<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF SECURITIES EXCHANGE ACT OF 1934

       For the fiscal year ended September 30, 1998    Commission File 
                                                       Number 0-15495

                              MESA AIR GROUP, INC.
             (Exact name of registrant as specified in its charter)

                Nevada                             85-0302351
    (State or other jurisdiction of             (I.R.S. Employer
    incorporation or organization)              Identification No.)

    410 North 44th Street, Suite 700, Phoenix, Arizona          85008
     (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:        (602) 685-4000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of December 17, 1998:

                    Common Stock, no par value: $199,729,822

On December 17, 1998, the Registrant had outstanding 28,369,081 shares of Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE



           DOCUMENTS                FORM 10-K REFERENCE
           ---------                -------------------
           None                     None
<PAGE>   2
PART I

This Form 10-K includes certain statements, including statements regarding the
Company's operations which are within the meaning of the safe harbor provisions
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should",
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
or the negative of such terms and other comparable terminology. However, this
Form 10-K also contains other forward-looking statements. Such statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions which could cause Mesa's future results to differ materially
from those expressed in any forward-looking statements made by or on behalf of
Mesa. Many of such factors are not under Mesa's ability to control or predict.
Readers are cautioned not to put undue reliance on forward-looking statements.
Mesa disclaims any intent or obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
See, "FORWARD-LOOKING STATEMENTS."

ITEM 1.       BUSINESS

GENERAL

Mesa Air Group, Inc. and its subsidiaries (collectively referred to herein as
"Mesa") is an independently owned regional airline serving 108 cities in 28
states, the District of Columbia, Toronto, Canada, and Guaymas and Hermasillo,
Mexico. Mesa operates a fleet of 112 aircraft and has approximately 1,000 daily
departures.

Mesa's airline operations are conducted by two regional airlines utilizing
hub-and-spoke systems. Mesa Airlines, Inc. ("MAI"), a wholly-owned subsidiary of
Mesa, operates as America West Express under a code-sharing agreement with
America West Airlines, Inc. ("America West") and as USAirways Express under
code-sharing agreements with USAirways, Inc. ("USAirways") and also operates
an independent division, Mesa Airlines, from a hub in Albuquerque, New Mexico.
Air Midwest, Inc., a wholly-owned subsidiary of Mesa, also operates under a
code-sharing agreement with USAirways and flies as USAirways Express.

CORPORATE STRUCTURE

Mesa is a Nevada corporation and has its principal executive office in Phoenix,
Arizona. In addition to its airline operating subsidiaries, MAI and Air Midwest,
Inc., a Kansas corporation and certificated air carrier ("Air Midwest"), Mesa
owns WestAir Holdings, Inc., a California corporation, and the owner of WestAir
Commuter Airlines, Inc. ("WestAir"), a certificated carrier, which ceased
operations in 1998; and various non-airline operations which include:

-   MPD, Inc., a Nevada corporation d.b.a. Mesa Pilot Development, which
    operates Mesa's training program for new pilots in conjunction with San Juan
    college in Farmington, New Mexico.

-   Regional Aircraft Services, Inc., a California corporation owned by WestAir
    Holdings, Inc., which performs component overhaul and repair services.

-   FCA, Inc., a Nevada corporation d.b.a. Four Corners Aviation, a fixed-base
    operation in Farmington, New Mexico.

-   Mesa Leasing, Inc. a Nevada corporation, a subsidiary established to assist
    Mesa's acquisition and leasing of aircraft.

-   MAGI Insurance, Ltd., a Barbados, West Indies based captive insurance
    company established for the purpose of obtaining more favorable liability
    rates for Mesa and its subsidiaries.

Mesa and CCAIR, Inc., a regional airline based in Charlotte, North Carolina that
operates under a code-sharing agreement with USAirways, announced in August
1998 that they had signed a Letter of Intent whereby Mesa would acquire CCAIR as
a wholly owned subsidiary. The transaction would be valued at approximately $60
million (including $15 million of debt assumed) and is intended to be accounted
for as a pooling of interests. The agreement contemplated by the Letter of
Intent is an all stock transaction whereby Mesa would acquire all outstanding
shares of CCAIR's common stock by issuing Mesa shares equivalent in value to
$5.40 for each share of CCAIR common stock, subject to a maximum of .982 shares
(at a Mesa share price of $5.50) and a minimum of .568 shares 


                                       2
<PAGE>   3
(at a Mesa share price of $9.50). Consummation of the transaction is subject to
certain conditions, including completion of mutual due diligence, the
negotiation and execution of a definitive merger agreement, receipt of
regulatory approval, shareholder approval from both the CCAIR shareholders (as
to the merger) and the Mesa shareholders (as to the issuance of Mesa shares in
the merger), and satisfaction of closing conditions to be contained in a
definitive purchase agreement.

 MESA AIRCRAFT IN OPERATION BY CODE SHARE PARTNER AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                 BEECH            EMBRAER
                                 1900    DASH 8   BRASILIA   CRJ      TOTAL

<S>                             <C>      <C>      <C>        <C>      <C>
   USAirways Express            68        -         1        12         81

   America West Express          7       12        --         4         23
                                     
   Mesa                          8       --        --        --          8
                               ---      ---       ---        ---        ---
                                     
      TOTAL:                    83       12         1         16        112
                               ====     ===       ===        ===        ===
</TABLE>
 

In addition to carrying passengers, Mesa carries freight and express packages on
its passenger flights and has interline small cargo freight agreements with many
other carriers. Mesa has contracts with the U.S. Postal Service for carriage of
mail by air to the cities it serves and occasionally operates charter flights
when aircraft are not otherwise utilized for scheduled service.

CODE-SHARING RELATIONSHIPS

Approximately 93% of Mesa's consolidated revenues are derived from operations
associated with code-sharing agreements with America West and USAirways. These
code-sharing agreements allow use of the code-sharing partner's reservation
system and flight designator code to identify flights and fares in the computer
reservation system, permit use of the logo, service marks, exterior aircraft
paint schemes, and uniforms similar to the code-sharing partners', and provide
coordinated schedules and joint advertising. Mesa's passengers receive mileage
credits in the respective frequent flyer programs, and credits in those programs
can be used on Mesa's flights.

Mesa's subsidiaries have one code-sharing agreement with America West and four
separate code-sharing agreements with USAirways. Renewal of one code-sharing
agreement with a code-sharing partner does not guarantee the renewal of any
other code-sharing agreement with the same code-sharing partner.

The code-sharing agreements provide for terms of six years for America West
(expiring in 2004), and five to 10 years for USAirways (Air Midwest expires in
2000 in the Kansas City hub, and the various MAI agreements expire in 2003 in
Pittsburgh and for the Canadair Regional Jets ("CRJ") service (described below)
and 2004 in the New Orleans, Boston, Philadelphia, Tampa and Orlando hubs).
Although the provisions of the agreements vary, generally they are subject to
cancellation should Mesa's subsidiaries fail to meet certain operating and
performance standards, the breach of other contractual terms and conditions,
and, in the case of the USAirways code-sharing agreements (other than the new
CRJ service agreement described below), upon six months' notice by either party.
The code-sharing agreements do not prohibit the major carrier from serving
routes served by the various subsidiaries of Mesa. The code-sharing agreements
contain varying provisions allowing Mesa's partners to terminate the agreements
upon certain potential operational or "change in control" events. The agreements
with USAirways provide that USAirways may terminate its code-sharing
agreements upon a change in control of Mesa consisting of not less than 51
percent of the outstanding voting stock or a replacement of 50 percent or more
of the members of the Board of Directors. A termination or expiration without
renewal of any code-sharing agreements with America West or USAirways would
have a material adverse effect on Mesa's business, financial condition, and
results of operation.

In November 1997, MAI entered into a new code-sharing agreement with USAirways
to provide CRJ service between various domestic city pairs. The CRJ code-sharing
agreement terminates five years after CRJ service first begins but is subject to
earlier termination by USAirways (i) in the event certain performance
requirements are not met and remain uncured for 90 days or (ii) without cause on
a "per aircraft basis" three years after such aircraft have been installed in
the system upon 180 days' notice. In addition, payments to MAI are based on
operating performance goals and may be increased or decreased based on actual
results. For the fiscal year ended September 30, 1998, USAirways Express
represented approximately 66% of the available seat mile (ASM)



                                       3
<PAGE>   4
capacity of Mesa's aircraft and 70% of its consolidated revenue.

Mesa operates 23 of its fleet of 112 aircraft as America West Express out of
hubs in Phoenix, Arizona and Columbus, Ohio. For the fiscal year ended September
30, 1998, the America West Express operation represented approximately 27% of
the ASMs of Mesa's aircraft and approximately 23% of its consolidated revenue.
Mesa is currently operating four CRJ aircraft in the America West system, and
intends to add one additional CRJ each month through September 1999. Allocation
of additional CRJ aircraft is a forward looking statement and is subject to
change depending on, among other factors, the availability of CRJ aircraft from
the manufacturer, the willingness of management of America West to agree to
deployment of additional aircraft, and changes in competitors' routes.

MARKET FACTORS

The key factors supporting the regional airline market are:

-   Service in low-density markets which remain unattractive to major airlines
    and low-fare carriers;

-   Relationships with the major airlines, operating feeder service to hubs for
    connecting passengers under code-sharing arrangements;

-   Allocation of new-generation, lower-cost turboprop and smaller regional jet
    aircraft to routes that were traditionally larger jet routes;

-   Ability to provide complementary service in existing major airline markets
    by operating flights in scheduling gaps between those of the major air
    carrier; and

-   Lower costs than a major airline operating a similar route due to lower
    wages, more flexible work rules and more suitable aircraft for that
    particular route.

CORPORATE STRATEGY

Mesa's long-term business strategy is to operate a competitive and profitable,
high-frequency, quality-service airline, primarily with a hub-and-spoke route
system. The strategy is implemented through a disciplined approach to the
regional airline business which incorporates (i) the previously discussed
regional diversification, (ii) a focus on profitable markets, (iii) reactions to
the changing economic and competitive environment , and (iv) a modern, efficient
aircraft fleet that positions the airline to be able to capitalize on future
growth opportunities.

For Mesa's USAirways Express turboprop operations, Mesa's market selection
process follows an in-depth analysis on a route-by-route basis. Agreement is
then reached, where appropriate, with USAirways regarding the level of service
and fares. Mesa believes that this selection process enhances the likelihood of
profits in a given market. Under the America West Contract and the USAirways
Express Regional Jet operation, market selection is accomplished by America West
and USAirways respectively.

AIRLINE OPERATIONS

In 1998, Mesa moved its corporate headquarters from Farmington, New Mexico and
training department from Ft. Worth, Texas to Phoenix, Arizona. Departments
included in the move were executives, flight operations including dispatch,
accounting, training, personnel, and planning. Headquarters for Mesa's Air
Midwest subsidiary is located in Wichita, Kansas.

Mesa has reduced the number and type of aircraft it operates. In July 1997, the
Fokker 70 aircraft were retired and replaced by CRJ aircraft. Termination of
Mesa's and WestAir's code-sharing agreement with United Airlines resulted in a
surplus of 21 British Aerospace Jetstream 31 aircraft, 29 Embraer Brasilia
aircraft and 37 1900D Beech aircraft. Management also elected to cease the
operation of five Embraer Brasilia aircraft in Florida. Through a settlement
agreement reached with WestAir's creditors, Mesa retired all 21 of the British
Aerospace Jetstream 31 aircraft as well as 17 of the remaining 30-seat Embraer
Brasilia aircraft. Retirement of these aircraft reduced the type of aircraft
operated by Mesa to three: the 1900D, Dash 8-200 and CRJ aircraft. The last
Embraer Brasilia aircraft in the system was parked on October 4, 1998. Of the 37
surplus Beech 1900D aircraft, 22 were sold to Great Lakes Aviation prior to
September 30, 1998, and two Beech 1900D aircraft were sold on November 30, 1998.
Mesa has entered into an agreement with Beechcraft whereby Beechcraft will
market Mesa's remaining excess 1900D aircraft for a fee. SkyWest Airlines




                                       4
<PAGE>   5
purchased two Embraer Brasilia aircraft and assumed leases on eight other
Embraer aircraft. There were seven Embraer Aircraft left at September 30, 1998
which are scheduled to be traded in as Mesa receives CRJ deliveries. As of
December 1998, three had been traded in on CRJ deliveries.

MESA'S JET SERVICE

In August 1996, Mesa entered into a memorandum of understanding with Bombardier
Regional Aircraft Division ("BRAD") to acquire 16 CRJ 50-passenger jet aircraft
with options to acquire an additional 32 of the jet aircraft. In August 1997,
Mesa exercised options to purchase 16 of the 32 CRJ aircraft reserved under the
option agreement. This exercise included the conversion of eight of its Dash
8-200 aircraft then on order to CRJ 50-passenger jet aircraft. Twenty CRJ
aircraft had been delivered to Mesa by December 18, 1998. Delivery of the
remaining twelve CRJ aircraft is scheduled to be completed before the end of
calendar 1999.

MAI commenced independent jet service under its own name, "Mesa Airlines",
between Ft. Worth and Houston, Texas in May 1997 and between Ft. Worth and San
Antonio, Texas in September 1997. Subsequent to September 30, 1997, CRJ flights
were initiated between Ft. Worth and Austin, Texas; San Antonio and Colorado
Springs, Colorado; and Colorado Springs and Nashville, Tennessee. This
independent jet operation was discontinued in February 1998, and the CRJ
aircraft were redeployed in Mesa's USAirways Express and America West Express
operations.

MARKETING

Under Mesa's code-sharing agreements, America West and USAirways (the major
partners) coordinate advertising and public relations within their respective
regions. In addition, Mesa benefits from the major partners' advertising
programs in regions outside those served by Mesa, with the major partners'
customers becoming customers of Mesa as a result of through-fares. Under these
code-sharing arrangements, Mesa's passengers also benefit from through-fare
ticketing with the major partners and greater accessibility to Mesa's flights on
computer reservation systems and in the Official Airline Guide.

Mesa's services are promoted through listings in computer reservation systems,
the Official Airline Guide, and through direct contact with travel agencies and
corporate travel departments. Mesa participates in shared advertising with
resort and rental property operators and ski areas in leisure markets in which
it operates. Mesa's non-code-share operation utilizes SABRE, a computerized
reservation system widely used by travel agents, corporate travel offices and
other airlines. The reservation systems of Mesa's code-sharing partners are also
utilized in each of Mesa's other operations through their respective
code-sharing agreements. Mesa also pays booking fees to owners of other
computerized reservation systems based on the number of passengers booked by
travel agents using such systems. Mesa believes that it has good relationships
with the travel agents handling its passengers.

