MIDWAY AIRLINES CORP, S-3, 2000-05-31

MIDWAY AIRLINES CORP
S-3, 2000-05-31
AIR TRANSPORTATION, SCHEDULED

Previous: TARGET RECEIVABLES CORP, S-3/A, EX-8, 2000-05-31

Next: MIDWAY AIRLINES CORP, S-3, EX-4.1, 2000-05-31

<PAGE>

Registration No. 333-
As Filed with the Securities and Exchange Commission on May 31, 2000
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________

FORM S-3

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_________________

MIDWAY AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 36-3915637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2801 Slater Road, Suite 200
Morrisville, North Carolina 27560
(919) 595-6000

(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
_______________

JONATHAN S. WALLER, ESQ.
Senior Vice President and General Counsel
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, North Carolina 27560
(919) 595-6000
(Name, address, including zip code and telephone number, including area code,
of agent for service)

Copies of Correspondence to:

ROY L. GOLDMAN, ESQ.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 318-3000

_______________

Approximate date of commencement of proposed sale to the public: From
time to time after this registration statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]

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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

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 expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Title of each class of securities to be Amount to be Proposed maximum Proposed maximum Amount of
registered registered(1) offering price per unit aggregate offering price registration fee
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subscription rights to purchase 8,613,595 N/A N/A N/A
common stock(2)

Common stock, par value $0.01 per 8,613,595 $5.20 $44,790,694 $11,825
share
================================================================================================================================
</TABLE>

(1) Maximum number of shares of common stock of Midway Airlines Corporation to
be sold to current holders of its common stock in this rights offering.
(2) Pursuant to Rule 457(g), no separate registration fee is required for the
rights since they are being registered in the same registration statement as the
common stock underlying the rights.

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>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer and sale is not permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

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

Subject to Completion, dated May 31, 2000

PROSPECTUS

MIDWAY AIRLINES CORPORATION

8,613,595 shares of common stock

$5.20 per share

_________________

We are distributing, together with this prospectus, subscription rights to
purchase shares of our common stock to persons who own our common stock as of
the close of business on __________, 2000, the record date. You will receive
one (1) subscription right for each share of our common stock that you own on
the record date. Each subscription right will entitle you to purchase one share
of our common stock at the subscription price of $5.20 per share.

The subscription rights are exercisable beginning on the date of this
prospectus and will expire at 5:00 p.m., New York City time, on __________,
2000.

If you timely exercise all of your subscription rights, you will be
entitled to exercise over-subscription privileges to purchase additional shares
of our common stock at the same subscription price. The number of additional
shares of our common stock that you will be entitled to purchase will be equal
to your percentage ownership of our common stock on the record date multiplied
by the number of subscription rights that were not timely exercised by our other
stockholders, rounded down to the nearest whole number.

We are undertaking this rights offering to meet our obligations to reduce
the lender's commitment under the terms of a revolving credit facility with an
entity that is wholly owned by our two principal stockholders, who together own
approximately 47.4% of our outstanding common stock. Both of these stockholders
have agreed to exercise their respective basic subscription privileges and over-
subscription privileges in full and, if no other stockholders exercise their
subscription rights, these two stockholders will in aggregate own approximately
69.4% of our outstanding common stock. Accordingly, we expect to receive
proceeds from the offering of at least $32.4 million and up to $44.8 million,
before deducting expenses payable by us. We expect to issue at least 6,226,050
and up to 8,613,595 shares of common stock in the offering.

The subscription rights may not be sold, transferred or assigned, and will
not be listed for trading on any stock exchange.

Shares of our common stock are currently listed for quotation on the Nasdaq
National Market under the symbol "MDWY". On May 30, 2000, the closing price of
a share of our common stock on Nasdaq was $6.0625.

See "Risk Factors" beginning on page 8 to read about factors you should
consider before buying additional shares of our common stock.

_________________

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

The date of this prospectus is __________, 2000.
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary......................................................... 1
Questions and Answers About Midway Airlines Corporation.... 1
Questions and Answers About the Rights Offering............ 1
Note Regarding Forward-Looking Statements....................... 7
Risk Factors.................................................... 8
Risk Factors Related to Midway and the Airline Industry.... 8
Risk Factors Related to Our Common Stock................... 17
Risk Factors Related to the Rights Offering................ 20
Selected Financial Information.................................. 22
Use of Proceeds................................................. 26
Dividend Policy................................................. 26
Price Range of Common Stock..................................... 27
Capitalization.................................................. 28
The Rights Offering............................................. 29
Federal Income Tax Considerations............................... 38
Description of Capital Stock.................................... 40
Determination of Offering Price................................. 45
Plan of Distribution............................................ 45
Legal Matters................................................... 45
Experts......................................................... 45
Where You Can Find More Information............................. 45
</TABLE>
_________________

Midway has not authorized any person to give you information that differs
from the information in this prospectus. You should rely solely on the
information contained in this prospectus. This prospectus is not an offer to
sell these securities, and we are not soliciting offers to buy these securities,
in any state where the offer or sale of these securities is not permitted. The
information in this prospectus is accurate only as of the date of this
prospectus, even if the prospectus is delivered to you after the prospectus
date, or you buy our common stock after the prospectus date.

i
<PAGE>

SUMMARY

This section answers in summary form some questions you may have about
Midway Airlines Corporation and this rights offering. The information in this
section is not complete and does not contain all of the information that you
should consider before exercising your subscription rights. You should read the
entire prospectus carefully, including the "Risk Factors" section and the
documents listed under "Where You Can Find More Information." For convenience,
references in this prospectus to "we," "us," or "Midway" mean Midway Airlines
Corporation.

Questions and Answers About Midway Airlines Corporation

What is Midway Airlines Corporation?

We are an all jet aircraft operator serving 22 destinations in 13 states
and the District of Columbia from our hub at Raleigh-Durham International
Airport in North Carolina, where we currently carry more passengers and operate
more flights than any other airline. We organize our business to attract and
retain business travelers by providing frequent non-stop service from Raleigh-
Durham International Airport to major business destinations, maintaining a high
level of service and offering American Airlines Inc. AAdvantage(R) frequent
flyer miles. We also fly leisure passengers traveling between the Northeast and
Florida.

Where are we located?

Our principal executive offices are located at:

2801 Slater Road, Suite 200
Morrisville, North Carolina 27560

Our telephone number is (919) 595-6000.

When were we formed?

We were incorporated under the laws of the State of Delaware in 1983 as Jet
Express, Inc. and renamed Midway Airlines Corporation in November 1993 in
connection with our commencement of jet operations.

Questions and Answers About the Rights Offering

What is a rights offering?

A rights offering is an opportunity for you to purchase additional shares
of our common stock at a fixed price of $5.20 per share and in an amount
proportional to your existing interest, which enables you to maintain your
current percentage ownership in Midway.
<PAGE>

What is a subscription right?

We are distributing to you, at no charge, one (1) subscription right for
every share of common stock that you owned on ____________, 2000, the record
date. Each subscription right entitles you to purchase one share of our common
stock for $5.20. When you "exercise" a subscription right, that means that you
choose to purchase the common stock that the subscription right entitles you to
purchase. You may exercise any number of your subscription rights, or you may
choose not to exercise any subscription rights. Each right carries with it a
basic subscription privilege and an over-subscription privilege. You cannot give
or sell your subscription rights to anybody else; only you can exercise them.

What is the basic subscription privilege?

The basic subscription privilege of each subscription right entitles you to
purchase one (1) share of our common stock at a subscription price of $5.20.

What is the over-subscription privilege?

We do not expect that all of our stockholders will exercise all of their
basic subscription privileges. By extending over-subscription privileges to our
stockholders, we are providing for the purchase of those shares which are not
purchased through exercise of basic subscription privileges. The over-
subscription privilege entitles you, if you fully exercise your basic
subscription privilege, to subscribe for additional shares of common stock not
acquired by other holders of rights at the same subscription price of $5.20 per
share.

What are the limitations on the over-subscription privilege?

We will issue up to 8,613,595 shares of common stock in the rights
offering. The number of shares available for over-subscription privileges will
be 8,613,595 minus the number of shares purchased upon exercise of all basic
subscription privileges. The number of additional shares of our common stock
that you will be entitled to purchase if you exercise the over-subscription
privilege will be equal to your percentage ownership of our common stock on the
record date multiplied by the number of subscription rights that were not timely
exercised by our other stockholders, rounded down to the nearest whole number.
However, in certain circumstances, in order to comply with applicable state
securities laws, we may not be able to honor all over-subscription privileges
even if we have shares available.

Why are we engaging in a rights offering?

We are proceeding with the rights offering to raise capital to allow us to
reduce to $10 million the commitment under our $30 million revolving credit
facility with Reedy Creek Investments, L.L.C., an entity that is wholly-owned by
our two principal stockholders, James H. Goodnight, Ph.D. and John P. Sall. The
revolving credit agreement requires us to reduce this commitment by September
30, 2000. We have determined to use a rights offering in order to allow our
existing stockholders to participate in this offering and therefore not have
their interest in Midway be diluted by the issuance of additional equity to a
third party. Dr. Goodnight and Mr.

2
<PAGE>

Sall have agreed to exercise their respective basic subscription privileges and
over-subscription privileges in full. Accordingly, Dr. Goodnight and Mr. Sall
will acquire between 4,078,692 and 6,226,050 shares of our common stock,
depending upon the number of other stockholders who exercise their basic
subscription privileges. If no stockholders other than Dr. Goodnight and Mr.
Sall exercise their basic subscription privileges, Dr. Goodnight's ownership
interest in Midway will increase to approximately 46.7% from approximately 31.9%
and Mr. Sall's ownership interest in Midway will increase to approximately 22.7%
from approximately 15.5%.

The proceeds of the loans under the revolving credit facility are being
used for, and any proceeds from the sale of the common stock in the rights
offering which exceed the amount necessary to reduce the outstanding balance
under the revolving credit facility to $10 million will be used for, working
capital and capital expenditure requirements, including the funding of pre-
delivery deposits due to aircraft manufacturers.

How many shares may I purchase?

You will receive one (1) subscription right for each share of common stock
that you owned on _________, 2000, the record date. Each subscription right
entitles you to purchase one share of common stock for $5.20. If you exercise
all of the subscription rights that you receive, you may have the opportunity to
purchase additional shares of common stock. On the enclosed subscription
certificate, you may exercise your over-subscription privilege by indicating the
number of additional shares that you wish to purchase for $5.20 per share.
However, we may not be able to honor your over-subscription privilege for as
many additional shares as you request on your subscription certificate, because
you may only purchase that number of additional shares of our common stock equal
to your percentage ownership of our common stock on the record date multiplied
by the number of subscription rights that were not timely exercised by our other
stockholders, rounded down to the nearest whole number. Subject to state
securities laws and regulations, we have the discretion to issue less than the
total number of shares that may be available for over-subscription requests in
order to comply with state securities laws.

How did Midway arrive at the $5.20 per share price?

In determining the price at which a share of common stock may be purchased
in this rights offering, our board of directors considered several factors,
including the historic and current market price of the common stock, our
business prospects, our history of profits and losses, general conditions in the
securities market, our need for capital, alternatives available to us for
raising capital, the amount of proceeds desired, the liquidity of our common
stock, the level of risk to our investors, and the need to offer shares at a
price that would be attractive to our investors relative to the then current
trading price of our common stock. We did not seek or obtain any opinion of
financial advisors or investment bankers in establishing the subscription price.

How do I exercise my subscription rights?

You must properly complete the attached subscription certificate and
deliver it to the Subscription Agent before 5 p.m., New York City time, on
_________, 2000. The address for

3
<PAGE>

the Subscription Agent is on page 36. Your subscription certificate must be
accompanied by proper payment for each share that you wish to purchase.

What should I do if I want to participate in the rights offering but my shares
are held in the name of my broker or a custodian bank?

If you hold shares of Midway common stock through a broker, dealer or other
nominee, we will ask your broker, dealer or nominee to notify you of the rights
offering. If you wish to exercise your rights, you will need to have your
broker, dealer or nominee act for you. To indicate your decision with respect to
your rights, you should complete and return to your broker, dealer or nominee
the form entitled "Beneficial Owner Election Form." You should receive this form
from your broker, dealer or nominee with the other rights offering materials.

How long will the rights offering last?

You will be able to exercise your subscription rights only during a limited
period. If you do not exercise your subscription rights before 5 p.m., New York
City time, on ___________, 2000, your subscription rights will expire. We may,
in our discretion, decide to extend the rights offering. In addition, if the
commencement of the rights offering is delayed, the expiration date will
similarly be extended.

After I exercise my subscription rights, can I change my mind?

No. Once you send in your subscription certificate and payment, you cannot
revoke the exercise of your subscription rights, even if you later learn
information about us that you consider to be unfavorable. You should not
exercise your subscription rights unless you are certain that you wish to
purchase additional shares of our common stock at a price of $5.20 per share.

