jet airframe maintenance are accrued
over the flight hours remaining before such periodic maintenance must be
performed. Costs relating to non-jet periodic airframe maintenance are expensed
as incurred.

With respect to aircraft engines, the estimated useful life is the period
to the next required engine overhaul, as the Company currently anticipates the
cost of overhauling its engines would exceed the cost of replacement.

Income Taxes

Income taxes have been provided using the liability method in accordance
with the Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes.

Revenue Recognition

Revenues are recognized as services are provided.

Net Income Per Share

Net income per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. The effect of options to purchase 390,707 and

F-7
<PAGE> 69

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

153,567 shares of the Company's common stock at $0.01 granted to certain
executives in December 1995 and June 1996, respectively, have been included in
the calculation of weighted average common and common equivalent shares for all
periods presented. As a result of the merger, there was no financial change in
basis of the Company.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and held in banks, money market funds, and other investments with
original maturities of three months or less.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Reorganization

In October 1994, Kitty Hawk, Inc. was organized as a wholly owned
subsidiary of Kitty Hawk Group, Inc. ("Group"). Group subsequently merged with
Kitty Hawk, Inc. with Kitty Hawk, Inc. being the surviving entity. In connection
therewith, each outstanding share of Group common stock was exchanged for
106,049 shares of Kitty Hawk, Inc. common stock. Additionally, Group stock held
in treasury was retired. The accompanying consolidated financial statements
present the effects of the merger on a retroactive basis.

Reclassifications

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

2. DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, MAY 31,
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C> <C>
(1) Note payable, bearing interest at prime plus 1.75%
(11.0% at May 31, 1996) payable in 48 monthly
installments of $25,021 plus interest, with a
maturity date of December 1996; secured by a
Douglas DC-9 aircraft, with a carrying value of
approximately $838,000 at May 31, 1996............. $ 675,562 $ 350,291 $ 125,104
(2) Note payable, bearing interest at an adjusted
Eurodollar rate plus 2.25% (7.723% at May 31, 1996)
payable in 21 quarterly installments of $153,354
plus interest, with a maturity date of September
1999; secured by two Douglas DC-9 aircraft, with a
carrying value of approximately $3,088,000 at May
31, 1996........................................... 3,233,218 2,607,021 2,146,958
(3) Note payable, bearing interest at an adjusted
Eurodollar rate plus 2.25% (7.723% at May 31, 1996)
payable in 71 monthly installments of $76,891 plus
interest, with a maturity date of October 2000;
secured by two Boeing 727-200 aircraft, with a
carrying value of approximately $5,309,000 at May
31, 1996........................................... 5,236,155 4,767,245 3,998,334
</TABLE>

F-8
<PAGE> 70

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, MAY 31,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C> <C>
(4) Note payable, bearing interest at an adjusted
Eurodollar rate plus 2.00% (7.473% at May 31, 1996)
payable in 72 monthly installments of $60,517 plus
interest, with a maturity date of March 2001;
secured by two DC-9 aircraft, with a carrying value
of approximately $4,366,000 at May 31, 1996........ -- 4,054,641 3,509,988
(5) Note payable, bearing interest at an adjusted
Eurodollar rate plus 2.00% (7.473% at May 31, 1996)
payable in 72 monthly installments of $59,077 plus
interest, with a maturity date of July 2001;
secured by two Boeing 727-200 aircraft, with a
carrying value of approximately $5,027,000 at May
31, 1996........................................... -- 4,201,507 3,733,433
(6) Note payable, bearing interest at 9.75% payable in
18 monthly installments of interest only and 42
monthly installments of $28,212 plus interest
beginning December 1996, with a maturity date of
May 2000; secured by a Douglas DC-9 aircraft, with
a carrying value of approximately $838,000 at May
31, 1996........................................... -- 1,000,500 1,000,500
(7) Note payable, bearing interest at an adjusted
Eurodollar rate plus 1.50% to 2.50% based upon a
debt-to-cash-flow ratio of the Company (7.0625% at
May 31, 1996) payable in monthly installments of
interest only through June 1996 and 28 quarterly
installments of $400,893 plus interest beginning
September 1996, with a maturity date of June 2003;
secured by two Boeing 727-200 aircraft, with a
carrying value of approximately $12,377,000 at May
31, 1996........................................... -- -- 11,225,000
---------- ----------- -----------
9,144,935 16,981,205 25,739,317
Less current portion............................... 1,760,799 3,278,553 4,346,924
---------- ----------- -----------
$7,384,136 $13,702,652 $21,392,393
========== =========== ===========
</TABLE>

Maturities of long-term debt at May 31, 1996 are as follows:

<TABLE>
<S> <C>
Three months ended August 31, 1996.............................. $ 817,870
1997............................................................ 4,808,921
1998............................................................ 4,842,407
1999............................................................ 4,857,078
2000............................................................ 4,368,473
2001............................................................ 2,825,821
Thereafter...................................................... 3,218,747
-----------
$25,739,317
===========
</TABLE>

Certain notes subject the Company to financial covenants, including debt
service coverage, cash flow and leverage ratios. These notes also prohibit the
payment of dividends. The Company makes quarterly elections to have the
borrowings under notes 2 and 3 bear interest at either the prime rate minus
0.25% or the adjusted

F-9
<PAGE> 71

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Eurodollar rate plus 2.25% and notes 4 and 5 bear interest at either the prime
rate or adjusted Eurodollar rate plus 2.00%.