FARES AND FEE PER DEPARTURE

Since 1978, airlines in the United States have been free to set their own
domestic fares without governmental regulation. Mesa has increasingly relied on
fee per departure contractual agreements with its two code-sharing partners to
generate revenue. All of Mesa's America West Express operations (except Guaymas
and Hermasillo, Mexico) and all its USAirways Express jet operations are on a
fee per departure basis. The percentage of revenue generated under the fee per
departure agreements is expected to significantly increase in 1999 as Mesa adds
additional regional jets to its America West Express and USAirways Express
operations. Mesa derives the remainder of its passenger revenues from a
combination of local fares, through fares, joint fares and fee per departure
arrangements. Local fares are fares for one-way and round-trip travel provided
by Mesa within its route system. Passengers connecting with other carriers also
frequently use local fares. A through-fare is a fare offered to passengers by
either America West or USAirways which generally provides cost savings to the
passenger who transfers to the major carrier's code-sharing partner on routes
flown by the code-sharing partner. Through-fares are prorated in accordance with
standards specified in the various code-sharing agreements. Joint fares are
single fares for travel combining flights with Mesa and other airlines, which
are not code-sharing partners with Mesa. With joint fares, the passenger
generally pays a single lower fare than the sum of the local fares charged for
the combined flights. Mesa has been able to negotiate joint-fare arrangements
with some major carriers as an additional means of deriving passengers
connecting through its hub cities.





                                       5
<PAGE>   6
COMPETITION

The airline industry is highly competitive and volatile. Airlines compete in the
areas of pricing, scheduling (frequency and timing of flights), on-time
performance, type of equipment, cabin configuration, amenities provided to
passengers, frequent flyer plans, travel agents' commissions and the automation
of travel agents' reservation systems. Further, because of the Deregulation Act,
airlines are currently free to set prices and establish new routes without the
necessity of seeking governmental approval. At the same time, deregulation has
allowed airlines to abandon unprofitable routes where the affected communities
will not be left without air service. See, "ESSENTIAL AIR SERVICE PROGRAM."

Mesa believes that the Deregulation Act facilitated Mesa's entry into scheduled
air service markets and will allow it to compete on the basis of service and
fares. The Deregulation Act, however, makes possible the entry of other
competitors, which have substantial financial resources and experience, creating
the potential for intense competition among regional air carriers in Mesa's
markets.

Mesa believes its code-sharing agreements provide a significant competitive
advantage in hub airports where its major partner has a predominant share of the
market. The ability to control connecting passenger traffic by offering a
superior service makes it very difficult for other regional airlines to compete
at such hubs. In addition to the enhanced competitive edge offered by the
code-sharing agreements, Mesa competes with other airlines by offering frequent
flights, flexible schedules and numerous fare levels.

FUEL

During its operating history, Mesa has experienced few problems with the
availability of fuel, and it believes that it will be able to obtain fuel
sufficient to meet its existing and anticipated future requirements at
competitive prices. Standard industry contracts do not generally provide
protection against fuel price increases, nor do they ensure availability of
supply. The extent and the duration of fuel price increases are not predictable;
however, to the extent that fuel price increases cannot be passed on to the
customer they are absorbed as an additional expense by Mesa. A substantial
increase in the price of jet fuel or the lack of adequate fuel supplies in the
future would have a material adverse effect on Mesa's business, financial
condition and results of operation.

MAINTENANCE OF AIRCRAFT AND TRAINING

All mechanics and avionics specialists employed by Mesa have the appropriate
training and experience and hold the required licenses issued by the Federal
Aviation Administration (the "FAA"). Using a combination of FAA certified
maintenance vendors and its own personnel and facilities, Mesa maintains its
aircraft on a scheduled and "as-needed" basis. Mesa emphasizes preventive
maintenance and inspects its aircraft engines and airframes as required. Mesa
has also developed an inventory of spare parts specific to the aircraft it flies
and has instituted a computerized tracking system to increase maintenance
efficiency and to avoid excess inventories of spare parts.

Mesa provides periodic in-house and outside training for its maintenance and
flight personnel and also takes advantage of factory training programs that are
offered when acquiring new aircraft.

Maintenance and repairs, including major engine overhauls, are charged to
operating expenses as incurred. Engine overhaul costs for the Dash 8 and CRJ
engines are subject to power by the hour contracts with outside vendors and
considered incurred as the aircraft are flown.

INSURANCE

Mesa carries types and amounts of insurance customary in the airline industry,
including coverage for public liability, passenger liability, property damage,
product liability, aircraft loss or damage, baggage and cargo liability and
workers' compensation.

Mesa's captive insurance company, MAGI Insurance, Ltd., handles baggage and
freight claims in addition to a portion of Mesa's hull and liability insurance.

EMPLOYEES

Mesa currently has approximately 2,500 employees. Mesa's success is in part
dependent upon its ability to continue to attract and retain qualified
personnel. Historically, Mesa has had no difficulty attracting qualified
personnel to meet its requirements.




                                       6
<PAGE>   7
Pilot turnover at times is a significant issue among regional carriers when
major carriers are hiring experienced commercial pilots away from regional
carriers. The addition of aircraft, especially new aircraft types, can result in
pilots upgrading between aircraft types and becoming unavailable for duty during
the extensive training periods required. Commencing in early 1997, the
consolidation and standardizing of Mesa's pilot training program resulted in
training delays and impacted Mesa's operations and resulted in unavailability of
flight crews and cancellation of flights. The pilot shortage was reduced in
October 1997 when Mesa reduced service in certain markets and temporarily
removed aircraft from service, however, in early 1998 10 aircraft remained out
of service to comply with the reduced levels of service required by USAirways
until pilot and crew shortages could be alleviated in the second quarter of
1998. There has been no pilot shortages since the termination of Mesa's United
Express operation in April 1998. No assurances can be made that pilot turnover
and unavailability will not again be a significant problem in the future,
particularly if major carriers expand. Similarly, there can be no assurance that
sufficient numbers of new pilots will be available to support any future growth.

During December 1996, Mesa reached a five-year agreement with the Air Line
Pilots Association (ALPA) for a single pilot contract for MAI and Air Midwest,
Inc. The contract provides for industry-average pay, economic work rules and
opportunities for advancement. Air Midwest mechanics are represented by the
International Association of Machinists (IAM), flight attendants at MAI are
represented by the Association of Flight Attendants (AFA). No other Mesa
subsidiaries are parties to any other collective bargaining agreement or union
contracts.

ESSENTIAL AIR SERVICE PROGRAM

The Essential Air Service program administered by the United States Department
of Transportation (the "DOT") guarantees a minimum level of air service in
certain communities, predicated on predetermined guidelines set forth by
Congress. Based on these guidelines, the DOT will subsidize air service to
communities, which might otherwise not have air service. Mesa services 14 such
markets for an annual subsidy of approximately $4.7 million.

REGULATION

As an interstate air carrier, Mesa is subject to the economic jurisdiction,
regulation and continuing air carrier fitness requirements of the DOT which
include required levels of financial, managerial, and regulatory fitness. The
DOT is authorized to establish consumer protection regulations to prevent unfair
methods of competition and deceptive practices, to prohibit certain pricing
practices, to inspect a carrier's books, properties and records, and to mandate
conditions of carriage. The DOT also has the power to bring proceedings for the
enforcement of air carrier economic regulations, including the assessment of
civil penalties, and to seek criminal sanctions.

Mesa is subject to the jurisdiction of the FAA with respect to its aircraft
maintenance and operations, including equipment, ground facilities, dispatch,
communication, training, weather observation, flight personnel and other matters
affecting air safety. To ensure compliance with its regulations, the FAA
requires airlines to obtain an operating certificate, which is subject to
suspension or revocation for cause, and provides for regular inspections.

As a result of a special review by the FAA of Mesa's operations, and other
factors, a Consent Order was signed with the FAA in September 1996, assessing a
compromise civil penalty of $500,000. Mesa paid $250,000 of the compromise
amount, and the remaining $250,000 was waived after Mesa complied with
provisions of the Consent Order by September 30, 1997. Mesa agreed to adopt
operational standards that exceed the requirements of the Federal Aviation
Regulations ("FAR") and consolidate control of operational areas (maintenance,
flight operation and training) under one central management team.

Effective in March 1997, the FAA required that regional airlines with aircraft
of 10 or more passenger seats operating under FAR Part 135 rules to begin
operating those aircraft under FAR Part 121 regulations. Mesa, one of the
largest regional airlines operating under FAR Part 135 regulations, completed
the transition to Part 121 within the FAA's deadline. These requirements have
resulted in increases in Mesa's costs, affecting Mesa's ability to profitably
serve certain markets. Such increased costs are primarily related to additional
training, dispatch and maintenance procedures. Efforts are being made to
minimize the cost of these new operating procedures while fully complying with
FAR Part 121 operating requirements.

Mesa is also subject to the jurisdiction of the Federal Communications
Commission regarding the utilization of its radio facilities and to the
jurisdiction of the United States Postal Service with respect to carriage of
United States mail. Local governments in certain 


                                       7
<PAGE>   8
markets have adopted regulations governing various aspects of aircraft
operations, including noise abatement and curfews.

ITEM 2.           PROPERTIES

Mesa's primary property consists of the aircraft used in the operation of its
business. The following table lists the aircraft owned and leased by Mesa as of
September 30, 1998:


                                       NUMBER OF AIRCRAFT

<TABLE>
<CAPTION>
                                                           PASSENGER
       TYPE OF AIRCRAFT      OWNED     LEASED     TOTAL    CAPACITY
                            
<S>                          <C>       <C>        <C>      <C>
Beechcraft 1900                86        10        96        19
                            
Embraer Brasilia               --         7         7        30
                            
Dash 8-200                     --        12        12        37
                            
Canadair Regional Jet          --        16        16        50
                              ---       ---       ---                            
Total                          86        45       131
                              ===       ===       ===
</TABLE>

                            
                          
Of the total aircraft, 13 of the Beechcraft 1900D aircraft were not in active
service at September 30, 1998. Two of these Beechcraft 1900D aircraft were sold
subsequent to September 30, 1998, while the remaining 11 are still available for
sale. Six of the seven Embraer Brasilia were not used in scheduled service at
September 30, 1998. The one Embraer Brasilia that was in active service at
September 30, 1998 was removed from service in October 1998. All of these
Embraer Brasilia aircraft are scheduled to be traded in to Bombardier upon the
delivery of additional CRJ's. At December 1998, three of the seven Embraer
Brasilia aircraft had been traded in on CRJ aircraft. See "Business - Airline
Operations" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION -- Liquidity and Capital Resources " for a discussion
regarding Mesa's aircraft fleet commitments.

In addition to aircraft, Mesa has office and maintenance facilities to support
its operations. The facilities are as follows:

<TABLE>
<CAPTION>
   TYPE                             LOCATION                   OWNERSHIP            APPROXIMATE SIZE
   ------------------------        ---------------            ------------          -----------------
<S>                                <C>                        <C>                   <C>
   Administration/Executive        Phoenix, AZ                    Leased              21,003 sq. ft.   
      Accounting/Dispatch                                                           
   Flight                          Phoenix, AZ                    Leased               7,559
   Operations/Training                                                              
   Revenue Accounting              Farmington, NM                 Owned                7,000.
   Administration                  Farmington, NM                 Owned               18,000.
   Operations                      Farmington, NM                 Owned               16,000
   Hangar                          Farmington, NM                 Leased              30,000
   Engine Shop                     Farmington, NM                 Leased               6,000
   Hangar                          Fresno, CA                     Leased              50,000
   Warehouse/Office                Fresno, CA                     Leased              21,750
   Hangar/Office                   Wichita, KS                    Leased              30,000
   Hangar/Office                   Jacksonville, FL               Leased              30,256
   Hangar                          Jamestown, NY                  Leased              30,000
   Hangar/Office                   Dubois, PA                     Leased              23,000
   Hangar                          Reading, PA                    Leased              56,250
   Hangar/Office                   Grand Junction, CO             Leased              32,768
   Hangar/Office                   Bullhead City, AZ              Leased              12,852
   Parts Storage                   Phoenix, AZ                    Leased               1,000
</TABLE>



Mesa's Administration/Executive/Accounting/Dispatch space is on a ten year lease
that commenced November 1, 1998. The Flight Operations/Training space is on a
two year lease commencing August 15, 1998. The Administration building in
Farmington, New Mexico was sold in December 1998. Mesa anticipates selling the
Revenue Accounting and Operations buildings in early 1999 and leasing back
approximately 10,000 square feet for revenue accounting and reservations.
Included in this sale is an additional 32,000 square feet of commercial real
estate leased to unrelated entities. Almost 16,000 square feet of the hangar
space in Fresno has also been sub-leased.




                                       8
<PAGE>   9
Mesa, as the lessee, leases space at each of the airports in which it operates
to accommodate its operations. These leases are generally month-to-month or
relatively short-term leases.

Mesa believes its current real property is both suitable and adequate for its
current and anticipated needs.

ITEM 3.       LEGAL PROCEEDINGS

During 1994, seven shareholder class action complaints were filed in the United
States District Court for the District of New Mexico against Mesa, certain of
its present and former corporate officers and directors, its independent
auditor, and certain underwriters who participated in Mesa's June 1993 public
offering of Common Stock. During October 1995, the Court certified a class
consisting of persons who purchased Mesa stock between January 28, 1993 and
August 5, 1994. These complaints were consolidated by court order, and in May,
1996, the court granted, in part, a motion to dismiss. Thereafter, a third
amended consolidated complaint was filed alleging that during the class period
the defendants caused or permitted Mesa to issue publicly misleading financial
statements and other misleading statements in the registration statement for the
June 1993 public offering, annual and quarterly reports to shareholders, press
releases and interviews with securities analysts. In May 1998, Mesa entered into
a memorandum of understanding with the plaintiffs to settle the litigation.
While Mesa and its corporate officers and directors believe they have
substantial and meritorious defenses against the plaintiff's allegations and
have defended their position vigorously, they have agreed to a settlement to
avoid ongoing litigation and associated costs. The memorandum of understanding
provides for a total of $8 million to be paid to the class plaintiffs on behalf
of the defendants. Mesa paid a substantial portion of the settlement. Mesa
accrued an additional $2.5 million as of September 30, 1998 and on December 1,
1998, the settlement was approved by the Court and the cases were dismissed. A
substantial portion of the ultimate settlement was provided by Mesa's previous
accrual to vigorously defend this litigation.

In June 1997, UAL filed a complaint in the United States District Court for the
Northern District of Illinois against two subsidiaries of Mesa, Mesa Airlines,
Inc. and WestAir Commuter Airlines, Inc., seeking a judicial declaration of the
parties' rights and obligations under two separate written agreements, pursuant
to which MAI and WestAir allegedly agreed to provide certain airline
transportation services to UAL including the provision of scheduled air
transportation services in certain areas of the United States under the service
mark "United Express." UAL contends that, under these agreements, UAL has the
right to "increase, decrease, or in any other way adjust the flight frequencies,
markets, or both" in certain airports currently serviced by WestAir and/or MAI.
In January 1998, UAL amended its complaint to include damages related to MAI's
purported breach of contract to provide specified levels of service in certain
cities. On November 1, 1998, UAL filed a motion with the Court to amend its
Complaint to include an additional $4.0 million in damages resulting from Mesa's
alleged failure to remit baggage fees at Denver International Airport to UAL.
The motion has not yet been considered. MAI and WestAir dispute the principal
contentions in UAL's complaint, and unless a satisfactory negotiated resolution
is achieved, intend to defend their positions vigorously. Furthermore, MAI and
WestAir believe that UAL has breached its code-sharing agreements with the
respective entities and have filed a counterclaim seeking to recover the
substantial damages to the business of MAI and WestAir which have been incurred.

