A new, implicit approximate factorization (AF) algorithm designed to solve the conservative full-potential equation for the transonic flow past arbitrary airfoils has been developed. The new algorithm uses an upwind bias of the density coefficient to provide stability in supersonic regions. This allows the simple two- and three-banded matrix form of the AF scheme to be retained over the entire flow field, even in regions of supersonic flow. A numerical transformation is used to establish an arbitrary body-fitted finite-difference mesh. Airfoil pressure distributions have been computed and are in good agreement with independent results.