The Company has entered into two interest rate swap agreements to reduce
the impact of changes in the floating interest rate on note 7 in the table
above. At May 31, 1996 the Company has outstanding two interest rate swap
agreements with the commercial bank to whom note 7 is payable, having a total
notional principal amount of $9,225,000. These swap agreements effectively
change the interest rate exposure on $9,225,000 of the total principal amount of
note 7 to a fixed 7.75 percent. The notional principal amounts of the interest
rate swaps reduce in proportion to required principal reductions on the related
note. The Company is exposed to credit loss in the event of nonperformance by
the other party in the interest rate swap agreements. However, the Company does
not anticipate nonperformance by the counterparty. Based on a quote provided by
the bank, these swap agreements, if terminated at May 31, 1996, would have
resulted in a payment to the Company of approximately $395,000.

The Company has a $3,000,000 revolving line of credit facility (the
"Facility"), expiring June 30, 1996, which bears interest, at the Company's
option, at the bank's prime rate or adjusted Eurodollar rate plus 1.95%.
Borrowings are limited to a percentage of eligible accounts receivable. The
Facility also subjects the Company to various financial covenants, including
maintenance of various liquidity and net worth levels. At May 31, 1996,
$3,000,000 was available to the Company under the Facility. The Company is
negotiating an expansion of its line of credit.

Based upon the variable interest rates provided for in the substantial
majority of the Company's long-term debt, management believes the fair value of
its long-term debt approximates its carrying value at May 31, 1996.

The Company made cash interest payments of $127,262, $280,754, $1,088,928
and $1,374,285 during fiscal years ended 1993, 1994 and 1995, and the nine
months ended May 31, 1996, respectively.

3. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, NINE MONTHS
------------------------------------ ENDED MAY 31,
1993 1994 1995 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Current income tax:
Federal...................................... $1,251,025 $3,434,725 $1,829,723 $ 1,961,075
State........................................ 174,806 350,000 580,135 404,425
---------- ---------- ---------- ------------
Total current income tax............. 1,425,831 3,784,725 2,409,858 2,365,500
---------- ---------- ---------- ------------
Deferred income tax:
Federal...................................... 1,060,804 (608,460) 627,993 (37,806)
State........................................ 125,924 (30,108) 104,802 (5,852)
---------- ---------- ---------- ------------
Total deferred income tax............ 1,186,728 (638,568) 732,795 (43,658)
---------- ---------- ---------- ------------
$2,612,559 $3,146,157 $3,142,653 $ 2,321,842
========== ========== ========== ===========
</TABLE>

F-10
<PAGE> 72

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The differences between the provision for income taxes and the amount
computed by applying the statutory federal tax rate to income before income
taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, NINE MONTHS
------------------------------------ ENDED MAY 31,
1993 1994 1995 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Income tax computed at statutory rate........ $2,283,978 $2,858,330 $2,570,076 $ 1,949,325
State income taxes, net of federal benefit... 198,482 211,129 452,058 266,921
Other, net................................... 130,099 76,698 120,519 105,596
---------- ---------- ---------- ------------
Total.............................. $2,612,559 $3,146,157 $3,142,653 $ 2,321,842
========== ========== ========== ===========
</TABLE>

The components of the net deferred tax liabilities recognized on the
accompanying balance sheets are as follows:

<TABLE>
<CAPTION>
AUGUST 31,
------------------------- MAY 31,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation........................................ $ (996,335) $(2,071,971) $(3,026,169)
Prepaid expenses.................................... (11,069) (117,440) (33,799)
----------- ----------- -----------
Total deferred tax liabilities.............. (1,007,404) (2,189,411) (3,059,968)
----------- ----------- -----------
Deferred tax assets:
Stock option grant to executive..................... -- -- 1,084,221
Nondeductible accruals.............................. 166,365 167,850 167,750
Airframe reserves................................... 220,292 755,606 585,700
Accrued bonuses..................................... 4,436 -- --
State taxes......................................... 83,151 -- --
----------- ----------- -----------
Total deferred tax assets................... 474,244 923,456 1,837,671
----------- ----------- -----------
Net deferred tax liability............................ $ (533,160) $(1,265,955) $(1,222,297)
=========== =========== ===========
</TABLE>

The Company made cash income tax payments of $1,133,985, $2,170,203,
$4,552,371 and $2,078,673 during fiscal years 1993, 1994 and 1995, and the nine
months ended May 31, 1996, respectively.

