SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


[X] Quarterly report pursuant to section 13 or 15(d) of the Securities  Exchange
    Act of 1934 for the quarterly period ended June 30, 1999

                         Commission file number: 1-8306

                      AIR EXPRESS INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in its charter)

            Delaware                                   36-2074327
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)


                  120 Tokeneke Road, Darien, Connecticut 06820
                                 (203) 655-7900
   (Address of, Including Zip Code, and Telephone Number, Including Area Code,
                  of Registrant's Principal Executive Offices)

                                      NONE
Former name, former address and former fiscal year, if changed since last report


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 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. Yes X No

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest  practicable  date  (applicable only to corporate
registrants).

The  number  of  shares of  common  stock  outstanding  as of August 9, 1999 was
33,527,805 (Net of 1,817,660 Treasury Shares).


<PAGE>
                      AIR EXPRESS INTERNATIONAL CORPORATION
                      June 1999 Form 10-Q Quarterly Report

                                Table of Contents


                         Part I - Financial Information
                                                                           Page

Item 1.  Financial Statements

                    Condensed Consolidated Balance Sheets as at
                    June 30, 1999 and December 31, 1998...................   2

                    Condensed Consolidated Statements of Operations -
                    Three Months and Six Months Ended June 30, 1999
                    and 1998..............................................   3

                    Consolidated Statements of Cash Flows -
                    Six Months Ended June 30, 1999 and 1998...............   4

                    Notes to Condensed Consolidated Financial
                    Statements............................................   5


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations..............................   8


                           Part II - Other Information


Item 1.  Legal Proceedings................................................  14

Item 4.  Submission of Matters to a Vote of Security Holders..............  14

Item 6.  Exhibits and Reports on Form 8-K.................................  14

<PAGE>

                                                                          Page 2
<TABLE>

             AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

                                                    June 30, 1999   Dec 31, 1998
                                                     (Unaudited)
<S>                                                    <C>           <C>
Assets
Current Assets:
   Cash and cash equivalents ......................... $  51,286    $  60,246
   Accounts receivable (less allowance for
    doubtful accounts of $5,294 and $5,112) ...........  355,972      366,417
   Marketable securities ..............................       --        7,188
   Other current assets ...............................    7,071        7,096
         Total current assets .........................  414,329      440,947
Investment in unconsolidated affiliates ...............   29,513       29,507
Restricted funds ......................................    1,136        2,126
Property, plant and equipment (less accumulated
 depreciation of $74,720 and $70,515) .................   87,344       81,178
Deposits and other assets .............................   16,343       13,937
Goodwill (less accumulated amortization of $16,277
 and $15,331) .........................................  103,186      107,783
         Total assets .................................$ 651,851    $ 675,478

Liabilities and stockholders' investment

Current Liabilities:
   Current portion of long-term debt ..................$   4,062    $   4,337
   Bank overdrafts payable ............................    1,604        4,432
   Transportation payables ............................  151,410      157,763
   Accounts payable ...................................   64,300       66,023
   Accrued liabilities ................................   61,483       72,780
   Income taxes payable ...............................    5,704        6,644
         Total current liabilities ....................  288,563      311,979
   Long-term debt .....................................   41,617       42,578
   Other liabilities ..................................    6,847       10,050
         Total liabilities ............................  337,027      364,607

Stockholders' Investment:
   Capital stock-
   Preferred (authorized 1,000,000 shares, none
    outstanding) ......................................      --           --
   Common, $.01 par value (authorized 100,000,000
    shares, issued 35,283,023 and 35,028,154 shares) ..      353          350
   Additional paid-in capital .........................  151,003      147,544
   Accumulative other comprehensive income ............  (39,384)     (28,192)
   Retained earnings ..................................  238,749      216,763
                                                         350,721      336,465
Less: 1,807,502 and 1,217,586 shares of treasury
       stock, at cost..................................  (35,897)     (25,594)
   Total stockholders' investment .....................  314,824      310,871
   Total liabilities and stockholders' investment .....$ 651,851    $ 675,478


The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
                                                                          Page 3

<TABLE>

             AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

(In thousands, except
 per share data)

                                Three Months Ended       Six Months Ended
                                      June 30,                June 30,
                               1999        1998         1999        1998

<S>                          <C>        <C>           <C>        <C>
Revenues .................   $373,263   $378,494      $727,947   $750,870