Is exercising my subscription rights risky?

The exercise of your subscription rights involves certain risks. Exercising
your subscription rights means buying additional shares of our common stock, and
should be carefully considered as you would view other equity investments. Among
other things, you should carefully consider the risks described under the
heading "Risk Factors," beginning on page 8.

What happens if I choose not to exercise my subscription rights?

You will retain your current number of shares of common stock in Midway
even if you do not exercise your subscription rights. However, if other
stockholders exercise their subscription rights and you do not, your relative
percentage ownership of Midway will decrease, and your relative voting rights
and economic interests will be diluted. Because Dr. Goodnight and Mr. Sall, our
two principal stockholders who together own approximately 47.4% of our common
stock, have agreed to exercise their respective basic subscription privileges
and over-subscription privileges in full, your percentage ownership in Midway
will be reduced and your economic interest will be diluted if you do not
exercise your basic subscription privileges.

4
<PAGE>

Can I sell or give away my subscription rights?

No. Subscription rights are not transferable.

Must I exercise any subscription rights?

No.

What are the federal income tax consequences of exercising my subscription
rights?

The receipt and exercise of your subscription rights are intended to be
nontaxable. You should seek specific tax advice from your personal tax advisor.

When will I receive my new shares?

If you purchase shares of common stock through the rights offering, you
will receive shares as soon as practicable after ____________, 2000. Subject to
state securities laws and regulations, we have the discretion to delay
allocation and distribution of any shares you may elect to purchase by exercise
of your basic or over-subscription privilege in order to comply with state
securities laws.

Can Midway cancel the rights offering?

Yes. Our board of directors may cancel the rights offering at any time on
or before ______________, 2000, for any reason. If we cancel the rights
offering, any money received from stockholders will be refunded promptly,
without interest. If we cancel the rights offering, we will have to find an
alternative way to reduce the commitment under the revolving credit facility to
$10 million by September 30, 2000. We cannot assure you that we will be able to
do so.

How much money will Midway receive from the rights offering?

Our gross proceeds from the rights offering will depend on the number of
shares that are purchased. If we sell all 8,613,595 shares which may be
purchased upon exercise of the rights offered by this prospectus, then we will
receive proceeds of $44,790,694, before deducting expenses payable by us,
estimated to be $[__________]. Since Dr. Goodnight and Mr. Sall, who currently
own approximately 31.9% and 15.5%, respectively, of our outstanding common
stock, without giving effect to the shares that may be issued upon the exercise
of outstanding warrants and stock options, have agreed to exercise their basic
subscription privileges and over-subscription privileges in full, we expect to
issue at least 6,226,050 shares and to receive proceeds of at least $32,375,460
from the rights offering, before deducting expenses.

How many shares of common stock will be outstanding after the rights offering?

The number of shares of common stock that will be outstanding after the
rights offering depends on the number of shares that are purchased. We expect
to issue at least 6,226,050 shares

5
<PAGE>

during this rights offering, and if we sell all of the shares offered by this
prospectus, then we will issue 8,613,595 new shares of common stock. As a
result, we expect to have between approximately 14,839,645 and 17,227,190 shares
of common stock outstanding immediately after the rights offering.

What if I have more questions?

If you have more questions about the rights offering, please contact Steven
Westberg, Executive Vice President and General Manager of Midway, at (919) 595-
6000.

6
<PAGE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains or incorporates by reference certain forward-
looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995, about our financial condition, results of operations and
business that are based on our current and future expectations. You can find
many of these statements by looking for words such as "estimate," "project,"
"believe," "anticipate," "intend," "expect," and similar expressions. Such
statements reflect our current views with respect to future events and are
subject to risks and uncertainties, including those discussed under "Risk
Factors," that could cause actual results to differ materially from those
contemplated in such forward-looking statements. You are cautioned that no
forward-looking statement is a guarantee of future performance and you should
not place undue reliance on these forward-looking statements, which speak only
as of the date of this prospectus. We do not undertake any obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events which may cause actual results to differ from
those expressed or implied by the forward-looking statements contained in this
prospectus.

7
<PAGE>

RISK FACTORS

An investment in our securities involves a high degree of risk. You should
carefully consider the risks and uncertainties described below and the other
information in this prospectus before deciding whether to invest in shares of
our common stock. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our business operations. If
any of the following risks actually occur, our business, financial condition and
operating results could be materially adversely affected. In such case, the
trading price of our common stock could decline and you may lose part or all of
your investment.

Risk Factors Related to Midway and the Airline Industry

The airline industry is characterized by low gross profit margins and high fixed
costs, and is highly competitive

Our business, as is typical in the airline industry generally, is
characterized by low gross profit margins and high fixed costs, principally for
debt service, fuel and personnel. The expenses of each flight do not vary
significantly with the number of passengers carried and, therefore, a relatively
small change in the number of passengers, or in average fare paid or traffic mix
(the ratio of typically high-yielding business passengers to typically low-
yielding leisure passengers), could have a disproportionate effect on an
airline's operating and financial results. Accordingly, a minor shortfall from
expected revenue levels could have a material adverse effect on our results of
operations.

The airline industry is highly competitive and is particularly susceptible
to price discounting because airlines incur only nominal costs to provide
service to passengers occupying otherwise unsold seats. We currently compete
with other air carriers either directly or indirectly on all of our routes.
Nearly all of these carriers have greater financial resources than we do, and
many of them have lower unit costs than we do. Furthermore, the introduction of
service or discounted fares by a major U.S. airline or one of its low cost
affiliates in markets served by us could also have an adverse impact upon our
business, financial condition and results of operations.

Since late 1997, we have experienced, and likely will continue to
experience, increased competition in the Raleigh-Durham market. In 1999, both
Southwest Airlines and MetroJet, the low-fare division of US Airways, initiated
service at Raleigh-Durham International Airport. Southwest began service to five
cities from Raleigh-Durham International Airport with 12 daily flights and, as
of April 29, 2000, operates service to six cities with 16 daily flights.
Although MetroJet announced plans to serve six cities from Raleigh-Durham
International Airport with 17 daily flights, as of May 25, 2000 MetroJet was not
offering for sale any air transportation services to or from Raleigh-Durham
International Airport after June 10, 2000.

8
<PAGE>

We have a significant amount of debt and capital lease obligations that could
adversely affect our ability to meet our strategic goals

We have a large amount of indebtedness when compared to the equity of our
stockholders. At March 31, 2000, our long-term debt and capital lease
obligations, including current portion, accounted for 63.8% of our total
capitalization. As of March 31, 2000, we had minimum operating and capital lease
obligations through the year ending December 31, 2016 aggregating approximately
$563 million. In addition, based on current interest rates, we estimate that our
operating and capital lease obligations will increase by approximately $60
million annually following delivery of the 15 Boeing 737-700 aircraft and four
Canadair Regional Jets currently subject to firm orders, which deliveries are
scheduled to be completed by October 2002. This amount will increase if current
interest rates increase during the aircraft delivery period. These additional
lease obligations, as well as any increase in interest rates, could materially
adversely affect our results of operations. The degree to which we are
leveraged, as well as our rent expense, could have significant consequences,
including the following:

. our ability to obtain additional financing for working capital and
other purposes could be limited;

. a substantial portion of our cash flow will be required to service our
obligations under securities issued in aircraft financing transactions
and rent expense, diverting such cash from our operations; and

. we will be more vulnerable to adverse changes in general economic and
industry conditions and we may be less able to withstand competitive
pressures than our competitors that are less highly leveraged.

Our ability to make scheduled principal and interest payments on or to refinance
our obligations underlying securities issued in aircraft financing transactions
and our other debt obligations will depend upon our future operating performance
and cash flow, which are in turn dependent upon prevailing economic conditions
and financial, competitive, regulatory, business and other factors, many of
which are beyond our control. There can be no assurance that our cash flows will
be sufficient for the payment of our debt and lease obligations. If we are
unable to meet interest, principal or lease payments, we could be required to
seek renegotiation of such payments or obtain additional equity or debt
financing. To the extent we finance our activities with additional debt, we may
become subject to certain financial and other covenants that may restrict our
ability to pursue our growth strategy. There can be no assurance that any such
efforts would be successful or timely or that we could obtain any such financing
or refinancing on acceptable terms.

Increases in aircraft fuel costs will adversely affect our financial results

Because fuel costs constitute a significant portion of our total operating
expenses (approximately 12.6%, 10.5% and 11.2% for the years ended December 31,
1997, 1998 and 1999, respectively, and 8.6% and 14.0% for the three months ended
March 31, 1999 and 2000, respectively), significant changes in fuel costs will
materially affect our results of operations. We

9
<PAGE>

estimate that for the year ended December 31, 1999, a ten percent increase in
the price per gallon of aircraft fuel would have increased our total operating
expenses (excluding equipment retirement charges) in 1999 by 1.1%. Our fuel
costs increased approximately 144% for the quarter ending March 31, 2000, from
the quarter ending March 31, 1999, primarily as a result of a 122% increase in
fuel prices subsequent to March 31, 1999. This increase, and any additional
increases, in the cost of fuel will adversely impact our results of operations
in 2000 compared to 1999.

Historically, jet fuel costs have been subject to wide price fluctuations.
Jet fuel availability is also subject to periods of market surplus and shortage.
Because of the effect of such events on price and availability of oil, the cost
and future availability of jet fuel cannot be predicted with any degree of
certainty.

Our fuel requirements are met by approximately a dozen different suppliers.
We contract with these suppliers as fuel is needed, and the terms vary as to
price and quantity. We have not entered into any agreement that fixes the price
of fuel over any period of time.

In the event of a fuel supply shortage, higher fuel prices or curtailment
of scheduled service could result. There can be no assurance that increases in
the price of fuel can be offset by higher fares.

Our business is labor intensive and the general inflationary trend in labor
costs, along with the location of our hub and our position in the industry, will
increase our costs and may lead to excessive turn-over and attrition rates

Our business, as is typical in the airline industry generally, is labor
intensive, with labor costs representing approximately 15.1%, 17.4%, 19.6%,
19.1% and 18.4% of our operating costs before recapitalization and equipment
retirement charges for calendar 1997, 1998 and 1999 and the three months ended
March 31, 1999 and 2000, respectively. We are required to carry the same number
of crew on our flights regardless of the number of passengers carried. The
Raleigh-Durham area has experienced an unemployment rate which is significantly
less than the national average over the last several years. We compete for labor
against employers in the area that are leaders in the high-technology, medical
services, telecommunications, bio-technology and pharmaceutical industries. We
also compete for labor in highly skilled positions (such as pilots and
mechanics) against major airlines who offer wage and benefit packages that
generally exceed our wage and benefit packages. While we maintain an active
recruiting program for all job classifications, offer competitive terms of
employment and endeavor to maintain positive relationships with our employees,
we have in the past and may in the future suffer excessive turn-over and
attrition rates, which could have an adverse impact upon our operations. We also
expect wages to continue to increase both as a percentage of our overall costs
and on a gross basis.

Our growth strategy involves significant risk

Our growth strategy involves increasing the frequency of flights to markets
we currently serve, increasing the number of markets served and maximizing
connecting opportunities. Opening new markets requires us to commit a
substantial amount of resources, both before the

10
<PAGE>

new services commence and throughout the early phases of the new operation.
There can be no assurance that these efforts will be successful. As part of our
growth strategy, we are also increasing the size of the planes we operate, and
we currently have firm orders to increase the number of 128 seat Boeing 737-700
aircraft we operate from two to 17 by October 2002. In addition, in order to
effect our growth strategy, we may also need to obtain additional slots at
certain destinations. A slot is an authorization to take off or land at the
designated airport within a specified time window. There can be no assurance
that we will be able to identify and successfully establish new markets, that we
will be able to fill a sufficient number of seats on the larger planes to
operate profitably or that we will be able to obtain additional slots on a
timely basis or at commercially reasonable prices, if at all. Our failure to
implement our growth strategy could have a material adverse effect on our
financial condition and results of operations.

Our business is dependent on the Raleigh-Durham market

Our growth has focused and will, at least in the near-term, continue to
focus on adding flights to and from our Raleigh-Durham base of operations,
established in March 1995. Because all of our current flights have Raleigh-
Durham as the origin or destination, we remain highly dependent upon the
Raleigh-Durham market. Our growth strategy continues to emphasize the Raleigh-
Durham hub. A reduction in our share of the Raleigh-Durham market or reduced
passenger traffic to or from Raleigh-Durham in general could have a material
adverse effect on our financial condition and results of operations. In
addition, our dependence on a single hub and on a route network operating
largely on the East Coast makes our business more susceptible to adverse weather
conditions along the East Coast than some of our competitors that may be better
able to spread weather-related risks over larger route systems. For example,
during January 2000, due to severe weather, we effectively lost five business
days of operations, which had a significant adverse impact on our first quarter
2000 results.