4. COMMITMENTS

The Company leases its primary office and maintenance space under a
non-cancelable operating lease which expires in fiscal year 1998 from a party
who, effective October 1994, became a member of the Company's Board of
Directors. Rent expense under this lease was $216,152, $260,970, $252,595 and
$191,156 for fiscal years 1993, 1994 and 1995, and the nine months ended May 31,
1996, respectively. The minimum annual rental under the noncancelable operating
lease is $63,000, $252,000 and $126,000 for the three months ended August 31,
1996, for fiscal year 1997, and for fiscal year 1998, respectively. Under the
lease agreement, the Company has the option to purchase the office facilities
and the landlord's interest in the associated ground lease at any time prior to
March 1, 1997 for consideration of $2,200,000 less $5,000 for each monthly
rental payment made after March 1, 1993.

The Company leases its secondary maintenance space under a cancelable
operating lease which expires in May 1999. The lease can be canceled by either
party with 60 days notice. Rent expense under this lease was $59,853 and
$136,250 in fiscal year 1995 and the nine months ended May 31, 1996. The minimum
annual rental under this lease is $40,875, $163,500, $163,500 and $122,625 for
the three months ended August 31, 1996, and fiscal year 1997, 1998 and 1999,
respectively.

F-11
<PAGE> 73

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. CONTRACT SETTLEMENT

In September 1992, the Company was awarded a contract by the United States
Postal Service (the "USPS"). An unaffiliated air freight carrier (the
"associated bidder") was associated with the Company in the successful bid.
Prior to the commencement of the contract, competing bidders filed suit against
the USPS seeking to set aside the award.

In April 1993, to avoid the expense and uncertainty of continued
litigation, the Company accepted a settlement. Under the settlement, the
contract was terminated for convenience and re-awarded to the incumbent.
Additionally, the Company received $12.7 million and the right to receive up to
a total of $6.5 million over ten years in installments of $162,500 per quarter,
contingent on the re-awarded contract remaining in effect. Appropriate releases
were exchanged.

At August 31, 1993, the Company and the associated bidder had not agreed
upon the division of the settlement proceeds, which were held in escrow; but the
Company reasonably estimated its share of the proceeds, exclusive of the $6.5
million to be paid in installments over ten years, to be at least $3.5 million.
The Company therefore recorded the $3.5 million as a receivable in current
assets and, net of contract-related expense, settlement income of $724,683 for
fiscal year 1993.

During fiscal year 1994, the Company and the associated bidder agreed to a
division of the settlement proceeds and resolution of all their related claims.
Under that agreement, the Company received from escrow approximately $3.5
million cash, obtained title to a Boeing 727-200 aircraft, independently valued
and recorded by the Company at $750,000, and was relieved of $1.2 million of
previously accrued transportation costs. Additionally, one-half of the
contingent future quarterly installment payments were allocated to the Company's
stockholder. As a result of this settlement, for fiscal year 1994, the Company
recorded additional contract settlement income of $1,177,742, which is net of
approximately $730,000 in additional settlement costs, principally legal fees.
This amount also included both income and an offsetting expense of $677,239,
representing the estimated fair value of the future quarterly installment
payments that will be paid directly to the Company's sole stockholder.

6. LITIGATION

The Company filed suit against Express One International, Inc. ("Express
One") in July 1992 in Dallas County, Texas, claiming that Express One breached
an aircraft charter agreement and seeking actual damages of approximately
$60,000. Express One counterclaimed, asserting that the Company wrongfully
repudiated the lease agreement and seeking damages of $356,718 for services
performed, $1,140,000 for additional fees it would have received under the
contract, punitive damages and its attorney's fees and costs.

In February 1995, a jury verdict in the case granted the Company $25,000 in
damages plus its attorneys fees and denied Express One's claims. The court
entered judgment in favor of the Company for $25,000 in damages, for $148,115 in
attorneys fees through trial and for additional attorneys fees if Express One
appeals. Before expiration of the time for appeal, Express One filed a petition
under Chapter 11 of the U.S. Bankruptcy Code. There is a dispute about whether
Express One has preserved a right to appeal and whether the judgment has become
final. Therefore, the judgment awarded to the Company has not been recorded in
the financial statements. The Company does not expect the outcome to have a
material adverse effect upon the Company's financial condition or results of
operations.

The USPS selected the Company's air freight carrier in September 1992 as
the successful bidder on a contract for a multi-city network of air
transportation services supporting the USPS Express Mail system. Two
unsuccessful bidders sued the USPS to enjoin the award. The Company intervened.
This litigation (the "ANET Litigation") was settled in April 1993 by agreements
under which the USPS terminated the Company's contract for convenience and
awarded the contract to the incumbent contractor, Emery Worldwide Airlines, Inc.
("Emery").