In addition, Mesa and WestAir have filed suit against UAL and SkyWest Airlines,
Inc. ("SkyWest"). SkyWest was contracted to be Mesa's successor of the West
Coast. The complaint alleges that SkyWest unlawfully interfered with Mesa's and
WestAir's contracts with UAL. It further alleges improper conduct on the part of
UAL and SkyWest in terminating markets under the Mesa agreement and in leading
to the non-renewal of the WestAir agreement. Mesa is seeking substantial damages
against each defendant.

In November 1998, Mesa settled all claims with the aircraft and equipment
lessors of WestAir for approximately $15 million. WestAir contributed
approximately $11.2 toward the settlement and Mesa contributed approximately
$3.8 million. Mesa anticipates recovering $2 million from WestAir in the future.
WestAir had operated 43 leased aircraft pursuant to a Partnership Agreement
with United Airlines, a division of UAL, and upon cessation of United Express
service had considerable liabilities for the remaining terms of the leases. Mesa
worked closely with all lessors to develop and implement a plan that was
acceptable to both Mesa and the various lessors.

Mesa is also a party to legal proceedings and claims, which arise in the
ordinary course of business.

Although the ultimate outcome of the above pending lawsuits cannot be determined
at this time, Mesa believes, based upon information at this time, the ultimate
outcome of all the proceedings and claims pending against Mesa is not expected
to have a material adverse effect on 






                                       9
<PAGE>   10
Mesa's consolidated financial position. Mesa's belief regarding the outcome of
all pending proceedings and claims is a forward-looking statement.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

1.       Election of Directors
         Each nominee for Director received in excess of 90% of the total votes
         cast.

2.       The Key Officers' Stock Option Plan was approved with 17,322,436
         (81.1%) voting for, 3,937,331 (18.4%) voting against, and 109,212
         abstentions.

3.       The Outside Directors Stock Option Plan was approved with 8,602,297
         (82.7%) voting for, 3,780,533 (16.8%) voting against, and 107,370
         abstentions.

4.       The amendment to the 1996 Restated and Amended Employee Stock Option
         Plan was approved with 15,831,818 (74%) voting for, 5,417,360 (25.4%)
         voting against, and 19,896 abstentions.

5.       The Indemnification Agreements granted to officers and directors were
         ratified with 24,931,771 (97.7%) voting for, 477,458 (1.8%) voting
         against, and 107,744 abstentions.

6.       The ratification of selection of KPMG Peat Marwick LLP as independent
         auditors of the Company for fiscal 1998 was approved with 26,651,950
         (99.5%) voting for, 65,756 (0.2%) voting against, and 64,038
         abstentions.

7.       The shareholder proposal to hire an investment banker to explore the
         sale or merger of the Company was defeated with 1,750,078 (8.2%) voting
         for, 17,475,205 (81.9%) voting against, and 2,113,991 abstentions.

PART II

ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
         RELATED STOCKHOLDER MATTERS

MARKET PRICE OF COMMON STOCK

Presented below are the high and low sales prices of the Common Stock of Mesa
Air Group, Inc. on the NASDAQ National Market System under the symbol "MESA".

<TABLE>
<CAPTION>
                              FISCAL 1998                   FISCAL 1997
        QUARTER           HIGH            LOW          HIGH            LOW

<S>                    <C>              <C>         <C>          <C>       
    First                $6.875         $4.938        $10.500    $    6.440

    Second                9.406          5.250          7.630         5.440

    Third                 8.875          7.500          6.500         4.690

    Fourth                8.313          4.672          6.630         5.000
</TABLE>


On December 2, 1998, Mesa had 1,236 shareholders of record. Mesa has never paid
cash dividends and does not intend to pay cash dividends in the future.

ITEM 6.       SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA AND OPERATING STATISTICS
In thousands of dollars, except per share and average fare amounts and otherwise
indicated

<TABLE>
<CAPTION>
                                                                        YEARS ENDED SEPTEMBER 30
                                                  1998             1997             1996             1995             1994

<S>                                             <C>              <C>              <C>              <C>              <C>     
   Operating revenues                           $423,541         $510,977         $500,363         $455,139         $396,134
   Operating expenses                           468,329          565,463          452,369          425,567          347,760
   Operating income (loss)                      (44,788)         (54,486)         47,994           29,572           48,374
   Other income (expense)                       6,100            3,087            14,302           (156)            3,534
</TABLE>






                                       10
<PAGE>   11
<TABLE>
<S>                                             <C>              <C>              <C>              <C>              <C>  
   Interest expense                             22,508           27,776           12,777           6,395            7,916
   Earnings (loss) before income taxes          (61,196)         (79,175)         49,519           23,021           43,992
   Net earnings (loss)                          (53,434)         (48,597)         30,407           14,012           27,688
                                                
   Net earnings (loss) per share: basic         (1.89)           (1.72)           1.01             0.43             0.78
   Net earnings (loss) per share: diluted       (1.89)           (1.72)           1.00             0.42             0.76
   Working capital                              3,371            68,561           70,860           115,378          134,186
   Total assets                                 470,952          679,866          678,491          446,722          419,902
   Long-term debt, excluding current            234,475          338,199          338,278          78,411           91,722
    portion                                      
   Stockholders' equity                         121,099          177,088          224,666          255,883          234,316
   Net book value per share                     $4.27            $6.26            $7.96            $7.53            $7.16
                                                
   Passengers carried                           5,103,931        6,720,631        6,463,690        6,086,782        5,170,252
   Revenue passenger miles (000)                1,239,900        1,397,645        1,364,681        1,179,397        982,642
   Available seat miles (000)                   2,289,488        2,484,489        2,437,662        2,310,895        1,897,933
   Average passenger journey                    243              208              211              194              190
   Average stage length                         191              171              167              167              163
   Load factor                                  54.2%            56.3%            56.0%            51.0%            51.8%
   Break-even passenger load factor             93.9%            94.4%            51.7%            49.2%            47.0%
   Revenue per available seat mile              18.5(cent)       20.6(cent)       20.5(cent)       19.7(cent)       20.9(cent)
   Cost per available seat mile                 20.5(cent)       22.8(cent)       18.6(cent)       18.4(cent)       18.3(cent)
   Average yield per revenue passenger mile     34.2(cent)       35.8(cent)       35.9(cent)       37.5(cent)       38.9(cent)
                                            
   Average fare                                 $80.83           $74.52           $75.72           $72.53           $74.11
   Aircraft in service                          112              184              175              177              166
   Cities served                                108              168              164              172              165
   Number of employees                          2,500            4,800            4,000            3,900            3,500
</TABLE>
                                            

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
              RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS

Mesa Air Group, Inc. and its subsidiaries are a group of regional airlines and
related companies providing service across the United States as America West
Express, Mesa Airlines, USAirways Express, and until May 31, 1998, as United
Express.

The following tables set forth selected operating and financial data of Mesa for
the years indicated below:

<TABLE>
<CAPTION>
                                                OPERATING DATA
                                             YEARS ENDED SEPTEMBER 30
                                          1998         1997          1996
                                       ----------    ---------     --------- 
                                    
<S>                                    <C>           <C>           <C>      
    Passengers                         5,103,931     6,720,631     6,463,690
    Available seat miles (000)         2,289,488     2,484,489     2,437,662
    Revenue passenger miles (000)      1,239,900     1,397,645     1,364,681
    Load factor                        54.23%        56.3%         56.0%
    Revenue per ASM                    18.5(cent)    20.6(cent)    20.5(cent)
    Yield per RPM                      34.2(cent)    35.8(cent)    35.9(cent)
    Cost per ASM                       20.5(cent)    22.8(cent)    18.6(cent)
</TABLE>                            
                                                             


                                 FINANCIAL DATA
                                                                                
<TABLE>
<CAPTION>
                                                          YEARS ENDED
                                                          SEPTEMBER 30
                                                                   
                                      1998                                1997                                  1996
                         -----------------------------       -------------------------------      -----------------------------
                                     PERCENT      COST                   PERCENT        COST                   PERCENT     COST
                         AMOUNT        OF          PER       AMOUNT        OF            PER       AMOUNT        OF         PER
                          (000)     REVENUES       ASM        (000)     REVENUES         ASM        (000)     REVENUES      ASM

<S>                    <C>           <C>       <C>        <C>           <C>         <C>         <C>           <C>       <C>      
Flight operations      $ 167,630     39.6%     7.3(cent)  $181,696        35.6%     7.3(cent)   $166,151        33.2%   6.8(cent)

Maintenance               81,847     19.3%     3.6(cent)    93,278        18.3%     3.8(cent)     81,400        16.3%   3.3(cent)
</TABLE>




                                       11
<PAGE>   12
<TABLE>
<S>                               <C>        <C>     <C>         <C>        <C>      <C>           <C>     <C>     <C>      
Aircraft and traffic                68,125    16.1%   3.0(cent)    85,755    16.8%    3.5(cent)    73,469  15.0%    3.0(cent)
servicing

Promotion and sales                 57,767    13.6%   2.5(cent)    75,448    14.8%    3.0(cent)    74,844   15.0%    3.1(cent)

General and administrative          26,768     6.3%   1.2(cent)    26,543     5.2%    1.1(cent)    29,186    5.8%    1.2(cent)

Depreciation and amortization       25,749     6.1%   1.1(cent)    34,859     6.8%    1.4(cent)    24,296    4.9%    1.0(cent)

Other operating items               40,443     9.6%   1.8(cent)    67,884    13.3%    2.7(cent)     3,023    0.6%    0.1(cent)

    Total operating expenses      $468,330   110.6%  20.5(cent)  $565,463   110.7%   22.8(cent)   452,369   90.4%   18.6(cent)

Interest expense                  $ 22,508     5.3%   1.0(cent)  $ 27,776     5.4%    1.1(cent)  $ 12,777    2.6%    0.5(cent)
</TABLE>



REVENUE AND EXPENSE COMPARISON  

Fiscal 1998 versus Fiscal 1997

Operating revenues decreased by $87.4 million (17.1%) for fiscal year ended
September 30, 1998, compared to the prior fiscal year. This decrease was
primarily attributable to the termination of Mesa's United Express operations on
the west coast and Denver, Colorado in April and May, 1998. This represents a
24.1% decrease in passengers, partially offset by an 8.5% increase in average
fares. Capacity, measured by Available Seat Miles (ASMs), decreased by 7.8% and
passenger traffic, measured by Revenue Passenger Miles (RPMs), which represents
one passenger carried one mile, decreased by 11.3%. The load factor decreased
from 56.3% to 54.2%, yield (passenger revenue per RPM) decreased to 34.2(cent)
in fiscal 1998 from 35.8(cent) per RPM, and revenue per ASM decreased to
18.5(cent) from 20.6(cent) per ASM in fiscal 1997. The airline industry has a
history of fare and traffic volatility. Management expects revenue per available
seat mile to remain relatively stable in existing markets during the next fiscal
year. However, the CRJ jet aircraft, which is faster and flown over a longer
stage length than turbo prop aircraft, generates lower revenue per ASM than
turbo prop aircraft. Because Mesa expects to operate increasing numbers of CRJ
aircraft in the future, overall revenue per ASM and cost per ASM is expected to
be lower in the 1999 fiscal year than that attained in fiscal 1998.


Flight Operations expense decreased by 7.8 percent to $167.6 million (7.3 cent)
per ASM) for the 1998 fiscal year, from $181.7 million (7.3(cent) per ASM) for
the comparable period in 1997. Fuel costs decreased by $16.7 million during the
current period as compared to the prior period, primarily as a result of
operating fewer aircraft in 1998. On an ASM basis, fuel costs decreased to
2.2(cent) during the current period from 2.7(cent) in the prior period as a
result of longer stage length and more efficient aircraft. Pilot costs decreased
by $4.4 million during the year, remaining at 2.2(cent) per ASM for both the
fiscal years ending September 30, 1998 and 1997. Pilot training costs increased
by $6.5 million for the fiscal year ended September 30, 1998, from the fiscal
year ended September 30, 1997 due to the retraining costs associated with adding
11 CRJ aircraft into the fleet. Dispatch costs increased by $.8 million in the
1998 period due to the stricter operating requirements of FAR Part 121. These
cost increases were partially offset by an approximate $9.4 million reduction in
aircraft lease expense, from 2.7(cent) per ASM in the 1997 fiscal year to
2.5(cent) in the 1998 fiscal year, which resulted from flying fewer aircraft.
Ownership costs of owned aircraft are reported as depreciation and interest
expense rather than flight operations expense.

Maintenance costs decreased by 12.3% to $81.8 million (3.6(cent) per ASM) for
the 1998 fiscal year, from $93.3 million (3.8(cent) per ASM) for the prior year.
Engine overhaul expenses decreased by $14.0 million due to the decline in fleet
size. These savings were partially offset by increased parts usage of $7.3
million and accrued costs for engine overhauls for the Dash 8 and CRJ engines on
power by the hour contracts.

Aircraft and Traffic Servicing costs decreased by 20.6% to $68.1 million
(3.0(cent) per ASM) during fiscal 1998 from $85.8 million (3.5(cent) per ASM )
in fiscal 1997. Station wages decreased by $8.3 million or from 1.0(cent) per
ASM in fiscal 1998 to 0.7(cent) per ASM in fiscal 1998 due to more efficient
staffing. Station rent decreased by $5.5 million in fiscal 1998 from fiscal 1997
due to the elimination of the higher rental cost West Coast and Denver
operations.

Promotion and Sales expense decreased by 23.4% to $57.8 million (2.5(cent) per
ASM) during fiscal 1998 from $75.4 million (3.0(cent) per 


                                       12
<PAGE>   13
ASM) in fiscal 1997. The decrease was primarily attributable to a reduction in
booking fees. Mesa's new contract with America West eliminates booking fees and
travel agency commissions, and thus these expenses are expected to continue to
decrease in fiscal year 1999.

Depreciation and amortization expense decreased by $9.1 million to $25.7 million
in fiscal 1998 and interest expense decreased by $5.3 million to $22.5 million
in such period. The decrease in depreciation was due to the write-off of the
Denver system intangibles at September 30, 1997 in connection with the
termination of the United Express operations. The decrease in the interest
expense was due to lower outstanding loan balances as a result of the retirement
of aircraft.

