UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                                Washington, DC 20549

                                     FORM 10-KSB



ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                       BALTIA AIR LINES, INC. (Baltia)
           (Exact name of registrant as specified in its charter)

STATE of NEW YORK                                    11-2989648
(State of Incorporation)                  (IRS Employer Identification No.)

                63-25 SAUNDERS STREET, SUITE 7 I, REGO PARK, NY 11374
                      (Address of principal executive offices)

        Registrant's telephone number, including area code: (718) 275 5205

Securities Registered: 12 G #O-28502, SB-2 Registration Statement No.
333-20006-NY,



                        DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, $.0001 par value per share, and 500,000 shares of Preferred
Stock,$.01 par value.  As of December 31, 1998, a total of 2,035,416 shares of
Common Stock are issued and outstanding and held by over 100 shareholders.  At
total of 80,000 shares of Preferred Stock are issued and outstanding.  No
stock was issued under 333-21006-NY and all securities registered therein
are carried forward into Registration 333-37409 pending an effective date.

Common Stock

All outstanding shares of Common Stock are, and the shares offered hereby will
be, duly authorized, validly issued, fully paid and non-assessable.  Holders of
Common Stock are entitled to receive dividends, when and if declared by the
board of directors, out of funds legally available therefor and, subject to
prior rights of holders of any Preferred Stock then outstanding, if any, to
share rateably in the net assets of the Company upon liquidation.  Holders of

Common Stock do not have preemptive or other rights to subscribe for additional
shares, nor are there any redemption or sinking fund provisions associated with
the Common Stock.  The Certificate of Incorporation does not provide for
cumulative voting.  Shares of Common Stock have equal voting, dividend,
liquidation and other rights, and have no preference, exchange or appraisal
rights.

Lack of Control by Minority Shareholders

Holders of shares of Common Stock are entitled to one vote per share on all
matters requiring a vote of stockholders.  Since the Common Stock does not have
cumulative voting rights in electing directors, the holders of a majority of
the outstanding shares of Common Stock voting for the election of directors can
elect all of the directors, excepting one board seat reserved for the
Underwriter's nominee for three years.

Stock Transfer Agent

The Transfer Agent and Registrar for the shares of Common Stock is Continental
Stock Transfer and Trust Company, 17 Battery Place, 8th Floor, New York, NY
10004, telephone: (212) 509-4000.

Warrants

In the Offering under 333-37409 the Company will issue 1,100,000 Warrants.
Each Warrant entitles the holder to purchase one share of Common Stock at $6.05
commencing six months from the date of this Prospectus until five years from
the date of this Prospectus.  The Company may redeem outstanding Warrants,
once they become exercisable at a price of $.10 per Warrant on not less than
30 days written notice, provided the closing bid quotations of the Shares
have exceeded $10 for 20 consecutive trading days ending on the third day
prior to the date on which notice is given. Baltia intends to redeem the
Warrants at the earliest opportunity.  Warrants may not be exercised
following redemption.  Therefore, the investor may have to exercise the
Warrant earlier than he or she intended.  If the Warrants are called for
redemption by the Company, an investor may have to exercise the Warrants
before maximum profit can be gained.  The Warrants expire five years after
the Effective Date, or sooner if the Warrants are called for redemption. The
Prospectus will become "stale" nine months following the Effective Date. The
Company will try to maintain, and will provide, a current prospectus at such
time as the Company may call for redemption, but assumes no obligation to
maintain a current prospectus otherwise.  Warrants may not be exercised or
redeemed in the absence of a current prospectus and the Company's Warrant
and Transfer agents are forbidden to accept Warrants unaccompanied a current
prospectus.

Warrant Exercise Procedure

Warrants may be exercised by mailing or delivering a dully executed and
completed Warrant Subscription Certificate together with payment in full of the
subscription price of $6.50 per share of Common Stock.  Except as described
herein under "Late Delivery of Warrants," Warrant Subscription Certificates
must arrive on or before the Expiration Date and any subscriptions received
after the Expiration Date will not be honored.  Payment must be made in
United States dollars in cash or by bank certified or cashier's check, or
by wire transfer of good funds payable to the order of the Warrant Agent.
Once a holder has exercised a Warrant, the exercise is irrevocable.
Certificates representing the shares of Common Stock purchased upon the
exercise of Warrants will be delivered to the purchasers as soon as
practicable after receipt of the Subscription Agreement and funds.

The Warrant Agent is Continental Stock Transfer and Trust Company, 17
Battery Place, 8th Floor, New York, NY 10004, telephone: (212) 509-4000.

The instructions in the Warrant Subscription Certificate should be read
carefully and followed in detail.  Do not send Warrant Subscription Certificates
or payment to the Company or to the Underwriters.  Except as described herein
under "Late Delivery of Warrants," no subscriptions will be accepted until the
Warrant Agent has received delivery of a duly executed Warrant Subscription
Certificate and payment of the subscription price.  The risk of delivery of
Warrant Subscription Certificates and payments to the Warrant Agent will be
borne by the holders of Warrants and not by the Company or the Warrant
Agent. If the mail is used to exercise Warrants, it is recommended that insured,
registered mail be used.  Any questions or requests for assistance concerning
the method of subscribing for shares or for additional copies of this
Prospectus should be directed to the Warrant Agent.

All questions as to the validity, form, eligibility and acceptance of any
exercise of Warrants will be determined by the Company at its sole
discretion. The Company may waive any defect or irregularity, permit a defect or
irregularity to be corrected within such time as it may determine, or reject
any exercise of a Warrant which it determines to have been made improperly.

Late Delivery of Warrants

If on or before the Warrant Expiration Date the Warrant Agent receives the full
subscription price for the shares of Common Stock, together with a letter or
telegraphic guaranty from a bank or trust company which is a member of the New
York Clearing House (or is a correspondent of such a bank) or a member firm of
the New York Stock Exchange or American Stock Exchange or Nasdaq, that the
Warrant Subscription Certificate to which it relates will be surrendered to the
Warrant Agent within five business days after the Expiration Date, the
subscription will be accepted subject to receipt of the duly executed
Warrant Subscription Certificate within the five business days.

Purchase and Sale of Warrants

The Warrants are immediately detachable, exercisable and separately tradable.
The Company has applied for the Nasdaq listing symbol "BALTW" for Warrants.  No
assurance can be given that  a trading market for the Warrants will develop, or
if one does develop, whether it will sustain or at what price the Warrants will
trade.  Prior to this Offering, there has been no public market for the
Warrants.

Representative's Warrants

At the Closing of this Offering the Company will sell to the Representative,
for a total purchase price of $100.00, Warrants entitling the Representative to
purchase up to 110,000 shares of Common Stock at $6.05 per Share (110% of
initial public offering price) and 110,000 Warrants at $.11 per Warrant (10%
of initial public offering price). Warrants underlying the Representative's
Warrants  differ from the Warrants offered to the public hereunder to the
extent that the Warrants are non-redeemable by the Company.  The exercise prices
of the Option and underlying Warrants are subject to anti-dilution adjustment
under certain conditions.  The Representative's Warrants are exercisable during
the four-year period commencing one year form the date of this Prospectus, and
the Warrants are non-transferable for one year except to the officers of the
Representative, members of the underwriting group and their respective officers
or partners.  The Securities issuable upon the exercise of the Representative's
Warrants  have been reserved by the Company and have been included in the
Registration Statement of which this Prospectus is a part.

Preferred Stock

The Company has authorized 500,000 Preferred Shares which may be issued from
time to time, as authorized by the board of directors.  Preferred shares
have $.01 par value and no voting rights.  As of the present date thereof,
80,000 shares of Preferred Stock are outstanding.


                            BALTIA IS A CORPORATE ISSUER

The number of shares outstanding of each of the issuer's classes of
common equity, as of December 31, 1998:

      Class                                              Number of Shares
Common Stock Par Value $.0001 Per Share                     2,035,416
Preferred Stock Par Value $.01 Per Share                       80,000

Transitional Small Business Disclosure Format (Check one): No  X

                         DOCUMENTS INCORPORATED BY REFERENCE


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

Required reports filed herewith.

Baltia's Initial Public Offering Registration Statement became effective
September 16, 1996.  This is the third annual report to which Baltia is subject
to filing under Section 13 or 15(d) of the Exchange Act.


Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB.   X

Baltia has not commenced revenue operations to date.  State issuer's
revenues for its most recent fiscal year. $ -0-

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past
60 days.  To date, Baltia stock is not publicly trading.

                                       PART I

Item 1. Description of Business.

                       BUSINESS

Summary.