We are dependent on our relationship with American Airlines

We maintain a significant relationship with American Airlines. Part of this
relationship includes contractual arrangements with American that allow Midway
to participate in the AAdvantage(R) frequent flyer program and accept
AAirpass(R) tickets and American first class upgrades from its passengers. We
currently lease the Raleigh-Durham International Airport facility and purchase a
number of services, including yield management and ground handling, from
American.

Our contract with American to participate in the AAdvantage(R) frequent
flyer program extends through April 30, 2001, and gives us the ability to offer
AAdvantage(R) miles on several additional routes, though we may, as part of our
growth strategy, select routes that are not covered by our agreement with
American. The ability to offer AAdvantage(R) miles on additional routes and the
extension of the term of the agreement are the subject of ongoing discussions
between Midway and American. We believe that our participation in the
AAdvantage(R) program gives us access to a flexible and extremely powerful
marketing tool. However, due to the potential limitations of the agreement
(including the number of additional markets and the term of the agreement),
there can be no assurance that we will be able to offer AAdvantage(R) frequent
flyer benefits to our customers after the expiration of our current contract
with American, and we

11
<PAGE>

may in the future choose or be obligated to develop our own frequent flyer
program or participate in an alternate program.

American may terminate Midway's participation in the AAdvantage(R) program
under several circumstances, including:

. our commencement of a new frequent flyer program or our participation
in another frequent flyer program;

. any person or group becoming the owner of 20% or more of our
outstanding voting securities or any "Disqualified Investor" becoming
the owner of 10% or more of our outstanding voting securities;

. our making a significant acquisition; or

. our entering into any marketing-oriented collaborative agreement with
another airline which American reasonably believes would likely
materially adversely affect American's interests or objectives under
any of its or its affiliates' agreements with us.

"Disqualified Investor" is defined as:

. any other airline or airline-related services company;

. any person or entity offering a frequent traveler program; or

. any person or entity that American believes would likely, by virtue of
its affiliation with us, materially adversely affect American's
interests or objectives under any of its or its affiliates' agreements
with us.

In addition, American may terminate our lease of the Raleigh-Durham
International Airport facility and one other service agreement that we have with
American if any person or group acquires 30% or more of our voting securities.
Finally, if we pay any dividends or make any other cash or asset distribution to
our stockholders without American's consent at any time prior to our payment in
full of a certain promissory note to American, then American may terminate the
Raleigh-Durham International Airport facility lease, our right to offer
AAdvantage(R) frequent flyer benefits, our license of the yield management
system and one other service agreement that we have with American.

We are dependent on a limited number of routes

We derive a substantial majority of our operating income from a small
number of our routes. Any circumstance causing a reduction in demand on such
routes or the introduction of increased competitive pressures on such routes
could have a material adverse effect on our financial condition and results of
operations.

12
<PAGE>

We depend in part on landing slots leased from others

The regulations of the Federal Aviation Administration ("FAA") currently
limit the availability of, and permit the buying, selling, trading, and leasing
of, certain airline slots at Chicago's O'Hare, New York's LaGuardia and Kennedy
International, and Ronald Reagan Washington National airports. We currently
lease seven of our ten slots at New York's LaGuardia Airport and ten of our
twelve slots at Ronald Reagan Washington National Airport from other airlines.
The United States Department of Transportation ("DOT") must grant slot
exemptions at LaGuardia Airport to airlines if certain conditions are met. We
believe we meet these conditions and we have filed an application for nine slot
exemptions at LaGuardia Airport which, if granted, will allow us to add a sixth
round trip in the market and to terminate our leasing of slots at LaGuardia
Airport from other airlines. The DOT has the discretionary authority to grant
limited slot exemptions at Ronald Reagan Washington National Airport to airlines
if certain conditions are met. We believe we meet these conditions and have
filed an application for four slot exemptions at Ronald Reagan Washington
National Airport. Other airlines have also filed for slot exemptions at Ronald
Reagan Washington National Airport. The DOT has issued an order establishing the
procedures for reviewing such requests, and has indicated it will issue its
decision on those applications no later than July 5, 2000. We cannot assure you
that the DOT will grant us these slot exemptions. The lease for two of our slots
at New York's LaGuardia Airport and for four of our slots at Ronald Reagan
Washington National Airport are each scheduled to expire in October 2000. The
leases for our remaining five leased slots at LaGuardia Airport and six of our
leased slots at Ronald Reagan Washington National Airport are scheduled to
expire April 1, 2001. To the extent we are not granted slot exemptions effective
upon expiration of these leases and we cannot renew or replace these leases, our
business will be harmed. Our routes between Raleigh-Durham International Airport
and LaGuardia Airport and Ronald Reagan Washington National Airport are among
our most important, and, as a result, an inability to obtain slot exemptions or
to renew or replace these leases could have a material adverse effect on our
financial condition and results of operations.

We operate a limited number of aircraft

We have a fleet of 32 jet aircraft, 27 of which are leased and five of
which, all CRJs, are owned. The limited number of aircraft we operate involves
financial risks not present for larger carriers that are able to spread their
operating costs over more equipment and routes. In addition, the lessor of four
of our F-100s has the right to terminate each of these leases on six months'
prior notice, provided that no lease can be terminated if it would result in a
fourth termination of any F-100 lease in any 12-month period, including
scheduled terminations. Finally, in the event aircraft are removed from service
for unscheduled maintenance, repairs or other reasons, any resulting
interruption in service could materially and adversely affect our service,
reputation and profitability.

We depend on a limited number of aircraft types

As of April 30, 2000, our fleet of 32 aircraft consists of eight 98-seat
Fokker F-100 aircraft, 22 50-seat Canadair Regional Jets (CRJs) and two128-seat
Boeing 737-700s. We have firm orders for four additional CRJs to be delivered by
December 2001 and fifteen 737s to be

13
<PAGE>

delivered by October 2002. However, the delivery schedule for the 737s may be
impacted by a recently ended strike of The Boeing Company's engineers. The
additional aircraft will be utilized to replace some or all of the F-100s, to
serve existing Midway destinations with greater frequency, and to enter new
routes, providing our customers with more non-stop jet destinations. We also
have options to acquire 14 additional CRJs and 10 additional 737 aircraft. We
have exercised an option to terminate four F-100 leases prior to their scheduled
termination dates. We will return these four aircraft in the first half of 2001
at a pre-tax cost of $2.1 million per aircraft. Our dependence on the F-100s and
CRJs for the vast majority of our flights could have a material adverse effect
on us in the event of a government directive prohibiting or restricting the use
of one of these aircraft types or in the case of adverse public perception of
one of these aircraft types. In addition, delay in delivery of the 737s may
adversely affect our growth and results of operations.

We are subject to extensive government regulation

We are subject to regulation by the DOT, the FAA and certain other
governmental agencies. The DOT principally regulates economic issues affecting
air service such as air carrier certification and fitness, insurance, consumer
protection and competitive practices. The FAA primarily regulates flight
operations, in particular matters affecting air safety, such as airworthiness
requirements for aircraft and pilot and flight attendant certification. We
believe we are in compliance with all requirements necessary to maintain in good
standing our operating authority granted by the DOT and our air carrier
operating certificate issued by the FAA. Additional laws and regulations have
been proposed from time to time that could significantly increase the cost of
our airline operations by, for instance, imposing additional requirements or
restrictions on operations. There can be no assurance that we will continue to
be able to comply with all present and future rules and regulations or that the
cost of continued compliance will not have a material adverse effect on our
results of operations.

The FAA also has authority to issue maintenance directives and other
mandatory orders relating to, among other things, inspection of aircraft and
engines, fire retardant and smoke detection devices, increased security
precautions, collision and windshear avoidance systems, noise abatement and the
mandatory removal and replacement of aircraft parts that have failed or may fail
in the future. Depending upon the scope of the FAA's order, these requirements
may cause us to incur substantial, unanticipated expenses.

We are also subject to numerous other federal and state laws and
regulations relating to protection of the environment, radio communications,
labor relations, equal employment opportunity and other matters.

In August 1998, the Compliance and Enforcement Branch of the FAA conducted
an inspection of our compliance with certain regulations related to our alcohol
and drug testing programs. In September 1998, the FAA notified us that it was
investigating alleged violations discovered in the August 1998 inspection. We
responded to these alleged violations in October 1998. In May 1999, the FAA
requested that we provide them with an update of certain matters raised during
the investigation. We promptly provided this information to the FAA. While we
are unable to determine whether the FAA will pursue an assessment as a result of
the findings of

14
<PAGE>

this investigation, or what the amount of any such assessment might be, a
substantial assessment could have a material adverse effect on our results of
operations.

In September 1997, the Civil Aviation Security Division of the FAA
conducted an investigation of our compliance with certain regulations requiring
us to verify the accuracy of background information provided by our employees
who have access to secure airport areas. We revised our background check
procedures during the course of the FAA's investigation and then obtained and
verified the necessary background information of those employees who had been
identified by the FAA as having insufficient background check documentation. The
investigation will likely result in the finding of violations of these
regulations. We have received no communications from the FAA in this respect
since 1998. While we are unable to determine whether the FAA will pursue an
assessment as a result of the findings of this investigation, or what the amount
of any such assessment might be, a substantial assessment could have a material
adverse effect on our results of operations.

We have incurred operating losses from time to time

We began commercial flight operations in 1993 and incurred substantial
losses through September 30, 1996. Although we were profitable in the 13
quarters from October 1, 1996 through December 31, 1999, we incurred a loss of
$7.6 million in the first quarter of 2000. The first quarter 2000 loss was
primarily the result of:

. a $9.5 million pre-tax charge related to an option we exercised for
the early return of four Fokker F100s in the first half of 2001, a
writedown of the value of certain leasehold improvements associated
with those aircraft and related costs;
. an increase in fuel expense of $4.8 million year-over-year driven by a
122% increase in fuel prices;
. $1.2 million in Boeing 737-700 induction costs, including rent expense
incurred prior to revenue service and increased initial training
costs; and
. an estimated $4 million impact from severe January weather, which
included a record 20 inch snowfall that shut down our Raleigh-Durham
hub for three and one-half days.

There can be no assurance that we will be profitable in the future.

Maintenance of our Fokker F-100s, which are no longer being manufactured, is
more expensive than maintenance of similar aircraft still in production

Eight of our current 32 aircraft are Fokker F-100s. Fokker Aircraft B.V., a
Dutch corporation, has ceased operations. As a result, the F-100 is no longer
being manufactured. Our cost to maintain F-100 aircraft generally exceeds the
cost of maintaining similar aircraft that are presently in production. Vendors
and suppliers of key parts are generally fewer in number and their products more
expensive, and engineering is not as readily available. Our inability to obtain
parts and servicing for our F-100 aircraft on a timely and cost-effective basis
could have a material adverse effect on our financial condition and results of
operations.

15
<PAGE>

We are required to purchase four Airbus A320 aircraft that we no longer desire
to purchase

Pursuant to a March 1995 purchase agreement, we are obligated to purchase
four Airbus A320 aircraft with deliveries in 2005 and 2006. To support the
operation of the four A320 aircraft, we also agreed to purchase one IAE V2527-A5
spare engine scheduled for delivery in November 2005 from International Aero
Engines AG. The purchase of the A320s and the associated spare engine no longer
fit with our current strategy. We are considering several alternatives with
respect to the A320s, including restructuring our agreement with Airbus or
selling our positions. There can be no assurance that we will be able to
restructure or sell our rights under this purchase agreement. If we are required
to take delivery of these aircraft or if we incur significant financial expense
in lieu of taking delivery, our financial position and results of operations
could be materially adversely affected.

Our business could be adversely affected if we lose the services of the key
personnel upon whom we depend

Our management and operations are dependent upon the efforts of our
Chairman of the Board, President and Chief Executive Officer, Robert R. Ferguson
III, and a small number of management and operating personnel. We do not
maintain key-man life insurance on any executive officer. The loss of the
services of key members of management could have an adverse impact on our
business.

Our business is seasonal and cyclical

Our financial results are sensitive to seasonal variations in traffic. The
highest levels of traffic and revenue are generally realized in the second
quarter and the lowest levels of traffic and revenue are generally realized in
the third quarter. Given our high proportion of fixed costs, such seasonality
affects our profitability from quarter to quarter.

Many of our areas of operations experience adverse weather in the winter,
causing a greater percentage of our flights to be canceled and/or delayed than
in other quarters. For example, during January 2000, due to severe weather, we
effectively lost five business days of operations.