Operating expenses:
 Transportation ..........    246,618    255,459       480,924    509,982
 Terminal ................     70,296     66,806       139,816    133,932
 Selling, general and
  administrative .........     37,604     36,592        76,558     74,163

Operating profit .........     18,745     19,637        30,649     32,793

Other income:
 Interest, net ...........         37        633           113        990
 Other, net ..............      1,391      1,586        11,036      3,641
                                1,428      2,219        11,149      4,631

Income before provision
  for income taxes .......     20,173     21,856        41,798     37,424

Provision for income taxes      7,464      8,195        15,465     14,033
Net income ...............   $ 12,709   $ 13,661      $ 26,333   $ 23,391

Income per common share:
     Basic ...............   $    .38   $    .39      $    .78   $    .67
     Diluted .............   $    .38   $    .39      $    .78   $    .66

Weighted average number
  of common shares:
     Basic ...............     33,429     34,753        33,584     34,694
     Diluted .............     33,850     35,343        33,919     35,329

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

                                                                          Page 4
<TABLE>

             AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998

(Dollars in thousands)

                                                                1999      1998
<S>                                                          <C>        <C>
Cash flows from operating activities:
    Net Income ...........................................   $ 26,333  $ 23,391
    Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation expense ..............................      8,501     6,945
       Amortization of goodwill ..........................      1,526     1,262
       Deferred income taxes .............................        773       954
       Equity in earnings of unconsolidated affiliates ...       (848)   (1,898)
       Gains on sales of assets, net .....................        (10)      (23)
       Gain on sale of marketable securities .............     (7,852)       --
   Changes in assets and liabilities, net of acquisitions:
      (Increase) decrease in accounts receivable, net ....     (2,183)   28,859
      (Increase) decrease in other current assets ........       (244)    1,277
      (Increase) in other assets .........................     (1,704)     (637)
      (Decrease) in transportation payables ..............     (1,865)  (23,537)
       Increase (decrease) in accounts payable ...........      2,162    (1,063)
      (Decrease) in accrued liabilities ..................     (9,922)     (369)
      (Decrease) in income taxes payable .................        (52)   (1,291)
       Increase in other liabilities .....................        138       192
         Total adjustments ...............................    (11,580)   10,671

       Net cash provided by operating activities .........     14,753    34,062

Cash flows from investing activities:
    Acquisitions, net of cash acquired ...................       --      (9,532)
    Restricted funds .....................................        990     6,103
    Other investing activities ...........................       --       1,370
    Proceeds from sales of assets ........................         48       674
    Proceeds from sale of marketable securities ..........      7,877        --
    Capital expenditures .................................    (15,673)  (14,494)
    Investment in unconsolidated affiliates ..............     (1,726)   (7,102)

       Net cash used by investing activities .............     (8,484)  (22,981)

Cash flows from financing activities:
    Net (repayments) borrowings in bank overdrafts payable     (2,586)    1,132
    Additions to long-term debt ..........................      2,058        --
    Payment of long-term debt ............................     (1,511)     (792)
    Issuance of common stock .............................      2,332     2,746
    Payment of cash dividends ............................     (4,032)   (3,464)
    Purchase of treasury stock ...........................     (9,692)       --

       Net cash used by financing activities .............    (13,431)     (378)

Effect of foreign currency exchange rates on cash ........     (1,798)   (1,398)

Net (decrease) increase in cash and cash equivalents .....     (8,960)    9,305

Cash and cash equivalents at beginning of period .........     60,246    67,576

Cash and cash equivalents at end of period ...............   $ 51,286  $ 76,881

</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                                                          Page 5


             AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.   The  consolidated   balance  sheet  at  June  30,  1999,  the  consolidated
     statements of operations for the  three-month  and six-month  periods ended
     June 30, 1999 and 1998, and the  consolidated  statements of cash flows for
     the  six-month  periods  ended June 30, 1999 and 1998 were  prepared by the
     Company  without  audit.  In the  opinion of  management,  all  adjustments
     necessary to present fairly the financial position,  results of operations,
     and cash flows for the interim periods were made. Certain items in the June
     30,  1998  financial   statements  were  reclassified  to  conform  to  the
     classification of June 30, 1999 financial statements.

     Certain  information  and  footnote   disclosures,   normally  included  in
     financial   statements  prepared  in  accordance  with  generally  accepted
     accounting  principles,  were  condensed  or  omitted.  Accordingly,  these
     condensed  consolidated  financial statements should be read in conjunction
     with the  consolidated  financial  statements and notes thereto included in
     the Company's annual report to stockholders for the year ended December 31,
     1998.