                      The Company

The  Company, a development stage U.S. airline, has been granted rights
by the U.S. government to provide scheduled full-service commercial
passenger, freight, and mail transportation by air between New York City
and St. Petersburg, Russia.  With the proceeds from this Offering the
Company intends to commence revenue flights as the U.S. designated carrier
on this route.

St. Petersburg is the former capital of Russia, with  a population of
just  under five million people,  which makes  it the second  largest
city in  Russia and the  fourth largest  in  Europe.   It is  a
central hub  for commercial activity in  the  Northwestern  Region
of  Russia,  and  is  the  major intellectual, cultural, financial,
and industrial center  of the Russian Federation. (Department of Commerce
("DOC"), Bureau  of the Census). The Company believes that there is a large
market of passengers and shippers desiring direct non-stop air transport
between New York and St. Petersburg.  See "Business."

Presently, the Company is the sole U.S. airline with
authority to fly non-stop direct between the U.S. and St. Petersburg, Russia.
The authority to fly non-stop between the U.S. and Russia derives from an
aviation agreement between the two countries and is delegated exclusively
to airlines of the U.S. and Russia.  Thus, excepting Russian carriers,
which have authority delegated by the Russian Government, all foreign air
carriers (third-party carriers) providing service between the U.S. and
Russia must stop in their respective home countries before flying onto
Russia.  Presently, all third-party carriers change gauge in the home
and operate a narrow-bodied aircraft into St. Petersburg.

Although it recognizes that the air transport industry is very competitive,
the Company understands that the passengers prefer direct non-stop flights
with relative seating comfort on trans-Atlantic flights.  The Company also
believes that freight forwarders prefer to load cargo in containers, seal
them, place them on a U.S carrier in New York and have them delivered
directly to St. Petersburg.  The alternative is to ship cargo via Russian
carrier, or via third-party carrier where cargo would be off-loaded in a
third country, and reloaded as small packages into a narrow-bodied
airplane for the flight from the third country into St. Petersburg.

The Company's  business strategy  is to initially establish service
between New York and St. Petersburg with one airplane.  The U.S.
Department of Transportation, Office of Airline Analysis, found that
the Company's plan was both comprehensive and reasonable.  As the
market demands, the Company hopes to add a second airplane.  After
service between New York City and St. Petersburg, Russia is established,
the Company may expand service to other cities in Russia and the former
Soviet Union.  Eventually, the Company's goal is to be a leading
carrier in the US - Russia niche  market.

The Company's marketing strategy is to associate the Company's  name
with  quality  service while matching current ticket pricing structures.
The Company plans to operate a Boeing 747 configured with 316 seats to
promote passenger comfort.  The Company's proposed three-class non-stop
direct service should provide convenient 8 hour 30 minute transport
between New York City and St.  Petersburg.

On August 5, 1998 the Company signed an initial agreement with Cathay
Pacific Airways Limited for one Boeing 747-267, Manufacturers Serial No.
21746 with an agreed value of $35,000,000, and installed engines together
with technical records.  A non-refundable payment of $100,000 was made by
the Company against a security deposit of $850,000. The Company has
allocated $1,020,000 of proceeds from its public offering for aircraft
acquisition deposit. The Boeing 747 is capable of carrying standard freight
containers and pallets in its belly.  The Company plans to provide non-stop
palletized and containerized air cargo service between the United States and
 St. Petersburg, a service  presently not offered by  any other U.S.
airline. Also, the Company expects to be carrying U.S. mail.

The Company's  activities, from  inception  to  the present,  have  been
devoted to raising capital,  obtaining route authority and approval from
the  US   Department  of   Transportation  and   the  Federal   Aviation
Administration, and on market research and development of  the Company's
overall  marketing program. The Company's management has been found fit
by the U.S. Department of Transportation to provide scheduled air service
between New York and St. Petersburg.  Its management and business plan
have had the benefit of cross examination by the major U.S. airlines when,
in  1990 the Company competed with eleven airlines (American  Airlines,
Delta, Continental, TWA, PanAm, Northwest Airlines, American  Trans Air,
United Airlines, Alaska Airlines, Federal Express and  Evergreen
International Airlines) before the  U.S. Department  of Transportation
("DOT") for rights to fly to the former Soviet  Republics.  See
"Business -  U.S. Carrier Operations Under Bilateral Rights."
The Company won rights to serve St. Petersburg, Riga, Minsk, Kiev,
Tblisi, and Moscow in June 1991, followed thereafter by an attempted coup
d'etat of the Soviet government which disrupted the Company's financing.
The Company's rights subsequently terminated for dormancy.  In 1996 the
DOT again found the Company's management fit and reactivated its
authority to serve St. Petersburg.

BALTIA(R), VOYAGER CLASS(R), THE NEW  WAY TO EUROPE(TM), CLUB BALTIA(TM),
BALTIA CARGO(TM), AIR BALTIA(TM), and BALTIA EXPRESS(TM)  are trademarks
of the Company.


FAA Air Carrier Certification

To assure that an airline, previously certified as fit by the
DOT, uses safe operating procedures, its operating procedures
and personnel must be certified by the FAA.  In order to
accomplish this certification, the Company has prepared a
detailed schedule of events of approximately ninety (90) days
duration.  The certification process begins with providing the
FAA with written documentation of the procedures to be used in
its operations.  These written procedures, which include training
procedures, are reviewed by the FAA.  After the FAA is satisfied
with the documentation, the airline trains its personnel according
to its procedures under FAA supervision.  Finally the airline
employees demonstrate their mastery of the procedures to the FAA.
Upon successful completion of demonstrations, an airline receives
its FAA air carrier certification. The FAA will require that the
Company submit its manuals and other documentation, train crews
for B747, conduct a mini-evacuation demonstration, and complete
50 hours of proving-flight demonstration from JFK to St.
Petersburg (equivalent of 3 round trips).  During the proving
flights the Company is not permitted to carry passengers but it
may carry freight.

Regulatory Compliance

The Company intends to operate as a Part 121 carrier, a heavy jet
operator.  As such, following certification the Company is
required to maintain its air carrier standards as prescribed by
DOT and FAA regulation and as specified in the FAA approved
Company manuals.  As part of its regulatory compliance the
Company is required to submit periodic reports of its operations
to the DOT.  As a new airline, the Company is likely to be subjected
to a greater FAA scrutiny during the first year of its flight
operations than an established carrier.  Failure to maintain
compliance may cause suspension or revocation of air carrier
certificate.  The Company will be subject to FAA directives, including
those that may ground the Company's airplane.

US Carrier Operations Under Bilateral Rights

Prior to the conclusion of the 1990 US-USSR Bilateral Agreement,
only PanAm and Aeroflot were authorized to operate between their
respective countries.  All flights between the US and the former
Soviet Union were conducted between New York and Moscow, with
Washington and St. Petersburg (Leningrad) being served on a
limited level.  In 1990, shortly after the United States and the
former USSR concluded a new expanded bilateral air transportation
agreement, the Department of Transportation invited US airlines
to compete for the limited route rights under the new bilateral
agreement.  A total of 12 US airlines were admitted in the
competition:  the Company, American, Delta, Continental, United,
TWA, PanAm, Northwest, Alaska Airlines, American Trans Air,
Federal Express, and Evergreen.  In 1991, the Department of
Transportation awarded the Company rights (passengers, cargo and
mail) to fly from JFK to St. Petersburg, and to Riga non-stop;
with on-line service via Riga to Minsk, Kiev and Tbilisi.  Alaska
Airlines was awarded the right to fly to Russia's Magadan and
Khabarovsk in the US Pacific, which routes Alaska Airlines
currently serves.

After the USSR broke up, the US-Russia Bilateral Agreement of
1994 was signed reinforcing and expanding the former US-USSR
Bilateral Agreement of 1990.  Under the US-Russia Bilateral
Agreement the designated US airlines enjoy certain rights backed
by the US Government.  Russia has granted certain rights to the
United States and reciprocal rights were granted by the United
States to Russia.  Among the most important of the bilateral
rights the Company considers the following: (i) the right to fly
non-stop, (ii) the right of change gauge in Russia for beyond
service, and (iii) the ability to provide its own service within
Russia i.e. ground service of the aircraft, passenger services,
cargo service, etc.  Other rights enable the Company to conduct
normal business practices between the US and Russia, including
exemption from duties on materials usable in the Company's
business, and unimpeded currency transfers.

Unexpected political changes in Russia might affect the Company's
growth.  Airline services under bilateral agreements typically
continue even between countries that are adversarial.  A break in
diplomatic relations could be accompanied by interruption of air
service, but such extended occurrences are rare.  However,
adverse political direction in Russia could impede US-Russia
commerce.