At December 31, 1997 and September 30, 1997, Mesa recognized provisions of $33.9
million and $72.1 million, respectively, for the termination of the United
Express operations which included the non-renewal of the WestAir, and early
termination of the MAI, code-sharing agreements with UAL. These provisions are
included in other operating items. (See footnotes 11 and 15 in the accompanying
consolidated financial statements for additional discussion). Both the $33.9
million and the $72.1 million provisions provide for the estimated loss on the
retirement or sale of aircraft, parts and equipment which were surplus to the
needs of Mesa upon expiration and early termination of the code-sharing
agreements. In addition, the provision includes an estimate for all other
anticipated costs of discontinuation or sale of Mesa's WestAir, Denver and
Pacific Northwest operations. Other operating items in fiscal 1998 also include
$4.0 million for the termination of the Ft. Worth jet operations, and $2.5
million for the settlement of a shareholder lawsuit. Other operating items in
fiscal 1997 also include a gain from the settlement with an aircraft
manufacturer of $5.2 million and a $1 million aircraft return provision related
to the final settlement and return of Mesa's Fokker 70 aircraft.

FISCAL 1997 VERSUS FISCAL 1996

Operating revenues increased by $10.6 million (2.1%) for fiscal 1997 compared to
the prior fiscal year. This increase in operating revenues is the result of a 4%
increase in passengers, partially offset by a 1.6% decrease in average fares.
Capacity, measured by ASMs, increased by 1.9% and passenger traffic, measured by
RPMs, increased by 2.4%. The load factor increased from 56.0% to 56.3%, yield
decreased to 35.8(cent) in fiscal 1997 from 35.9(cent) per RPM, and revenue per
ASM increased to 20.6(cent) from 20.5(cent) per ASM in fiscal 1996.

Flight Operations expense increased by 9.4% to $181.7 million (7.3(cent) per
ASM) for the fiscal year ended September 30, 1997, from $166.2 million
(6.8(cent) per ASM) for the year ended September 30, 1996. Fuel costs increased
by $10.1 million to 2.7(cent) per ASM from 2.3(cent) per ASM during the current
period as compared to the prior period. Of that increase, $6.2 million is a
result of a 7.0(cent) per gallon increase in the average price of fuel with
increased usage accounting for the balance. Pilot costs increased by $14.0
million during the year due primarily to a $10.2 million increase in pilot wages
and payroll taxes. Of this increase $6.1 million was a result of increased rates
of pay associated with the new pilot contract which became effective in December
1996 and $4.1 million of the increase was due to an increase in the number of
pilots employed. The costs of pilot meals and lodging increased by $3.4 million
as a result of the new contract and conversion to operating under FAR Part 121.
Dispatch costs increased by $1.9 million and pilot training costs rose by $2.0
million in the 1997 period due to the stricter operating requirements of FAR
Part 121. These cost increases were partially offset by an approximate $17.0
million reduction in aircraft lease costs during the 1997 fiscal year which
resulted from the purchase of 69 aircraft in May 1996, previously operated by
Mesa under operating leases. Aircraft ownership costs are reported as
depreciation and interest expense rather than flight operations expense.

Maintenance costs increased by $11.9 million to $93.3 million (3.8(cent) per
ASM) for the 1997 fiscal year, from $81.4 million (3.3(ceNt) per ASM) for the
prior year. The requirements of operating under FAR Part 121, the associated new
training requirements and implementation of the Consent Order with the FAA
resulted in a 20% increase in the number of mechanics per airplane in fiscal
1997 as compared to fiscal 1996. The increase in number of mechanics per
aircraft and a wage increase granted to the mechanics resulted in increasing
labor costs by approximately $3.8 million during the fiscal year. An increase in
the number of aircraft engine overhauls resulted in an increase in engine
overhaul expense of $8.1 million (35.7%).

Aircraft and Traffic Servicing costs increased to $85.7 million (3.5(cent) per
ASM) during fiscal 1997 from $73.5 million (3.0(cent) pEr ASM ) in fiscal 1996.
Station labor costs rose by $6.1 million due to an across the board wage
increase granted in September 1996 in order to attract and retain qualified
individuals. Non-completion costs increased by $1.4 million in fiscal 1997. The
increase was caused by a higher than normal level of flight cancellations as a
result of flight crew scheduling difficulties and training delays. The flight
crew scheduling difficulties and training delays were related to the significant
changes required by conversion to FAR Part 121 and 





                                       13
<PAGE>   14
compliance with the FAA Consent Order. Deicing costs increased $.8 million and
security expenses increased $.5 million in 1997 over the prior year. Increased
costs of security are directly related to the increase in passengers carried.

Promotion and Sales expense increased slightly from $74.8 million in fiscal 1996
to $75.4 million in fiscal 1997.

General and Administrative costs declined from $29.2 million in fiscal 1996 to
$26.5 million in fiscal 1997. The decrease was primarily attributable to reduced
management compensation expense under the management incentive program.

Depreciation and amortization expense rose by $10.5 million to $34.9 million and
interest expense increased by $15.0 million to $27.8 million. The increase in
depreciation and interest expense was due to the purchase of 69 aircraft in May
1996, which had previously been operated by Mesa under operating leases, and the
purchase of 22 new Beechcraft aircraft financed with debt.

At September 30, 1997, Mesa recognized a provision of $72.1 million for the
non-renewal of the WestAir, and early termination of the MAI, code-sharing
agreements with UAL. This provision is included in other operating items. (See
footnotes 11 and 15 in the accompanying consolidated financial statements for
additional discussion). The $72.1 million provision provides for the estimated
loss on the retirement or sale of aircraft, parts and equipment which are
expected to be surplus to the needs of Mesa upon expiration and early
termination of the code-sharing agreements. In addition, the provision included
an estimate for all other anticipated costs of discontinuation or sale of Mesa's
WestAir, Denver and Pacific Northwest operations. Other operating items in
fiscal 1997 also includes a gain from the settlement with an aircraft
manufacturer of $5.2 million and a $1 million aircraft return provision related
to the final settlement and return of Mesa's Fokker 70 aircraft. In fiscal 1996,
Mesa recognized a $3 million provision related to return of the Fokker 70
aircraft.

Mesa's effective tax rate of 38.6% is comparable with prior years.

LIQUIDITY AND CAPITAL RESOURCES

Mesa's cash, cash equivalents and marketable securities as of September 30, 1998
were $35.6 million, representing a decrease of $21.6 million over the prior
year. Mesa's net cash flows used in operations was approximately $18.3 million
during 1998, primarily as a result of the termination of the United Express
code-sharing agreement. Mesa's cash, cash equivalents and marketable securities
are intended to be used for working capital, capital expenditures and
acquisitions.

Mesa had receivables of approximately $22.8 million at September 30, 1998, which
consist primarily of amounts due from code-sharing partner USAirways. Under the
terms of the USAirways agreement, Mesa receives a substantial portion of its
revenues through the Airline Clearing House. Historically, Mesa has generated
adequate cash flow to meet its operating needs. However, termination of the
United Express code-sharing agreement has left Mesa with excess aircraft which
will need to be re-deployed on other routes, or alternatively, sold or returned
to their lessors. At September 30, 1998, Mesa had 13 excess Beech 1900D
aircraft, of which two were sold subsequent to September 30, 1998. At September
30, 1998, Mesa had seven Embraer Brasilia aircraft which will all be traded in
on new CRJ aircraft. The manufacturer intends to reimburse Mesa for the lease
cost until the aircraft are sold or leased elsewhere. By December 1998, three of
the Embraer Brasilia aircraft had been traded in on CRJ aircraft. Management's
belief that Mesa will have adequate cash flow to meet its operating needs is a
forward-looking statement. Actual cash flow could materially differ from the
forward-looking statement in the event of the termination of one or more code-
sharing agreements; failure to sell, dispose of, or re-deploy excess aircraft in
a timely manner; a substantial decrease in the number of routes allocated to MAI
under its code-sharing agreement with USAirways; termination of one or more of
Mesa's credit facilities resulting in the need to repay unanticipated debt;
reduced levels of passenger revenue, additional taxes or costs of compliance
with governmental regulations, fuel cost increases, increase in competition,
increase in interest rates, general economic conditions and unfavorable
settlement of existing or potential litigation. Mesa has minimal market risk
with respect to market risk instruments such as foreign currency exchange risk
and commodity price risk. Mesa is subject to interest rate risk with respect to
current and future aircraft financings.

On March 1, 1998, Mesa's $20 million secured line of credit expired by its terms
and the bank declined to renew it. Mesa has $2.4 million in restricted cash to
secure letters of credit for various airports under this line of credit at
September 30, 1998.

Mesa has significant lease obligations and debt payments on existing aircraft.
At September 30, 1998, Mesa had 86 aircraft with debt balances with maturities
through December 2011. During 1996, Raytheon Aircraft Credit Corporation
("RACC") provided financing 




                                       14
<PAGE>   15
on 69 Beech 1900D aircraft. In April 1998, Mesa reached an agreement with RACC,
to defer the monthly principle and interest payments due on the aircraft for the
months of May, June and July. The payments were deferred by extending the
financing terms for an additional three months. In addition, RACC agreed to
finance two Beech 1900 aircraft owned by Mesa for an amount equal to the monthly
payments due on 69 Beech 1900D aircraft for the months of August, September and
October 1998. Mesa then used the proceeds of the financing for those monthly
payments. The two aircraft were financed by RACC with non-recourse, non-interest
bearing loans and are in the process of being sold. In September 1998, RACC
refinanced from another lender an additional 11 Beech 1900D aircraft. The total
financing by RACC is secured by the aircraft and totals $260 million at
September 30, 1998 with monthly payments of $2.1 million. In November 1998, RACC
refinanced from another lender three more Beech 1900D aircraft.

In August 1998 Mesa reached an Agreement with RACC whereby RACC agreed to
purchase excess Beech 1900 aircraft parts from Mesa. As a result of disputes
between Mesa and RACC regarding the applicability and value of certain aircraft
parts under the Agreement, Mesa withheld its monthly payment on 83 Beech 1900
aircraft to RACC for the months of October and November 1998. In an Agreement
dated January 7, 1999, Mesa and RACC resolved the issues regarding these parts
and RACC accepted them in lieu of payment for the months of October and November
1998. To the extent that any Event of Default, as defined in the Loans, may have
occurred for the months of October and November 1998, they have been deemed
fully cured pursuant to the terms of the Agreement with RACC.

Future lease payments due under all aircraft operating leases were approximately
$535 million at September 30, 1998. In addition, Mesa has significant lease
obligations on other operating and non-operating aircraft. These leases are
classified as operating leases and therefore are not reflected as liabilities in
the accompanying consolidated balance sheet. At September 30,1998, 45 aircraft
were leased by Mesa with terms extending through June 2016. Total lease expense
for the twelve months ended September 30, 1998 was $29.1 million.

Mesa has ordered 32 CRJ aircraft for use in its America West Express operation
in Phoenix, Arizona and Columbus, Ohio, and for its USAirways Express
operations on the East Coast. As of December 18, 1998, Mesa had received 20 of
the 32 CRJ aircraft on order and expects to take delivery of the remaining 12 by
the end of 1999. Mesa has options for an additional 16 CRJ aircraft with a
delivery schedule of one per month beginning June 2000. The value of these
additional 16 CRJ aircraft, at listed prices, is approximately $320 million. The
expected delivery schedule of aircraft is a forward-looking statement, which
could significantly differ based on manufacturer's delivery delays, among other
factors. Permanent financing has been completed on 11 of these aircraft for
which Mesa has entered into operating leases. The manufacturer, Bombardier
Regional Aircraft Division, is providing interim financing and has agreed to
provide back up financing at agreed upon rates if Mesa is not successful in
obtaining permanent financing. The rate, but not the commitment, is subject to
there being no material adverse change of Mesa. Mesa anticipates finalizing
operating leases upon the completion of permanent financing for the additional 9
aircraft delivered through December 1998 and for the remaining 12 aircraft to be
delivered in 1999.

Approximately $1.0 million was incurred as a one-time expense in the fourth
quarter of fiscal 1997 related to the two Fokker 70 aircraft returned by Mesa to
Daimler-Benz.

Mesa currently has offers for various real properties in Farmington, New Mexico.
The Administration Building was sold in December 1998 and Mesa anticipates
closing on the Revenue Accounting and Operations buildings in early 1999. Mesa
expects to receive in excess of $5.5 million from these sales. Mesa is also
currently reviewing offers to buy Desert Turbine Services and Four Corners
Aviation.

WestAir ceased operations on May 31, 1998 as a result of the termination of its
United Express code-share agreement. In November 1998, Mesa settled all claims
with the aircraft and equipment lessors of WestAir for approximately $15
million. WestAir contributed approximately $11.2 million of the settlement and
Mesa approximately $3.8 million. Mesa anticipates recovering $2 million from
WestAir's receivables and deposits in the future. WestAir had operated 43 leased
aircraft pursuant to the Partnership Agreement and upon cessation of United
Express service had considerable liabilities for the remaining terms of the
leases. Mesa worked closely with all lessors to develop and implement a plan
that was acceptable to both Mesa and the various lessors.




                                       15
<PAGE>   16
Mesa has negotiated 10-year engine maintenance contracts with General Electric
Aircraft Engines ("GE") for the CRJ and with Pratt and Whitney, Canada Aircraft
Services ("PWC") for the Dash 8-200 aircraft. The GE engine maintenance contract
provides coverage for the engines on the first 16 CRJ aircraft to be delivered.
Mesa is presently negotiating with GE to add the CRJ aircraft engines for 16
additional CRJ aircraft to this maintenance contract. The PWC contract provides
coverage for all Dash 8-200 aircraft engines operated by Mesa. Both contracts
provide for payment at the time of the repair event and a fixed dollar amount
per flight hour, subject to escalation based on changes in the CPI, for the
number of flight hours incurred since the previous event.

In connection with the $110 million loss provision recorded of which $72.1
million was for the fiscal year ended September 30, 1997 and $37.9 million was
for the year ended September 30, 1998, Mesa incurred $29.6 million in cash
expenditures in fiscal 1998 primarily for disposition of surplus aircraft,
severance and other expenditures. Mesa estimates that the cash expenditures for
fiscal year 1999 attributable to the remaining costs related to the termination
of the United Express code-share agreements and the shut down of the Denver and
Fort Worth operations are approximately $6.9 million primarily related to
aircraft interest and severance costs. At September 30, 1998, Mesa had applied
$76.0 million to this provision, leaving a balance of $34 million for remaining
disposition costs. Mesa estimates that the remaining provision will be adequate
for the remaining disposition expenses. Mesa's estimation that the remaining
provision will be adequate for the remaining disposition expenses is a
forward-looking statement.

YEAR 2000 ISSUES

Many currently installed computer systems and software products are coded to
accept two digits entries in the date code field. These date code fields will
need to accept four digit entries to distinguish 21st century dates from 20th
century dates. Any programs that have time sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
the computer shutting down or performing incorrect computations. As a result, in
less than eleven months, computer systems and software used by many companies
will need to be upgraded to comply with such "Year 2000" requirements. Certain
of Mesa's systems, including information and computer systems and automated
equipment, will be affected by the Year 2000 issue.