In addition, the airline industry is highly sensitive to general economic
conditions. Because a substantial portion of airline travel (both business and
leisure) is discretionary, the industry tends to experience adverse financial
results during general economic downturns. Any general reduction in airline
passenger traffic may materially and adversely affect our results of operations,
particularly since current industry traffic patterns are based in part on
substantial stimulation of discretionary air travel.

Many of our employees are represented by labor unions

Our pilots, fleet service (ramp) agents and flight attendants are
represented by labor unions. The pilots' representative, Air Line Pilots
Association, was elected in December 1997.

16
<PAGE>

The fleet service employees' representative, International Association of
Machinists & Aerospace Workers, AFL-CIO (IAM), was elected in June 1998. The
flight attendants' representative, the Association of Flight Attendants, AFL-CIO
(AFA), was elected in December 1998. Prior to those dates, none of our employees
were represented by a union. Our pilots recently ratified a collective
bargaining agreement with Midway that became effective on April 1, 2000. With
respect to the fleet service employees, a contract proposal was agreed upon by
the IAM and Midway, but an agreement submitted to the employees for ratification
on October 28, 1999 was rejected. The IAM filed an application for mediation
with the National Mediation Board (NMB) on November 3, 1999. In February 2000,
with the assistance of an NMB-appointed mediator, we reached agreement with the
IAM and members of the fleet service agent negotiating committee on a collective
bargaining agreement. The agreement was then submitted to the fleet service
agents for ratification. On March 20, 2000, we were informally advised that the
fleet service agents voted not to approve the agreement. We believe that a
request for further mediation will be made in this matter, but the NMB has not
yet scheduled any future mediation sessions. Negotiations with the AFA are
ongoing.

Although we believe mutually acceptable agreements can be reached with the
unions representing our fleet service agents and flight attendants, the ultimate
outcome of the negotiations is unknown at this time. Union representation of any
of our employees could result in employee compensation and working condition
demands that may increase our operating expenses and adversely affect our
profitability.

Risk Factors Related to Our Common Stock

Volatility of our common stock price could result in substantial losses for
stockholders who exercise their subscription rights

The market price of our common stock ranged between a high closing price of
$17.125 and a low closing price of $6.125 during 1999 and from $6.938 to $4.75
in 2000 (through May 30, 2000) and may continue to be highly volatile and
subject to wide fluctuations in response to factors including the following,
some of which are beyond our control:

. actual or anticipated variations in our quarterly operating results;

. announcements of new service offerings or new pricing practices by us
or our competitors;

. changes in financial estimates by security analysts;

. under-performance against analysts' estimates;

. changing laws and government regulations relating to our business;

. results of regulatory inspections;

. increased market share penetration by our competitors;

17
<PAGE>

. general economic conditions;

. aircraft operating costs, particularly fuel and personnel;

. additions or departures of key personnel;

. sales of additional shares of common stock; and

. existing and potential litigation or regulatory proceedings.

In addition, the stock market in general, and stocks of airlines in particular,
have from time to time experienced extreme price and volume fluctuations. This
volatility is often unrelated or disproportionate to the operating performance
of these companies. These broad market fluctuations may adversely affect the
market price of our common stock, regardless of our actual operating
performance.

We do not expect to pay cash dividends on our common stock

We have not paid cash dividends since our formation and do not anticipate
paying cash dividends in the foreseeable future, since we intend to retain any
future earnings to finance the expansion and continuing development of our
business. In addition, one of our debt instruments prohibits the payment of
dividends until the debt has been repaid and certain aircraft leases prohibit
the payment of dividends to insiders until other debt has been repaid. The
declaration and payment in the future of any cash dividends will be at the
discretion of our board of directors and will depend upon our earnings, capital
requirements and financial position, future loan covenants, general economic
conditions and other pertinent factors.

Anti-takeover provisions in our charter documents may delay or prevent a
takeover of Midway

Certain provisions of our charter documents may make it more difficult for
a third party to acquire control of us, even on terms that a stockholder might
consider favorable. Our amended and restated certificate of incorporation
authorizes our board of directors to issue preferred stock without stockholder
approval. The issuance of preferred stock could make it more difficult for a
third party to acquire us because the preferred stock could have dividend,
redemption, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of holders of our common stock. Our
board of directors does not currently have any intent to issue shares of
preferred stock.

Our amended and restated certificate of incorporation also provides that
our board of directors is divided into three classes, and the directors in each
class serve staggered three-year terms. Further, our bylaws set forth advance
notice procedures for the nomination by a stockholder of a candidate for
election to the board of directors and other matters to be brought before an
annual meeting of our stockholders. These provisions may make it more difficult
for stockholders to replace current members of our board of directors and may
make the acquisition of Midway by a third party more difficult.

18
<PAGE>

The existence of controlling stockholders may limit your ability to influence
the outcome of matters requiring stockholder approval and could discourage
potential acquisitions of our business by third parties

James H. Goodnight, Ph.D. and John P. Sall currently own approximately
31.9% and 15.5%, respectively, of our outstanding shares of common stock,
without giving effect to the shares that may be issued upon the exercise of
outstanding warrants and stock options. Although we are not aware of any
arrangement or understanding, contractual or otherwise, that obligates Dr.
Goodnight and Mr. Sall to act in concert with respect to Midway, the level of
stock ownership by Dr. Goodnight and Mr. Sall may allow them to elect all of
their designees to the board of directors and to control the outcome of
virtually all matters submitted for a vote of our stockholders. The combined
equity interests of Dr. Goodnight and Mr. Sall in Midway may have the effect of
making certain transactions more difficult or of delaying, deferring or
preventing a change in control of Midway.

In November 1999, Dr. Goodnight and Mr. Sall submitted to Midway a proposal
to merge Midway with a company owned by Dr. Goodnight and Mr. Sall. In the
merger proposal, all of the shares of Midway not owned by Dr. Goodnight and Mr.
Sall would have been exchanged for cash at $8.00 per share. A special committee
comprised of independent members of our board of directors was appointed to
review the proposal. In December 1999, we announced that the special committee
and Dr. Goodnight and Mr. Sall were unable to reach an agreement with respect to
the value of our common stock, and that the merger proposal had been withdrawn
by Dr. Goodnight and Mr. Sall.

On March 31, 2000, we closed a $30 million revolving credit facility with
Reedy Creek Investments, L.L.C., an entity that is wholly owned by Dr. Goodnight
and Mr. Sall. We are undertaking this rights offering to meet our obligation
under the revolving credit facility to reduce the commitment to $10 million by
September 30, 2000. Both Dr. Goodnight and Mr. Sall have agreed to exercise
their respective basic subscription privileges and over-subscription privileges
in full. As a result, unless all stockholders exercise their basic subscription
privileges, which we believe is highly unlikely, Dr. Goodnight and Mr. Sall will
increase their respective ownership interests in Midway as a result of this
rights offering. If no other stockholders exercise their subscription rights,
Dr. Goodnight and Mr. Sall will in aggregate own approximately 69.4% of our
outstanding common stock.

This concentration of ownership could have the effect of delaying or
preventing a change in control or otherwise discouraging a potential acquirer
from attempting to obtain control of Midway, even on terms that a stockholder
might consider favorable. This in turn could harm the market price of our common
stock or prevent our stockholders from realizing a premium over the market price
for their shares of common stock.

In addition, amendments to certain provisions of our certificate of
incorporation and by-laws require the approval of 66 2/3% of our common stock.
To the extent that Dr. Goodnight and Mr. Sall own more than 66 2/3% of our
common stock as a result of the rights offering or

19
<PAGE>

otherwise, they will have the ability to vote to amend our certificate of
incorporation and by-laws without obtaining the vote of any other stockholder.

The sale of a substantial amount of common stock could cause the market price of
our common stock to drop significantly

Sales of a substantial amount of our common stock in the public market, by
our principal stockholders or otherwise, or the perception that these sales may
occur, could materially adversely affect the market price of our common stock
and impair our ability to raise funds in additional stock offerings.

Risks Related to the Rights Offering

If you do not exercise all of your subscription rights, you may suffer
significant dilution of your percentage ownership of our common stock

This rights offering is designed to enable Midway to raise capital while
allowing all stockholders on the record date to maintain their relative
proportionate voting and economic interests. Our two principal stockholders, Dr.
Goodnight and Mr. Sall, have agreed to exercise their respective basic
subscription privileges and over-subscription privileges in full. To the extent
that you do not exercise your subscription rights and shares are purchased by
other stockholders in the rights offering, your proportionate voting interest
will be reduced, and the percentage that your original shares represent of our
expanded equity after exercise of the subscription rights will be
disproportionately diluted. If no stockholders other than Dr. Goodnight and Mr.
Sall exercise their basic subscription privileges, Dr. Goodnight's ownership
interest in Midway will increase to approximately 46.7% from approximately 31.9%
and Mr. Sall's ownership interest in Midway will increase to approximately 22.7%
from approximately 15.5%, and the ownership interest of the remaining
stockholders, who currently own in the aggregate approximately 47.4% of our
common stock, will decrease to approximately 30.6%.

The price of our common stock may decline before or after the subscription
rights expire

We cannot assure you that the public trading market price of our common
stock will not decline after you elect to exercise your subscription rights. If
that occurs, you will have committed to buy shares of common stock at a price
above the prevailing market price and you will have an immediate unrealized
loss. Moreover, we cannot assure you that following the exercise of subscription
rights you will be able to sell your shares of common stock at a price equal to
or greater than the subscription price. Until shares are delivered upon
expiration of the rights offering, you may not be able to sell the shares of our
common stock that you purchase in the rights offering. Certificates representing
shares of our common stock purchased will be delivered as soon as practicable
after expiration of the rights offering. We will not pay you interest on funds
delivered to the Subscription Agent pursuant to the exercise of rights.

20
<PAGE>

Once you exercise your subscription rights, you may not revoke the exercise

Once you exercise your subscription rights, you may not revoke the
exercise, even if less than all of the shares that we are offering are actually
purchased. If we elect to withdraw or terminate the rights offering, neither we
nor the Subscription Agent will have any obligation with respect to the
subscription rights except to return, without interest, any subscription
payments.

The subscription price is not an indication of the value of Midway

The subscription price was set by our board of directors after considering
a variety of factors. The subscription price does not necessarily bear any
relationship to the book value of our assets, past operations, cash flows,
earnings, financial condition or any other established criteria for
value. You should not consider the subscription price as an indication of the
present or future value of Midway. Our board of directors has established the
subscription price at a 12.4% discount from the market price of the common stock
at the time the board of directors determined the subscription price to
encourage all stockholders to exercise their subscription rights and thereby
raise capital without diluting the interests of current stockholders. We have
neither sought nor obtained a valuation opinion from an outside financial
consultant or investment banker.

21
<PAGE>

SELECTED FINANCIAL INFORMATION

Our selected financial information is derived from our Annual Report on
Form 10-K for the year ended December 31, 1999 and our Quarterly Report on Form
10-Q for the quarter ended March 31, 2000. You should read the following
financial information in conjunction with those reports, which are incorporated
herein by reference. See "Where You Can Find More Information."