Aircraft Acquisition

The Company intends to operate Boeing 747 aircraft on the
JFK-St. Petersburg route.  The Company has signed the initial
agreement to lease one B-747 aircraft that meets FAA
airworthiness requirements.  The Company has budgeted $1,020,000
deposit for the aircraft. Monthly acquisition costs will be
paid from operating revenue.

Description of the Market

In the opinion of the Company's Management, a first-time visitor
to St. Petersburg would find many similarities with a first-time
visitor to New York, Paris or Rome.  New York is a prime destination
for international air transportation due to the size of its
population, the magnitude of its port-of-entry position within the
U.S., and its cultural, industrial and commercial role in the nation.
Considering these same fundamental indicators, St. Petersburg is a
prominent gateway to Russia and, indeed, to all of Northern Europe.
St. Petersburg is the leading maritime and surface cargo center, and
the Company expects it to become Russia's air cargo center.

     The DOC, Bureau of the Census, reported in 1994 that air cargo
traffic from the U.S. to Russia grew from 14,000,000 lbs in 1992 to
30,800,000 lbs in 1993, a 120% increase.  Air cargo from Russia to the
U.S. grew from 1,540,000 lbs in 1992 to 3,740,000 lbs in 1993, a 143%
increase.  In 1993 IATA forecast a 21.1% annual growth rate for
freight traffic to and from Eastern Europe in the period from 1993 to
1997.  The actual statistics available in 1994 demonstrate that the
growth rate between 1992 and 1993 in the U.S.-Russia air cargo traffic
was 5.8 times greater than the IATA forecast.  The Company has
received offers from two JFK-based cargo agents.  Paramount Cargo
Marketing, Inc. projects shipments of 20 tons per flight, and RAF
International Sales projects shipments of 50 to 75 tons weekly to St.
Petersburg.  See "SUMMARY, Company", para. 7.

     According to the DOC, USTTA, in 1993 there were 478,950 American
passengers visiting Russia; and there were 126,158 Russian-originating
passengers who visited the United States. Because no 1993 city traffic
statistics were available, using U.S.-Russia traffic, the Company
projected U.S.-St Petersburg traffic to be 20% of 1994 U.S.-Russia
traffic.  According to CIC Research (DOC contractor), by 1995 actual
traffic to St. Petersburg had doubled the Company's traffic
projection. The actual growth rate from 1995 to the present is not
publicly available. St. Petersburg has a growing number of private
travel agencies that serve the new segment of affluent Russian
travelers who require quality service.  IATA forecasts a 10.2% annual
growth rate in passenger traffic to and from Eastern Europe from 1993
to 1997.

     The Company acknowledges that, particularly since August 1998,
Russia has been experiencing economic transition difficulties.
Although statistics on such recent traffic is not available, these
difficulties do not seem to affect the demand for airline seats.  As
recently as December 1998, the Company had difficulty obtaining
immediate bookings.  Only advance purchase seats were available
between New York and Russia. The Company expects the U.S. government
involvement with Russia to continue and government traffic between the
U.S. and Russia to maintain.  Commercial traffic is expected to
increase with stabilization of the Russian economy.  The devaluation
of the Russian ruble is an incentive for American tourists to visit
Russia and reason to expect tourist traffic to maintain.

The Company surveyed fares of the leading foreign airlines that are
serving the U.S.-Russia market. Over the past several years, fares in
the U.S.-Russia market have remained stable and have incrementally
risen (6% from 1993 to 1994, and 4% from 1994 to 1995).

     The Bilateral Agreement restricts foreign airlines, excepting
Russian airlines, from providing non-stop service between the U.S. and
Russia. Additionally, no U.S. airline offers non-stop service between
the U.S. and St. Petersburg, and only Aeroflot offers non-stop
Russian service between the U.S. and St. Petersburg. The most
recent Bilateral Agreement limits the aggregate number of round
trips U.S. carriers may make to Russian cities (frequencies).
All frequencies available under that Bilateral Agreement
have been allocated by the DOT for use by U.S. carriers to
serve Russian cities other than St. Petersburg. Thus, the Company
anticipates that it will offer the only U.S. non-stop service
with a wide-body aircraft  from New York to St. Petersburg.  Unlike
the domestic flights, the international flights are conducted pursuant
to bilateral agreements between countries, and most countries are
considered "limited entry markets."  The U.S.-Russia market is a
limited entry market because only a restricted number of airlines from
the two nations are authorized therein to operate between the U.S. and
Russia.  Furthermore, the number of foreign airlines in the market is
limited by restrictions in bilateral agreements between their
respective countries and both the U.S. and Russia. The European
carriers who serve this market are required to stop at their national
hubs en route.

     The Company has identified several market segments in the
U.S.-Russia Market: (i) Business Travelers, (ii) General Tourism,
(iii) Ethnic Travelers, (iv) Special Interest Groups, (v) Professional
Exchanges, and (vi) Government and Diplomatic Travel.


Effects of Seasonality Over the North Atlantic

The Company's business is affected by seasonal factors.  Airlines
serving routes over the North Atlantic are subjected to a pattern of
seasonal variation in traffic which the industry has termed the "North
Atlantic Seasonality" factor.  In general, the traffic peaks during the
summer season and dips during the winter season.  To mitigate this
seasonal trend, the Company intends a winter marketing program
featuring St. Petersburg's World-famous winter cultural activities of
museums and world class performances, such as the Hermitage Museum and
the Marinsky Theater.  The Company has no specific plans, but has
discussed with Air Exchange, Inc. and other charter users the
possibility of chartering the Company's aircraft for use in opposite
season markets during the days when the aircraft is not on scheduled
route service.  For example, JFK-Caribbean is an opposite season market
to JFK- St. Petersburg because JFK-St. Petersburg traffic peaks in
summer and the JFK-Caribbean traffic peaks in winter.

 [CHART depicting seasonal passenger traffic variation throughout
 year varying approximately as follows: Jan -20%, Feb -25%, Mar -12%,
 Apr -5%, May +3%, Jun +10%, Jul +23%, Aug +45%, Sep +14%, Oct -.5%,
 Nov -10%, Dec -21%]

The above chart depicts monthly distribution of hypothetically 93,431
passengers, adjusted to the North Atlantic monthly seasonality
variation (data from AVMARK, industry analysts).  Specific seasonal
variation on the JFK-St. Petersburg route may differ from the North
Atlantic average variation and cannot be specifically determined until
the service has been operated.

Marketing

     The Company intends to operate between two of the largest nations
in what Management believes to be one of the world's fastest growing
markets providing non-stop, wide-body passenger service with First,
Business, and Voyager Class accommodations.  The Company's passenger
market strategy is tailored to particular preferences of the various
segments of its customers with marketing attention particularly
focused on American business travelers with interests in Russia who
require high quality, non-stop service from the U.S. to Russia.

     The Company's initial marketing strategy is based on selected
travel and business publications, supplemented by direct mailings to
corporate travel planners, and individual American businesses that are
currently involved in Russia.  The Company plans to sponsor selected
industry and trade events in the U.S. and in St. Petersburg, and to
implement a controlled frequent flyer program for frequent business
travelers.  Seawind Cruise Lines and Hilton Hotels have expressed
interest to conduct joint marketing programs with the Company.  The
Company has no contractual relationships with Seawind Cruise Lines,
Hilton Hotels or other referenced businesses.  The Company also
intends to advertise to the general public throughout the U.S..  In
June 1997, the Company issued 27,083 shares to Kent Trading for the
purchase of $396,090 in media placements (advertising space in U.S.
NEWS & WORLD REPORT, BUSINESS WEEK and NEW YORK LAW JOURNAL).

     In addition to the Company's schedules and tariffs listed in the
Official Airline Guide ("OAG"), and worldwide access to reservations
on the Company's flights through a Computer Reservations and Ticketing
System ("CRS"), the Company intends to provide customer service and
reservations centers in New York and in St. Petersburg.  With respect
to the CRS service, the Company has proposals from Pars Worldspan,
Sabre and Apollo reservations and ticketing systems.  The Company
intends to activate the reservations service with the selected system
when the DOT issues its order authorizing the Company to sell advance
tickets.