     Statements   included   herein   which   are  not   historical   facts  are
     forward-looking  statements.  These  statements are based upon  information
     available to the Company on the date hereof.  Inherent in these  statements
     are a variety of risks and other factors, both known and unknown, which may
     cause the  Company's  actual  results  to differ  materially  from those in
     forward-looking statements. Accordingly, the realization of forward-looking
     statements  is not  certain,  and all such  statements  should be evaluated
     based upon the applicable  risks and  uncertainties  affecting the Company.
     Consequently,  the results of operations for the  three-month and six-month
     periods ended June 30, 1999 are not  necessarily  indicative of the results
     of operations expected for the full year ending December 31, 1999.


B.   Marketable securities:

     During the first quarter of 1999, the Company sold approximately 30% of its
     investment in the equity securities of Equant,  N.V., an international data
     network service provider,  for a pre-tax gain of approximately $7.9 million
     (See Note D) and an after-tax gain of approximately  $4.9 million,  or $.14
     per diluted share.  The remaining  shares are not currently  marketable and
     are  carried at a cost of  approximately  $.1  million in the  accompanying
     balance sheet.


C.   Interest, net was as follows:
<TABLE>

                                   Three Months Ended       Six Months Ended
                                         June 30,                 June 30,
                                   1999          1998       1999          1998

<S>                              <C>          <C>         <C>          <C>
       Interest expense .......  $  (607)     $  (343)    $(1,217)     $  (666)
       Interest income ........      644          976       1,330        1,656
                                 $    37      $   633     $   113      $   990
</TABLE>

<PAGE>

                                                                         Page 6



D.    Other, net was as follows:
<TABLE>
                                        Three Months Ended     Six Months Ended
                                              June 30,              June 30,
                                        1999         1998       1999        1998

<S>                                    <C>       <C>         <C>        <C>
        Gain on the sale of
          marketable securities ...    $   --    $    --     $  7,852   $    --
        Equity in earnings of
          unconsolidated affiliates      1,243      1,196       2,386      2,770
        Foreign exchange gains ....        236        367         836        840
        Other .....................        (88)        23         (38)        31
                                       $  1,391  $  1,586    $ 11,036   $  3,641
</TABLE>

<TABLE>

E.    Comprehensive income:
                                          Three Months Ended    Six Months Ended
                                                June 30,            June 30,
                                           1999     1998       1999       1998

<S>                                    <C>        <C>        <C>       <C>
        Net income ....................$ 12,709   $13,661    $26,333   $23,391
        Other comprehensive income:

        Translation of foreign
         currency financial statements . (1,247)   (5,496)    (7,852)   (7,357)
        Income tax benefit (expense) ..     400      (276)       787      (138)
                                           (847)   (5,772)    (7,065)   (7,495)
        Reclassification adjustment for
         gain on sale of marketable
         securities included in net
           income......................                       (7,019)
        Income tax expense ............      --        --      2,892        --
                                             --        --     (4,127)       --
        Comprehensive income ..........$ 11,862   $ 7,889    $15,141   $15,896
</TABLE>


F.    Supplemental disclosures of cash flow information:
<TABLE>

                                        Three Months Ended     Six Months Ended
                                               June 30,             June 30,
                                          1999      1998       1999        1998
<S>                                    <C>       <C>          <C>       <C>
      Interest and income taxes paid:
      Interest ....................... $   449   $   295      $   778   $   517
      Income taxes. ..................   9,262     8,037       13,672    12,502
                                       $ 9,711   $ 8,332      $14,450   $13,019

</TABLE>

       Noncash investing and financing activities:

       During the second quarter of 1998, as part of an acquisition, the Company
       issued a $6.0 million note.
<PAGE>

                                                                         Page 7


G.    Regional Operations:

      The Company operates its integrated logistics business as a single segment
      comprised of three major services:  airfreight  forwarding,  ocean freight
      forwarding,  and customs  brokerage and other  services,  all of which are
      fully integrated.
<TABLE>

                               Three Months Ended       Six Months Ended
                                    June 30,                  June 30,
                               1999        1998         1999         1998

<S>                            <C>        <C>          <C>        <C>
Revenues by service:
Airfreight .................   $276,147   $291,485     $544,423   $583,015
Ocean freight ..............     55,727     51,697      104,979     94,852
Customs brokerage & other ..     41,389     35,312       78,545     73,003
Total revenues .............   $373,263   $378,494     $727,947   $750,870

