<PAGE>

                       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 September 30, 1998

                         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 3 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  November  9, 1998 
was 33,777,724 (Net of 1,217,586 Treasury Shares).


<PAGE>


                      AIR EXPRESS INTERNATIONAL CORPORATION
                    September 1998 Form 10-Q Quarterly Report

                                Table of Contents


                         Part I - Financial Information
                                                                           Page

Item 1.  Financial Statements

               Condensed  Consolidated  Balance  Sheets as at
               September 30, 1998 and December 31, 1997..................... 2

               Condensed  Consolidated  Statements  of Operations - 
               Three Months and Nine Months Ended September 30, 1998
               and 1997..................................................... 3

               Consolidated Statements of Cash Flows -
               Nine Months Ended September 30, 1998
               and 1997..................................................... 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..................................................12

Item 6.  Exhibits and Reports on Form 8-K...................................12

<PAGE>

                                                                          Page 2
<TABLE>

             AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

                                                     Sept 30, 1998   Dec 31,1997
                                                      (Unaudited)
<S>                                                      <C>          <C>      
Assets
Current Assets:
   Cash and cash equivalents .........................   $  55,870    $  67,576
   Accounts receivable, (less allowance for
    doubtful accounts of $4,353 and $4,224) ..........     367,506      366,159
   Other current assets ..............................       7,027        8,344
         Total current assets ........................     430,403      442,079
Investment in unconsolidated affiliates ..............      27,845       19,174
Restricted funds .....................................       5,036       15,957
Property, plant and equipment (less accumulated
 depreciation and amortization of $66,392
 and $57,235) ........................................      73,691       60,441
Deposits and other assets ............................      18,349       17,386
Goodwill (less accumulated amortization
 of $14,645 and $12,424) .............................      97,439       83,104
         Total assets ................................   $ 652,763    $ 638,141

Liabilities and stockholders' investment

Current Liabilities:
   Current portion of long-term debt .................   $   3,037    $   2,654
   Bank overdrafts payable ...........................       1,735          315
   Transportation payables ...........................     155,109      174,125
   Accounts payable ..................................      72,585       58,373
   Accrued liabilities ...............................      64,793       61,263
   Income taxes payable ..............................       8,197       10,168
         Total current liabilities ...................     305,456      306,898
   Long-term debt ....................................      35,910       31,008
   Other liabilities .................................      11,611        8,673
         Total liabilities ...........................     352,977      346,579

Stockholders' Investment:
   Capital stock-
   Preferred (authorized 1,000,000 shares,
    none outstanding) ................................        --           --
   Common, $.01 par value (authorized 100,000,000
    shares, issued 34,979,155 and 34,676,626 shares)..         350          347
   Additional paid-in capital ........................     146,971      142,674
   Accumulated other comprehensive income ............     (33,378)     (28,961)
   Retained earnings .................................     211,437      180,887
                                                           325,380      294,947
Less: 1,217,586 and 132,388 shares of treasury stock,
       at cost .......................................     (25,594)      (3,385)
   Total stockholders' investment ....................     299,786      291,562
   Total liabilities and stockholders' investment ....   $ 652,763    $ 638,141

</TABLE>
                   The accompanying notes are an integral part
                         of these financial statements.
<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        Nine Months Ended
                                       September 30,           September 30, 
                                   1998          1997       1998         1997   
<S>                            <C>          <C>          <C>          <C>       
Revenues ...................   $  372,961   $  395,405   $1,123,831   $1,133,151

Operating expenses:
 Transportation ............      249,068      270,401      759,050      773,450
 Terminal ..................       67,027       68,008      200,959      196,521
 Selling, general and
  administrative ...........       38,236       37,258      112,399      111,744
Operating profit ...........       18,630       19,738       51,423       51,436

Other income:
 Interest, net .............          566          375        1,556          853
 Other, net ................        1,208        1,179        4,849        3,531
                                    1,774        1,554        6,405        4,384

Income before provision
 for income taxes ..........       20,404       21,292       57,828       55,820

Provision for income taxes .        7,394        7,929       21,427       20,876
Net income .................   $   13,010   $   13,363   $   36,401   $   34,944