     Marketing strategy relating to capacity and overall quality
experienced by passengers are important in the Company's aircraft
choice.  Four aircraft types which are capable of flying non-stop on
the JFK-St. Petersburg route, B747, DC10-30, B767, and B777, reduce
the travel time to approximately 8 hours.  Of these, the Company's
management believes that the cabin size of a Boeing B747 aircraft
offers the greatest degree of comfort and capacity for the JFK-St.
Petersburg market.  Its dispatch reliability lies within the 97% range
contributing to passenger confidence in the Company's dependability
(Boeing Report ID:RM 23004).  The Company's dependability is further
enhanced because B747, a four-engine aircraft, is not subject to ETOPS
regulations which could limit flights during certain weather
conditions.  "ETOPS" is an acronym for Extended Range Twin Engine
Operations which generally requires that during year one a twin engine
aircraft be operated within 75 minutes from a suitable airport.  If
one of the airports on the Great Circle route is snowed in, or
otherwise unusable, a twin engine aircraft would not receive dispatch
clearance for a flight to St. Petersburg.  With B747 the Company
intends to provide non-stop wide-body cargo service from the JFK to
St. Petersburg, offering containers, pallets, and block space
arrangements in the aircraft's cargo bay.  Additionally, the Company
plans to market "Baltia Express", non-stop shipment of express
packages between the U.S. and St. Petersburg.  The Company also
expects revenues from diplomatic mail and cargo.

Description of the Industry

Until the Airline Deregulation Act of 1978, the domestic airline
industry was economically regulated by the Civil Aeronautics
Board ("CAB").  Deregulation brought numerous new carriers into
the domestic scheduled airline business challenging the industry
fares, work rules, and wages.  Over the ensuing years,
most of the new carriers either merged with major carriers or
left the business.  Now, major carriers are creating alliances,
bringing to a close the period of adjustment to jet travel under
deregulation, and the Company believes, setting the stage for a new era of
profitability in the airline industry.  Generally, major US
airlines are currently either making a profit or decreasing their
annual loss. (See generally http://www.bts.gov/oia/indicators,
Bureau of Transportation Statistics, U.S. DOT)

Competition

The Company recognizes that it will face non-stop competition from
Aeroflot as well as one-stop and two-stop service competition from
the leading European airlines and competition from US airlines with
marketing arrangements with European airlines. The European airlines
provide connections to St. Petersburg through their European hubs.  In
1996 Delta ceased serving St. Petersburg and has since applied
to the DOT for authority to market St. Petersburg through code
sharing with foreign carriers.

     The Company's Management does not take the Company's proposed
non-stop service advantage for granted.  Management is convinced that,
if and when the Company commences revenue service, it will have to
compete by using operating efficiency and by providing consistent
quality service to passengers and cargo shippers alike in order to
establish the Company as a commercial success in its market niche.
The Company intends to provide non-stop, wide-body, First, Business
and Voyager class passenger service, and a palletized and
containerized service for cargo.

     The following is a brief summary of the results of a survey the
Company conducted in 1997 of one and two stop services in the U.S. -
St. Petersburg market.  The respective airlines can change their
flight schedules and frequency.  (April 1997 Official Airline Guide
("OAG") generally confirms the stated competition.)  Note: Aeroflot
NY-St. Petersburg service survey was done in January 1999.

Finnair

     Finnair flew between Helsinki and St. Petersburg daily.  Five
days a week, to connect with its flights from U.S. to Helsinki, a
layover time of 1:15 hours was required east-bound, and 1:40 hours of
layover was required west-bound.  Total en route time east-bound was
11 hours, and total en route time west-bound was 11:30 hours.  The
other two days required a layover of 5 hours east-bound, and an
overnight stay in Helsinki west-bound. Total en route time east-bound
was 19 hours, and west-bound 31 hours.  The JFK - Helsinki flight was
on a wide-body MD11 aircraft.  The connecting flight from Helsinki to
St. Petersburg was on a narrow-body DC9 aircraft.  Finnair did not
have First Class service, and did not have palletized and
containerized cargo service into St. Petersburg.  From the MD11, cargo
must be unpacked and manually loaded into the narrow-body DC9.

Scandinavian Airlines System (SAS)

     SAS served St. Petersburg from Stockholm and Copenhagen daily.
To connect with its flights from the U.S. at Stockholm or Copenhagen,
east-bound layover time was 1:30 hours, and west-bound required an
overnight stay in either Copenhagen or Stockholm.  Total en route time
east-bound was 10:30 hours, and total en route time west-bound was 30
hours through Stockholm and 31:30 hours through Copenhagen.  The
Newark - Stockholm or Newark - Copenhagen flight was on a wide-body
B767 aircraft.  From Stockholm or Copenhagen the connecting flight to
St. Petersburg was on a narrow-body DC9 aircraft.  SAS did not have
First class service, and did not have palletized and containerized
cargo service into St. Petersburg.  From the B767, cargo must be
unpacked and manually loaded into the narrow-body DC9.

Lufthansa

     Lufthansa served St. Petersburg from Frankfurt daily.  To connect
with its flights from the U.S. at Frankfurt, East-bound layover time
was 1:40 hours, and an overnight stay in Frankfurt was required on
West-bound flights.  Total en route time East-bound was 13:10 hours,
and total en route time West-bound was 25:20 hours.  The New York to
Frankfurt flight was on a wide-body A340 aircraft.  From Frankfurt the
connecting flight to St. Petersburg was on a narrow-body A320
aircraft.  Lufthansa had First, Business and Couch seating, but did
not have palletized and containerized cargo service into St.
Petersburg.  From the A340, cargo must be unpacked and manually loaded
into the narrow-body A320.

KLM Royal Dutch Airlines

     KLM served St. Petersburg from Amsterdam daily.  To connect with
its flights from the U.S. at Amsterdam, East-bound layover time was 1
hour, and West-bound layover time was 1 hour.  Total en route time
East-bound was 12:30 hours, and total en route time West-bound was 15
hours.  The New York to Amsterdam flight was on a wide-body B747
aircraft.  From Amsterdam the connecting flight to St. Petersburg was
on a narrow-body B737 aircraft.  KLM did not have First class seating,
and did not have palletized and containerized cargo service into St.
Petersburg.  From the B747, cargo must be unpacked and manually loaded
into the narrow-body B737.

British Airways, Air France, Austrian Airlines, and Swissair

     British Airways served St. Petersburg through London twice
weekly.  The return required overnight stay in London.  Air France
flew to St. Petersburg through Paris twice weekly and required
overnight stay in Paris on return.  Austrian Airlines flew to St.
Petersburg through Vienna four times a week.  Swissair flew to St.
Petersburg through Zurich three times a week.

Delta Air Lines (U.S. carrier)

     Delta Air Lines provided non-stop service to Moscow. In 1996
Delta ceased providing service to St. Petersburg and has applied to
the DOT for authority to market St. Petersburg through code sharing
with foreign carriers.

Aeroflot (Russian carrier)

     Aeroflot provided non-stop service from St. Petersburg to New
York and return twice weekly (on Friday and Sunday) and via Moscow
on Saturday.  Service from New York to St. Petersburg through Moscow
was available only in one direction four times a week (Monday-Thursday).
Aeroflot listed no service from St. Petersburg to New York four days
a week (Monday through Thursday).  Aeroflot operated the Boeing 767
on the non-stop flights between New York and St. Petersburg.  On
flights from New York to St. Petersburg via Moscow, Aeroflot operated
the Russian-built Tupolev on the leg between Moscow and St. Petersburg.

Summary of Competition

     Although Aeroflot has commenced non-stop service between St.
Petersburg and New York, Finnair and SAS remain the leading foreign
airlines in the U.S.-Russia market.  Finnair and SAS have fleets of
airplanes capable of trans Atlantic flight, offer service quality
acceptable to Western travelers, and have intermediate stops in
Helsinki, Stockholm and Copenhagen (change of gauge points - hubs).
Other foreign airlines have to fly more circuitous routes through
their hubs.  A total of 36 world airlines provide some form of
connecting flights at varying levels of service from New York City to
St. Petersburg.  Excepting Aeroflot service, the Company intends
to offer exclusive non-stop, wide-body service in the market.  The
Company's JFK - St. Petersburg non-stop block time is conservatively
listed at 8 hours and 34 minutes (includes taxi times and estimated
air traffic delays).  The normal JFK - St. Petersburg flying time is
approximately 7 hours and 20 minutes.

Pricing

     The Company's calculation of year one results is based on: (i)
the number of passengers (93,431) multiplied by the Weighted Average
Fare After Dilution, plus (ii) the pounds of freight (2,800,000)
multiplied by the rate per pound.  Thus, along with the passenger and
cargo volume transported, fares and cargo rates have a direct impact
on revenues.  In general, traffic volume is driven by the intensity of
commerce between two countries, depending on the underlying economic,
social and political factors.  In general, fares are market driven,
depending on demand for and supply of the transportation in the
particular market.  Fares may also be influenced by tradition and
marketing objectives of airlines.  All fares and cargo rates are
subject to change over time.  For discussion on passenger and cargo
volume, see "Management Discussion and Analysis - Forecast Results of
Year One Operation."