Mesa has begun to compile a comprehensive inventory of its core business
applications to determine the adequacy of these systems to meet future business
requirements. To date, Mesa's Year 2000 remediation efforts have focused on its
core business computer applications (i.e., those systems that Mesa is dependent
upon for the conduct of day-to-day business operations). Year 2000 readiness is
only one of many factors considered in this assessment. Out of this effort, a
number of systems have already been identified for upgrade or replacement. In no
case has a system been replaced or contemplated to be replaced solely because of
Year 2000 issues, although in some cases the timing of system replacements is
being accelerated. Thus, Mesa does not believe the costs of these system
replacements are specifically Year 2000 related. Additionally, while Mesa may
have incurred an opportunity cost for addressing the Year 2000 issue, it does
not believe that any specific information technology projects have been deferred
as a result of its Year 2000 efforts.

Mesa's reservation systems are tied to its code-sharing partners, USAirways and
America West. Mesa representatives have met with the reservation system
providers and are engaged in on-going dialogue regarding their year 2000
progress. Mesa has installed an upgraded version of its current accounting
system which is represented by the vendor to be compliant but has not yet been
tested. A new flight operations software package which will handle crew
scheduling and dispatch is currently being installed to replace an in-house
system and is expected to be compliant after implementation of a vendor supplied
upgrade. Mesa has had extensive discussions with the manufacturers of its
various aircraft to discuss year 2000 issues and identify the required avionics
and flight systems upgrades which will be implemented during 1999. The aircraft
manufacturers are also required to report the Year 2000 status of their aircraft
to the FAA. Mesa currently has two employees devoted full-time to Year 2000
issues - one in Information Technology and one in the Maintenance department.
Projects are currently underway to evaluate the remaining systems (including
tracking of maintenance parts, revenue accounting and payroll) and replace them
if needed, with implementations and testing scheduled for the remainder of
calendar year 1999. As with systems that have already been replaced, Mesa does
not believe the costs of these replacements are specifically Year 2000 related.
Mesa has upgraded or replaced much of its personal computers and related
equipment that have embedded software in the last several months. Again, these
replacements were not specifically related to Year 2000 but were part of a
larger system upgrade. Mesa has spent approximately $1 million on these upgrades
thus far, and anticipates another $.5 million in expenditures to complete its
system upgrade. Mesa expects to incur costs to replace or repair some of its
systems, but it has not at this time determined the amount of these costs.




                                       16
<PAGE>   17
Mesa is currently assessing other potential Year 2000 issues, including
non-information technology systems. A broad-based Year 2000 Task Force is being
formed and will began meeting to identify areas of concern and develop action
plans. Mesa has also been meeting with similar task forces at America West,
USAirways, and SABRE. Also as part of the Task Force effort, the Company's
relationships with vendors, contractors, financial institutions and other third
parties will be examined to determine the status of the Year 2000 issue efforts
on the part of the other parties to material relationships. The Year 2000 Task
Force will include both internal and Company-external representation.

Mesa expects to incur Year 2000-specific costs in the future but does not at
present anticipate that these costs will be material. Mesa believes that the
most reasonably likely worst-case scenario for the Year 2000 issue would be that
Mesa or the third parties with whom it has relationships would cease or not
successfully complete their Year 2000 remediation efforts. If this were to
occur, Mesa would encounter disruptions to its business that could have a
material adverse effect on its business, financial position, and results of
operations. Mesa could be materially impacted by widespread economic or
financial market disruption or by Year 2000 computer system failures.

Mesa has not at this time established a formal Year 2000 contingency plan but
will consider and, if necessary, address doing so as part of its Year 2000 Task
Force activities. Mesa maintains and deploys contingency plans designed to
address various other potential business interruptions. These plans may be
applicable to address the interruption of support provided by third parties
resulting from their failure to be Year 2000 ready.

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") has issued several new
pronouncements that are not yet adopted by Mesa.

In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," to establish standards for
reporting and display of comprehensive income (all changes in equity during a
period except those resulting from investments by and distributions to owners)
and its components in financial statements. This new standard, which will be
effective for Mesa for the fiscal year ended September 30, 1999, is not
currently expected to have a material impact on Mesa's consolidated financial
statements based on the current financial structure and operations of Mesa.

In June 1997 the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," to establish standards for reporting
information about operating segments in annual financial statements, selected
information about operating segments in interim financial reports and
disclosures about products and services, geographic areas and major customers.
This new standard, which will be effective for Mesa for the fiscal year ending
September 30, 1999, will require Mesa to report financial information on the
basis that is used internally for evaluating segment performance and deciding
how to allocate resources to segments, which is currently anticipated to result
in more detailed information in the notes to Mesa's consolidated financial
statements than is currently required and provided.

FORWARD-LOOKING STATEMENTS

This Form 10-K contains certain statements including, but not limited to,
information regarding the replacement, deployment, and acquisition of certain
numbers and types of aircraft, and projected expenses associated therewith;
costs of compliance with FAA regulations and other rules and acts of Congress;
the passing of taxes, fuel costs, inflation, and various expenses to the
consumer; the relocation of certain operations of Mesa; the resolution of
litigation in a favorable manner; compliance with Year 2000 issues, and certain
projected financial obligations. These statements, in addition to statements
made in conjunction with the words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," and similar expressions, are forward-looking
statements within the meaning of the Safe harbor provision of Section 27A of the
Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act
of 1934 as amended. These statements relate to future events or the future
financial performance of Mesa and only reflect Management's expectations and
estimates. The following is a list of factors, among others, that could cause
actual results to differ materially from the forward-looking statements:
changing business conditions in certain market segments and industries; an
increase in competition along the routes Mesa operates or plans to operate;
material delays in completion by the manufacturer of the ordered and yet-to-be
delivered aircraft; changes in general economic conditions; changes in fuel
price; changes in regional economic conditions; Mesa's relationship with
employees and the terms of future collective bargaining agreements; and the
impact of current and future laws, Congressional 




                                       17
<PAGE>   18
investigations, and governmental regulations affecting the airline industry and
Mesa's operations; bureaucratic delays; amendments to existing legislation;
consumers unwilling to incur greater costs for flights; unfavorable resolution
of negotiations with municipalities for the leasing of facilities; and risks
associated with litigation outcomes. One or more of these or other factors may
cause Mesa's actual results to differ materially from any forward-looking
statement. Mesa is not undertaking any obligation to update any forward-looking
statements contained in this Form 10-K.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    1. Consolidated Financial Statements

         Page 30 - Independent Auditors' Report

         Page 31 - Consolidated Balance Sheets - September 30, 1998 and 1997

         Page 33 - Consolidated Statements of Operations - Years ended September
                   30, 1998, 1997, and 1996

         Page 34 - Consolidated Statements of Cash Flows - Years ended September
                   30, 1998, 1997, and 1996

         Page 35 - Consolidated Statements of Stockholders' Equity - Years ended
                   September 30, 1998, 1997, and 1996

         Page 36 - Notes to Consolidated Financial Statements

    All schedules for which provision is made in the applicable accounting
    regulations of the Securities and Exchange Commission have been omitted
    because they are not applicable, not required or the information has been
    furnished elsewhere.


                                       18
<PAGE>   19
                         REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS

MESA AIR GROUP, INC.:

We have audited the accompanying consolidated balance sheets of Mesa Air Group,
Inc. and subsidiaries as of September 30, 1998 and 1997, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
each of the years in the three-year period ended September 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those 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 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 that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mesa Air Group, Inc.
and subsidiaries as of September 30, 1998, and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1998, in conformity with generally accepted accounting
principles.

                                                                       KPMG LLP

Phoenix, Arizona

January 7, 1999


                                       19
<PAGE>   20
PART 1. FINANCIAL INFORMATION
Item 1.

                              MESA AIR GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                       Year Ended September 30,
                                                                  1998           1997              1996
                                                          --------------------------------------------------
<S>                                                       <C>                  <C>                <C>  
Operating revenues:                                       
      Passenger                                                $ 412,526       $ 500,822          $ 489,432
      Freight and other                                           11,015          10,155             10,931
                                                          --------------------------------------------------
                                                          
            Total operating revenues                             423,541         510,977            500,363
                                                          --------------------------------------------------
                                                          
Operating expenses:                                       
      Flight operations                                          167,630         181,696            166,151
      Maintenance                                                 81,847          93,278             81,400
      Aircraft and traffic servicing                              68,125          85,755             73,469
      Promotion and sales                                         57,767          75,448             74,844
      General and administrative                                  26,768          26,543             29,186
      Depreciation and amortization                               25,749          34,859             24,296
      Other operating items (note 15)                             40,443          67,884              3,023
                                                          --------------------------------------------------
                                                          
           Total operating expenses                              468,329         565,463            452,369
                                                          --------------------------------------------------
                                                          
            Operating income (loss)                              (44,788)        (54,486)            47,994
                                                          --------------------------------------------------
                                                          
Non-operating income (expense):                           
      Interest expense                                           (22,508)        (27,776)           (12,777)
      Interest income                                                802           1,837              2,274
      Other                                                        5,298           1,250             12,028
                                                          --------------------------------------------------
                                                          
          Total non-operating income (expense)                   (16,408)        (24,689)             1,525
                                                          --------------------------------------------------
                                                          
           Earnings (loss) before income taxes                   (61,196)        (79,175)            49,519
Income tax expense (benefit) (note 5)                             (7,762)        (30,578)            19,112
                                                          --------------------------------------------------
                                                          
           Net earnings (loss)                                 $ (53,434)      $ (48,597)          $ 30,407
                                                          ==================================================
                                                          
 Average common shares outstanding: Basic                         28,328          28,275             29,988
                                                          ==================================================
 Average common shares outstanding: Diluted                       28,328          28,275             30,449
                                                          ==================================================
                                                          
Net earnings (loss) per share: Basic                             $ (1.89)        $ (1.72)            $ 1.01
                                                          ==================================================
Net earnings (loss) per share: Diluted                           $ (1.89)        $ (1.72)            $ 1.00
                                                          ==================================================
</TABLE>
                                                  


          See accompanying notes to consolidated financial statements.



                                       20
<PAGE>   21
                                   MESA AIR GROUP, INC.
                               CONSOLIDATED BALANCE SHEETS
                                      (in thousands)

<TABLE>
<CAPTION>
                                                                                                       September 30
                                                                                                    1998         1997
                                                                                                  ---------------------

<S>                                                                                               <C>          <C>
ASSETS
Current Assets:
    Cash and cash equivalents                                                                     $ 35,622     $ 57,232
    Marketable securities (note 2)                                                                    --          8,690
    Receivables, primarily traffic                                                                  22,807       53,852
    Income tax refund receivable (note 5)                                                            9,057        6,999
    Expendable parts and supplies, less allowance for obsolescence of $1,952 and $2,631             29,774       31,377
    Prepaid expenses and other current assets                                                        4,897        8,553
                                                                                                  ---------------------
          Total current assets                                                                     102,157      166,703
Property and equipment, net (notes 3 and 4)                                                        331,974      440,890
Lease and equipment deposits (notes 8)                                                              11,515       10,354
Intangibles, less amortization of $6,625 and $5,200                                                 20,646       22,071
Other assets                                                                                         4,660        9,848
                                                                                                  ---------------------
    Total assets                                                                                  $470,952     $649,866
                                                                                                  =====================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term debt and capital leases (note 4)                                 $ 33,945     $ 31,786
    Accounts payable                                                                                12,243       21,884
    Air traffic liability                                                                            4,758        6,785
    Accrued compensation                                                                             3,834        7,025
    Other accrued expenses                                                                          44,006       30,662
                                                                                                  ---------------------
          Total current liabilities                                                                 98,786       98,142
Long-term debt and capital leases, excluding current portion                                       234,475      338,199
Deferred credits and other liabilities                                                              16,592       34,837
Deferred income taxes                                                                                 --          1,600
Stockholders' equity (note 6):
    Preferred stock of no par value, 2,000,000 shares                                                 --           --
        authorized; no shares issued and outstanding
    Common stock of no par value, 75,000,000 shares authorized;                                    101,847      101,361
         28,363,915 and 28,294,584 shares issued and outstanding
   Retained earnings                                                                                19,252       72,686
   Unrealized gain on marketable securities, net of deferred income taxes of $1,754 (note 2)          --          3,041
                                                                                                  ---------------------
          Total stockholders' equity                                                               121,099      177,088
                                                                                                  ---------------------
   Commitments, contingencies, and subsequent events (notes 4,7,8,9,11 and 15)
Total liabilities and stockholders' equity                                                        $470,952     $649,866
                                                                                                  =====================
</TABLE>



          See accompanying notes to consolidated financial statements.




                                       21
<PAGE>   22
                              MESA AIR GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              Year ended September 30
                                                                           1998         1997         1996
                                                                         -----------------------------------

<S>                                                                     <C>          <C>           <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)                                                      (53,434)     $(48,597)     $ 30,407
Adjustments to reconcile net earnings (loss) to
    net cash flows from operating activities:
      Depreciation and amorization                                        25,749        34,859        24,296
      Provision for code share agreements and other operating items       40,443        72,100        10,000
      Deferred income taxes                                                 --         (20,439)       10,473
      Loss on disposal of property and equipment                            --            --             689
      Gain on sale of securities                                          (4,544)         --         (22,008)
      Amortization and write-off of deferred credits                     (38,327)       (1,745)       (3,271)
      Stock bonus plan                                                      --             349           970
      Provision for doubtful accounts                                      1,036          --            --
      Changes in assets and liabilities:
          Receivables                                                     30,533       (12,747)        3,706
          Income tax refund receivable                                    (2,058)       (6,999)         --
          Expendable parts and supplies                                    1,603        (4,421)       (2,274)
          Prepaid expenses and other current assets                        3,656        (2,159)          529
          Accounts payable                                                (9,641)        8,073        (4,361)
          Other accrued liabilities                                      (13,282)       (7,306)       (6,109)
                                                                         -----------------------------------
               NET CASH FLOWS FROM OPERATING ACTIVITIES:                 (18,266)       10,968        43,047
                                                                         -----------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                  (8,062)       (4,562)      (20,263)
    Proceeds from sale of property and equipment                          17,624         1,874         1,616
    Proceeds from sale of marketable securities                           11,102         1,000        40,861
    Other assets                                                            (481)        9,539          (354)
    Lease and equipment deposits                                          (1,161)         (339)          699
                                                                         -----------------------------------
            NET CASH FLOWS FROM INVESTING ACTIVITIES:                     19,022         7,512        22,559
                                                                         -----------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of long term debt                              27,464          --            --
    Principal payments on long-term debt and obligations
        under capital leases                                             (50,272)      (17,114)      (12,141)
    Proceeds from issuance of common stock                                   442           123         1,510
    Common stock repurchase and retirement                                  --            --         (53,930)
    Proceeds from deferred credits                                          --           1,023          --
                                                                         -----------------------------------
            NET CASH FLOWS FROM FINANCING ACTIVITIES:                    (22,366)      (15,968)      (64,561)
                                                                         -----------------------------------

            NET CHANGE IN CASH AND CASH EQUIVALENTS:                     (21,610)        2,512         1,045

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                          57,232        54,720        53,675
                                                                         -----------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                              $ 35,622      $ 57,232      $ 54,720
                                                                         ===================================
</TABLE>




          See accompanying notes to consolidated financial statements.