F-12
<PAGE> 74

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In March 1995, the Company was served with a complaint in a qui tam lawsuit
filed on behalf of the U.S. Government by a third-party plaintiff seeking to
share a recovery under the Federal False Claims Act (the "Act"). The suit, filed
in May 1994, was filed under seal in accordance with the Act, to enable the U.S.
Government to review the claim before its disclosure to the defendants. The U.S.
Government declined to pursue the claim, but the third-party plaintiff chose to
continue. The suit claimed that the Company and another defendant fraudulently
failed to disclose to the USPS, both in the Company's successful bid and in the
settlement of the ANET litigation, that some of the aircraft the Company
proposed to purchase and use to perform the contract were aging aircraft with
high use, and claimed that the Company and Emery similarly fraudulently
conspired in connection with the settlement of the ANET litigation. The suit
sought to recover treble the $10 million settlement payment made by the USPS in
settling the ANET litigation, plus the third party plaintiff's costs and fees.

The Company moved to dismiss the suit with prejudice on grounds that it was
barred by the Act. The Company also sought to recover its attorneys' fees from
the plaintiff and to obtain sanctions against the plaintiff's attorneys. The
Company believes the suit was clearly frivolous because, among other things, the
Company in the ANET bid identified each aircraft by serial number, age, hours
and cycles, and made available use and maintenance records for each aircraft as
required by the request for proposal, and that the USPS reviewed and inspected
the aircraft, data and records and found them acceptable. In May 1996, the court
dismissed the suit and awarded the Company its attorneys' fees and costs. The
plaintiff has asked the court to reconsider its ruling. The Company does not
expect the outcome of this matter to have a material adverse effect upon the
Company's financial condition or results of operations.

Additionally, in the normal course of business, the Company is a party to
matters of litigation, none of which, in the opinion of management, will have a
material adverse effect on the Company's financial condition or the results of
operations.

7. STOCK OPTIONS

In October 1994 the Company granted non-qualified options to two executives
to purchase a total of 337,848 shares of common stock at $7.81 per share.

In December 1995, the Company canceled 245,708 of the options outstanding
and granted to an executive a non-qualified option to purchase 390,707 shares of
common stock at $0.01 per share. The new option has a term of nine years and is
fully vested. Based on an independent appraisal commissioned by the Company, the
fair value of the option of $2,906,758 is reflected as a charge to earnings in
the accompanying statement of income for the nine months ended May 31, 1996.

In June 1996, the Company canceled the remaining 92,140 options outstanding
and granted to another executive a non-qualifying option to purchase 153,567
shares of common stock at $0.01 per share. The new option has a term of nine
years and is fully vested. Based on an independent appraisal commissioned by the
Company, the fair value of the option of $1,324,196 will be reflected as a
charge to earnings during the fourth fiscal quarter ending August 31, 1996.

8. RELATED PARTY TRANSACTIONS

The Company provided maintenance and other services as well as cash
advances to Martinaire East, Inc. ("Martinaire"), a company that is 50% owned by
the Company's stockholder. Total sales to Martinaire for fuel and services were
approximately $424,000, $235,000, $22,000 and $0 in fiscal years 1993, 1994 and
1995, and the nine months ended May 31, 1996, respectively. Martinaire also
flies charter service for the Company. During fiscal years 1993, 1994 and 1995,
and the nine months ended May 31, 1996, Martinaire provided the Company services
in the amount of approximately $1,799,000, $982,000, $232,000 and $1,502,000,
respec-

F-13
<PAGE> 75

KITTY HAWK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tively. At August 31, 1994 and 1995, and May 31, 1996, approximately $481,000,
$0 and $0, respectively, was due from Martinaire.

9. EMPLOYEE COMPENSATION PLANS AND ARRANGEMENTS

The Company has a retirement savings plan under Section 401(k) of the
Internal Revenue Code. Established effective September 1, 1993, the plan covers
substantially all employees meeting minimum service requirements. Under the
plan, contributions are voluntarily made by employees and the Company provides
matching contributions based upon the employees contribution. The Company
incurred $80,812, $121,217, and $123,993 in matching contributions related to
this plan during fiscal year 1994 and 1995, and the nine months ended May 31,
1996, respectively.

The Company has adopted:

- An Omnibus Securities Plan (the Plan) under which 300,000 shares of its
common stock are reserved for issuance to its employees. The Plan will
be administered by the Company's Compensation Committee which may grant
stock based and non-stock based compensation to the Plan participants.

- An Annual Incentive Compensation Plan (the Compensation Plan) under which
the Compensation Committee will determine and award semiannual bonuses
to employees of the Company. The aggregate amount of bonuses available
for award is limited to 10% of the Company's income before income taxes
and the bonuses to be paid under the Compensation Plan. The Company may
elect to pay the full amount of the bonuses in common stock, which is
limited to total stock distributions of 200,000 shares of common stock.