<TABLE>
<CAPTION>
Three Months
ended
Year ended December 31, March 31,
---------
1995 1996(1) 1997(1) 1998(1) 1999 1999 2000
--------- ----------- ------------ ----------- ----------- ----------- -----------
(dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues:
Passenger $118,568 $173,541 $179,000 $ 205,566 $ 213,018 $ 53,659 $ 59,063
Other 4,034 6,493 7,275 5,873 4,928 1,327 1,281
--------- ----------- ------------ ----------- ----------- ----------- -----------
Total operating revenues 122,602 180,034 186,275 211,439 217,946 54,986 60,344
Operating expenses:
Wages, salaries and
related costs 19,874 24,619 25,757 31,822 38,875 8,939 11,511
Aircraft fuel 16,782 27,300 21,499 19,623 22,738 4,119 10,034
Aircraft and engine
rentals 30,889 34,113 30,495 29,927 31,429 7,317 10,807
Commissions 9,382 13,728 13,978 15,071 14,229 3,642 3,797
Maintenance, materials
and repairs 13,551 17,930 17,006 17,103 13,388 3,962 3,326
Other rentals and
landing fees 11,924 12,711 9,812 9,646 10,098 2,391 3,431
Depreciation and
amortization 2,056 1,346 1,999 6,162 7,938 1,729 2,338
Other operating expenses 43,769 54,603 49,862 53,541 59,773 14,639 17,282
Restructuring (2) 6,004 - - - - - -
Impairment of
long-lived assets (3) - 16,941 - - - - -
Equipment retirement
charges (4) - - - 2,413 2,765 927 9,163
Recapitalization (5) - - 750 - - - -
--------- ----------- ------------ ----------- ----------- ----------- -----------
Total operating
expenses 154,231 203,291 171,158 185,308 201,233 47,665 71,689
--------- ----------- ------------ ----------- ----------- ----------- -----------

Operating Income (loss) (31,269) (23,257) 15,117 26,131 16,713 7,321 (11,345)

Interest income (expense),
net (413) (1,841) 114 (1,972) (1,621) (859) (849)
Other income (expense) (222) 834 - - - - -
--------- ----------- ------------ ----------- ----------- ----------- -----------
Total other income (expense) (635) (1,007) 114 (1,972) (1,621) (859) (849)
--------- ----------- ------------ ----------- ----------- ----------- -----------

Income (loss) before
income taxes and
extraordinary gain (32,264) (24,264) 15,231 24,159 15,092 6,462 (12,194)
Income tax expense
(benefit) - - 6,306 9,178 5,736 2,456 (4,634)
--------- ----------- ------------ ----------- ----------- ----------- -----------
Income (loss) before
extraordinary gain (32,264) (24,264) 8,925 14,981 9,356 4,006 (7,560)
Extraordinary gain (6) - - 15,969 - - - -
--------- ----------- ------------ ----------- ----------- ----------- -----------
Net income (loss) (32,264) (24,264) 24,894 14,981 9,356 4,006 (7,560)
Preferred dividends (1,440) - - - - - -
--------- ----------- ------------ ----------- ----------- ----------- -----------
Net income (loss)
available for common
stockholders $(33,704) $ (24,264) $ 24,894 $ 14,981 $ 9,356 $ 4,006 $ (7,560)
======== =========== ============ =========== =========== =========== ===========
</TABLE>

22
<PAGE>

Net income $ 4.11 $ 1.75 $ 1.09 $ 0.47 $ (0.88)
============ =========== =========== =========== ===========

Weighted average shares
used in computing
basic earnings per share 6,059,051 8,574,972 8,602,395 8,602,395 8,608,426
============ =========== =========== =========== ===========

Diluted earnings per
share:
Income before
extraordinary gain $ 1.24 $ 1.54 $ 0.98 $ 0.42 $ (0.88)
Extraordinary gain 2.22 - - - -
------------ ----------- ----------- ----------- -----------

Net income $ 3.46 $ 1.54 $ 0.98 $ 0.42 $ (0.88)
============ =========== =========== =========== ===========

Weighted average
shares used in
computing diluted
earnings per share 7,193,794 9,731,527 9,507,175 9,652,117 8,608,426
============ =========== =========== =========== ===========

Other Financial Data:
Cash flows provided by
(used in):
Operating activities $ (805) $ 5,784 $ 10,283 $ 22,257 $ 21,979 $ 2,319 $ (4,226)
Investing activities (6,876) (2,614) (25,219) (9,681) (51,345) (11,396) (12,289)
Financing activities 3,571 4,836 58,640 (18,349) 7,981 (1,771) 12,990
</TABLE>

Three Months ended
Year ended December 31, March 31,
----------------------- ---------
1995 1996(1) 1997 1998 1999 1999 2000
---------- ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating Statistics (8)
Available seat miles (000s) 1,387,921 1,758,560 1,387,864 1,544,945 1,565,781 375,649 464,127
Revenue passenger miles (000s) 692,681 998,959 875,752 1,008,567 1,031,583 238,624 310,823
Load factor 49.9% 56.8% 63.1% 65.3% 65.9% 63.5% 67.0%
Break-even load factor (9) 60.8% 59.2% 57.5% 56.8% 60.4% 54.8% 70.4%
Departures 24,403 29,192 26,898 35,990 46,751 10,482 14,491
Block hours 38,933 48,682 42,867 55,783 71,705 16,071 22,192
Passenger revenue per ASM (cents) 8.54 9.87 12.90 13.31 13.60 14.3 12.7
Yield (cents) 17.12 17.37 20.44 20.38 20.65 22.5 19.0
Average fare $ 89 $ 99 $ 108 $ 103 $ 103 $ 114 $ 95
Operating cost per available seat
mile (cents) (10) 10.68 10.60 12.28 11.84 12.68 12.4 13.5
Onboard passengers 1,338,438 1,742,957 1,660,140 1,995,117 2,063,192 471,593 621,319
Average seats per departure 108 104 101 88 68 74 66
Average stage length (miles) 532 571 524 475 471 467 459
Aircraft (average during period) 11.0 13.7 13.0 18.1 22.8 21.5 29.0
Aircraft utilization (hours per day) 9.9 9.8 9.0 8.4 8.6 8.3 8.4
Fuel price per gallon (cents)(11) 69.0 80.6 73.4 57.3 61.7 36 80
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
As of
As of December 31, March 31,
1995 1996 1997 1998 1999 2000
---------- ----------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
Balance Sheet Data
Cash, cash equivalents,
restricted cash and
short-term investments $ 2,799 $ 12,805 $ 58,071 $ 58,248 $ 38,564 $ 41,947
Working capital (deficit) (41,117) (42,198) 20,826 32,880 4,414 (9,376)
Equipment and property, net 9,258 6,669 46,574 103,007 120,405 124,353
Equipment purchase
deposits, net 7,749 1,846 17,133 18,103 61,824 78,278
Total assets 56,010 38,384 139,810 203,581 256,689 290,856
Long-term debt and capital
lease obligations
(net of current
maturities) 7,307 11,704 39,187 78,764 103,349 111,399
Stockholders' equity (18,385) (40,569) 48,486 70,463 83,136 75,620
</TABLE>

___________________________
(1) Midway reclassified certain balances to reflect classifications in the
1997, 1998 and 1999 financial statements.

(2) Midway recorded restructuring charges in 1995 related to the return of four
A320 aircraft and other related one-time charges.

(3) Midway recorded an impairment loss of $16.9 million from certain long-lived
assets, primarily intangible assets, that were determined by Midway's
management to be impaired in accordance with SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."

(4) Midway recorded equipment retirement charges in 1998 and 1999 related to
the return of four Fokker and one Airbus aircraft to their lessors. See
Note 2 of Notes to Financial Statements incorporated herein by reference to
Midway's Annual Report on Form 10-K for the year ended December 31, 1999.
Midway recorded equipment retirement charges in the three months ended
March 31, 2000 related to the exercise of an option to return four
additional Fokker aircraft prior to their lease termination dates.

(5) Midway recorded a one-time charge in 1997 related to its recapitalization.
See Note 12 of Notes to Financial Statements incorporated herein by
reference to Midway's Annual Report on Form 10-K for the year ended
December 31, 1999.

(6) Extraordinary gain consists of one-time gains recognized in connection with
Midway's recapitalization. See Note 12 of Notes to Financial Statements
incorporated herein by reference to Midway's Annual Report on Form 10-K for
the year ended December 31, 1999.

(7) Since Midway was recapitalized in February 1997 and all prior capital stock
was canceled at that time, per share amounts prior to 1997 are not
meaningful and are thus not presented.

(8) The airline operating terms used in this table have the following meanings:

Aircraft (average during period): The average number of aircraft operated
during the period.
Aircraft utilization: The average number of block hours operated in
scheduled service per day per aircraft for the total fleet of aircraft.

24
<PAGE>

Available seat miles (ASMs): The number of seats available for scheduled
passengers multiplied by the number of miles those seats were flown.
Average fare: The average fare paid by a revenue passenger.
Average seats per departure: The average number of available seats per
departing aircraft.
Average stage length: The average number of miles flown per flight.
Block hour: The total time an aircraft is in motion from brake release at
the origination to brake application at the destination.
Break-even load factor: The load factor at which scheduled passenger
revenues would have been equal to operating plus non-operating
expenses/(income) (holding yield constant).
Cost per available seat mile (CASM): Operating expenses plus non-operating
expenses/(income) divided by ASMs.
Departure: A scheduled aircraft flight.
Fuel price per gallon: The average price per gallon of jet fuel for the
fleet (excluding into plane fees).
Load factor: Revenue passenger miles divided by available seat miles.
Onboard passengers: The number of revenue passengers carried.
Revenue passenger miles (RPMs): The number of miles flown by revenue
passengers.
Passenger revenue per available seat mile (PRASM): Passenger revenues
divided by ASMs.
Yield: The average scheduled passenger fare paid for each mile a
scheduled revenue passenger is carried.

(9) "Break-even load factor" as represented above excludes restructuring,
impairment of long-lived assets, equipment retirement charges and
recapitalization expenses. Had restructuring, impairment of long-lived
assets, equipment retirement charges and recapitalization expenses been
included for the years ended December 31, 1995, 1996, 1997, 1998 and 1999
and the three months ended March 31, 1999 and 2000 the break-even load
factor would have been 63.3%, 64.6%, 57.8%, 57.6%, 61.2%, 55.9% and 80.8%,
respectively.

(10) "Operating cost per available seat mile" as represented above equals total
operating costs less restructuring, impairment of long-lived assets,
equipment retirement charges and recapitalization expenses, divided by
available seat miles. Had restructuring, impairment of long-lived assets,
equipment retirement charges and recapitalization expenses been included
for the years ended December 31, 1995, 1996, 1997, 1998 and 1999 and the
three months ended March 31, 1999 and 2000 cost per available seat mile
would have been 11.11 cents, 11.56 cents, 12.33 cents, 11.99 cents, 12.85
cents, 12.69 cents and 15.44 cents, respectively.

(11) Excludes taxes and into-plane fees.

We have analyzed our three most recently completed fiscal years in our
last Annual Report on Form 10-K that we filed and our first quarter of 1999 and
2000 in our last Quarterly Report on Form 10-Q that we filed. See "Where You
Can Find More Information."

25
<PAGE>

USE OF PROCEEDS

Our gross proceeds from the rights offering will depend on the number of
shares that are purchased. If we sell all 8,613,595 shares which may be
purchased upon exercise of the rights offered by this prospectus, then we will
receive proceeds of $44,790,694, before deducting expenses payable by us,
estimated to be $[__________]. Since Dr. Goodnight and Mr. Sall, who currently
own approximately 31.9% and 15.5%, respectively, of our outstanding shares of
common stock, without giving effect to the shares that may be issued upon the
exercise of outstanding warrants and stock options, have agreed to exercise
their basic subscription privileges and over-subscription privileges in full, we
expect to issue at least 6,226,050 shares and to receive proceeds of at least
$32,375,460 from the rights offering, before deducting expenses.

We will use the proceeds from the rights offering to pay all outstanding
borrowings under our $30 million revolving credit facility with Reedy Creek
Investments, L.L.C. At May 30, 2000, we had $5 million outstanding under this
facility. Any proceeds remaining after making these prepayments will be used for
working capital and capital expenditure requirements, including the funding of
pre-delivery deposits due to aircraft manufacturers.

The credit facility with Reedy Creek Investments matures on March 31, 2002,
although the commitment under the facility will reduce from $30 million to $10
million on the earlier of September 30, 2000 or the date we receive net proceeds
from a public equity offering. This rights offering will result in a reduction
of the commitment to $10 million. Borrowings under the credit facility bear
interest at the applicable LIBOR rate at the time of borrowing plus 3% and are
secured by our interest in certain aircraft parts and tooling. We borrowed $15
million under this facility on March 31, 2000 to meet working capital and
capital expenditure requirements, including the funding of pre-delivery deposits
due to aircraft manufacturers. We subsequently repaid $10 million of these
borrowings.

DIVIDEND POLICY

We have not paid cash dividends since our formation and do not anticipate
paying cash dividends in the foreseeable future, since we intend to retain any
future earnings to finance the expansion and continuing development of our
business. In addition, one of our debt instruments prohibits the payment of
dividends until the debt has been repaid and certain aircraft leases prohibit
the payment of dividends to insiders until other debt has been repaid. The
declaration and payment in the future of any cash dividends will be at the
discretion of our board of directors and will depend upon the earnings, capital
requirements and financial position of Midway, future loan covenants, general
economic conditions and other pertinent factors.

26
<PAGE>

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the symbol
"MDWY". Trading began in December 1997 upon the completion of Midway's initial
public offering of common stock, and the following table sets forth the reported
high and low closing sale prices of our common stock for the periods indicated:

1998 High Low
---- ---- ---

First Quarter $21.750 $16.125
Second Quarter 21.063 17.750
Third Quarter 21.750 9.875
Fourth Quarter 14.875 9.688

1999 High Low
---- ---- ---

First Quarter $17.125 $11.000
Second Quarter 12.625 9.000
Third Quarter 9.875 6.125
Fourth Quarter 7.375 6.125

2000 High Low
---- ---- ---

First Quarter $ 6.938 $ 4.750
Second Quarter
(through May 30, 2000) 6.063 4.813

The closing price of our common stock was $5.9375 on March 29, 2000, the
last full trading day before we publicly announced the rights offering. The
closing price of our common stock was $_____ on __________, 2000, the last full
trading day before the date of this prospectus. We urge you to obtain a current
stock quote for our common stock.