                                       22
  
<PAGE>   23
                              MESA AIR GROUP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     (in thousands, except number of shares)

<TABLE>
<CAPTION>
                                                                                                       Available
                                                          Number         Common          Retained       for sale
Years ended September 30, 1998, 1997, and 1996          of shares        stock           earnings      securities          Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>             <C>           <C>               <C> 
Balance at September 30, 1995                           33,460,742       $ 151,957        $ 90,876       $ 13,050        $ 255,883
Exercise of options (note 6)                               194,759           1,510               -              -            1,510
Stock bonus plan (note 7)                                   94,281             970               -              -              970
Common stock repurchase                                 (5,506,400)        (53,930)              -              -          (53,930)
Tax benefits from sale of optioned stock                         -             369               -              -              369
Change in unrealized gains, net of tax (note 2)                  -               -               -        (10,543)         (10,543)
Net earnings                                                     -               -          30,407              -           30,407
-----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996                           28,243,382         100,876         121,283          2,507          224,666
Exercise of options (note 6)                                16,333             123               -              -              123
Stock bonus plan (note 7)                                   34,869             349               -              -              349
Tax benefits from sale of optioned stock                         -              13               -              -               13
Change in unrealized gains, net of tax (note 2)                  -               -               -            534              534
Net loss                                                         -               -         (48,597)             -          (48,597)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997                           28,294,584         101,361          72,686          3,041          177,088
Exercise of options (note 6)                                69,331             442               -              -              442
Tax benefit from sale of optioned stock                          -              44               -              -               44
Change in unrealized gains, net of tax (note 2)                  -               -               -         (3,041)          (3,041)
Net loss                                                         -               -         (53,434)             -          (53,434)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998                           28,363,915         101,847          19,252              -          121,099
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                       
                                                       
                                                   
          See accompanying notes to consolidated financial statements.



                                       23
<PAGE>   24
MESA AIR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended September 30, 1998, 1997 and 1996

1.  Summary of Significant Accounting Policies

    a. Principles of Consolidation and Organization

       Mesa Air Group, Inc. and its subsidiaries ("Mesa") is a group of regional
       airlines providing service in various regions across the United States,
       plus the District of Columbia, as well as Toronto, Canada and Guaymas and
       Hermosillo, Mexico. Mesa operates as America West Express in the
       Southwest, USAirways Express throughout the East coast and Midwest, and
       independently as Mesa Airlines in New Mexico and Colorado utilizing 96
       turboprop aircraft and 16 jet aircraft.

       Mesa is a Nevada corporation which owns Mesa Airlines, Inc. ("MAI"), a
       Nevada corporation and certificated air carrier; WestAir Holdings, Inc.,
       a California corporation and owner of certificated air carrier WestAir
       Commuter Airlines, Inc. which ceased operations in 1998; Air Midwest,
       Inc., a Kansas corporation and certificated air carrier. Mesa's
       non-airline subsidiaries are MPD, Inc., a Nevada corporation d.b.a. Mesa
       Pilot Development, Mesa's pilot training program; FCA, Inc., a Nevada
       corporation, d.b.a. Four Corners Aviation; Mesa Leasing, Inc. a Nevada
       corporation established to facilitate Mesa's acquisition and leasing of
       aircraft; and MAGI Insurance, Ltd. a Barbados, West Indies based
       insurance company. The consolidated financial statements include the
       accounts of Mesa and its wholly owned subsidiaries. All significant
       intercompany balances and transactions have been eliminated in
       consolidation.

       Mesa currently operates as America West Express under a code-sharing
       agreement which expires in 2004 with America West, utilizing Phoenix,
       Arizona and Columbus, Ohio as hubs.

       Mesa utilizes an Albuquerque hub as Mesa Airlines, serving the Southwest
       and Rocky Mountain regions.

       Mesa operates as USAirways Express under four code-sharing agreements
       with USAirways, Inc. ("USAirways"). One agreement covers operations
       utilizing a Kansas City hub and expires in 2000. Another USAirways
       code-sharing agreement covers operations out of the Pittsburgh hub and
       expires in 2003. The third agreement covers hubs in New Orleans, Tampa,
       Orlando, Philadelphia and Boston and expires in 2004. The fourth
       agreement which provides for Canadair Regional Jet ("CRJ") 50-passenger
       jet service on certain defined routes and expires in 2003.

       MPD, Inc. provides flight training in coordination with a community
       college. FCA, Inc. is a fixed-base operation in Farmington, New Mexico.
       Regional Aircraft Services, Inc. and Desert Turbine Services provide
       aircraft and engine maintenance service to Mesa. MAGI Insurance, Ltd. is
       a captive insurance created to handle freight and baggage claims in
       addition to a portion of Mesa's aviation insurance.

    b. Cash and Cash Equivalents

       For purposes of the statements of cash flows, Mesa considers all highly
       liquid debt instruments with original maturities of three months or less
       to be cash equivalents. At September 30, 1998, the Company had $2.4
       million of cash restricted as collateral for letters of credit.

    c. Marketable Securities

       All marketable securities are considered to be available for sale. Any
       unrealized holding gains or losses on available-for-sale securities have
       been recorded net of deferred taxes through stockholders' equity.
       Premiums and discounts on debt securities are amortized over the term to
       maturity using the interest method.



                                       24
<PAGE>   25
    d. Receivables

       Mesa provides commercial air transportation into most regions of the
       United States. The majority of the passenger tickets collected by Mesa at
       the time of travel are sold by other air carriers largely as a result of
       the code-sharing agreements discussed above. As a result, Mesa has a
       significant concentration of its accounts receivable with other air
       carriers and does not have any collateral securing such accounts
       receivable. At September 30, 1998 and 1997, accounts receivable from air
       carriers totaled approximately $15.1 million and $41.7 million,
       respectively. Accounts receivable credit losses have not been significant
       and have been within management's expectations.

    e. Expendable Parts and Supplies

       Expendable parts and supplies are stated at the lower of average cost or
       market, less an allowance for obsolescence. Expendable parts and supplies
       are charged to expense as they are used.

    f. Property and Equipment

       Property and equipment are recorded at cost and depreciated to estimated
       residual values. Depreciation of property and equipment is provided on a
       straight-line basis over estimated useful lives as follows:

         Buildings                           30 years
         Flight equipment                    7-20 years
         Leasehold improvements              Life or term of lease, whichever is
                                              less
         Equipment                           5-12 years
         Furniture and fixtures              3-5 years
         Vehicles                            5 years
                                                  
       Assets utilized under capital leases are amortized over the lesser of the
       lease term or the estimated useful life of the asset using the
       straight-line method. Amortization of capital leases is included in
       depreciation expense.

    g. Intangibles

       Mesa evaluates the recoverability of its intangible assets by measuring
       the carrying amount of the assets against the estimated undiscounted
       future cash flows associated with them. At the time such evaluations
       indicate that the future undiscounted cash flows are not sufficient to
       recover the carrying value of such assets, the assets are adjusted to
       their fair values.

       In July 1991, Mesa acquired Air Midwest, Inc. This acquisition resulted
       in purchased intangible goodwill of approximately $10.2 million, which is
       being amortized over a 40-year period. Subsequently the intangibles were
       reduced by approximately $4.7 million for the recognition of the tax
       effects of net operating loss and investment tax credit carryovers
       acquired in the Air Midwest purchase.

       In 1994, Mesa entered into Asset Purchase Agreements related to its
       operations as USAirways. Intangible assets acquired of $21.8 million are
       being amortized over a 20-year period.

       In connection with the discontinuance of United Express operations (Notes
       11 and 15), the related intangibles were determined to be impaired at
       September 30, 1997 and a provision has been made for the carrying value
       of $26.3 million.

   h.  Income Taxes

       Income taxes are accounted for under the asset and liability method.
       Deferred tax assets and liabilities are recognized for the future tax
       consequences attributable to differences between the financial statement
       carrying amounts of existing assets and liabilities and their respective
       tax bases and operating loss and tax credit carryforwards. Deferred tax
       assets and liabilities are measured using enacted tax rates expected to
       apply to taxable income in future years in which those temporary
       differences are 



                                       25
<PAGE>   26
       expected to be recovered or settled. The effect on deferred tax assets
       and liabilities of a change in tax rates is recognized in income in the
       period that includes the enactment date. Mesa and its subsidiaries file a
       consolidated federal income tax return.

    i. Deferred Credits

       Deferred lease incentives consist of credits for parts or services and
       deferred gains from the sale and leaseback of aircraft. Deferred credits
       are amortized on a straight-line basis as a reduction of lease expense
       over the term of the respective leases.

    j. Revenues

       Passenger, freight and other revenues are recognized as earned when the
       service is provided.

       Mesa receives public service revenues for providing scheduled air service
       to certain small communities. These revenues are recognized as earned in
       the period to which the payments relate. The amount of such payments is
       determined by the Department of Transportation on the basis of its
       evaluation of the amount of revenue needed to meet operating expenses and
       to provide a reasonable return on investment with respect to eligible
       routes.


   k.  Maintenance

       Maintenance and repairs, including major engine overhauls, are charged to
       operating expenses as incurred. Engine overhaul costs for the Dash 8 and
       CRJ engines are subject to power by the hour contracts with external
       vendors and considered incurred as the aircraft are flown.

    l. Earnings (Loss) Per Share

       On October 1, 1997, the Company adopted Statement of Financial Accounting
       Standards ("SFAS") no. 128, "Earnings Per Share", which standardizes the
       reporting for earnings (loss) per share ("EPS") into basic EPS and
       diluted EPS, and has restated all prior period EPS data to conform to
       SFAS No. 128.

       The number of shares used in the per share computation are as follows:

<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30
                                                                 -------------------------------------
                                                                    1998          1997           1996
                                                                             (IN THOUSANDS)
                                                                   
<S>                                                             <C>              <C>            <C>   
                   Basic:
                    Weighted average shares outstanding                         
                      during the year                              28,328         28,275         29,988
                   Diluted:
                    Weighted average shares outstanding
                       during the year                             28,328         28,275         29,988 
                    Common stock equivalent shares -
                      assumed exercise of options                      --             --            461  
                                                                                              

                                                                   28,328         28,275         30,449 
</TABLE>


    m. Stock Options

       Prior to October 1, 1996, Mesa accounted for its stock option plan in
       accordance with the provisions of Accounting Principles Board ("APB")
       Opinion No. 25, "Accounting for Stock Issued to Employees," and related
       interpretations. As such, compensation expense would be recorded on the
       date of grant only if the current market price of the underlying stock
       exceeded the exercise price. On October 1, 1996, Mesa adopted Statement
       of Financial Accounting Standards ("SFAS") No. 123, 



                                       26
<PAGE>   27
       "Accounting for Stock-Based Compensation," which permits entities to
       recognize as expense over the vesting period the fair value of all
       stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
       allows entities to continue to apply the provisions of APB Opinion No. 25
       and provide pro forma net earnings and pro forma earnings per share
       disclosures for employee stock option grants made in fiscal 1996 and
       future years as if the fair-value-based method defined in SFAS No. 123
       had been applied. Mesa has elected to continue to apply the provisions of
       APB Opinion No. 25 and provide pro forma disclosure provision of SFAS No.
       123. (See note 6, "Stockholders' Equity.")

   n.  Use of Estimates

       Management of Mesa has made certain estimates and assumptions relating to
       the reporting of assets and liabilities and the disclosure of contingent
       assets and liabilities to prepare these financial statements in
       conformity with generally accepted accounting principles. Actual results
       could differ from those estimates.

    o. New Accounting Standards

       The Financial Accounting Standards Board ("FASB") has issued several new
       pronouncements that are not yet adopted by Mesa.

       In June 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive
       Income," to establish standards for reporting and display of
       comprehensive income (all changes in equity during a period except those
       resulting from investments by and distributions to owners) and its
       components in financial statements. This new standard, which will be
       effective for Mesa for the fiscal year ended September 30, 1999, is not
       currently anticipated to have a significant impact on Mesa's consolidated
       financial statements based on the current financial structure and
       operations of Mesa.

       In June 1997 the FASB issued SFAS No. 131, "Disclosures about Segments of
       an Enterprise and Related Information," to establish standards for
       reporting information about operating segments in annual financial
       statements, selected information about operating segments in interim
       financial reports and disclosures about products and services, geographic
       areas and major customers. This new standard, which will be effective for
       Mesa for the fiscal year ending September 30, 1999, will require Mesa to
       report financial information on the basis that is used internally for
       evaluating segment performance and deciding how to allocate resources to
       segments, which is currently anticipated to result in more detailed
       information in the notes to Mesa's consolidated financial statements than
       is currently required and provided.

2.   Marketable Securities

     Marketable securities available for sale are summarized as follows:

<TABLE>
<CAPTION>
                                                   SEPTEMBER 30
                                                  
                                              1998                    1997
                                   -----------------------      --------------------     
                                                     (IN THOUSANDS)
                                      COST         MARKET        COST        MARKET
                                      BASIS        VALUE

<S>                                 <C>            <C>          <C>          <C>   
     Equity securities --
     available for sale             $  --          $  --        $3,895       $8,690
</TABLE>


      Mesa invested $18.7 million in America West in 1994 and received Class A
     shares of common stock, Class B shares of common stock and warrants. In
     1996, Mesa sold a portion of its Class B common stock of America West,
     resulting in a realized gain of $22 million. In January 1998, Mesa sold its
     remaining investment in America West comprising Class A shares, Class B
     shares and warrants for Class B shares. Mesa received cash of approximately
     $11.1 million and recognized non-operating income of approximately $4.5
     million on the sale of these securities.

3.   Property and Equipment



                                       27
<PAGE>   28
     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                         SEPTEMBER 30
                                                    1998              1997
                                                       (IN THOUSANDS)

<S>                                             <C>               <C>       
        Flight equipment, substantially
          pledged                               $  386,300        $  494,755                           
        Other equipment                             12,952            17,206
        Construction in progress                       ---               221
        Leasehold improvements                       2,895             6,517
        Furniture and fixtures                       1,570             2,422
        Buildings                                   10,091             9,098
        Land                                           525               525
        Vehicles                                     1,422             2,258
                                                -----------       -----------
                                                   415,755           533,002
        Less accumulated depreciation              (83,781)          (92,112)
                                                -----------       -----------
        Net property and equipment              $  331,974        $  440,890
                                                ===========       ===========

</TABLE>


     At September 30, 1998, Mesa had 13 surplus Beech 1900D aircraft with a net 
     book value of approximately $40 million included in property and equipment,
     which were non-operating. Estimated losses to be realized upon the
     disposition of these aircraft are included in the restructuring provision
     (note 15). As of September 30, 1998 and 1997, Mesa had property and
     equipment consisting primarily of aircraft parts held for sale with a fair
     value of approximately $.9 million and $5.0 million, respectively, included
     in Other Assets.