Income per common share:
     Basic .................   $      .38   $      .39   $     1.05   $     1.02
     Diluted ...............   $      .38   $      .38   $     1.04   $     1.00

Weighted average number
  of common shares:
     Basic .................       34,314       34,428       34,530       34,302
     Diluted ...............       34,633       35,446       35,006       35,034
</TABLE>

<PAGE>
                                                                         Page 4
<TABLE>

             AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


(Dollars in thousands)
                                                           1998          1997 
<S>                                                      <C>           <C>     
Cash flows from operating activities:
    Net income ......................................... $ 36,401      $ 34,944
    Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization ...................   10,256         9,868
       Amortization of goodwill ........................    2,001         1,935
       Deferred income taxes ...........................    3,158           (85)
       Equity in earnings of unconsolidated affiliates .   (2,059)       (1,834)
      (Gains) losses on sales of assets ................      (15)           12

    Changes in assets and liabilities, net of
     business acquisitions:
       Decrease (increase) in accounts receivable, net .    4,109       (31,143)
       Decrease (increase) in other current assets .....    2,048          (557)
      (Increase) in other assets .......................     (945)       (1,456)
      (Decrease) increase in transportation payables ...  (22,554)       28,357
       Increase in accounts payable ....................    8,374         2,620
       Increase in accrued liabilities .................    2,051           816
      (Decrease) in income taxes payable ...............   (1,119)       (5,229)
       Increase (decrease) in other liabilities ........      157           (75)
           Total adjustments ...........................    5,462         3,229

        Net cash provided by operating activities ......   41,863        38,173

Cash flows from investing activities:
      Acquisitions, net of cash acquired ...............  (10,568)           --
      Restricted funds .................................   10,921       (18,692)
      Other investing activities .......................    1,370           700
      Proceeds from sales of assets ....................      968           624
      Capital expenditures .............................  (24,442)      (12,038)
      Investment in unconsolidated affiliates ..........   (7,101)       (3,776)

        Net cash used in investing activities ..........  (28,852)      (33,182)

Cash flows from financing activities:
    Net borrowings (repayments) in bank overdrafts
     payable ...........................................    1,490          (418)
    Additions to long-term debt ........................      271        19,055
    Payment of long-term debt ..........................   (1,455)       (1,564)
    Issuance of common stock ...........................    3,402         4,932
    Payment of cash dividends ..........................   (5,553)       (4,466)
    Purchase of treasury stock .........................  (22,209)       (2,679)

        Net cash (used) provided by financing 
         activities ....................................  (24,054)       14,860

Effect of foreign currency exchange rates on cash ......     (663)       (2,021)

Net (decrease) increase in cash and cash equivalents ...  (11,706)       17,830

Cash and cash equivalents at beginning of period .......   67,576        46,516

Cash and cash equivalents at end of period ............. $ 55,870      $ 64,346

</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 September 30, 1998, the consolidated
        statements of operations  for the  three-month  and  nine-month  periods
        ended  September 30, 1998 and 1997, and the  consolidated  statements of
        cash flows for the nine-month  periods ended September 30, 1998 and 1997
        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 September 30, 1997 financial  statements
        were reclassified to conform to the classification of September 30, 1998
        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, 1997.

        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 nine-month  periods ended September
        30, 1998 are not  necessarily  indicative  of the results of  operations
        expected for the full year ending December 31, 1998.


B.    Interest, net was as follows:
<TABLE>
                                      Three Months Ended      Nine Months Ended
                                         September 30,           September 30,  
                                       1998         1997       1998       1997  
<S>                                  <C>          <C>        <C>        <C>     
        Interest expense ...........  $ (380)     $ (310)    $(1,046)   $(1,089)
        Interest income ............     946         685       2,602      1,942
                                      $  566      $  375     $ 1,556    $   853
</TABLE>

C.    Other, net was as follows:
<TABLE>
                                       Three Months Ended     Nine Months Ended
                                          September 30,          September 30,  
                                        1998         1997      1998       1997  
<S>                                   <C>         <C>        <C>         <C>   
        Equity in earnings of
         unconsolidated affiliates..  $ 1,132     $   986    $ 3,902     $2,603
        Foreign exchange gains......       92         171        932        940
        Other.......................      (16)         22         15        (12)
                                      $ 1,208     $ 1,179    $ 4,849     $3,531
</TABLE>