Revenues by geographic area:

U.S.A ......................   $144,900   $160,288     $286,295   $319,769

 United Kingdom ............     36,002     39,011       70,958     78,290
 Other .....................     75,318     76,212      149,447    151,939
Europe .....................    111,320    115,223      220,405    230,229
Asia and Others ............    117,043    102,983      221,247    200,872
  Total foreign ............    228,363    218,206      441,652    431,101

Total revenues .............   $373,263   $378,494     $727,947   $750,870

Operating profit by
 geographic area:

U.S.A ......................   $  8,432   $  8,803     $ 13,251   $ 11,617

Europe .....................      3,256      5,270        4,912     10,930
Asia and Others ............      7,057      5,564       12,486     10,246
  Total foreign ............     10,313     10,834       17,398     21,176

Total operating profit .....   $ 18,745   $ 19,637     $ 30,649   $ 32,793

</TABLE>

<PAGE>

                                                                          Page 8


Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations


Results of Operations

     The Company operates its integrated  logistics business as a single segment
comprised  of  three  major  services:   airfreight  forwarding,  ocean  freight
forwarding,  and customs  brokerage and other  services,  all of which are fully
integrated.  The following  table sets forth the gross revenues and net revenues
(gross revenues minus  transportation  expenses) for each of these three service
categories,  as well as the Company's  internal  operating  expenses  (terminal,
selling, general and administrative expenses) and operating profit:
<TABLE>

                                       Three Months Ended     Six Months Ended
                                             June 30,              June 30,
                                          1999      1998       1999       1998
<S>                                     <C>      <C>         <C>       <C>
Gross Revenues:
  Airfreight ........................   $  276.2 $  291.5    $  544.4 $  583.0
  Ocean freight .....................       55.7     51.7       105.0     94.9
  Customs brokerage and other .......       41.4     35.3        78.5     73.0
    Total Gross Revenues ............   $  373.3 $  378.5    $  727.9 $  750.9

Net Revenues:
  Airfreight ........................   $   75.8 $   78.0    $  151.8 $  152.6
  Ocean freight .....................       17.2     16.6        32.6     29.1
  Customs brokerage and other .......       33.6     28.4        62.6     59.2
    Total Net Revenues ..............      126.6    123.0       247.0    240.9

Internal Operating Expenses:
  Terminal ..........................       70.3     66.8       139.8    133.9
  Selling, general and administrative       37.6     36.6        76.6     74.2
    Total Internal Operating Expenses      107.9    103.4       216.4    208.1

Operating Profit ....................   $   18.7 $   19.6    $   30.6 $   32.8
</TABLE>

     Consolidated  gross revenues for the second quarter and first six months of
1999 decreased 1.4% to $373.3 million and 3.1% to $727.9 million,  respectively,
compared  to the same  periods in 1998.  Additionally,  gross  revenues  for the
quarter and six months were negatively  impacted by  approximately  $4.9 million
and $6.7 million, respectively, due to the effect of a stronger U.S. dollar when
converting  foreign currency revenues into U.S. dollars for financial  reporting
purposes.  Consolidated net revenues for the second quarter and first six months
of  1999  increased  2.9%  to  $126.6  million  and  2.5%  to  $247.0   million,
respectively, over the comparable 1998 periods.

     Gross  airfreight  revenues for the second  quarter and first six months of
1999 decreased 5.2% to $276.2 million and 6.6% to $544.4 million,  respectively,
compared to the same 1998 periods. The declines in gross airfreight revenues for
both the second quarter and first six months of 1999 were mainly attributable to
<PAGE>

                                                                         Page 9

softness  in exports  from the United  States  and  Europe and  generally  lower
selling  prices.  Airfreight  net revenues for the second  quarter and first six
months of 1999 declined $2.2 million (2.8%) and $.8 million (.5%), respectively,
compared to the same periods in 1998. Airfreight gross margin (net revenues as a
percentage  of gross  revenues)  for the second  quarter and first six months of
1999 increased .6% to 27.4% and 1.7% to 27.9%, respectively, over the comparable
1998 periods.  The increases were mainly due to lower  transportation  costs and
improved routing and mix of cargo.