- An Employee Stock Purchase Plan covering up to 100,000 shares of the
Company's common stock.

10. SUBSEQUENT EVENT

On June 28, 1996 the Company approved a 1.2285391-for-1 stock split
effected as a stock dividend. All references to common stock and per share data
have been restated to give effect to the split.

F-14
<PAGE> 76

[PICTURE OF KITTY
HAWK BUILDING]

[PICTURE OF KITTY HAWK CONTAINERS]

[PICTURE OF KITTY
HAWK BOEING 727]

[PICTURE OF
KITTY HAWK AIRCRAFT]

[PICTURE OF KITTY
HAWK AIRCRAFT
BEING LOADED]

[MAP OF KITTY HAWK
SCHEDULED PACIFIC RIM ROUTES]
<PAGE> 77

================================================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER, OR BY ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT
IS NOT LAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 7
Risk Factors.......................... 8
Use of Proceeds....................... 16
Dividend Policy....................... 17
Dilution.............................. 18
Capitalization........................ 19
Selected Consolidated Financial and
Operating Data...................... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 30
Management............................ 45
Certain Transactions.................. 51
Principal Stockholders and Selling
Stockholder......................... 52
Description of Capital Stock.......... 53
Shares Eligible for Future Sale....... 56
Underwriting.......................... 57
Legal Matters......................... 58
Experts............................... 58
Additional Information................ 59
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

Until , 1996 (25 days after the commencement of the offering), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.

================================================================================

3,000,000 SHARES

KITTY HAWK, INC.

COMMON STOCK

[KITTY HAWK, INC. LOGO]

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

PROSPECTUS

, 1996

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

SMITH BARNEY INC.
ALEX. BROWN & SONS
INCORPORATED

FIELDSTONE
FPCG SERVICES, L.P.

================================================================================
<PAGE> 78

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Estimated expenses payable solely by the Company in connection with the
issuance and distribution of the securities to be registered, other than
underwriting discounts and expenses, are as follows:

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 19,034
NASD filing fee................................................... 6,020
Nasdaq application fee............................................ 45,125
Printing and engraving expenses................................... 150,000
Legal fees and expenses........................................... 210,000
Accounting fees and expenses...................................... 135,000
Blue sky fees and expenses........................................ 5,000
Transfer agent and registrar fees................................. 10,000
Miscellaneous expenses............................................ 84,821
--------
Total................................................... $665,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or any of its stockholders for
monetary damages arising from the director's breach of fiduciary duty as a
director. However, this does not apply with respect to any action in which the
director would be liable under Section 174 of the General Corporation Law of the
State of Delaware ("Delaware Code") nor does it apply with respect to any
liability in which the director (i) breached his duty of loyalty to the Company
or its stockholders; (ii) did not act in good faith or, in failing to act, did
not act in good faith; (iii) acted in a manner involving intentional misconduct
or a knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or (iv)
derived an improper personal benefit.

The Certificate of Incorporation of the Company provides that the Company
shall indemnify its directors and officers and former directors and officers to
the fullest extent permitted by the Delaware Code. Pursuant to the provisions of
Section 145 of the Delaware Code, the Company has the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was a director, officer, employee, or agent of the Company, against any and all
expenses, judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit, or proceeding. The
power to indemnify applies only if such person acted in good faith and in a
manner he reasonably believed to be in the best interest, or not opposed to the
best interest, of the Company and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.

The power to indemnify applies to actions brought by or in the right of the
Company as well, but only to the extent of defense and settlement expenses and
not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct unless the
court, in its discretion, believes that in light of all the circumstances
indemnification should apply.

The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.

II-1
<PAGE> 79

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Company granted certain options to Messrs. Reeves and Wadsworth in
December of 1995 and June of 1996, respectively. See "Management -- Employee
Compensation Plans and Arrangements." All such options were issued in connection
with employment or consulting services rendered pursuant to Rule 701 and/or
Section 4(2) of the Securities Act of 1933, as amended and were exercised on
June 27, 1996.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<C> <S>
1.1*** -- Form of Underwriting Agreement.

3.1 -- Certificate of Incorporation of Kitty Hawk, Inc. (the "Company"),
filed as Exhibit 3.1 to the Registrant's previously filed
Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of
December 1994, which exhibit is incorporated herein by reference.

3.2 -- Bylaws of the Company, filed as Exhibit 3.2 to the Registrant's
previously filed Registration Statement on Form S-1 (Reg. No.
33-85698) dated as of December 1994, which exhibit is incorporated
herein by reference.

3.3 -- Amendment No. 1 to the Certificate of Incorporation of the Company,
filed as Exhibit 3.3 to the Registrant's previously filed
Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of
December 1994, which exhibit is incorporated herein by reference.