27
<PAGE>

CAPITALIZATION

The following table shows our capitalization as of March 31, 2000. The
table also shows our capitalization as adjusted for the completion of the rights
offering (including application of net proceeds from that transaction as
described on page 26 under the heading "Use of Proceeds") at the subscription
price of $5.20 per share and assuming that all subscription rights are
exercised.

<TABLE>
<CAPTION>
March 31, 2000
----------------------
Actual As Adjusted
--------- -----------
<S> <C> <C>
(dollars in thousands)
Debt:

Current maturities of long-term debt and
capital lease obligations $ 11,575 $ 6,575

Long-term debt and capital lease obligations(1) 121,399 111,399
-------- --------
Total debt 132,974 117,974
-------- --------
Stockholders' equity:

Preferred stock, $0.01 par value, 12 million shares - -
authorized; none issued and outstanding

Common stock, $0.01 par value, 25 million shares 86 172
authorized; 8,613,595 shares issued and
outstanding at March 31, 2000 and 17,227,190
issued and outstanding after the rights offering

Additional paid-in capital 54,349 99,054

Retained earnings ($51.1 million of accumulated
deficit eliminated in the quasi-reorganization
as of June 30, 1997) 21,141 21,141
-------- --------

Total stockholders' equity 75,576 120,367
-------- --------

Total capitalization $208,550 $238,341
======== ========
</TABLE>

_____________
(1) Subsequent to March 31, 2000, we repaid $10 million outstanding at March
31, 2000 under our revolving credit facility with an entity owned by our
two principal stockholders, and at May 30, 2000, we had $5 million
outstanding under this facility.

28
<PAGE>

THE RIGHTS OFFERING

Before exercising any subscription rights, you should read carefully the
information set forth under "Risk Factors."

The Subscription Rights

We are distributing non-transferable subscription rights to stockholders
who owned shares of our common stock on __________, 2000, the record date, at no
cost to the stockholders. We will give you one (1) subscription right for each
share of common stock that you owned on the record date. Each subscription right
will entitle you to purchase one share of common stock for $5.20. If you wish to
exercise your subscription rights, you must do so before 5 P.M., New York City
time, on _____________, 2000. After that date, the subscription rights will
expire and will no longer be exercisable.

Basic Subscription Privilege

Each subscription right will entitle you to receive, upon payment of $5.20,
one (1) share of common stock. You will receive the shares that you purchase
pursuant to your basic subscription privilege as soon as practicable after
___________, 2000, whether you exercise your subscription rights immediately
prior to that date or earlier. You are not required to exercise any or all of
your rights unless you wish to purchase shares under your over-subscription
privilege described below, in which case you must exercise all of your rights.

Over-Subscription Privilege

Subject to the limitations described below, each subscription right also
grants you an over-subscription privilege to purchase additional shares of
common stock that are not purchased by other stockholders. You are entitled to
exercise your over-subscription privilege only if you exercise your basic
subscription privilege in full. If you wish to exercise your over-subscription
privilege, you should indicate the number of additional shares that you would
like to purchase in the space provided on your subscription certificate.
However, you may not be able to purchase as many additional shares as you
requested on your subscription certificate, because you may only purchase that
number of additional shares of our common stock equal to your percentage
ownership of our common stock on the record date multiplied by the number of
subscription rights that were not timely exercised by our other stockholders,
rounded down to the nearest whole number. When you send in your subscription
certificate, you must also send the full purchase price for the number of
additional shares that you have requested to purchase (in addition to the
payment due for shares purchased through your basic subscription privilege). If
the number of additional shares you are eligible to purchase based on your
percentage ownership on the record date exceeds the number of shares you
requested, you will receive only the number of shares that you requested, and
the remaining shares will be divided among other stockholders exercising their
over-subscription privileges. In certain circumstances, however, in order to
comply with applicable state securities laws, we may not be able to honor all
over-subscription privileges even if we have shares available.

29
<PAGE>

To determine if you have fully exercised your basic subscription privilege,
we will consider only the basic subscription privileges held by you in the same
capacity. For example, suppose you were granted rights to purchase shares of
Midway common stock you own individually and for shares of Midway common stock
you own jointly with your spouse. You only need to fully exercise your basic
subscription privilege with respect to your individually owned rights in order
to exercise your over-subscription privilege with respect to your individually
owned rights. You do not have to subscribe for any shares under the basic
subscription privilege owned jointly with your spouse to exercise your
individual over-subscription privilege.

When you complete the portion of the subscription certificate to exercise
the over-subscription privilege, you will be representing and certifying that
you have fully exercised your basic subscription privilege received in respect
of shares of Midway common stock you hold in that capacity. You must exercise
your over-subscription privilege at the same time you exercise your basic
subscription privilege in full.

If you own your shares of Midway common stock through your broker, dealer
or other nominee holder who will exercise your over-subscription privilege on
your behalf, the nominee holder will be required to certify to us and the
Subscription Agent:

. the number of shares held on __________, 2000, the record date, on
your behalf;

. the number of rights you exercised under your basic subscription
privilege;

. that your entire basic subscription privilege held in the same
capacity has been exercised in full; and

. the number of shares of Midway common stock you subscribed for
pursuant to the over-subscription privilege.

Your nominee holder must also disclose to us certain other information
received from you.

If you exercised your over-subscription privilege and are allocated less
than all of the shares of Midway common stock for which you wished to subscribe,
the excess funds you paid for shares of Midway common stock that are not
allocated to you will be returned in full by mail, without interest or
deduction, as soon as practicable after the expiration date of the rights.

Intended Purchases

Dr. Goodnight and Mr. Sall, who currently own approximately 31.9% and
15.5%, respectively, of our outstanding shares of common stock, without giving
effect to the shares that may be issued upon the exercise of outstanding
warrants and stock options, have agreed to exercise their basic subscription
privileges and over-subscription privileges in full. As a result, we expect
that at least 6,226,050 of the 8,613,595 shares offered in this rights offering
will be subscribed for.

30
<PAGE>

No Recommendation to Rights Holders

Neither Midway nor its Board of Directors is making any recommendations to
you as to whether or not you should exercise your subscription rights. You
should make your decision based on your own assessment of your best interests
after reading this prospectus.

Expiration Date

The rights will expire at 5 p.m., New York City time, on ___________, 2000,
unless we decide to extend the rights offering. If you do not exercise your
subscription rights prior to that time, your subscription rights will expire and
will no longer be exercisable. We will not be required to issue shares of
common stock to you if the Subscription Agent receives your subscription
certificate or your payment after that time, regardless of when you sent the
subscription certificate and payment, unless you send the documents in
compliance with the guaranteed delivery procedures described below.

Withdrawal Right

Our board of directors may withdraw the rights offering in its sole
discretion at any time prior to or on ___________, 2000, for any reason
(including, without limitation, a change in the market price of our common
stock). If we withdraw the rights offering, any funds you paid will be promptly
refunded, without interest or penalty.

Determination of Subscription Price

Our board of directors chose the $5.20 per share subscription price after
considering a variety of factors, including the following:

. the historic and current market price of the common stock;

. our business prospects;

. our history of profits and losses;

. general conditions in the securities market;

. our need for capital;

. alternatives available to us for raising capital;

. the amount of proceeds desired;

. the liquidity of our common stock; and

. the level of risk to our investors.

31
<PAGE>

The $5.20 per share subscription price should not be considered an indication of
the actual value of Midway or of our common stock. We cannot assure you that the
market price of the common stock will not decline during or after the rights
offering. We also cannot assure you that you will be able to sell shares of
common stock purchased during the rights offering at a price equal to or greater
than $5.20 per share. We urge you to obtain a current quote for our common stock
before exercising your rights.

Transferability of Subscription Rights

Both the basic subscription privileges and over-subscription privileges are
non-transferable and non-assignable. Only you may exercise these subscription
rights.

Exercise of Subscription Privileges

You may exercise your subscription privileges by delivering to the
Subscription Agent on or prior to _________, 2000:

. A properly completed and duly executed subscription certificate;

. Any required signature guarantees; and

. Payment in full of $5.20 per share for the shares of common stock
subscribed for by exercising your basic subscription privileges and,
if desired, your over-subscription privileges.

You should deliver your subscription certificate and payment to the
Subscription Agent at the address shown under the heading "Subscription Agent."
We will not pay you interest on funds delivered to the Subscription Agent
pursuant to the exercise of rights.

Method of Payment

Payment for the shares must be made by check or bank draft (cashier's
check) drawn upon a United States bank or a postal, telegraphic or express money
order payable to the order of [_________], as Subscription Agent. Payment for
basic subscription privileges and over-subscription privileges may also be
effected through wire transfer as follows:

Bank Name:
Address:
ABA#:
Account #:
Account Name:

Payment will be deemed to have been received by the Subscription Agent only
upon:

. clearance of any uncertified check;

32
<PAGE>

. receipt by the Subscription Agent of any certified check or bank
draft drawn upon a U.S. bank or of any postal, telegraphic or express
money order;

. receipt by the Subscription Agent of any funds transferred by wire
transfer; or

. receipt of funds by the Subscription Agent through an alternative
payment method approved by Midway.

Please note that funds paid by uncertified personal check may take at least
five business days to clear. Accordingly, if you wish to pay by means of an
uncertified personal check, we urge you to make payment sufficiently in advance
of __________, 2000, to ensure that the payment is received and clears before
that date. We also urge you to consider payment by means of a certified or
cashier's check or money order.

Guaranteed Delivery Procedures

If you want to exercise your subscription rights, but time will not permit
your subscription certificate to reach the Subscription Agent on or prior to
_________, 2000, you may exercise your subscription rights if you satisfy the
following guaranteed delivery procedures:

(1) You send, and the Subscription Agent receives, payment in full for
each share of common stock being subscribed for through the basic
subscription privilege and the over-subscription privilege, on or
prior to _________, 2000;

(2) You send, and the Subscription Agent receives, on or prior to
__________, 2000, a notice of guaranteed delivery, substantially in
the form provided to you with your subscription certificate, from a
member firm of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in
the United States. The notice of guaranteed delivery must state your
name, the number of subscription rights that you hold, the number of
shares of common stock that you wish to purchase pursuant to the basic
subscription privilege and the number of shares, if any, you wish to
purchase pursuant to the over-subscription privilege. The notice of
guaranteed delivery must guarantee the delivery of your subscription
certificate to the Subscription Agent within three Nasdaq National
Market trading days following the date of the notice of guaranteed
delivery; and

(3) You send, and the Subscription Agent receives, your properly completed
and duly executed subscription certificate, including any required
signature guarantees, within three Nasdaq National Market trading days
following the date of your notice of guaranteed delivery. The notice
of guaranteed delivery may be delivered to the Subscription Agent in
the same manner as your subscription certificate at the addresses set
forth under the heading "Subscription Agent," or may be transmitted to
the Subscription Agent by facsimile transmission, to facsimile number
[( ) ___-____]. You can obtain additional copies of the form of
notice of guaranteed delivery by

33
<PAGE>

requesting them from the Subscription Agent at the address set forth
under the heading "Subscription Agent."

Signature Guarantee

Signatures on the subscription certificate do not need to be guaranteed if
either the subscription certificate provides that the shares of common stock to
be purchased are to be delivered directly to the record owner of such
subscription rights, or the subscription certificate is submitted for the
account of a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States.
If a signature guarantee is required, signatures on the subscription certificate
must be guaranteed by an Eligible Guarantor Institution, as defined in Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended, subject to the
standards and procedures adopted by the Subscription Agent. Eligible Guarantor
Institutions include banks, brokers, dealers, credit unions, national securities
exchanges and savings associations.

Notice to Beneficial Holders

If you are a broker, a trustee or a depositary for securities who holds
shares of Midway common stock for the account of others as a nominee holder, you
should notify the respective beneficial owners of such shares of the issuance of
the rights as soon as possible to find out such beneficial owners' intentions.
You should obtain instructions from the beneficial owner with respect to the
rights, as set forth in the instructions we have provided to you for your
distribution to beneficial owners. If the beneficial owner so instructs, you
should complete the appropriate subscription certificates and, in the case of
the over-subscription privilege, the related nominee holder certification, and
submit them to the Subscription Agent with the proper payment. A nominee holder
that holds shares for the account(s) of more than one beneficial owner may
exercise the number of rights to which all such beneficial owners in the
aggregate otherwise would have been entitled if they had been direct record
holders of Midway common stock on the record date, so long as the nominee
submits the appropriate subscription certificates and certifications and proper
payment to the Subscription Agent.

Beneficial Owners

If you are a beneficial owner of shares of Midway common stock or rights
that you hold through a nominee holder, we will ask your broker, dealer or other
nominee to notify you of this rights offering. If you wish to exercise your
rights, you will need to have your broker, dealer or other nominee act for you.
To indicate your decision with respect to your rights, you should complete and
return to your broker, dealer or other nominee the form entitled "Beneficial
Owner Election Form." You should receive this form from your broker, custodian
bank or other nominee with the other rights offering materials.