4.   Long-Term Debt and Capital Leases

     Long-term debt and capital leases consist of the following:

<TABLE>
<CAPTION>
                                                                              SEPTEMBER 30
                                                                           1998           1997
                                                                              (IN THOUSANDS)

<S>                                                                     <C>               <C>
Notes payable to manufacturers: approximately $2.1 million
including interest due monthly through 2011. Notes provide
variable rates of interest ranging from 6.87% to 7.5% at
September 30, 1998. Secured by aircraft.                                $ 236,639         $ 319,442

Notes payable to manufacturers: principal and interest due in
September 1999. Notes provide fixed interest at 7.5%. Secured by
aircraft.                                                                  23,100              --   

Notes payable to banks: Approximately $93,500 due monthly plus
interest indexed to adjusted LIBOR rates (7.31% to 7.56% at
September 30, 1998) through 2006. Secured by aircraft.                      8,174            49,569


Capital leases: due in monthly installments through 1999;
interest indexed to prime rate. Secured by equipment                          507               974
                                                                        ---------         ---------
Total long-term debt and capital leases                                   268,420           369,985

Less current portion                                                      (33,945)          (31,786)
                                                                        ---------         ---------
Long-term debt and capital leases, excluding current portion            $ 234,475         $ 338,199
                                                                        =========         =========
</TABLE>







                                       28
<PAGE>   29
     Principal maturities of long-term debt and capital leases for each of the
next five years are as follows:

                YEAR ENDING SEPTEMBER 30:             (IN THOUSANDS)
                          1999                           $33,945
                          2000                            10,950
                          2001                            11,630
                          2002                            12,203
                          2003                            12,841
                       Thereafter                        186,852
                        


At September 30, 1998, Mesa had 86 aircraft with debt balances with maturities
through December 2011. During 1996, Raytheon Aircraft Credit Corporation
("RACC") provided financing on 69 Beech 1900D aircraft. In April 1998, Mesa
reached an agreement with RACC, to defer the monthly principle and interest
payments due on the aircraft for the months of May, June and July. The payments
were deferred by extending the financing terms for an additional three months.
In addition, RACC agreed to finance two Beech 1900 aircraft owned by Mesa for an
amount equal to the monthly payments due on 69 Beech 1900D aircraft for the
months of August, September and October 1998. Mesa then used the proceeds of the
financing for those monthly payments. The two aircraft were financed by RACC
with non-recourse, non-interest bearing loans and are in the process of being
sold. In September 1998, RACC refinanced from another lender an additional 11
Beech 1900D aircraft. The total financing by RACC is secured by the aircraft and
totals $260 million at September 30, 1998 with monthly payments of $2.1 million.
In November 1998, RACC refinanced from another lender three more Beech 1900D
aircraft.

In August 1998 Mesa reached an Agreement with RACC whereby RACC agreed to
purchase excess Beech 1900 aircraft parts from Mesa. As a result of disputes
between Mesa and RACC regarding the applicability and value of certain aircraft
parts under the Agreement, Mesa withheld its monthly payment on 83 Beech 1900
aircraft to RACC for the months of October and November 1998. In an Agreement
dated January 7, 1999, Mesa and RACC resolved the issues regarding these parts
and RACC accepted them in lieu of payment for the months of October and
November, 1998. To the extent that any Event of Default, as defined in the
Loans, may have occurred for the months of October and November 1998, they have
been deemed fully cured pursuant to the terms of the Agreement with RACC.

Mesa leases a flight simulator which has been recorded as a capital lease. This
simulator was sold subsequent to year end.

5.   Income Taxes

     Income tax expense (benefit) consists of the following:


<TABLE>
<CAPTION>
                                              SEPTEMBER 30
                                     1998          1997           1996
                  CURRENT:                  (IN THOUSANDS)
<S>                               <C>          <C>             <C>      
                        Federal   $ (6,162)    $(10,139)       $   7,912
                        State           --           --              727
                                  --------     --------        ---------
                                    (6,162)     (10,139)           8,639
                                  --------     --------        ---------
                  DEFERRED:                                 
                        Federal     (1,451)     (16,054)           8,457
</TABLE>
                                                              
                                                              

                                       29
<PAGE>   30
<TABLE>
<S>                    <C>         <C>          <C>   
           State           (149)     (4,385)      2,016 
                       ---------   ---------    -------
                         (1,600)    (20,439)     10,473
                       ---------   ---------    -------

                       $ (7,762)   $(30,578)    $19,112
                       =========   =========    =======
</TABLE>



     The actual income tax expense (benefit) differs from the "expected" tax
     expense (benefit) (computed by applying the U.S. federal corporate income
     tax rate of 35 percent in 1998, 1997 and 1996 to earnings (loss) before
     income taxes) as follows:

<TABLE>
<CAPTION>
                                                                           SEPTEMBER 30
                                                               1998            1997             1996
                                                            ---------        ---------        --------
                                                                          (IN THOUSANDS)

<S>                                                         <C>              <C>              <C>     
Computed "expected" tax expense (benefit)                   $(21,419)        $(27,711)        $ 17,332

Increase (reduction) in income taxes resulting from:

    Intangibles                                                   98               98               98

    Investment tax credits                                        --               --              (29)

    Tax exempt interest                                           --               (1)             (32)

    State taxes, net of federal tax benefit                   (2,203)          (2,850)           1,783


    Increase in valuation allowance
                                                              15,762               --               --

    Other                                                       --               (114)             (40)
                                                            --------         --------         --------

        Total income tax expense (benefit)                  $ (7,762)        $(30,578)        $ 19,112
                                                            ========         ========         ========
</TABLE>



     Elements of deferred income tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                                                      SEPTEMBER 30
         DEFERRED TAX ASSETS:                                      1998          1997
                                                                     (IN THOUSANDS)

<S>                                                            <C>          <C>       
             Inventory, parts and equipment allowances         $    3,566   $    2,485
                                                                               

             Accrued expenses                                        500           904

             Deferred credit                                          --           536

             Other accrued liabilities                               757           770

             Provisions not deductible for tax                    20,724        27,831
</TABLE>




                                       30
<PAGE>   31
                                                                            

<TABLE>
<S>                                                             <C>           <C>   
         AMT credit carryover                                        2,099        12,922
                                                                   
         Unrealized holding gain on marketable securities               --        (1,754)
                                                                   
         Benefit of net operating loss and tax credit               55,337        20,129
          carry forwards                                         ---------     ---------
                                                     
                                                                    82,983        63,823
                                                                   
         Valuation allowance                                       (15,500)       (1,000)
                                                                 ----------    ----------
         Net deferred tax assets                                    67,483        62,823
         Deferred tax liabilities:                                
           Depreciation and tax capital lease differences          (67,483)      (64,423)
                                                                 ------------- -----------
         Net deferred taxes                                      $      --     $  (1,600)
                                                                 ============= ===========
</TABLE>
                                                                

     Deferred tax assets include benefits estimated to be realized from the
     utilization of minimum tax credit carryforwards of $2.1 million which do
     not expire; from the utilization of investment tax credit carryforwards of
     $3.7 million which expire in 2000 through 2001; and net operating loss
     carryforwards of $41.9 million and $87.1 million which expire during 2012
     and 2018 respectively. The tax benefits from the investment tax credit and
     loss carryforwards, which were obtained in the acquisition of Air Midwest,
     Inc., have been recorded as a reduction of intangibles.

     Mesa's U.S. federal income tax returns for the tax years ended September
     30, 1993 and 1994 are being examined by the Internal Revenue Service (IRS).
     A final report of proposed adjustments, including a tax assessment of
     approximately $1.9 million, has been received from the IRS. Although the
     ultimate outcome of the examination cannot be predicted with certainty,
     management is of the opinion that adequate provision exists in the
     consolidated financial statements for the estimated impact of the
     examination.

6.   Stockholders' Equity

     At September 30, 1998, Mesa has the following stock-based compensation
     plans:

     a.  On June 2, 1992, Mesa adopted an employee stock option plan which
         provides for the granting of options to purchase up to 2,250,000 shares
         of Company common stock at the fair market value on the date of grant.
         Under this plan, 1,999,481 options have been granted. In 1996
         shareholders voted to reduce the number of options available for
         granting under the plan by 250,519. This eliminated all remaining
         options available for granting under this plan.

     b.  On December 1, 1995, Mesa adopted an additional employee stock option
         plan under the new management incentive program (Omnibus Plan) which
         provides for the granting of options to purchase up to 2,800,000 shares
         of Company common stock at the fair market value on the date of grant.
         On July 24, 1998, an additional 1,250,000 options were approved by the
         stockholders to be granted under this plan. Under the plan, options to
         2,399,797 shares are outstanding.

     c.  In March 1993, Mesa adopted a directors' stock option plan for outside
         directors. This plan provides for the grant of options for up to
         800,000 shares of Mesa's common stock at fair market value on the date
         of grant. This is a formula-based plan under which options to 150,000
         shares have been granted. In 1996 shareholders voted to reduce the
         number of options available for granting under the plan by 590,000.
         There are 60,000 remaining shares reserved for options under this plan.

     d.  On December 9, 1994, Mesa adopted an additional directors' stock
         option plan for outside directors. This plan provides for the grant of
         options for up to 50,000 shares of Mesa's common stock at fair market
         value on the date of grant. This is a formula-based plan under which
         options to 33,000 shares have been granted and are outstanding.

     e.  On June 1, 1998, Mesa adopted a Key Officer Stock Option Plan,
         which provided for the granting of options to purchase up to 1,600,000
         shares of Mesa common stock at the fair market value on the date of
         grant. Under this plan, 1,150,000 options have been granted.

     At September 30, 1998, there were 2,051,541 shares of common stock
     available for grant under these plans.




                                       31
<PAGE>   32
     Transactions involving stock options under these plans are summarized as
     follows:

<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30
                                          1998                        1997                           1996
                                  -----------------------      ---------------------       -----------------------
                                                 WEIGHTED                   WEIGHTED                      WEIGHTED
                                                  AVERAGE                   AVERAGE                       AVERAGE
                                  SHARES         EXERCISE      SHARES       EXERCISE       SHARES         EXERCISE
    FIXED OPTIONS                  (000)           PRICE        (000)         PRICE         (000)           PRICE

<S>                               <C>           <C>            <C>          <C>            <C>            <C>
Outstanding at                                                 
   beginning of year               3,365        $    9.93      3,389         $   10.30      1,625         $   11.38
Granted                            1,445             8.21        709              6.03      2,007              9.17
Exercised                            (69)            6.91        (16)             7.48       (195)             7.75
Canceled/Forfeited                  (345)           11.85       (717)             7.92        (48)             9.95
                                  ------                       -----                        -----

Outstanding at end of year         4,396        $    9.26      3,365         $    9.93      3,389         $   10.30
                                  ======                       =====                        =====
</TABLE>


     At September 30, 1998, the range of exercise prices was $4.88 - $17.25 and
     the weighted-average contractual life of all options was 9.2 years. The
     number of options exercisable at September 30, 1998 was 2,779,633, and the
     weighted-average exercise price of these options was $10.04.

     The per share weighted-average fair value of stock options granted during
     1998, 1997, and 1996 was $4.24, $3.24, and $4.97, respectively, on the date
     of grant using the Black-Scholes option pricing model with the following
     weighted-average assumptions: expected dividend yield 0.0%, risk-free
     interest rate of 4.5% in 1998 and 5.9% in 1997 and 1996, volatility of
     54.2% and an expected life of 6 years.

     Mesa applies APB Opinion No. 25 and related Interpretations in accounting
     for its plans. Accordingly, no compensation cost has been recognized for
     its fixed stock option plans. Had the compensation cost for Mesa's four
     stock-based compensation plans been determined consistent with SFAS No.
     123, Mesa's net earnings (loss) and earnings (loss) per share would have
     been changed to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                           SEPTEMBER 30
                                                1998          1997          1996
                                                ----          ----          ----
                                             
<S>                         <C>                <C>           <C>           <C> 
    Net earnings (loss)     As reported        $(53,434)     $(48,597)     $30,407
                                               ========      ========      =======
                            Pro forma          $(56,721)     $(50,643)     $27,422
                                               ========      ========      =======
                                       
                                             
    Earnings (loss)                          
      per share: Basic      As reported        $  (1.89)     $  (1.72)     $  1.01
                                               ========      ========      =======
                            Pro forma          $  (2.00)     $  (1.80)     $  0.91
                                               ========      ========      =======
                                       
                                             
    Earnings (loss)                          
      per share: Diluted    As reported        $  (1.89)     $  (1.72)     $  1.00
                                               ========      ========      =======
                            Pro forma          $  (2.00)     $  (1.80)     $  0.90
                                               ========      ========      =======
</TABLE>
                                          
                                               
     Pro forma net earnings (loss) does not reflect options granted prior to
     1996. Therefore, the full impact of calculating compensation cost for stock
     options under SFAS No. 123 is not reflected over the option vesting period
     and compensation cost for options granted prior to October 1, 1995 is not
     considered.

7.   Benefit Plans

     Mesa had sponsored two 401(k) plans, one for employees of WestAir Commuter
     and another for employees of MAI, Air Midwest and the non-airline
     operations, under which employees may contribute up to 15 percent of their
     annual compensation, as 




                                       32
<PAGE>   33
     defined. The WestAir plan was terminated in 1998. Mesa currently makes
     matching contributions of 50 percent of employee contributions up to 10
     percent of employee compensation. These plans are not available to certain
     union employees. Upon completing three years of service, the employee is 20
     percent vested in employer contributions and the remainder of the employer
     contributions vest 20 percent per year. Employees become fully vested in
     employer contributions after seven years of employment. Mesa has the right
     to terminate the 401(k) plan at any time.

     Contributions by Mesa to the above plans for the years ended September 30,
     1998, 1997 and 1996 were $1,485,618, $1,679,802, and $1,286,746,
     respectively.

     A management incentive program (Omnibus Plan), approved in September 1995
     and ratified by shareholders at the April 1996 annual meeting, has a cash
     incentive provision that ties the corporate officers to an increase in the
     earnings per share over the previous year, and the division/subsidiary
     executives to a specified rate of return on revenue. The total incentive
     expense under the Omnibus Plan for fiscal year 1997 and 1996 was
     approximately $191,000, and $1.9 million respectively. This plan was
     inactivated during 1998, and consequently, there was no expense under this
     plan for fiscal year 1998.

     On March 9, 1993, Mesa adopted an Employee Stock Bonus Plan which provides
     for employees of Mesa to receive shares of Common Stock in lieu of
     discretionary cash bonuses accrued each quarter. The custodian of the plan
     is empowered to determine the times at which and the conditions under which
     the plan, on behalf of participating employees, purchases shares of Common
     Stock. All purchases of Common Stock by the custodian will be made at
     prices approximating fair market value on the date of purchase, subject to
     the limitation that only 1,000,000 shares may be purchased over the life of
     the plan. The bonuses paid under the plan for the year ended September 30,
     1997 and 1996 were $348,693, and $969,937, respectively. No bonuses were
     paid under this program for fiscal year 1998. As of September 30, 1998, a
     total of 405,501 shares have been issued pursuant to the plan. As of May 9,
     1997 the Employee Stock Bonus Plan was discontinued and replaced with a
     monthly completion bonus based on improvements in percentage of on-time
     completed flights. This monthly completion bonus program was discontinued
     in the second calendar quarter of 1998.