3.4 -- Amendment No. 1 to the Bylaws of the Company, filed as Exhibit 3.4 to
the Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

4.1*** -- Specimen Common Stock Certificate.

5.1*** -- Opinion of Haynes and Boone, LLP, regarding legality of the Common
Stock being issued.

10.1 -- Master Agreement for Air Charter Transportation Services ("GM
Agreement") dated as of June 4, 1990 by and between General Motors
Corp. ("GM") and Kitty Hawk Charters, Inc. ("Charters"), filed as
Exhibit 10.1 to the Registrant's previously filed Registration
Statement on Form S-1 (Reg. No. 33-85698) dated as of December 1994,
which exhibit is incorporated herein by reference.

10.2 -- Addendum No. 1 to the GM Agreement dated as of August 9, 1990 by and
between the Company and GM, filed as Exhibit 10.2 to the Registrant's
previously filed Registration Statement on Form S-1 (Reg. No.
33-85698) dated as of December 1994, which exhibit is incorporated
herein by reference.

10.3 -- Addendum No. 1 to the GM Agreement dated as of June 4, 1991 by and
between the Company and GM, filed as Exhibit 10.3 to the Registrant's
previously filed Registration Statement on Form S-1 (Reg. No.
33-85698) dated as of December 1994, which exhibit is incorporated
herein by reference.

10.4 -- Addendum No. 2 to the GM Agreement dated as of October 1, 1990 by and
between the Company and GM, filed as Exhibit 10.4 to the Registrant's
previously filed Registration Statement on Form S-1 (Reg. No.
33-85698) dated as of December 1994, which exhibit is incorporated
herein by reference.
</TABLE>

II-2
<PAGE> 80

<TABLE>
<C> <S>
10.5 -- Addendum No. 3 to the GM Agreement dated as of November 5, 1990 by
and between the Company and GM, filed as Exhibit 10.5 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.6 -- Addendum No. 4 to the GM Agreement dated as of December 3, 1990 by
and between the Company and GM, filed as Exhibit 10.6 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.7 -- Addendum No. 5 to the GM Agreement dated as of January 7, 1991 by and
between the Company and GM, filed as Exhibit 10.7 to the Registrant's
previously filed Registration Statement on Form S-1 (Reg. No.
33-85698) dated as of December 1994, which exhibit is incorporated
herein by reference.

10.8 -- Addendum No. 6 to the GM Agreement dated as of February 4, 1991 by
and between the Company and GM, filed as Exhibit 10.8 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.9 -- Addendum No. 7 to the GM Agreement dated as of March 4, 1991 by and
between the Company and GM, filed as Exhibit 10.9 to the Registrant's
previously filed Registration Statement on Form S-1 (Reg. No.
33-85698) dated as of December 1994, which exhibit is incorporated
herein by reference.

10.10 -- Revision to Appendices and to Master Agreement for Air Charter
Transportation Services dated August 13, 1992 by and between the
Company and GM, filed as Exhibit 10.10 to the Registrant's previously
filed Registration Statement on Form S-1 (Reg. No. 33-85698) dated as
of December 1994, which exhibit is incorporated herein by reference.

10.11 -- Addendum No. 5 to the GM Agreement dated as of May 1, 1994 by and
between the Company and GM, filed as Exhibit 10.11 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.12 -- Aircraft Charter Agreement dated as of February 9, 1994 by and
between the Company and DHL Airways, Inc., filed as Exhibit 10.13 to
the Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.13*** -- Agreement to Furnish Three (3) CV-600 Aircraft and Air Cargo Services
dated as of May 15, 1995 by and between the Company and Burlington
Air Express Inc. ("Burlington").

10.14** -- Agreement to Furnish Five (5) B727-200 Aircraft and Air Cargo
Services dated as of March 1, 1996 by and between the Company and
Burlington.

10.15** -- Aircraft Operating Lease dated as of March 14, 1995 by and between
Ting Hong Oceanic Enterprises Co., Ltd. ("Ting Hong") and the
Company.

10.16** -- Amendment and Extension of Aircraft Operating Lease dated April 24,
1996 by and between Ting Hong and the Company.

10.17** -- Aircraft Operating Lease dated April 19, 1996 by and between the
Company and Pacific East Asia Cargo Airlines, Inc.

10.18 -- Settlement Agreement dated as of August 22, 1994 by and between the
Company, Aircargo, Leasing, M. Tom Christopher, American
International Airways, Inc., and Conrad Kalitta, filed as Exhibit
10.32 to the Registrant's previously filed Registration Statement on
Form S-1 (Reg. No. 33-85698) dated as of December 1994, which exhibit
is incorporated herein by reference.