Ambiguities in Exercise of Subscription Rights

If you do not specify the number of subscription rights being exercised on
your subscription certificate, or if your payment is not sufficient to pay the
total purchase price for all of the shares that you indicated you wished to
purchase, you will be deemed to have exercised the maximum number of

34
<PAGE>

subscription rights that could be exercised for the amount of the payment that
the Subscription Agent receives from you. If your payment exceeds the total
purchase price for all of the subscription rights shown on your subscription
certificate, your payment will be applied, until depleted, to subscribe for
shares of common stock in the following order:

(1) to subscribe for the number of shares, if any, that you indicated on
the subscription certificate that you wished to purchase through your
basic subscription privilege;

(2) to subscribe for shares of common stock until your basic subscription
privilege has been fully exercised; and

(3) to subscribe for additional shares of common stock pursuant to the
over-subscription privilege (subject to any applicable limitation).

Any excess payment remaining after the foregoing allocation will be returned to
you as soon as practicable by mail, without interest or deduction.

Regulatory Limitation

We will not be required to issue you shares of common stock pursuant to the
rights offering if, in our opinion, you would be required to obtain prior
clearance or approval from any state or federal regulatory authorities to own or
control such shares if, at the time the subscription rights expire, you have not
obtained such clearance or approval.

State and Foreign Securities Laws

The rights offering is not being made in any state or other jurisdiction in
which it is unlawful to do so, nor are we selling or accepting any offers to
purchase any shares of common stock to you if you are a resident of any such
state or other jurisdiction. We may delay the commencement of the rights
offering in certain states or other jurisdictions in order to comply with the
securities law requirements of such states or other jurisdictions. It is not
anticipated that there will be any changes in the terms of the rights offering.
In our sole discretion, we may decline to make modifications to the terms of the
rights offering requested by certain states or other jurisdictions, in which
case stockholders who live in those states or jurisdictions will not be eligible
to participate in the rights offering.

Our Decision Binding on You

All questions concerning the timeliness, validity, form and eligibility of
any exercise of subscription rights will be determined by us, and our
determinations will be final and binding. In our sole discretion, we may waive
any defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
subscription right by reason of any defect or irregularity in such exercise.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as we determine in our
sole discretion. Neither Midway nor the Subscription Agent will be under any

35
<PAGE>

duty to notify you of any defect or irregularity in connection with the
submission of a subscription certificate or incur any liability for failure to
give such notification.

No Revocation of Exercise of Subscription Right

After you have exercised your basic subscription privilege or over-
subscription privilege, you may not revoke that exercise. You should not
exercise your subscription rights unless you are certain that you wish to
purchase additional shares of our common stock.

Shares of Common Stock Outstanding after the Rights Offering

Assuming we issue all of the shares of common stock offered in the rights
offering, approximately 17,227,190 shares of common stock will be issued and
outstanding. This would represent a 100% increase in the number of outstanding
shares of common stock. If you do not exercise your basic subscription rights,
the percentage of common stock that you hold will decrease if shares are
purchased by other stockholders in the rights offering.

Fees and Expenses

We will pay all fees charged by the Subscription Agent. You are responsible
for paying any other commissions, fees, taxes or other expenses incurred in
connection with the exercise of the subscription rights. Neither Midway nor the
Subscription Agent will pay such expenses.

Subscription Agent

We have appointed First Union National Bank as Subscription Agent for the
rights offering. The Subscription Agent's address for packages sent by mail or
overnight delivery is:

Reorganization Department
1525 West W.T. Harris Boulevard,
Mail Code 3c3, NC1153
Charlotte, North Carolina 28288-1153

The Subscription Agent's telephone number is (800) 829-8432 and its
facsimile number is (704) 590-7628. You should deliver your subscription
certificate, payment of the subscription price and notice of guaranteed delivery
(if any) to the Subscription Agent. We will pay the fees and certain expenses
of the Subscription Agent, which we estimate will total $19,000. We have also
agreed to indemnify the Subscription Agent from any liability which it may incur
in connection with the rights offering.

If You Have Questions

If you have questions or need assistance concerning the procedure for
exercising subscription rights or if you would like additional copies of this
prospectus, the instructions, or forms for use in connection with the rights
offering, you should contact Steven Westberg, Executive Vice President and
General Manager of Midway, at:

36
<PAGE>

2801 Slater Road, Suite 200
Morrisville, North Carolina 27560
Telephone: (919) 595-6000.

IMPORTANT: Please carefully read the instructions accompanying the
subscription certificate and follow those instructions in detail. Do not send
subscription certificates directly to us. You are responsible for choosing the
payment and delivery method for your subscription certificate, and you bear the
risks associated with such delivery. If you choose to deliver your subscription
certificate and payment by mail, we recommend that you use registered mail,
properly insured, with return receipt requested. We also recommend that you
allow a sufficient number of days to ensure delivery to the Subscription Agent
and clearance of payment prior to ___________, 2000. Because uncertified
personal checks may take at least five business days to clear, we strongly urge
you to pay, or arrange for payment, by means of certified or cashier's check or
money order.

37
<PAGE>

FEDERAL INCOME TAX CONSIDERATIONS

The following summarizes the material federal income tax considerations of
the rights offering to you and Midway. This summary is based on the Internal
Revenue Code of 1986, as amended, the Treasury regulations thereunder, judicial
authority and administrative rulings and practice, all of which are subject to
change at any time, possibly with retroactive effect. This summary is not a
complete discussion of all federal income tax consequences of the rights
offering, and, in particular, may not address federal income tax consequences
applicable to stockholders subject to special treatment under federal income tax
law, such as financial institutions, broker-dealers, life insurance companies or
traders in securities that elect to mark to market. Also, this discussion does
not address applicable tax consequences if you hold our common stock as part of
a hedging, straddle, constructive sale, conversion or other risk reduction
transaction. In addition, this summary does not address the tax consequences of
the rights offering under applicable state, local or foreign tax laws. This
discussion assumes that your shares of common stock and the subscription rights
and shares issued to you during the rights offering constitute capital assets
(generally, property held for investment) for federal income tax purposes.

Receipt and exercise of the subscription rights distributed pursuant to the
rights offering is intended to be nontaxable to stockholders, and the following
summary assumes you will qualify for such nontaxable treatment. If, however, the
rights offering does not qualify as nontaxable, you would be treated as
receiving a taxable distribution equal to the fair market value of the
subscription rights on their distribution date. The distribution would be taxed
as a dividend to the extent made out of Midway's current or accumulated earnings
and profits; any excess would be treated first as a return of your basis
(investment) in your Midway stock and then as a capital gain. Expiration of the
subscription rights would result in a capital loss.

This discussion is included for your general information only. You should
consult your tax advisor to determine the tax consequences to you of the rights
offering in light of your particular circumstances, including any state, local
and foreign tax consequences.

Taxation of Stockholders

Receipt of a Subscription Right. You will not recognize any gain or other
income upon receipt of a subscription right.

Tax Basis and Holding Period of Subscription Rights. Your tax basis in
each subscription right will effectively depend on whether you exercise the
subscription right or allow the subscription right to expire.

If you exercise a subscription right, your tax basis in the subscription
right will be determined by allocating the tax basis of your common stock on
which the subscription right is distributed between the common stock and the
subscription right, in proportion to their relative fair market values on the
date of distribution of the subscription right. However, if the fair market
value of your subscription rights is less than 15% of the fair market value of
your existing shares of common stock, then the tax basis of each subscription
right will be deemed to be zero, unless you elect, by attaching

38
<PAGE>

an election statement to your federal income tax return for the taxable year in
which you receive the subscription rights, to allocate tax basis to your
subscription rights.

If you allow a subscription right to expire, it will be treated as having
no tax basis.

Your holding period for a subscription right will include your holding
period for the shares of common stock upon which the subscription right is
issued.

Expiration of Subscription Rights. You will not recognize any loss upon
the expiration of a subscription right.

Exercise of Subscription Rights. You generally will not recognize a gain or
loss on the exercise of a subscription right. The tax basis of any share of
common stock that you purchase through the rights offering will be equal to the
sum of your tax basis (if any) in the subscription right exercised and the price
paid for the share. The holding period of the shares of common stock purchased
through the rights offering will begin on the date that you exercise your
subscription rights.

Sale or Exchange of Shares Acquired Upon Exercise of Subscription Rights

If you sell or exchange shares of Midway common stock, you will generally
recognize gain or loss on the transaction. The gain or loss you recognize is
equal to the difference between the amount you realize on the transaction and
your basis in the shares you sold. Such gain or loss generally will be capital
gain or loss so long as you held the shares as a capital asset at the time of
the sale or exchange. Gain or loss from an asset held for more than one year
will generally be taxable as long-term capital gain or loss. If you are an
individual, any long-term capital gain is generally taxed at a maximum federal
income tax rate of 20%.

Taxation of Midway

We will not recognize any gain, other income or loss upon the issuance of
the subscription rights, the lapse of the subscription rights, or the receipt of
payment for shares of common stock upon exercise of the subscription rights.

39
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following is a summary of the terms of our capital stock and highlights
some of the provisions of our amended and restated certificate of incorporation
and bylaws. Since we are only providing a general summary of certain terms of
our amended and restated certificate of incorporation and bylaws, you should
only rely on the actual provisions of the amended and restated certificate of
incorporation or the bylaws. If you would like to read the certificate of
incorporation or bylaws, they are on file with the Securities and Exchange
Commission.

Authorized and Outstanding Capital Stock

Our authorized capital stock consists of 25,000,000 shares of common stock,
par value $0.01 per share, and 12,000,000 shares of preferred stock, par value
$0.01 per share. As of __________, 2000, there were 8,613,595 shares of common
stock outstanding and approximately 5,150 beneficial holders of common stock of
record. All outstanding shares of common stock are fully paid and non-
assessable. We have outstanding warrants to purchase 390,625 shares of our
common stock at a price of $0.0015 per share. The warrants were valued at $4.02
per share, or $1.57 million, and expire on February 11, 2002. The warrants may
be exercised in whole or in part at any time prior to expiration. Midway has
reserved 390,625 shares of common stock for the possible exercise of these
warrants. None of the warrants have been exercised as of __________ __, 2000.
As of March 31, 2000, we also had outstanding, under our 1997 option plan,
options to purchase 922,346 shares of our common stock at an exercise price of
$4.02 per share and options to purchase 220,935 shares of our common stock at an
exercise price of $15.50 per share. Midway has reserved 1,562,500 shares of
common stock for the possible exercise of options under the 1997 option plan.

Common Stock

The holders of common stock are entitled to dividends in such amounts and
at such times as may be declared by the board of directors out of funds legally
available therefor. Holders of common stock are entitled to one vote per share
for the election of directors and other corporate matters. Such holders are not
entitled to vote cumulatively for the election of directors and are not able to
act by written consent. In the event of liquidation, dissolution or winding up
of Midway, holders of common stock would be entitled to share ratably in all of
our assets available for distribution to the holders of common stock. The common
stock carries no preemptive rights. All outstanding shares of common stock are,
and the shares of common stock to be sold by Midway in the rights offering when
issued will be, duly authorized, validly issued, fully paid and non-assessable.

Preferred Stock

Our board of directors is authorized to issue from time to time, without
stockholder authorization, in one or more designated series, shares of preferred
stock with such dividend, redemption, conversion and exchange provisions as are
provided in the particular series. The issuance of preferred stock could have
the effect of delaying or preventing a change in control of Midway. Your rights
as a holder of our common stock may be affected by any preferred stock that we
may issue. Our board of directors has no present plans to issue any preferred
stock.

40
<PAGE>

Certain Limitations

Each lessor of Midway's F-100 aircraft has the right to terminate its lease
if, prior to our satisfaction of our obligations under certain promissory notes
issued to debis AirFrance B.V. or DASA Aircraft Finance XVI B.V., Midway makes
any redemption of, or any dividend or distribution with respect to, any shares
of Midway owned by any holder of equity in Midway representing the right to
vote 20% or more of the voting stock of Midway on any matter presented for vote
to the stockholders of Midway.

American Airlines may terminate Midway's participation in the AAdvantage(R)
frequent flyer program under several circumstances, including any person or
group becoming the owner of 20% or more of our outstanding voting securities or
any "Disqualified Investor" becoming the owner of 10% or more of our outstanding
voting securities. "Disqualified Investor" is defined as:

. any other airline or airline-related services company;

. any person or entity offering a frequent traveler program; or

Provisions Having Possible Anti-Takeover Effect

Classified Board of Directors. Our amended and restated certificate of
incorporation provides that our board of directors be divided into three
classes, the members of which will serve staggered three-year terms. We believe
that a classified board of directors could help to assure the continuity and
stability of the board of directors' and Midway's business strategies and
policies as determined by the board of directors. The classified board provision
could have the effect of making the removal of incumbent directors more time-
consuming and, therefore, discouraging a third party from making a tender offer
or otherwise attempting to obtain control of Midway, even though such an attempt
might be beneficial to Midway and its stockholders. Thus, the classified board
provision could increase the likelihood that incumbent directors would retain
their positions. In addition, our amended and restated certificate of
incorporation provides that directors may be removed from office only "for
cause" (as defined therein). Subject to rights of any holders of preferred
stock, newly created directors and vacancies on the board of directors will be
filled solely by majority vote of the remaining directors then in office.