     Ocean freight gross revenues for the second quarter and first six months of
1999 increased $4.0 million (7.7%) and $10.1 million (10.6%), respectively, over
the comparable  1998 periods.  Ocean freight net revenues for the second quarter
and first six months of 1999  increased  $.6  million  (3.6%)  and $3.5  million
(12.0%),  respectively,  over the  comparable  1998  periods.  Excluding the $.8
million  reclassification  from customs brokerage and other gross revenues which
occurred during the second quarter of 1998, which pertained to the first quarter
of 1998, ocean freight gross and net revenues  increased $4.8 million (9.4%) and
$1.4  million  (8.9%),  respectively,  over the  second  quarter  of  1998.  The
increases  in both gross and net ocean  freight  revenues  were due to increased
shipping volumes from existing  customers and the continuing  expansion into the
ocean freight market.

     Customs brokerage and other gross revenues for the second quarter and first
six months of 1999  increased  $6.1  million  (17.3%) and $5.5  million  (7.5%),
respectively,  over the comparable 1998 periods. Customs brokerage and other net
revenues  for the second  quarter  and first six months of 1999  increased  $5.2
million (18.3%) and $3.4 million (5.7%), respectively,  over the comparable 1998
periods.  Excluding the previously noted $.8 million  reclassification,  customs
brokerage and other gross and net revenues for the second quarter increased $5.3
million (14.7%) and $4.4 million (15.1%), respectively,  over the second quarter
of 1998.  The  increases in customs  brokerage  and other gross and net revenues
were mainly attributable to increased  brokerage  activity,  particularly in the
United States, and the inclusion of revenues from businesses acquired subsequent
to the second quarter of 1998.

     Internal  operating expenses for the second quarter and first six months of
1999 increased $4.5 million (4.4%) and $8.3 million (4.0%),  respectively,  over
the  comparable  1998 periods.  The increases  resulted  primarily from expenses
related to  acquisitions  made  subsequent to the second quarter of 1998, and an
increase in expenses pertaining to the Company's information systems.

     Consolidated  operating profit for the second quarter of 1999 decreased $.9
million  (4.6%)  compared  to  the  second  quarter  of 1998.  For the first six
months of 1999,  consolidated  operating  profit  decreased  $2.2 million (6.7%)
compared to the first six months of 1998.

     Interest,  net for the second quarter and first six months of 1999 declined
$.6 million and $.9 million,  respectively,  compared to the same 1998  periods.
The declines resulted from higher interest expense  associated with the increase
in long-term debt and lower interest  income due to the reduced amount of excess
cash available for investment (See Note C).

<PAGE>

                                                                         Page 10

     Other, net for the second quarter of 1999 decreased $.2 million compared to
the second  quarter of 1998 which was primarily  due to lower  foreign  exchange
gains. For the first six months of 1999,  Other, net increased $7.4 million over
the comparable 1998 period.  The increase resulted primarily from a $7.9 million
gain on the sale of marketable  securities,  (See Note B), which was offset by a
$.5  million  decline  which was mainly  attributable  to the  results  from the
Company's equity in the earnings of unconsolidated affiliates.

     The  effective  income tax rate for both the second  quarter  and first six
months of 1999 decreased .5% to 37.0% compared to 37.5% for the comparable  1998
periods.  The  decrease  was  largely  the result of a change in the  geographic
composition of worldwide  earnings to countries with lower effective  income tax
rates.

     United States gross revenues for the second quarter and first six months of
1999 declined $15.4 million  (9.6%) to $144.9 million and $33.5 million  (10.5%)
to $286.3  million,  respectively,  compared to the second quarter and first six
months of 1998.  The  decrease in the second  quarter was  comprised  of a $17.6
million (14.1%) decline in airfreight revenues, a $1.8 million (8.9%) decline in
ocean freight revenues and a $4.0 million (28.6%) increase in customs  brokerage
and other  revenues.  The decrease in the first six months of 1999 was comprised
of a $36.3 million (14.4%) decline in airfreight  revenues, a $.5 million (1.2%)
decline in ocean freight revenues and a $3.3 million (10.5%) increase in customs
brokerage and other revenues. Excluding the $.8 million reclassification,  which
was previously discussed, ocean freight revenues for the second quarter declined
$1.0 million  (5.2%) and customs  brokerage and other  revenues  increased  $3.3
million (21.7%). The decreases in airfreight revenues for the second quarter and
first six months of 1999 were primarily the result of lower export shipments and
selling prices.  The decreases in ocean freight  revenues for the second quarter
and first half of 1999  resulted  from lower  selling  rates.  The  increases in
customs  brokerage and other  revenues for the second  quarter and first half of
1999  resulted  from an increase in  brokerage  activity  and the  inclusion  of
results of an  acquisition  which was made  subsequent to the second  quarter of
1998.