The following table represents the seating configuration and
class occupancy ratio of 93,431 passengers forecast for year one:

<TABLE>
<CAPTION>
 Baltia's B747 Intended Seating Configuration and Assumed Average Occupancy
                         Assumed     Assumed
                   Available   Passengers    Percent     Percent of
                       Seats   per Flight   Occupancy    Passengers

 <S>                   <C>         <C>      <C>          <C>

 First . . . .           16           6      37.5%         3.3%
 Business  . .           32          17      53.1%         9.5%
 Economy . . .           64          37      57.8%        20.6%
 Discounts . .          204         120      58.7%        66.6%

 Total . . . .          316         180      56.9%         100%
</TABLE>

1994 DOC statistics report that between 1992 and 1993 the
distribution of US passengers to Russia among First, Business and
Tourist and Economy Classes was 6%, 14%, and 80% respectively.
Being conservative, the Company calculates its fare revenues based on a
3.3%, 9.5%, and 87.2% class distribution ratio among passengers.
However, recognizing the fact that in the market the requirement
for First and Business class service is strong, the Company intends
to allocate appropriate seating capacities for its First and
Business classes (16 First, 32 Business, and 268 Economy and
Discount class seats in Baltia's B747 layout). The following
table shows the Company's weighted average passenger fare
calculation.

<TABLE>

<CAPTION>
               The Company's JFK - St. Petersburg Fare Calculation
                                      Assumed      Assumed     Contrib. to
                                     Published    Percent of     Weighted
                                       Fare       Passengers     Av. Fare

<S>                                   <C>            <C>         <C>
 First . . . . . . . . . . . . . . . .$2,715          3.3%       $90.66
 Business  . . . . . . . . . . . . . . 1,595          9.5%       150.91
 Economy <FN1>  . . . . . . .  . . . . 1,193         20.6%       245.67
 Discount Fares  . . . . . . . . . . .   555         66.6%       369.67


<S>                                                           <C>
 Weighted Average Fare - Undiluted . . . . . . . . . . . . .  $856.91
 Dilution Factor @ 40% for promotion/discount programs . . .  $342.76
 Weighted Average Fare - After Dilution  . . . . . . . . . .  $514.15 <FN2>

<FN>
<FN1>
(1)  Company trademark: "Voyager Class".
<FN2>
(2)  Yield @ 3,900 NM (av. distance JFK-LED in nautical miles) is
     13.18 cents per mile
</FN>
</TABLE>

Personnel

The DOT Order 96-1-24 and 96-2-51 found the Company's Management
     fit to operate its scheduled international air service. See
     "Management."  At present twenty staff members are actively
     working on the Company's financing,  aircraft acquisition, and
     FAA certification. Upon receipt of financing from this Offering,
     more than twenty staff and managers will be actively working on
     air carrier certification and marketing prior to commencing
     revenue service during which time they will be paid salaries
     reduced by 50%.  At 50% reduction, total 90-day salaries and
     training allowances approximating $170,000.  Immediately prior to
     commencement of service, the Company intends to employ a total of
     94 employees, including: (i) 28 executive, administrative, and
     sales personnel, (ii) 33 station personnel at JFK and St.
     Petersburg, (iii) 2 captains, 2 first officers, 2 chief stewards,
     and 18 stewards.  Shortly after commencement of the JFK - St.
     Petersburg service, the Company intends to bring the total number
     of employees to 131.  Certain employees must be FAA qualified for
     specific positions.  The Company's policy is to hire and retain
     only the highest quality personnel.  The Company will neither pay
     very low nor excessively high salaries.  The Company's management
     has sole discretion as to the number of employees and employment
     requirements and conditions.   The  Company's employees are not
     represented by a union, but may be so represented in the future.

Facilities

The Company presently subleases facilities on a month-to-month
basis from Iceland Air, a permanent tenant in the East Wing of
the International Arrivals Building ("IAB"), JFK International
Airport, New York, at a rate of $1,200 per month.  Upon receipt
of IPO proceeds the Company should have an approximate date for
commencing revenue service, and will sign a written lease with
Iceland Air for larger space as need requires with increase in
frequency (aircraft turn-around).  Negotiations indicate that the
monthly rent presently charged will be replaced by a charge equal
to $750.00 per aircraft turn-around, i.e. one aircraft's landing,
servicing and departure.  As the US carrier providing
international service, the Company believes it is eligible for required
gate space and other facilities at JFK and at Pulkovo airport in St.
Petersburg.  Prior to leasing space from Iceland Air, the Company
leased office space from the Company's president at his residence
at $400 per month.


Currently Texaco quotes fuel at $0.62/gal at JFK and Aer Rianta quotes
fuel at $0.96/gal at St. Petersburg.  Fuel and other industry operating
costs are subject to variation.


Intellectual Property.

The laws of foreign countries may treat the protection of proprietary
rights of the Company differently from, and may not protect the Company's
proprietary rights to the same extent as do laws in the United States.

Item 2.  Description of Property.  Intentionally Omitted.

Item 3.  Legal Proceedings.    Intentionally Omitted.

Item 4.  Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting was held on August 24, 1998 at which time
the following four persons were unanimously re-elected to the four-
member Board of Directors by 1,635,643 affirmative votes of shareholders
present who represent 66.9% of issued shares. The engagement of Hornblower &
Weeks to underwrite Baltia's Public Offering pursuant to the engagement
letter dated 7/2/98 was approved. President Dmitrowsky's activities pursuant
to that Offering were ratified and he was authorized to execute documents
and transact any business necessary to complete Baltia's Offering.  The
Bridge Loan and Warrant Purchase Agreement between Baltia Air Lines and
accredited private lenders dated June 2, 1998, including the conveyance of
warrants stated therein, were ratified.  Shares (575,000) underlying the
warrants were set aside.  President Dmitrowsky and Secretary Kaplinsky were
authorized to execute and deliver the warrants so approved.  The lease of
the 747-200 aircraft from Cathay Pacific Airways was approved and actions
taken to that end were ratified.

                            PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.
 No present market.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

        MANAGEMENT DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
all of the Financial Statements and Notes included.

Overview

Baltia is a development stage US Airline focused on the US-Russian
market.  The Company has not commenced revenue operation and has
not received any revenues for air transport.  In preparing for revenue
flight operations as a US designated airline on an international route,
over eight years, the Company has invested approximately $6 million,
half in cash and half contributed services.  The officers and directors
of the Company have been compensated with Shares.  At December 31, 1997 the
Company had an accumulated deficit of $1,084,691.

The Company has been financed to date by officers, directors, key personnel,
and their families and friends.  In early 1991 the Company raised
approximately $200,000 in a Regulation D offering as seed money to be
followed by major financing upon receipt of route authority.  In June the
Department of Transportation granted the Company routes to provide non-stop
passenger, cargo and mail service from JFK to St. Petersburg and from JFK
to Riga, with online service to Minsk, Kiev and Tbilisi.  In August the
Company's financing efforts were destroyed by the attempted Soviet coup
d'etat.  Subsequently the route authorities terminated for dormancy.

In 1995, the Company reapplied for JFK-St. Petersburg authority.  In 1996
the DOT reissued JFK-St. Petersburg route authority to the Company based upon
reexamination of the Company's operating plan and fitness as a US air
carrier.  The Company's Registration Statement for a best-efforts
underwriting became effective in September 1996.  Due to the underwriter's
internal problems, in spring 1997, the underwriting was mutually terminated
unsuccessfully.  The offering is presently underwritten on a firm commitment
basis and the DOT has renewed the Company's JFK-St. Petersburg route
authority until August 7, 1998 to show evidence of FAA certification,
operating capital and liability insurance coverage. On August 7, 1998 the
company filed an extension request.  The Department of Transportation has
advised that it will act on the request upon closing of the Company's Public
Offering.


Twelve Months Operating Plan

For twelve months the Company will operate from one weekly round trip
flight between New York and St. Petersburg, increasing the frequency
as market demands, up to five weekly round trips carrying passengers,
cargo and mail.  If sufficient capital is raised, the Company may
apply to the DOT to serve additional cities in the former Soviet
Russia, but there is no specific plan to do so at this time.
Assuming zero revenue, and thus zero traffic, service would remain at
one round trip per week.