<PAGE>

                                                                          Page 6

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

                                   Three Months Ended       Nine Months Ended
                                       September 30,           September 30,    
                                   1998          1997       1998          1997  
<S>                               <C>           <C>         <C>          <C>    
        Interest and income
         taxes paid:
        Interest ...............  $   197      $   101      $   714      $   652
        Income taxes ...........    5,960        5,014       18,462       19,458
                                  $ 6,157      $ 5,115      $19,176      $20,110
</TABLE>

      Non-cash investing and financing activities:

      During the second quarter of 1998, as part of an  acquisition, the Company
      issued a $6.0 million note. See Note F.


E.    Comprehensive income:

<TABLE>
                                        Three Months Ended    Nine Months Ended
                                            September 30,        September 30,
                                          1998        1997     1998       1997 
<S>                                     <C>         <C>       <C>       <C>    
        Net income .................... $13,010     $13,363   $36,401   $34,944

        Other comprehensive income:
         Translation of foreign
          currency financial
          statements...................   3,472      (2,937)   (3,885)   (7,824)
        Income tax (expense) benefit ..    (394)        --       (532)      681
                                          3,078      (2,937)   (4,417)   (7,143)
        Comprehensive income .......... $16,088     $10,426   $31,984   $27,801
</TABLE>
<PAGE>

                                                                         Page 7



F.    Acquisitions:


      During the first nine months of 1998, the Company made three  acquisitions
      -  Aero  Expreso  Internacional  ("Aero  Expreso"),  Gulf  Coast  Drawback
      Services,  Inc. ("Gulf Coast") and Associated  Customhouse  Brokers,  Inc.
      ("ACB"). Aero Expreso,  based in Buenos Aires, is a long-time agent of the
      Company and the largest inbound forwarder and customs broker in Argentina.
      Gulf Coast is the largest provider of specialized  duty drawback  services
      in the United States. ACB, headquartered in Rochester,  New York, provides
      customs brokerage and freight forwarding services primarily in the upstate
      New York region.  The total paid for these  acquisitions was approximately
      $18.8  million,  which was  comprised of $12.8  million of cash and a $6.0
      million  note.   The   acquisitions   were  accounted  for  as  purchases.
      Accordingly,  the  purchase  price  was  allocated  on  the  basis  of the
      estimated  fair market value of the assets  acquired  and the  liabilities
      assumed.  The  total  cost  in  excess  of the  net  assets  acquired  was
      approximately  $16.2 million,  which is being amortized over 40 years. The
      results  of  operations  for  these  acquisitions  were  included  in  the
      Consolidated Statement of Operations from the dates of acquisition and had
      no material pro forma impact on the  Company's  results of  operations  or
      financial position.


<PAGE>


                                                                          Page 8

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


Results of Operations

     The Company  considers  its total  business to  represent 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              Nine Months
                                  Ended September 30,      Ended September 30,
                                   1998        1997         1998          1997 
<S>                               <C>       <C>         <C>          <C>      
Gross Revenues:
  Airfreight .................... $ 282.2   $ 305.9      $   865.2   $   875.2
  Ocean freight .................    52.5      54.3          147.4       152.0
  Customs brokerage and other ...    38.3      35.2          111.2       106.0
    Total Gross Revenues ........ $ 373.0   $ 395.4      $ 1,123.8   $ 1,133.2

Net Revenues:
  Airfreight .................... $  77.5   $  79.7      $   230.1   $   226.2
  Ocean freight .................    16.1      15.4           45.1        43.9
  Customs brokerage and other ...    30.3      29.9           89.6        89.6
    Total Net Revenues ..........   123.9     125.0          364.8       359.7

Internal Operating Expenses:
  Terminal ......................    67.0      68.0          201.0       196.5
  Selling, general and 
   administrative ...............    38.3      37.3          112.4       111.8
    Total Internal Operating
     Expenses ...................   105.3     105.3          313.4       308.3

Operating Profit ................ $  18.6   $  19.7      $    51.4   $    51.4
</TABLE>

     Consolidated  gross revenues for the third quarter and first nine months of
1998,   decreased  5.7%  to  $373.0   million  and  .8%  to  $1,123.8   million,
respectively,  over the  comparable  periods  in 1997.  Gross  revenues  for the
quarter and nine months were negatively  impacted by approximately $14.5 million
and $55.5  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 third quarter and first
nine months of 1998 decreased .9% to $123.9 million and increased 1.4% to $364.8
million, respectively, over the comparable 1997 periods.