     United States operating profit for the second quarter decreased $.4 million
(4.2%) to $8.4 million compared to the second quarter of 1998. For the first six
months of 1999, operating profit increased $1.6 million (14.1%) to $13.2 million
compared to the first six months of 1998.  The  decrease  in the second  quarter
operating profit was mainly the result of higher  information  systems expenses.
The increase in operating profit for the first six months of 1999 was the result
of improved  margins  resulting  from  improvement in the mix of cargo and lower
transportation  costs, and the inclusion of the results of an acquisition  which
was made subsequent to the second quarter of 1998.

     Foreign gross  revenues for the second quarter and first six months of 1999
increased  $10.2 million  (4.7%) to $228.4  million and $10.6 million  (2.4%) to
$441.6 million,  respectively,  over the comparable 1998 periods.  Foreign gross
revenues   were   negatively   impacted  for  the  quarter  and  six  months  by
approximately  $4.9 million  (Europe $4.6 million,  Asia and Others $.3 million)
and  $6.7  million  (Europe  $3.0  million,   Asia  and  Others  $3.7  million),
respectively,  due to the  effect of a  stronger  U.S.  dollar  when  converting
foreign currency  revenues into U.S. dollars for financial  reporting  purposes.
European gross  revenues for the second quarter  declined $3.9 million (3.4%) to
$111.3  million.  The decline was comprised of a $5.0 million (5.5%) decrease in
airfreight revenues, a $.6 million (4.1%) increase in ocean freight revenues and
<PAGE>

                                                                         Page 11

a $.5 million (4.7%) increase in customs  brokerage and other revenues.  For the
first half of 1999,  European  gross  revenues  declined $9.8 million  (4.3%) to
$220.4  million  which was  comprised  of a $12.1  million  (6.7%)  decrease  in
airfreight  revenues which was offset by increases in ocean freight revenues and
customs  brokerage  and other  revenues of $1.8  million  (6.6%) and $.5 million
(2.3%),  respectively.  The decrease in airfreight gross revenues was the result
of lower export  shipments and generally lower selling  prices.  The increase in
ocean freight revenues was attributable to greater shipping volumes from new and
existing  customers.  The  increase  in  customs  brokerage  and other  revenues
resulted from  increases in brokerage  activity.  Asia and Others gross revenues
for the second quarter  increased  $14.1 million (13.7%) over the second quarter
of 1998.  The  increase  was  comprised  of a $7.3  million  (9.6%)  increase in
airfreight  revenues,  a $5.3 million (31.4%) increase in ocean freight revenues
and a $1.5 million (14.3%) increase in customs brokerage and other revenues. For
the first half of 1999, gross revenues  increased $20.4 million (10.1%) over the
comparable  1998 period.  The increase  was  comprised of a $9.8 million  (6.6%)
increase in  airfreight  revenues,  an $8.8  million  (28.3%)  increase in ocean
freight  revenues and a $1.8 million  (8.7%)  increase in customs  brokerage and
other  revenues.  The increases in airfreight  and ocean freight gross  revenues
were due to  greater  shipping  volumes  from new and  existing  customers.  The
increases in customs brokerage and other gross revenues resulted  primarily from
an acquisition made subsequent to the second quarter of 1998.

     Foreign  operating  profit for the  second  quarter  of 1999  declined  $.5
million (4.8%) to $10.3 million  compared to the second quarter of 1998. For the
first six months of 1999,  operating  profit  declined  $3.8 million  (17.8%) to
$17.4 million  compared to the first six months of 1998.  The European  region's
operating  profit for the second quarter of 1999 decreased $2.0 million  (38.2%)
compared to the second quarter of 1998. For the first  six  months of 1999,  the
European  region's  operating  profit decreased $6.0 million (55.1%) compared to
the first six months of 1998. The declines were mainly the result of weakness in
airfreight  shipments  and lower selling  rates  throughout  the region with The
Netherlands  experiencing  the  greatest  impact.  The Asia and Others  region's
operating  profit for the second quarter of 1999 increased $1.5 million  (26.8%)
over the comparable 1998 period.  For the first six months of 1999, the Asia and
Others  region's  operating  profit  increased  $2.2  million  (21.9%)  over the
comparable 1998 period.