The Company believes its cash requirements to operate one Boeing 747
between NY and St. Petersburg, Russia once a week for twelve months
is $12.1 million, which includes three months pre-operating expenses
at $2.7 million as detailed in Use of Proceeds, nine months operating
expenses at $8.3 million as submitted to the DOT, and the Company's
total liabilities at $1.1 million as affirmed in Financial Statements
within this prospectus.  (DOT Order 97-9-11, p.5. Nine months operating
expenses equal DOT average three months expenses of $2.7 million times
3.)  The pre-operating and operating expenses include, but not
exclusively, aircraft leasing costs of $2.2 million, aircraft insurance
in the amount of $1.1 million, personnel expenses of approximately $4
million.  Complete budget projections of expenses expressed in regulated
categories is available in OST 96-2032 and OST 97-2763.

To provide this service, aside from office equipment, capital
expenditures include aircraft acquisition, spare parts and ground
equipment.  There will be no more capital assets acquired unless
there is market demand, in which case there will be revenue from
which to make the capital purchase. The funds to acquire the initial
capital items are listed in the Use of Proceeds table.  Monthly
aircraft lease payment is expected to be paid from revenue.  Even
assuming zero revenue, there are sufficient funds available from
the IPO and LainBanka line of credit ("LOC") to make lease payments
for one year.  (Total annual expenses $12.1 million and available
resources $13.1 million as discussed below.)

The LainBanka LOC was issued in 1998 and has never been drawn upon.
The LOC, in the amount of $6.2 million has been immediately
available to the Company upon the Company's opening
an account including registering a subsidiary in Latvia, maintaining
sufficient convertible currency in the account to perform any target
programs the Company may have in Latvia.  The funds should not be
employed for primary funding of capital investments.

Following the Closing, the Company expects to open an account with
LainBanka to hold $10,000 of the reserve from net proceeds.
This will require that the Company register a subsidiary in Latvia,
which it will do in a manner similar to registering as a foreign
corporation in another state of the US should the Company, at some
time in the future, do business in a state other than NY where it
is incorporated.  The Company will not conduct any target program
in Latvia during the first twelve months following the Closing and
therefore has no requirement to maintain a specific amount in the
LainBanka account.  The interest rate and repayment schedule will
be in accordance with the then effective lending rates (10% to 14%)
and terms at the LainBanka.  There is no assurance that the terms,
then in effect in Latvia, will be acceptable to the Company.

At Closing, the Company receives net proceeds in the amount of $6.9
million, which together with the LOC makes available resources
totaling $13.1 million.

In addition to the IPO proceeds and LOC, the Company may issue $6
million in bonds through W.R. Lazard.  The Company has no specific
present intent to issue the bonds, but has an agreement with  W.R.
Lazard to effect optimum timing of the bond issue should the
Company so choose.  If the Company were to issue bonds it would
incur debt equal to the amount of bonds issued plus a current
monthly liability for 10% to 15% interest on the debt. Further,
potential proceeds from the exercise of Warrants in this issue
may provide additional cash following this twelve month period.

FAA certification.  The Company expects to complete FAA
certification expediently, but cannot guaranty completion by
a specific date.  FAA air carrier certification process which
is based upon a 90-day schedule of events consisting of document
approval, crew training, and flight demonstration.

Inflation

The Company belongs to a capital-intensive industry, and extended
periods of inflation could have an impact on the Company's earnings by
causing operating expenses to increase.  If the Company is unable to
pass through increased costs, operating results of the Company could be
adversely affected.  The Company will conduct a certain amount of its
transactions in foreign currencies, including Western currencies and
Russia and NIS currencies.  The inflation rate of foreign currencies
has been more significant than inflation domestically.

Currency Exchange Fluctuations

The Company expects that for the foreseeable future the majority of its
business will be transacted in US dollars, however a portion of the
transactions will be conducted in foreign currencies.  In order to
limit significant impact due to possible fluctuations in currency
exchange, the Company has a policy which governs periodic price
adjustments depending on currency deviations from the US dollar.
Because a Company's marketing policy is to maintain an apparent pricing
stability for its customers who purchase the Company's services abroad
using foreign currencies, pricing adjustments are made at intervals,
not continuously.  Similarly, periodic currency adjustments will be
made in the rates of those Company employees who are compensated in
non-US currency.  Thus, a certain amount of exchange risk is inherent.
The Russian government began freeing prices in 1992 which sparked
devaluation of the Ruble.

Insurance Coverage and Expense

In 1998 AON Aviation of Virginia informed the Company that
current insurance costs associated with the Company's operating a B747
would total $600,000.  This estimate includes hull insurance,
comprehensive airline liability coverage up to $35,000,000 any one
occurrence, and war risks.  Comprehensive liability premium is coverage
for third party personal injury and property damage, general liability
and facilities, plus per seat passenger liability coverage.  The
Company will pay the aggregate annual premium in monthly installments
commencing after the Company begins revenue service.  The Company has
no influence over insurance rates which are known to fluctuate.
Regardless of the insurance costs, the Company will purchase coverage.
Further, in the event of a serious accident, there is no guaranty that
claims would not exceed the insurance coverage purchased.



Item 7.  Financial statements.

                            WANT & ENDER
                            C.P.A. P.C.
                            Certified Public Accountants

MARTIN ENDER CPA
STANLEY Z. WANT CPA CFP
                         Independent Auditor's Report

To the Shareholders' and Board of Directors of:

Baltia Air Lines, Inc
63 25 Saunders Street, #7I
Rego Park, NY 11374

  We have audited the accompanying balance sheet of Baltia Air Lines, Inc.
as at December 31, 1998 and the related statements of operations, retained
earnings and cash flows for the year then ended. These financial statements
are the responsibility of the management.  Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of Baltia Air Lines, Inc. as December 31, 1997, were audited by
other auditors whose report dated June 4, 1998, expressed an unqualified
opinion on those statements.

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

   In our opinion, the financial statements referred to above, present
fairly, in all material respects, the financial position of Baltia Air
Lines, Inc. at December 31, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

  Baltia Air Lines, Inc. has not estimated the remaining lives and
replacement costs of the common property and, therefore, has not presented
the Supplementary Information on Future Major Repairs and Replacements that
the American Institute of Certified Public Accountants has determined is
required to supplement, although not required to be a part of, the basic
financial statements.


Martin Ender
Want & Ender CPA, P.C.
Certified Public Accountants
New York, NY

November 13, 2001

   386 PARK AVENUE SOUTH - SUITE 1618 NEW YORK, NY 10016
TEL 212.684.2414 - FAX 212 684-5433 - EMAIL   WECPAPC@SPRYNET.COM

<PAGE>

<TABLE>
<CAPTION>
              BALTIA AIR LINES, INC.
                 BALANCE SHEETS
            DECEMBER 31, 1998 and 1997
                   (Audited)

                                        1998      1997
<S>                                  <C>          <C>
Current Assets
 Cash                                 $ 2,202      $ 3,135
Total Current Assets                  $ 2,202      $ 3,135

Fixed Assets
 Property, Plant and Equipment
    Property, Plant and Equipment      89,656            -
    Less: Accumulated Depreciation     (6,404)           -
 Net Property, Plant and Equipment     83,252            -

Other Assets
  Premedia Costs                      496,090            -
Total Other Assets                    496,090

TOTAL ASSETS                        $ 581,544      $ 3,135
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>

<TABLE>
<CAPTION>
                        BALTIA AIR LINES, INC.
                           BALANCE SHEETS
                      DECEMBER 31, 1998 and 1997
                              (Audited)

                                             1998          1997
<S>                                     <C>           <C>
Current Liabilities
   Accounts Payable                    $     59,568  $     571,154
Total Current Liabilities                    59,568  $     571,154

Other Liabilities
   Officers Loan                            122,000        368,890
Total Other Liabilities                     122,000        368,890

Stockholders Equity
   Common Stock -                               204            203
   (100,000,000 shares authorized,
    2,035,416 issued)
   Preferred Stock -                            800              -
   (2,000,000 shares authorized,
    80,000 shares issued)
   Paid-in-Capital                        7,870,179      5,846,484
   Prepaid Media Costs                            -       (396,090)
   Retained Earnings                     (7,471,207)    (6,387,506)
   Less: Treasury Stock                           -              -
Total Stockholders Equity                   399,976       (936,909)

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 581,544   $      3,135

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>

<TABLE>
<CAPTION>
                            BALTIA AIR LINES, INC.
                 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
                    FOR THE YEAR ENDED DECEMBER 31, 1998
                                 (Audited)

                                   Preferred Stock       Common Stock
                                                                            Additional Paid-
                                  Shares   Par Value   Shares     Par Value      In Capital