     Gross  airfreight  revenues for the third  quarter and first nine months of
1998 decreased 7.7% to $282.2 million and 1.1% to $865.2 million,  respectively,
over the comparable 1997 periods. The decreases in gross airfreight revenues for
the third  quarter  and first nine months of 1998 were  mainly  attributable  to
economic  difficulties  in Southeast  Asian  economies  and declines in shipping
volumes from the Company's  computer-related  customers.  The  airfreight  gross

<PAGE>
                                                                          Page 9


margin (net  revenues as a percentage  of gross  revenues) for the third quarter
and  first  nine  months  of 1998  increased  1.4% to  27.5%  and .8% to  26.6%,
respectively, over the comparable 1997 periods. The increases were mainly due to
improved   product  mix   allowing   for  better   utilization   of   airfreight
containers/pallets and lower transportation costs.

     Ocean freight gross revenues for the third quarter and first nine months of
1998 decreased $1.8 million (3.3%) and $4.6 million (3.0%),  respectively,  over
the  comparable  1997 periods.  Ocean freight net revenues for the third quarter
and first nine  months of 1998  increased  $.7 million  (4.5%) and $1.2  million
(2.7%),  respectively,  over the comparable 1997 periods.  Excluding the effects
from the sale of the Company's 60% - owned  foreign  subsidiary,  which was sold
during the fourth  quarter of 1997,  ocean freight gross  revenues for the third
quarter and first nine months of 1998  increased  $3.3 million  (6.7%) and $10.1
million (7.4%),  respectively,  over the comparable 1997 periods.  Additionally,
ocean freight net revenues for the same periods  increased $1.6 million  (11.0%)
and $3.9  million  (9.5%).  The  increases  in both gross and net ocean  freight
revenues were due to increased  shipping volumes from existing customers and the
Company's continuing expansion into the ocean freight market.

     Customs  brokerage and other gross revenues for the third quarter and first
nine months of 1998 increased 8.8% to $38.3 million and 4.9% to $111.2  million,
respectively,  over the comparable 1997 periods. Customs brokerage and other net
revenues for the third quarter  increased  1.3% to $30.3 million while the first
nine months of 1998 was unchanged compared to the first nine months of 1997. The
increases in customs  brokerage  and other gross  revenues for the third quarter
and first nine  months of 1998 were  mainly  due to the  increase  in  brokerage
activity in the United States.

     Internal  operating  expenses for the third quarter of 1998 were  unchanged
compared  to the  third  quarter  of 1997.  For the first  nine  months of 1998,
internal  operating  expenses increased $5.1 million or 1.7% over the comparable
1997 period.

     Operating  profit for the third quarter of 1998  decreased  $1.1 million or
5.6%  over the  third  quarter  of 1997.  For the  first  nine  months  of 1998,
operating profit was marginally lower than the comparable 1997 period.

     Other, net increased  marginally for the third quarter and $1.3 million for
the first nine months of 1998 over the  comparable  1997 periods.  The increases
were  mainly  attributable  to the  results  from the  Company's  equity  in the
earnings of its unconsolidated affiliates.

     The effective  income tax rate for the third quarter of 1998 decreased 1.0%
to 36.2% as compared with the third  quarter of 1997.  For the first nine months
of 1998 the  effective  tax rate  declined .3% to 37.1% when  compared  with the
first nine months of 1997.  The decreases  were largely the result of a shift in
the mix of worldwide earnings to countries with lower effective tax rates.