Liquidity and Capital Resources

     At June 30, 1999, cash and cash equivalents  decreased  approximately  $8.9
million to $51.3 million from $60.2 million at December 31, 1998.  For the first
six months of 1999,  the Company's  primary  sources of cash  consisted of $14.8
million from  operating  activities  and $7.9  million  from sale of  marketable
securities,  while the  primary  uses of cash  consisted  of $15.7  million  for
capital  expenditures,  $9.7  million  for  puchase of  treasury  stock and $4.0
million for  payment of  dividends.  Cash from  operating  activities  decreased
approximately  $19.3  million  compared  to the  first six  months of 1998.  The
decrease  was  mainly  the  result  of a  slowing  in the  collection  of  trade
receivables.

     Capital  expenditures  for the first  six  months  of 1999  increased  $1.2
million over the first six months of 1998 to $15.7 million. The $15.7 million of
capital  expenditures was primarily for management  information services and for
improvement and expansion of facilities.
<PAGE>

                                                                         Page 12


     At  June  30,  1999,  the  Company  had  available  for  future  borrowings
approximately $71.8 million of its $75.0 million revolving credit facility.  The
Company  utilized  approximately  $3.2 million  under this  facility  mainly for
letters  of  credit   issued  in  connection   with  its   insurance   programs.
Additionally, various of the Company's foreign subsidiaries maintained overdraft
facilities with foreign banks, aggregating approximately $23.2 million, of which
approximately $1.6 million was outstanding.

     The Company's  Board of Directors has  authorized the purchase from time to
time in the open market of up to 2,000,000 shares of the Company's common stock.
During the first six months of 1999, the Company purchased 557,500 of its common
shares at a cost of approximately $9.7 million. As of June 30, 1999, the Company
has  purchased  1,635,000  of the  2,000,000  shares  authorized  at a  cost  of
approximately $31.7 million.  Additionally, in June 1999, the Company's Board of
Directors  authorized an increase in the quarterly  cash dividend from six cents
($.06) to seven cents ($.07) per share.

     Management  believes  that the  Company's  available  cash and  sources  of
credit,  together with expected future sources of credit and cash generated from
operations,  will be  sufficient  to satisfy its  anticipated  needs for working
capital, capital expenditures and dividends.


Year 2000

     In 1997,  the Company  undertook an  assessment  to determine the impact of
Year 2000  compliance  on its  computer  systems.  This  assessment  resulted in
preliminary  plans to prepare the Company for Year 2000  readiness.  These plans
included remediation,  upgrading or replacement of the Company's various systems
including those utilizing embedded technology. In accordance with Issue 96-14 of
the Emerging  Issues Task Force of the  Financial  Accounting  Standards  Board,
which requires the costs  associated  with modifying  computer  software for the
Year 2000 to be expensed  as  incurred,  the  Company  has and will  continue to
expense the costs  incurred to remediate the applicable  systems.  For 1997, the
Company incurred  approximately  $1.0 million of expense and approximately  $3.6
million of expense in 1998.  Year 2000  expense  for 1999 is  anticipated  to be
approximately $2.5 million with approximately $1.5 million expended in the first
half of 1999.

     The  remediation of the Company's  systems was 100% completed by the end of
the first quarter of 1999.  Systems  testing was completed in the middle of July
1999. The systems testing verified  existing  functionality and system operation
before, during and after January 1, 2000. The testing placed particular emphasis
on the high risk dates of September 9, 1999, December 31, 1999, January 1, 2000,
February 28, 2000, February 29, 2000, March 1, 2000, February 28, 2001 and March
1, 2001. The Company believes that the  remediation,  upgrade and replacement of
its systems have been materially  completed in July 1999;  however,  the Company
intends to continue  testing its systems for the  remainder of 1999.  Management
believes  that Year 2000 - related  matters for the Company's  internal  systems
will not have a material adverse effect on the Company's operations or financial
position;  however the  ultimate  degree to which the  Company's  systems may be
affected by Year 2000 is uncertain.

<PAGE>

                                                                         Page 13


     In  connection  with this  effort,  the Company has  initiated a program to
communicate with its many customers and suppliers to determine the level of Year
2000  readiness of these  entities  and the  potential  impact on the  Company's
operations  if these  entities'  computer  systems are not ready.  This  program
encompasses  contacting  the  Company's  major  customers  and  its  significant
suppliers - airlines,  steamship  lines,  trucking  companies,  handling agents,
customs authorities and other governmental agencies and financial  institutions.
During the third quarter and early fourth quarter of 1998,  questionnaires  were
sent to the Company's significant  suppliers.  As of August 4, 1999, the Company
surveyed approximately 1,400 of its significant suppliers - approximately 91% of
those  suppliers  surveyed have advised the Company that they are currently Year
2000 compliant or expect compliance by September 30, 1999.