<S>                               <C>        <C>     <C>          <C>          <C>
Balance as at December 31, 1997           -   $     -  2,035,416   $ 204        $ 5,846,484
1998 Deferred financing costs             -         -          -       -            850,000
1998 Acquisition of treasury stock        -         -          -       -                  -
1998 Conversion of liabilities       80,000       800          -                  1,173,695

Balance as at December 31, 1998      80,000       800  2,035,416     204          7,870,179

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>

<TABLE>
<CAPTION>
                      BALTIA AIR LINES, INC.
                 STATEMENTS OF INCOME AND EXPENSES
                 YEARS ENDED DECEMBER 31, 1998 and 1997
                             (Audited)

                                             1998           1997
<S>                                      <C>            <C>
Expenses

  Depreciation                           $     6,404    $            -
  Interest Expense                           850,000                 -
  General and Adm Expenses                         -            84,512
  Professional Fees                           20,663            58,625
  FAA Cert Fee                               206,633                 -
  Media Costs                                      -                 -

Total Expenses                             1,083,700           143,137

Net Income (Loss) Before Income Taxes     (1,083,700)         (143,137)

Income Taxes

  Federal Income Tax                                -                 -
  New Jersey Franchise Tax                          -                 -

Total Income Taxes

Net Income (Loss) For The Year          $ (1,083,700)       $ (143,137)



</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>

<TABLE>
<CAPTION>
                           BALTIA AIR LINES, INC.
                           STATEMENT OF CASH FLOW
                         YEAR ENDED DECEMBER 31, 1998
                                 (Audited)

                                                               1998
<S>                                                        <C>
Cash Flows from Operations

Net Income                                                  $ (1,083,700)

Adjustments to reconcile net income to
  net cash provided by operations
  Depreciation                                                     6,404
  Change in Property, Plant and Equipment                        (89,656)
  Change in Premedia costs                                      (100,000)
  Change in Accounts Payable                                    (511,586)
  Change in Officers Loan                                       (246,890)
Total Adjustments                                               (941,728)

Net Cash Provided by Operations                               (2,025,428)

Cash Flows From Financing Activities

  Paid in Capital                                              2,023,695
  Common Stock issued at par value                                     -
  Preferred Stock issued at par value                                800
  Treasury Stock purchased                                             -

Net Increase (Decrease) in Cash Equivalents                         (933)
Cash and Cash Equivalents - Beginning                              3,135

CASH AND CASH EQUIVALENTS - ENDING                                 2,202


</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>

                     BALTIA AIR LINES, INC.
                 (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO FINANCIAL STATEMENT

      I. ORGANIZATION, NATURE OF OPERATIONS, GOING CONCERN CONSIDERATIONS

         (A) Organization

          The Company was incorporated under the laws of the state of New
York on August 24, 1989.

         (B) Nature of Operations

          The Company was formed to provide commercial, passenger, cargo and
mail air transportation between New York and Russia.

          Since inception, the Company's primary activities have been
raising of capital, obtaining financing and obtaining Route Authority and
approval from the U.S. Department of Transportation. The Company has not yet
commenced revenue producing activities.  Accordingly, the Company is deemed
to be a Development Stage Company.

           2. ACCOUNTING POLICIES

         (A) Cash and Cash Equivalents

          The Company considers cash and cash equivalents to be all short
term investments which have an initial maturity of three months or less.

         (B) Property and Equipment

          The cost of property and equipment is depreciated over the
estimated useful lives of the related assets. Leasehold improvements are
depreciated over the lesser of the term of the related lease or the
estimated lives of the assets. Depreciation is computed on the straight-line
method for financial reporting purposes and tax purposes.

          (E) Income Taxes

          Deferred income taxes assets and liabilities are computed based on
temporary differences between the financial statement and income tax bases
of assets and liabilities using the enacted marginal income tax rate in
effect for the year in which the differences are expected to reverse.
Deferred income tax expenses or credits are based on the changes in the
deferred income tax assets or liabilities from period to period.

           3. PROPERTY and EQUIPMENT

           Property and equipment at December31, 1998 (audited) consisted of
the following;

  Office Equipment                $53,406
  Furniture & Fixtures              6,782
  Automobiles                      29,465
     Total                         89,656
  Less, Accumulated Depreciation   (6,404)
  Total Property and Equipment    $83,252
<PAGE>

                         BALTIA AIR LINES, INC.
                      (A DEVELOPMENT STAGE COMPANY)
                      NOTES TO FINANCIAL STATEMENT

           3. PROPERTY and EQUIPMENT (Continued)

           The useful lives of property and equipment for purposes of
computing depreciation are;

Office equipment   5-7 years
Automobiles        5 Years

           5. RELATED PARTY TRANSACTIONS


          On June 30, 1997 Steffanie Lewis was issued 125,000 restricted
common shares, as negotiated with the  management of the Company, in
exchange for the total due to her, in the amount of $ 1,624,432.

          On June 23, 1997 Igor Dmitrowsky, President of the Company and a
shareholder, relinquished the amount due to him totaling $22,142.
Accordingly, the Company has recorded Contributed Capital in the amount of
$22,142.

          On March 30, 1998, Various shareholders including Igor Dmitrowsky,
President of the Company relinquished the amounts due them totaling
$160,983. Accordingly, the Company recorded Contributed Capital in the
amount of $160,983.

          On September 1998, Igor Dmitrowsky, President of the Company and a
shareholder, relinquished the amount due to him totaling $45,711.
Accordingly, the Company has recorded Contributed Capital in the amount of
$45,711.

          On September 1998, Leonard Becker, a shareholder, relinquished the
amount due to him totaling $57,000.  Accordingly, the Company has recorded
Contributed Capital in the amount of S57,000.

          6. INCOME TAXES

          At December 3l, 1998 the Company has a net operating loss carry
forward of $6,423,244, which is available  to offset future taxable income.
The Company is still liable for certain minimum state and city taxes.

          As of December 31,1998, a net deferred tax benefit has not been
reflected to record temporary differences between the amount of assets and
liabilities recorded for financial reporting and income tax purposes due to
the establishment of a 100% valuation allowance relating to the uncertainty
of recoverability.

<PAGE>
                               BALTIA AIR LINES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           NOTES TO FINANCIAL STATEMENT

          7. STOCKHOLDERS' DEFICIT

         (A) Stock Options

         In 1992, the Company granted options to purchase 43,583 restricted
shares of common stock, at $80.00 per share, to certain private investors.
These options expire upon the passing of thirty full calendar months after
the Company has  made a public sale of securities in compliance with the
Securities Act of 1933, as amended, or the passing of twenty years from date
of said agreements, whichever is earlier. As of December 3l, 1998, no
options have been exercised.

         (B) Retirement or Stock

          On November 4, 1992, the Company issued 10,416  restricted shares
of stock for $500,000 to a private investor. On November 24, 1992, these
shares were repurchased for the same amount from the investor and
subsequently retired.

         (C) Acquisition of Common Treasury Stock

          On September 28, 1998 the Company purchased from Igor Dmitrowsky,
president of the Company, 833,333 common shares for $100 and has granted him
an option to repurchase 1,000,000 common shares from the Company at $100
upon the completion or the Company's inaugural flight or upon the exercise
of any warrants, whichever occurs first.

         (D) Reverse Stock Split

          On August24, 1995, the Board of Directors  authorized and the
majority of the current shareholders ratified a ten for one reverse stock
split of the Company's $.0001 par value common stock.

          On December 31, 1997, the Board of Directors  authorized and the
majority of the current shareholders  ratified a two for one reverse stock
split of the Company's $.000l par value common stock.

          On September 29, 1998, the Board of Directors authorized and the
majority of the current shareholders  ratified a one and two tenths (1.2)
for one reverse stock split of the Company's $.0001 par value common stock.

          All references in the accompanying financial statements to the
number of common shares, warrants and per share amounts have been restated
to reflect the reverse stock  splits.

          (E) Preferred Shares

          On December 7, 1998, the Company amended its Articles of
Incorporation thereby, increasing the authorized  aggregate number of
preferred stock shares from 15,000  preferred stock shares at no par value
to 500,000 preferred  stock shares at $.01 par value.

         (F) Contributed Capital

          The Company has recorded service contributions  from certain key
officers who have worked for and on behalf of the Company. The service
contribution amounts have been  calculated based on an a normal rate of
compensation, on  either a full or part time basis, as based on the number
of  hours worked by each individual.

<PAGE>
                         BALTIA AIR LINES, INC.
                     (A DEVELOPMENT STAGE COMPANY)
                      NOTES TO FINANCIAL STATEMENT

             7. STOCKHOLDERS DEFICIT - (CONTINUED)

          The Company maintains no obligation, present or  future, to pay or
repay for any and all service contributions  received. Accordingly, the
Company has not recorded a liability  for, accrued for, and/or accounted for
any monetary reserves in  connection with the service contributions.