<PAGE>

                                                                         Page 10


Liquidity and Capital Resources

     At September 30, 1998, cash and cash  equivalents  decreased  approximately
$11.7 million to $55.9 million from $67.6 million at December 31, 1997.  For the
first nine  months of 1998,  the  Company's  primary  sources of cash were $41.9
million from operating activities and $10.9 million from restricted funds, while
its primary uses were for:  capital  expenditures of $24.4 million,  purchase of
treasury stock of $22.2 million, acquisitions of $10.6 million and investment in
unconsolidated  affiliates  of $7.1  million.  Cash flow  provided by  operating
activities  increased  approximately  $3.7 million when  compared with the first
nine  months of 1997.  The  increase  resulted  mainly  from the  decline in the
Company's trade receivables resulting from improved collections. Working capital
decreased  approximately  $10.2  million  for the first  nine  months of 1998 to
$124.9 million.  The decrease resulted  primarily from the Company's purchase of
treasury stock.

     Capital  expenditures  increased  approximately  $12.4  million  from $12.0
million  for the first nine  months of 1997 to $24.4  million for the first nine
months of 1998.  Approximately $10.9 million of the capital expenditures relates
to the  construction  of a  freight  terminal  at New  York's  John  F.  Kennedy
International  Airport, with the remaining balance primarily for improvement and
expansion  of  facilities   and   management   information   services.   Capital
expenditures for 1998 are estimated to be approximately $33.0 million.

     At September  30, 1998,  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 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 $22.3 million, of which approximately
$1.7 million was outstanding.

     During  the  third  quarter  of 1998,  the  Company's  Board  of  Directors
authorized  the  purchase  from  time to time in the  open  market  of up to one
million shares of the Company's common stock. This authorization,  combined with
a similar one granted in November 1997, allows the Company to purchase up to two
million shares of its common stock in the open market. As of September 30, 1998,
the  Company  has  purchased  1,077,500  of  its  common  shares  at a  cost  of
approximately $22.0 million.

     During the first nine months of 1998,  the Company made three  acquisitions
for  approximately  $18.8  million  comprised of $12.8  million of cash and $6.0
million of debt. See Note F.

     In June 1998,  the Company's  Board of Directors  authorized an increase in
the  quarterly  cash  dividend  from five cents  ($.05) to six cents  ($.06) per
share.
<PAGE>
                                                                         Page 11


     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
include  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  will  expense  the costs
incurred to remediate the applicable systems. These costs are estimated to be in
the range of $5.0 to $7.0 million over 1998 and 1999.  The estimated  costs will
be refined as the remediation and testing of the Company's  systems  progresses.
For the first nine  months of 1998,  the  Company  incurred  approximately  $2.4
million of  expense.  Additionally,  the  Company  incurred  approximately  $1.0
million of expense in 1997. The Company believes that the  remediation,  upgrade
and  replacement  of its systems will be ready for Year 2000 prior to any impact
on its operations.  If, however, the remediation,  upgrade or replacement of the
Company's systems is not completed timely,  and negatively impacts the Company's
Year 2000  readiness,  the  Company's  operations  may be  materially  adversely
affected.

     Additionally,  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 major
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  have
been sent to the airlines,  steamship lines and customs  authorities.  Responses
will be  received  and  evaluated  by the  Company  during the  fourth  quarter.
Additional communications will be made with suppliers deemed to be "at risk" for
non-compliance  by  the  Company  and  contingency   plans  developed   wherever
necessary.  Communications  with significant  customers will be initiated during
the first  quarter of 1999. 

     Contingency  plans will  include:  redeployment  of existing  personnel and
employing additional personnel to processes that were automated and will require
manual  intervention due to Year 2000  non-compliance,  selection of alternative
air carriers, 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  the  assurance  it receives  from  customers  and  suppliers

<PAGE>
                                                                         Page 12


regarding  the  compliance  of its  systems.  In the event  that  customers  and
suppliers systems are  non-compliant,  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, 1999.  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.


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 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 13


                                   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:  November 13, 1998                   /s/        Dennis M. Dolan          
                                                      Dennis M. Dolan
                                                     Vice President and
                                                   Chief Financial Officer
                                                (Principal Financial Officer)




Date:  November 13, 1998                   /s/        Martin J. McDonnell
                                                      Martin J. McDonnell
                                                  Vice President - Controller
                                                (Principal Accounting Officer)
<PAGE>