10.19 -- Sublease Agreement dated as of March 1, 1993 by and between Robert F.
Grammer and M. Tom Christopher, filed as Exhibit 10.33 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.
</TABLE>

II-3
<PAGE> 81

<TABLE>
<C> <S>
10.20 -- Transfer and Assignment of Sublease Agreement dated as of October 26,
1994 by and between the Company, M. Tom Christopher and Robert F.
Grammer, filed as Exhibit 10.34 to the Registrant's previously filed
Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of
December 1994, which exhibit is incorporated herein by reference.

10.21**** --

10.22**** --

10.23**** --

10.24**** --

10.25 -- Salary Continuation Agreement dated as of June 15, 1993 by and
between the Company and M. Tom Christopher, filed as Exhibit 10.36 to
the Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.26 -- Split Dollar Insurance Agreement dated as of June 15, 1993 by and
between the Company and James R. Craig, filed as Exhibit 10.37 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.27 -- Split Dollar Insurance Agreement dated as of June 15, 1993 by and
between the Company and James R. Craig, filed as Exhibit 10.38 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.28*** -- Kitty Hawk, Inc. Amended and Restated Omnibus Securities Plan, dated
as of September 3, 1996.

10.29**** --

10.30*** -- Kitty Hawk, Inc. Amended and Restated Employee Stock Purchase Plan,
dated as of September 3, 1996.

10.31*** -- Kitty Hawk, Inc. Amended and Restated Annual Incentive Compensation
Plan, dated as of September 3, 1996.

10.32 -- Kitty Hawk, Inc. 401(k) Savings Plan, filed as Exhibit 10.43 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.33 -- Employment Agreement dated as of October 27, 1994 by and between the
Company and M. Tom Christopher, filed as Exhibit 10.45 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.34*** -- Amended and Restated Employment Agreement dated as of June 12, 1996
by and between the Company and Richard R. Wadsworth.

10.35*** -- Amended and Restated Employment Agreement dated as of December 31,
1995 by and between the Company and Tilmon J. Reeves.

10.36**** --

10.37**** --

10.38**** --

10.39**** --

10.40 -- Request for written consent to expand ownership without management
change dated as of October 26, 1994 granted by GM, filed as Exhibit
10.50 to the Registrant's previously filed Registration Statement on
Form S-1 (Reg. No. 33-85698) dated as of December 1994, which exhibit
is incorporated herein by reference.
</TABLE>

II-4
<PAGE> 82

<TABLE>
<C> <S>
10.41 -- Request for written consent to certain disclosures of Master
Agreement and contractual relationship dated as of October 26, 1994
granted by GM, filed as Exhibit 10.51 to the Registrant's previously
filed Registration Statement on Form S-1 (Reg. No. 33-85698) dated as
of December 1994, which exhibit is incorporated herein by reference.

10.42 -- Kavouras Customer Order Acknowledgment, filed as Exhibit 10.52 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.43 -- Kavouras Meteorological Services Agreement, filed as Exhibit 10.53 to
the Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.44 -- Computer Flight Plan and Weather Service Agreement dated as of June
11, 1992 by and between Aircargo and Jeppesen DataPlan, Inc., filed
as Exhibit 10.54 to the Registrant's previously filed Registration
Statement on Form S-1 (Reg. No. 33-85698) dated as of December 1994,
which exhibit is incorporated herein by reference.

10.45** -- Purchase Agreement between Federal Express Corporation and Postal
Air, Inc. (predecessor to the Company) dated as of October 22, 1992
(the "FEASI Agreement").

10.46** -- Amendment No. 1 dated November 17, 1992 to the FEASI Agreement.

10.47** -- Amendment No. 2 dated February 1993 to the FEASI Agreement.

10.48** -- Amendment No. 3 dated June 11, 1993 to the FEASI Agreement.

10.49** -- Amendment No. 4 dated May 10, 1994 to the FEASI Agreement.

10.50** -- Amendment No. 5 dated September 29, 1995 to the FEASI Agreement.

10.51*** -- Amended and Restated Credit Agreement, dated as of August 14, 1996,
by and among the Company, Wells Fargo Bank (Texas), National
Association, and Bank One, Texas, N.A.

10.52*** -- Aircraft Purchase Agreement between the Company and Intrepid Aviation
Partners, LLC dated as of September 24, 1996.

21.1*** -- Subsidiaries of the Registrant.

23.1* -- Consent of Ernst & Young LLP.

23.2 -- Consent of Haynes and Boone, LLP (contained in legal opinion).

24.1*** -- The power of attorney of officers and directors of the Company is set
forth on the signature page hereto.

27.1*** -- Financial Data Schedule.
</TABLE>

- ---------------
* Filed herewith.
** Previously filed and confidential treatment requested for certain portions
pursuant to the Commission's Rule 406.
*** Previously filed.
**** Exhibit deleted because it is no longer applicable.

(b) Financial Statement Schedules and Auditors' Reports on Schedules:

None

II-5
<PAGE> 83

ITEM 17. UNDERTAKINGS

The undersigned Company hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-6
<PAGE> 84

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on the 8th day of October, 1996.