41
<PAGE>

Advance Notice Provisions for Certain Stockholder Actions. Our bylaws
establish an advance notice procedure with regard to the nomination, other than
by or at the direction of the board of directors, of candidates for election as
directors. This procedure requires that a stockholder give prior written notice,
in proper form, of a planned nomination for the board of directors to Midway's
corporate secretary. The requirements as to the form and timing of that notice
are specified in the bylaws. If the election inspectors determine that a person
was not nominated in accordance with prescribed procedure, that person will not
be eligible for election as a director.

The bylaws also establish an advance notice procedure with regard to
certain matters to be brought before an annual meeting of stockholders of
Midway. Under this procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to Midway's corporate secretary. The requirements as to the form and timing of
that notice are specified in the bylaws. If the chairman or other officer
presiding at a meeting determines that other business was not properly brought
before such meeting in accordance with the prescribed procedure, that business
will not be conducted at the meeting.

Although the bylaws do not give the board of directors any power to approve
or disapprove stockholder nominations for the election of directors or of any
other business desired by stockholders to be conducted at an annual or any other
meeting, the bylaws may have the effect of precluding a nomination for the
election of directors or precluding the conduct of business at a particular
annual meeting if the proper procedures are not followed, or may discourage or
deter a third party from conducting a solicitation of proxies to elect its own
slate of directors or otherwise attempting to obtain control of Midway, even if
the conduct of such solicitation or such attempt might be beneficial to Midway
and its stockholders.

Delaware Section 203. Section 203 of the General Corporation Law of the
State of Delaware restricts certain transactions between a corporation organized
under Delaware law (or its majority-owned subsidiaries) and any person holding
15% or more of the corporation's outstanding voting stock, together with the
affiliates or associates of such person (we refer to such a person as an
"interested stockholder"). Section 203 generally prohibits a publicly held
Delaware corporation from engaging in the following transactions with an
interested stockholder for a period of three years from the date the stockholder
becomes an interested stockholder (unless certain conditions, described below,
are met):

. all mergers or consolidations;

. sales, leases, exchanges or other transfers of 10% or more of the
aggregate assets of the corporation;

. issuances or transfers by the corporation of any stock of the
corporation which would have the effect of increasing the interested
stockholder's proportionate share of the stock of any class or series
of the corporation;

. any other transaction which has the effect of increasing the
proportionate share of the stock of any class or series of the
corporation which is owned by the interested stockholder; and

42
<PAGE>

. receipt by the interested stockholder of the benefit (except
proportionately as a stockholder) of loans, advances, guarantees,
pledges or other financial benefits provided by the corporation.

The three-year ban does not apply if either the proposed transaction or the
transaction by which the interested stockholder became an interested stockholder
is approved by the board of directors of the corporation prior to the date such
stockholder becomes an interested stockholder. Additionally, an interested
stockholder may avoid the statutory restriction if, upon the consummation of the
transaction whereby such stockholder becomes an interested stockholder, the
stockholder owns at least 85% of the outstanding voting stock of the corporation
without regard to those shares owned by the corporation's officers and directors
or certain employee stock plans. Business combinations are also permitted within
the three-year period if approved by the board of directors and authorized at an
annual or special meeting of stockholders, by the holders of at least 66 2/3% of
the outstanding voting stock not owned by the interested stockholder. In
addition, any transaction is exempt from the statutory ban if it is proposed at
a time when the corporation has proposed, and a majority of certain continuing
directors of the corporation have approved, a transaction with a party which is
not an interested stockholder of the corporation (or who becomes such with board
approval) if the proposed transaction involves:

. certain mergers or consolidations involving the corporation;

. a sale or other transfer of over 50% of the aggregate assets of the
corporation; or

. a tender or exchange offer for 50% or more of the outstanding voting
stock of the corporation.

Prior to the effective date of Section 203, a corporation, by action of its
board of directors, had the option of electing to exclude itself from the
coverage of Section 203. Since the effective date of such section, a corporation
may, at its option, exclude itself from the coverage of Section 203 by amending
its certificate of incorporation or bylaws by action of its stockholders to
exempt itself from coverage, provided that such charter or bylaw amendment shall
not become effective until 12 months after the date it is adopted. Midway has
not adopted such a charter or bylaw amendment.

The foregoing provisions of Section 203 could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of common stock even if such removal or assumption would be
beneficial, in the short term, to stockholders of Midway. The provisions could
also discourage or make more difficult a merger, tender offer or proxy contest
even if such event would be favorable to the interests of stockholders.

Limitation on Directors and Officers Liability

The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
such legislation, directors are

43
<PAGE>

accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Although the Delaware General Corporation Law does not change directors' duty of
care, it enables corporations to limit available relief to equitable remedies
such as injunction or rescission. The amended and restated certificate of
incorporation limits the liability of Midway's directors to Midway and its
stockholders to the fullest extent permitted by the Delaware General Corporation
Law. Specifically, directors of Midway will not be personally liable for
monetary damages for breach by directors of their fiduciary duty as directors,
except for liability:

. for any breach of the director's duty of loyalty to Midway or its
stockholders;

. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. under Section 174 of the Delaware General Corporation Law, which
relates to the unlawful payment of dividends, stock repurchases or
redemptions; or

. for any transaction from which the director derived an improper
personal benefit.

The inclusion of this provision in the amended and restated certificate of
incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefitted
Midway and its stockholders.

Transfer Agent

The transfer agent for the common stock is First Union National Bank.

44
<PAGE>

DETERMINATION OF OFFERING PRICE

Our board of directors decided to set a $5.20 per share subscription price
after considering a variety of factors described elsewhere in this prospectus.
The $5.20 per share price should not be considered an indication of the actual
value of Midway or of our common stock. We cannot assure you that the market
price of the common stock will not decline during or after the rights offering.
We also cannot assure you that you will be able to sell shares of common stock
purchased during the rights offering at a price equal to or greater than $5.20
per share. We have neither sought, nor obtained, any valuation opinion from
outside financial advisors or investment bankers.

PLAN OF DISTRIBUTION

On or about __________, 2000, we will distribute the subscription rights,
subscription certificates and copies of this prospectus to individuals who owned
shares of common stock on __________, 2000. If you wish to exercise your
subscription rights and purchase shares of common stock, you should complete the
subscription certificate and return it with payment for the shares, to the
Subscription Agent, First Union National Bank, at the address on page 36. If
you have any questions, you should contact Steven Westberg, Executive Vice
President and General Manager of Midway, at (919) 595-6000.

We have agreed to pay the Subscription Agent a fee of $19,000 plus certain
expenses. We estimate that our total expenses in connection with the rights
offering will be $_________.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Fulbright & Jaworski L.L.P., New York, New York.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference into this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-3, which
registers the securities that we are offering under this prospectus. The
registration statement, including the attached exhibits and schedules, contains
additional relevant information about us and the securities offered. The rules
and regulations of the SEC allow us to omit certain information included in the
registration statement from this prospectus.

45
<PAGE>

We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy this information at the following locations of the SEC:

Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

Seven World Trade Center
13/th/ Floor
New York, New York 10048

Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661

You may also obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at (800) SEC-0330.

The SEC also maintains an internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who file
electronically with the SEC. The address of that site is http://www.sec.gov.

The SEC allows us to incorporate by reference information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, except
for any information that is superseded by subsequent incorporated documents or
by information that is included directly in this prospectus. Our descriptions in
this prospectus concerning the contents of any contract, agreement or document
are not necessarily complete. For those contracts, agreements or documents that
we filed as exhibits to the registration statement, you should read the exhibit
for a more complete understanding of the document or subject matter involved.

46
<PAGE>

This prospectus includes by reference the documents listed below that we
previously have filed with the SEC and that are not delivered with this
document. They contain important information about Midway and its financial
condition.

Filing Date Filed
------ ----------

Annual Report on Form 10-K
for the year ended December 31, 1999 March 30, 2000

Current Report on Form 8-K April 14, 2000

Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000 May 11, 2000

Proxy Statement on Schedule 14A April 21, 2000

Our SEC file number is 1-9329.

We incorporate by reference additional documents that we may file with the
SEC between the date of this prospectus and the termination of the offering of
securities under this prospectus. These documents include our periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as our proxy statements.

You may obtain any of these incorporated documents from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference in such document. You may obtain documents
incorporated by reference in this prospectus by requesting them from us in
writing or by telephone at the following address:

Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, North Carolina 27560
Attention: Secretary
Telephone: (919) 595-6000.

47
<PAGE>

PART II

Item 14. Other Expenses of Issuance and Distribution.

The estimated expenses in connection with this offering are:

SEC registration fee............................. $11,825
Nasdaq listing fee...............................
Printing and engraving expenses*.................
Legal fees and expenses*.........................
Blue sky fees and expenses*......................
Accounting fees and expenses*.................... 9,000
Subscription Agent fees and expenses*............ 20,000
Miscellaneous*................................... -------
-------
Total*...................................... $
----- =======

* Estimated

Item 15. Indemnification of Directors and Officers.

Pursuant to Section 145 of the Delaware General Corporation Law ("DGCL"),
Midway Airlines Corporation (the 'Company") generally has the power to indemnify
its current and former directors, officers, employees and agents against
expenses and liabilities incurred by them in connection with any suit to which
they are, or threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action, they had not reasonable cause to believe
their conduct was lawful. With respect to suits by or in the right of the
Company, however, indemnification is generally limited to attorneys' fees and
other expenses and is not available if such person is adjudged to be liable to
the Company unless the court determines that indemnification is appropriate. The
statute expressly provides that the power to indemnify authorized thereby is not
exclusive of any rights granted under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Company also has purchased and
maintains insurance for such persons.

The above discussion of Section 145 of the DGCL is not intended to be
exhaustive and is qualified in its entirety by such statute.

Item 16. Exhibits.

See Index to Exhibits.

II-1
<PAGE>

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment of this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement 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.

II-2
<PAGE>

(c) The undersigned registrant hereby undertakes that, insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant, the
registrant 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 of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant 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 registrant 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Morrisville, State of North Carolina, on May 30,
2000.

MIDWAY AIRLINES CORPORATION

By: /s/ Robert R. Ferguson, III
-------------------------------------------
Robert R. Ferguson, III
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert R. Ferguson III, Jonathan S. Waller and
Steven Westberg, jointly and severally, his true and lawful attorneys-in-fact
and agents, each with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments to this registration statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.

Signature Titles Date
--------- ------ ----

Chairman of the Board,
President and Chief
/s/ Robert R. Ferguson, III Executive Officer
---------------------------------
Robert R. Ferguson, III (Principal Executive Officer) May 30, 2000

Executive Vice President
and General Manager
/s/ Steven Westberg (Principal Financial and
---------------------------------
Steven Westberg Accounting Officer) May 30, 2000

II-4
<PAGE>

Signature Titles Date
--------- ------ ----

/s/ W. Greyson Quarles Director May 30, 2000
--------------------------------
W. Greyson Quarles

/s/ Gregory J. Robitaille Director May 30, 2000
--------------------------------
Gregory J. Robitaille

/s/ Timothy Smith Director May 30, 2000
--------------------------------
Timothy Smith

/s/ Gregory Harding-Brown Director May 30, 2000
--------------------------------
Gregory Harding-Brown

II-5
<PAGE>

INDEX TO EXHIBITS
-----------------

Exhibit No. Description
----------- -----------

4.1 Form of Subscription Certificate.

5.1 Opinion of Fulbright & Jaworski L.L.P.*

23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit
5.1).*

23.2 Consent of Ernst & Young LLP.

24.1 Power of Attorney (included on page II-4).

99.1 Form of Instructions to Stockholders.

99.2 Form of Notice of Guaranteed Delivery.

99.3 Form of Letter to Stockholders Who Are Record Holders.

99.4 Form of Letter to Stockholders Who Are Beneficial Owners.

99.5 Form of Letter to Clients of Beneficial Owners.

99.6 Form of Beneficial Owner Election Form.

99.7 Form of Nominee Holder Certificate Form.

99.8 Substitute Form W-9 for Use with Rights Offering.

99.9 Form of Subscription Agent Agreement.*

_______________
* To be filed by amendment.

II-6