     The Company has identified those suppliers who have either not responded to
the questionnaires or will not be compliant and will discontinue utilizing those
suppliers  later  in 1999.  Additionally,  during  the  third  quarter  of 1999,
detailed  contingency  plans will be  formulated  within each country  where the
Company operates to minimize the risk of significant  service disruptions due to
a Year 2000 failure by supplier(s). Contingency plans will include: redeployment
of existing personnel and employing  additional personnel to processes that were
automated and may require manual  intervention due to Year 2000  non-compliance,
selection of alternative  airlines,  steamship lines,  trucking  companies etc.,
customer notification of possible service disruptions in markets where carriers,
aviation and/or customs authorities may not be Year 2000 compliant.

     The Company's Year 2000 compliance evaluation of customers and suppliers is
ongoing and the potential impact of  non-compliance  by the Company's  customers
and suppliers has not been determined.  However, the Company does not warrant as
true and  accurate  any  assurance  it receives  from  customers  and  suppliers
regarding the  compliance of their systems.  The Company relies  entirely on its
transportation  suppliers'  airlines,  steamship lines and independent  trucking
firms to transport its customers'  cargo  throughout its network.  To the degree
that the  operations  of any number of  transportation  providers  are adversely
affected by Year 2000, disruptions in the Company's business may occur which may
have a material adverse effect on the Company's operations.

New Accounting Standard

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities," which is
required to be adopted in years  beginning  after June 15, 2000.  The  Statement
establishes   accounting  and  financial   reporting  standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, and for hedging activities.  The Company does not anticipate that the
adoption of this Statement will have a material  impact on either its results of
operations or financial position.

<PAGE>


                                                                        Page 14


PART II - OTHER INFORMATION

Item 1. - Legal Proceedings

The Company is involved in various legal proceedings generally incidental to its
business. While the result of any litigation contains an element of uncertainty,
the  Company  presently  believes  that the  outcome  of any  known  pending  or
threatened legal  proceeding or claim, or all of them combined,  will not have a
material  adverse effect on its results of operations or consolidated  financial
position.

Item 4. -  Submission of Matters to a Vote of Security Holders

   a) The annual  meeting of  shareholders  was held on June 17, 1999.
   b) The following  persons  (constituting  the entire Board of Directors of
      the  Company)  were  elected as  directors at  the annual   meeting  of
      shareholders:

        Number of Common Shares Voted:
<TABLE>
                                          For       Withhold Authority
<S>       <C>                          <C>             <C>
          1) John M. Fowler .........   26,053,441      164,520
          2) Hendrik J. Hartong, Jr..   26,056,996      160,965
          3) Donald J. Keller .......   26,040,500      177,461
          4) Andrew L. Lewis IV .....   25,678,705      539,256
          5) Richard T. Niner .......   26,053,141      164,820
          6) John Radziwill .........   26,057,210      160,751
          7) Guenter Rohrmann .......   26,034,936      183,025
</TABLE>

   c) At the Annual Meeting of  Shareholders,  the  Shareholders  approved an
      Amendment  to the  Company's  1996  Incentive  Stock Plan to permit the
      grant of stock options and stock  application  rights to members of the
      Board of Directors of the Company who are not salaried employees of The
      Company.

            Shares voted for the Amendment                     20,044,291
            Shares voted against the Amendment                  4,908,125
            Shares abstaining                                   1,187,565

Item 6. - Exhibits and Reports on Form 8-K

   a)  Exhibits:

   Exhibit 11 - Computation of Earnings Per Common Share.

   Exhibit 27 - Financial Data Schedule.

   b)  Reports on Form 8-K:

   None.
<PAGE>

                                                                        Page 15


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                          Air Express International Corporation
                                                      (Registrant)




Date:  August 13, 1999                   /s/            Dennis M. Dolan
                                                        Dennis M. Dolan
                                                   Executive Vice President and
                                                      Chief Financial Officer
                                                   (Principal Financial Officer)




Date:  August 13, 1999                  /s/             Martin J. McDonnell
                                                        Martin J. McDonnell
                                                   Vice President - Controller
                                                  (Principal Accounting Officer)