          On June 23, 1997, certain of the Company's  management
relinquished the amount due them for back-pay  totaling $270,928
Accordingly, the Company has recorded Contributed Capital in the amount of
$270,928.





Item 8.  Changes In and Disagreements with Accountants on
         Accounting and Financial Disclosure.    Intentionally
         Omitted.

                        PART III

Item 9.  Directors, Executive officers, Promoters and Control Persons:

Compliance With Section 16(a) of the Exchange Act.  Compliance confirmed.

                       MANAGEMENT

Executive Officers and Directors

<TABLE>
<CAPTION>
The following table summarizes certain information with respect
to the executive officers and directors of the board <FN1>:

Name                     Age  Position
<S>                     <C>  <C>
Igor Dmitrowsky . . . .  43   President, CEO, Director of the Board
Walter Kaplinsky  . . .  59   Secretary and Director of the Board
Andris Rukmanis . . . .  36   V.P. Europe and Director of the Board
Anita Schiff-Spielman    43   Director of the Board
Brian Glynn . . . . . .  52   Vice President Marketing

<FN>
<FN1>
(1)     The by-laws limit the number of directors on the
     board to a maximum of four, with a provision that an
     additional seat on the board is created for the Lead-
     Manager's designee for a period of five years, at the
     option of the Representative.  Officers and Directors
     have a one year term and are elected at, and after, the
     Annual Meeting in August.
</FN>
</TABLE>

Igor Dmitrowsky, President and Chief Executive Officer, founded
the Company and served as Chairman of the Board from its inception
in August 24, 1989 until 1998.   Mr. Dmitrowsky, a US citizen, born
in Riga, Latvia, attended the State University of Latvia from 1972 to 1974
and Queens College from 1976 through 1979. In 1979, he founded
American Kefir Corporation, a dairy distribution company, which
completed a public offering in 1986, and from which he retired in
1987.  Mr. Dmitrowsky has financed aircraft and automotive projects,
speaks fluent Latvian and Russian, and has traveled extensively
in the republics of the former Soviet Union.  In 1990, he testified
before the House Aviation Subcommittee on the implementation of
United States' aviation authorities by US airlines.

Walter Kaplinsky, a US citizen, has been with the Company since
1990.  In 1993, Mr. Kaplinsky became secretary and a director of
the board.  In 1979, together with Mr. Dmitrowsky, Mr. Kaplinsky
was one of the co-founders of American Kefir Corporation, where
from 1979 through 1982 Mr. Kaplinsky served as secretary and
vice president.  Mr. Kaplinsky is the owner of Globe Enterprises,
Brooklyn, NY, a private company that exports to Russia.

Brian Glynn, a US citizen, is V.P. of Marketing and Service.  He
joined the Company in 1990.  Mr. Glynn has a background in
marketing and public relations.  WILL GET EDUCATION AND WORK
EXPERIENCE FROM GLYNN.  From 1982 through 1989, Mr. Glynn was
Vice President of American Kefir Corporation.

Andris Rukmanis, a citizen of Latvia, is the Company's Vice
President in Europe.  Mr. Rukmanis joined the Company in 1989.
In Latvia, Mr. Rukmanis has worked as an attorney specializing in
business law.  From 1988 through 1989 he was Senior Legal Counsel
for the Town of Adazhi in Riga County, Latvia.  From 1989 to 1990
he served as Deputy Mayor of Adazhi.

Anita Schiff-Spielman, a US citizen, serves as a director of the
board. She has been associated with the Company since its
inception in 1989.  Ms. Schiff-Spielman has owned Schiff Dental
Labs, New York, NY, for the past fifteen years.

Audit Committees

The Audit Committee consists of Mr.  Dmitrowsky, the Representative's
Designee and Ms. Schiff-Spielman.  The functions of the Audit Committee
are to review with the Company's independent public auditors the
scope and adequacy of the audit to be performed by such independent
public auditors; the accounting practices, procedures, and policies
of the Company; and all related party transactions. The Committee was
formed in 1996.Audit Review by the Board

New Nasdaq SmallCap standards require: (1) a minimum of 2 independent
directors; and, (2) an audit committee, a majority of which are
independent directors.  The Company has a small Board consisting
of four Directors, one of whom, Anita Schiff-Spielman, is
independent and a member of the audit committee.  One additional
independent directorship position is reserved for the
Representative's designee who will take a seat on
the board and on the audit committee simultaneously with the IPO
closing.




Item 10.  Executive Compensation.  Management, Compensation.

Employment Agreements

The Company has no individual employment agreements.
Compensation

The board of directors approves salaries for the Company's
executive officers as well as the Company's overall salary
structure.  For year one following the closing of this Offering,
the rate of compensation for the Company's executive officers is:
(i) President $186,000, (ii) Vice President Marketing $82,000,
and (iii) Vice President Europe $68,000.  Pursuant to written
agreement, the President's and Vice Presidents' salaries will be
reduced to an amount equal to 50% of budgeted salary during the
90-day period commencing when funds are received at Closing  Upon
commencement of flight services 100% of respective budgeted
salaries will be paid. To this date, the Company has paid
officers no salaries, nor otherwise have compensated officers.
Board directors are not presently compensated and shall receive
no compensation prior to commencement of revenue service.

The following table identifies executive compensation to be paid.
The board of directors has established the compensation.  No
individual personnel contracts exist.  The officers have been
working on behalf of the Company in their respective offices for
six years.  No executive salaries have been paid to date, nor
will be paid until funds are received at the Closing, but normal
salaries have been treated as capital contributions.  See
footnote 6(G) of the Company's Financial Statement and
"Contributed capital".  To preserve the IPO proceeds designated
working capital , these officers have agreed to continue in
their offices at reduced salaries for approximately three months
between the Closing and commencement of revenue operations.
Reduced salaries will not commence until proceeds are available
from this Offering.  The executive officers have provided written
affirmation that each will continue in his respective position at
reduced salary for the three months following the Closing.

Name                      Position                      Salary
Igor Dmitrowsky           President                    $186,000
Brian Glynn               Vice President Marketing       82,000
Andris Rukmanis           Vice President Europe          68,000


Item 11.  Security Ownership of Certain Beneficial Owners and Management.

  Principal Stockholders.

                 PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>

The following table sets forth, as of the date of this
Prospectus, the ownership of the Company's Common Stock by (i)
each director and officers of the Company, (ii) all executive
officers and directors of the Company as a group, and (iii) all
other persons known to the Company to own more than 5% of the
Company's Common Stock.  Each person named in the table has
sole voting and investment power with respect to all shares shown
as beneficially owned by such person.

                               Common Shares
                            Beneficially Owned    Percent of Total

 Directors and Officers

 <S>                                <C>                 <C>
 Igor Dmitrowsky . . . . . .          1,517,100           62.1%
 63-26 Saunders St., Suite 7I
 Rego Park, NY 11374

 Walter Kaplinsky  . . . . .             73,250            3.0%
 2000 Quentin Rd.
 Brooklyn, NY 11229

 Brian Glynn . . . . . . . .             50,000            2.0%
 148 Claremont Rd.
 Bernardsville, NJ 07924

 Andris Rukmanis . . . . . .             25,500            1.0%

 Kundzinsala, 8 Linija 9.
 Riga, Latvia LV-1005

 Anita Schiff-Spielman . . .              2,250            0.1%

 1149 Kensington Rd.
 Teaneck, NJ 07666

 Counsel

 Steffanie J. Lewis . . . . .           190,000            7.8%
 3511 North 13th St.
 Arlington, VA 22201

 All directors, officers
and counsel (Six people)              1,858,100           76.0%


</TABLE>


Item 12.  Certain Relationships and Related transactions.

Certain Transactions.

     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No officers or directors hold Company shares purchased since
March 4, 1995, i.e. within one year of the Company's filing its
initial registration of this Offering.  All securities previously
purchased by officers and directors were purchased for fair
market value at the time they were purchased.  Excepting
Management Stock Options and the Company's renting office space
from its president prior to moving to JFK, no transaction exists
between officers and the Company or affiliates of either, and
there are no incentive plans or options for delayed compensation.



Item 13.  Exhibits and Reports on Form 8-K. Financial Statements;
          Exhibits.  No report has been filed on Form 8-K.

                                     SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                     Baltia Air Lines, Inc., Registrant


Date:                _______________(SIGNATURE)__________________________
                                       By: Igor Dmitrowsky, President

Date:                _______________(SIGNATURE)__________________________

                                   By: Walter Kaplinsky, Secretary