KITTY HAWK, INC.

By: /s/ RICHARD R. WADSWORTH
------------------------------------
Richard R. Wadsworth
Senior Vice President -- Finance,
Chief
Financial Officer and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on the 8th day of October, 1996.

<TABLE>
<CAPTION>
NAME CAPACITIES
- --------------------------------------------- --------------------------------------------
<C> <S>
/s/ M. TOM CHRISTOPHER* Chairman of the Board of Directors, and
- --------------------------------------------- Chief Executive Officer
M. Tom Christopher

/s/ TILMON J. REEVES* President, Chief Operating Officer, and
- --------------------------------------------- Director
Tilmon J. Reeves

/s/ RICHARD R. WADSWORTH Senior Vice President -- Finance, Chief
- --------------------------------------------- Financial Officer, Secretary, and
Richard R. Wadsworth Director, and Principal Financial and
Accounting Officer

/s/ TED J. COONFIELD* Director
- ---------------------------------------------
Ted J. Coonfield

/s/ JAMES R. CRAIG* Director
- ---------------------------------------------
James R. Craig

/s/ ROBERT F. GRAMMER* Director
- ---------------------------------------------
Robert F. Grammer

/s/ LEWIS S. WHITE* Director
- ---------------------------------------------
Lewis S. White

* /s/ RICHARD R. WADSWORTH
- ---------------------------------------------
Richard R. Wadsworth
(As Attorney-in-Fact for each
person as indicated)
</TABLE>

II-7
<PAGE> 85

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1*** -- Form of Underwriting Agreement.

4.1*** -- Specimen Common Stock Certificate.

5.1*** -- Opinion of Haynes and Boone, LLP, regarding legality of the Common
Stock being issued.

10.5 -- Addendum No. 3 to the GM Agreement dated as of November 5, 1990 by
and between the Company and GM, filed as Exhibit 10.5 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<S> <C>
10.8 -- Addendum No. 6 to the GM Agreement dated as of February 4, 1991 by
and between the Company and GM, filed as Exhibit 10.8 to the
Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.13*** -- Agreement to Furnish Three (3) CV-600 Aircraft and Air Cargo Services
dated as of May 15, 1995 by and between the Company and Burlington
Air Express Inc. ("Burlington").

10.14** -- Agreement to Furnish Five (5) B727-200 Aircraft and Air Cargo
Services dated as of March 1, 1996 by and between the Company and
Burlington.

10.15** -- Aircraft Operating Lease dated as of March 14, 1995 by and between
Ting Hong Oceanic Enterprises Co., Ltd. ("Ting Hong") and the
Company.

10.16** -- Amendment and Extension of Aircraft Operating Lease dated April 24,
1996 by and between Ting Hong and the Company.

10.17** -- Aircraft Operating Lease dated April 19, 1996 by and between the
Company and Pacific East Asia Cargo Airlines, Inc.

10.20 -- Transfer and Assignment of Sublease Agreement dated as of October 26,
1994 by and between the Company, M. Tom Christopher and Robert F.
Grammer, filed as Exhibit 10.34 to the Registrant's previously filed
Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of
December 1994, which exhibit is incorporated herein by reference.

10.21**** --

10.22**** --

10.23**** --

10.24**** --
</TABLE>
<PAGE> 87

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<S> <C>
10.25 -- Salary Continuation Agreement dated as of June 15, 1993 by and
between the Company and M. Tom Christopher, filed as Exhibit 10.36 to
the Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.

10.28*** -- Kitty Hawk, Inc. Amended and Restated Omnibus Securities Plan, dated
as of September 3, 1996.

10.29**** --

10.30*** -- Kitty Hawk, Inc. Amended and Restated Employee Stock Purchase Plan,
dated as of September 3, 1996.

10.31*** -- Kitty Hawk, Inc. Amended and Restated Annual Incentive Compensation
Plan, dated as of September 3, 1996.

10.34*** -- Amended and Restated Employment Agreement dated as of June 12, 1996
by and between the Company and Richard R. Wadsworth.

10.35*** -- Amended and Restated Employment Agreement dated as of December 31,
1995 by and between the Company and Tilmon J. Reeves.

10.36**** --

10.37**** --

10.38**** --

10.39**** --

10.41 -- Request for written consent to certain disclosures of Master
Agreement and contractual relationship dated as of October 26, 1994
granted by GM, filed as Exhibit 10.51 to the Registrant's previously
filed Registration Statement on Form S-1 (Reg. No. 33-85698) dated as
of December 1994, which exhibit is incorporated herein by reference.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<S> <S>
10.43 -- Kavouras Meteorological Services Agreement, filed as Exhibit 10.53 to
the Registrant's previously filed Registration Statement on Form S-1
(Reg. No. 33-85698) dated as of December 1994, which exhibit is
incorporated herein by reference.