8.   Lease Commitments

     At September 30, 1998, Mesa leased 45 aircraft under non-cancelable
     operating leases with remaining terms ranging up to 18.5 years. The
     aircraft leases require Mesa to pay all taxes, maintenance, insurance and
     other operating expenses. Mesa has the option to terminate certain of the
     leases at various times throughout the lease. At September 30, 1998 five of
     the CRJ aircraft are under interim financing agreements which are expected
     to be replaced by operating leases and accordingly are included in the
     minimum lease commitments below. Included as leased aircraft are seven
     Embraer Brasilia aircraft which are to be traded in on CRJ's. The
     manufacturer intends to reimburse Mesa for the lease cost until the
     aircraft are sold or leased elsewhere.

     Aggregate rental expense totaled $21.9 million (net of approximately $8
     million in aircraft rental payments recorded against the United Express
     code-share provision (note 15)), $43.6 million, and $59 million for the
     years ended September 30, 1998, 1997 and 1996 respectively.

     Future minimum lease payments under noncancelable operating leases are as
     follows:

<TABLE>
<CAPTION>

                      YEAR ENDING        (IN
                      SEPTEMBER 30     THOUSANDS)
                      ------------     ----------
                      <S>               <C>

                      1999              $38,666

                      2000               37,217

                      2001               36,152

                      2002               35,815

                      2003               35,126

                      Thereafter        351,977
</TABLE>
[CAPTION]

                                       33
<PAGE>   34
9.   Aircraft Acquisitions  and Commitments

     Mesa has ordered 32 CRJ aircraft for use in its America West Express
     operation in Phoenix, Arizona and Columbus, Ohio, and for its USAirways
     Express operations on the East Coast. As of December 18, 1998, Mesa had
     received 20 of the 32 CRJ aircraft on order and expects to take delivery of
     the remaining 12 by the end of 1999. Mesa has options for an additional 16
     CRJ aircraft with a delivery schedule of one per month beginning June 2000.
     The value of these 16 CRJ aircraft at listed prices is approximately $320
     million. The remaining seven Embraer Brasilia aircraft will be traded in on
     new CRJ aircraft on a one-for-one basis.

     Approximately $1.0 million was incurred as a one-time expense in the fourth
     quarter of fiscal 1997 related to the return of two Fokker 70 aircraft to
     Daimler-Benz.

     On January 9, 1997, one of Mesa's wholly owned subsidiaries, FCA, Inc.,
     entered into a distributorship agreement ("the Distributorship Agreement")
     with Sino Swearingen Aircraft Company, L. P. ("SSAC"). The Distributor
     Agreement grants FCA exclusive distribution rights in the states of
     Colorado, Louisiana, New Mexico and Texas for sale of SSAC aircraft and
     parts. The Distributorship Agreement also requires FCA to maintain a retail
     sales area, hangar and maintenance facility, with appropriate staff, and an
     adequate supply of spare parts at a general aviation airport strategically
     located within FCA's distribution area. FCA has agreed to purchase eight
     aircraft from SSAC with delivery dates beginning in the first quarter of
     1999 and ending in the first quarter of 2001. The current purchase price of
     each aircraft is approximately $4.2 million and is subject to change by
     SSAC. FCA is required to make progress payments to SSAC on each aircraft as
     follows: upon execution of the purchase agreement, $75,000; 365 days prior
     to delivery date, $50,000; 180 days prior to delivery date, $150,000; at
     delivery, approximately $3.9 million (based upon the current purchase
     price) reduced by the distributors' profit. In total, FCA is presently
     obligated to purchase approximately $33.5 million of SSCA aircraft at
     current prices. FCA is also obligated to purchase an adequate supply of
     parts to support aircraft sold in the distribution area. In February 1997,
     FCA made progress payments of $600,000 to SSAC against its purchase order
     for eight aircraft. SSAC has subsequently notified FCA that the delivery
     schedule for the eight aircraft will be delayed until the fourth quarter of
     calendar year 1999. The Distributorship Agreement is cancelable by mutual
     agreement of the parties or unilaterally by SSAC. The Chief Executive
     Officer of SSAC, Mr. Jack Braly, is a member of the Board of Directors of
     Mesa.

     Mesa has negotiated 10-year engine maintenance contracts with General
     Electric Aircraft Engines ("GE") for the CRJ and with Pratt and Whitney,
     Canada Aircraft Services ("PWC") for the Dash 8-200 aircraft. The GE engine
     maintenance contract provides coverage for the engines on the CRJ aircraft.
     The PWC contract provides coverage for all Dash 8-200 aircraft engines
     operated by Mesa. Both contracts provide for payment at the time of the
     repair event and a fixed dollar amount per flight hour, subject to
     escalation based on changes in the CPI, for the number of flight hours
     incurred since the previous event.



10.  Supplemental Disclosures of Cash Flow Information

<TABLE>
<CAPTION>
                                                    SEPTEMBER 30

                                              1998        1997       1996
                                                    (IN THOUSANDS)

<S>                                        <C>          <C>         <C>    
           Cash paid for interest          $14,743      $27,776     $12,047

           Cash paid for income taxes      $ 4,138      $ 2,600     $12,445
</TABLE>


     In 1996 Mesa purchased property and equipment upon which debt was incurred
     of approximately $280 million. In 1997 Mesa purchased property and
     equipment upon which debt was incurred totaling approximately $31.7
     million. In 1998 Mesa did not purchase any property or equipment upon which
     debt was incurred.





                                       34
<PAGE>   35
11.      Commitments and Contingencies

     Mesa and CCAIR, Inc., a regional airline based in Charlotte, North Carolina
     that operates under a code-sharing agreement with USAirways, announced in
     August 1998 that they had signed a letter of intent whereby Mesa would
     acquire CCAIR as a wholly owned subsidiary. The transaction would be valued
     at approximately $60 million (including $15 million of debt assumed) and is
     intended to be accounted for as a pooling of interests. The agreement
     contemplated by the Letter of Intent is an all stock transaction whereby
     Mesa would acquire all outstanding shares of CCAIR's common stock by
     issuing Mesa shares equivalent in value to $5.40 for each share of CCAIR
     common stock, subject to a maximum of .982 shares (at a Mesa share price of
     $5.50) and a minimum of .568 shares (at a Mesa share price of $9.50).
     Consummation of the transaction is subject to certain conditions, including
     completion of mutual due diligence, the negotiation and execution of a
     definitive merger agreement, receipt of regulatory approval, shareholder
     approval from both the CCAIR shareholders (as to the merger) and the Mesa
     shareholders (as to the issuance of Mesa shares in the merger), and
     satisfaction of closing conditions to be contained in a definitive purchase
     agreement.

     Mesa operates under a five-year agreement with the Air Line Pilots
     Association (ALPA) covering pilots at MAI and Air Midwest, Inc. The
     contract provides for industry-average pay, economic work rules and
     excellent opportunities for advancement. Air Midwest mechanics are
     represented by the International Association of Machinists (IAM) and flight
     attendants are represented by the Association of Flight Attendants (AFA).
     No other Mesa subsidiaries are parties to collective bargaining agreement
     or union contracts.

     During December 1995, the Federal Aviation Administration (FAA) announced
     rules which require commuter airlines with aircraft of 10 or more passenger
     seats operating under FAR Part 135 rules to begin operating those aircraft
     under FAR Part 121 regulations by the end of March 1997. Mesa was one of
     the largest regional airlines operating under FAR Part 135 regulations. In
     anticipation of Mesa's conversion to FAR Part 121 and to address issues
     raised in past inspections, the FAA began a special review of Mesa's
     operations in June 1996. As a result of a special review by the FAA of
     Mesa's operations, and other factors, a Consent Order was signed with the
     FAA in September 1996, assessing a compromise civil penalty of $500,000.
     Mesa paid $250,000 of the compromise amount, and the remaining $250,000 was
     waived after Mesa complied with provisions of the Consent Order. Mesa
     agreed to adopt operational standards that exceed the requirements of the
     Federal Aviation Regulations and to consolidate control of operational
     areas (maintenance, flight operation and training) under one central
     management team. Effective in March 1997, the FAA required that commuter
     airlines with aircraft of 10 or more passenger seats begin operating those
     aircraft under FAR Part 121 regulations instead of FAR Part 135. Mesa
     completed the transition to FAR Part 121 on the FAA's deadline. Company
     management is monitoring the cost increases resulting from compliance with
     FAR Part 121 regulations. The cost increase is primarily related to
     additional training, dispatch and maintenance procedures.

     During 1994, seven shareholder class action complaints were filed in the
     United States District Court for the District of New Mexico against Mesa,
     certain of its present and former corporate officers and directors, its
     independent auditor, and certain underwriters who participated in Mesa's
     June 1993 public offering of Common Stock. During October 1995, the court
     certified a class consisting of persons who purchased Mesa stock between
     January 28, 1993 and August 5, 1994. These complaints have been
     consolidated by court order, and, after the court granted in part a motion
     to dismiss in May 1996, a third amended consolidated complaint has been
     filed alleging that during the class period the defendants caused or
     permitted Mesa to issue publicly misleading financial statements and other
     misleading statements in the registration statement for the June 1993
     public offering, annual and quarterly reports to shareholders, press
     releases and interviews with securities analysts. In May 1998, Mesa entered
     into a memorandum of understanding with the plaintiffs to settle the
     litigation. While Mesa and its corporate officers and directors believe
     they have substantial and meritorious defenses against the plaintiff's
     allegations and have defended their position vigorously, they have agreed
     to a settlement to avoid ongoing litigation. The memorandum of
     understanding provides for a total of $8 million to be paid the class
     plaintiffs on behalf of the defendants. Mesa paid a substantial portion of
     the settlement. On December 1, 1998, the settlement was approved by the
     Court and the cases dismissed. Mesa used funds reserved for the defense of
     the case as its contribution towards the settlement.

     In June 1997, UAL filed a complaint in the United States District Court for
     the Northern District of Illinois against two subsidiaries of Mesa, Mesa
     Airlines, Inc. ("MAI") and WestAir Commuter Airlines, Inc. ("WestAir"),
     seeking a judicial declaration of the parties' rights and obligations under
     two separate written agreements, pursuant to which MAI and WestAir




                                       35
<PAGE>   36
     allegedly agreed to provide certain airline transportation services to UAL
     including the provision of scheduled air transportation services in certain
     areas of the United States under the service mark "United Express." UAL
     contends that, under these agreements, UAL has the right to "increase,
     decrease, or in any other way adjust the flight frequencies, or markets, or
     both" in certain airports currently serviced by WestAir and/or MAI. In
     January 1998, UAL amended its complaint to include damages related to MAI's
     purported breach of contract to provide specified levels of service in
     certain cities. On November 30, 1998, UAL filed a motion with the Court to
     amend its Complaint to include an additional $4 million in damages
     resulting from Mesa's alleged failure to remit baggage fees at Denver
     International Airport to UAL. The motion has not yet been considered. MAI
     and WestAir dispute the principal contentions in UAL's complaint, and
     unless a satisfactory negotiated resolution is achieved, intend to defend
     their positions vigorously. Furthermore, MAI and WestAir believe that UAL
     has breached its code-sharing agreements with the respective entities and
     have filed a counterclaim seeking to recover the substantial damages to the
     business of MAI and WestAir which have been incurred.

     In addition, Mesa and WestAir have filed suit against UAL and SkyWest
     Airlines. SkyWest was contracted to be Mesa's successor on the West Coast
     for the operation of United Express flights. The complaint alleges that
     SkyWest unlawfully interfered with Mesa's and WestAir's contracts with UAL.
     It further alleges improper conduct on the part of UAL and SkyWest in
     terminating markets under the Mesa agreement and in leading to the
     non-renewal of the WestAir agreement. Mesa is seeking substantial damages
     against each defendant.

     Mesa settled all claims with the aircraft and equipment lessors of WestAir
     for approximately $15.0 million. WestAir contributed approximately $11.2
     million toward the settlement and Mesa approximately $3.8 million. Mesa
     anticipates recovering $2.0 million from WestAir's receivables and deposits
     in the future. WestAir had operated 43 leased aircraft pursuant to the
     Partnership Agreement and upon cessation of United Express service had
     considerable liabilities for the remaining terms of the leases.

     Mesa is also a party to legal proceedings and claims which arise during the
     ordinary course of business.

     In the belief of management, based upon information at this time, the
     ultimate outcome of all the proceedings and claims pending against Mesa
     referred to above is not expected to have a material adverse effect on
     Mesa's consolidated financial position.

12.  Financial Instrument Disclosure

     The carrying amount of cash and cash equivalents, receivables, notes
     receivable and accounts payable approximate fair value due to the short
     maturity periods of these instruments. The fair value of marketable
     securities is based on quoted market prices (see note 2). At September 30,
     1998 the carrying value of Mesa's long-term debt approximates fair value.

13.  Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                  BALANCE AT          ADDITIONS
                                                 BEGINNING OF     CHARGED TO COSTS                      BALANCE AT END
                                                     YEAR           AND EXPENSES        DEDUCTIONS         OF YEAR
                                                (IN THOUSANDS)
<S>                                             <C>               <C>                   <C>             <C> 
        ALLOWANCE FOR OBSOLESCENCE DEDUCTED   
        FROM EXPENDABLE                       
        PARTS AND SUPPLIES                    
                                              
             September 30, 1998                  $2,631            $   --                (679)           $    1,952
                                                                                                       
             September 30, 1997                   1,350              1,281                 --                 2,631
                                                                                                       
             September 30, 1996                   1,200                150                 --                 1,350
</TABLE>



14.  Selected Quarterly Financial Data (Unaudited)




                                       36
<PAGE>   37
     The following table presents selected quarterly unaudited financial data
     (in thousands):

<TABLE>
<CAPTION>
                                      FIRST             SECOND            THIRD             FOURTH
    1998                             QUARTER            QUARTER          QUARTER           QUARTER
                                                                             
<S>                                  <C>               <C>               <C>               <C>      
Operating revenues                   $ 124,559         $ 119,633         $  99,522         $  79,827

Operating income (loss)                (35,827)          (11,448)              (38)            2,525

Net earnings (loss)                    (39,091)          (13,259)           (4,361)            3,278

Net earnings (loss) per share        $   (1.38)        $    (.47)        $    (.15)        $     .11
    (Basic and diluted)
</TABLE>



<TABLE>
<CAPTION>
                                 FIRST            SECOND             THIRD            FOURTH
    1997                        QUARTER           QUARTER           QUARTER           QUARTER
                                                           
<S>                            <C>               <C>               <C>               <C>      
Operating revenues             $ 121,412         $ 125,410         $ 129,443         $ 134,712

Operating income (loss)            4,650             4,570             1,772           (65,478)

Net loss                            (875)             (989)           (2,503)          (44,230)

Net loss per share             $   (0.03)        $   (0.03)        $   (0.09)        $   (1.57)
   (Basic and diluted)
</TABLE>


     The net earnings in the fourth quarter ended September 30, 1998 includes an
     income tax benefit of $5.3 million.

     The net loss in the fourth quarter ended September 30, 1997 and first
     quarter ended December 31, 1997, include a provision for the non-renewal of
     the WestAir code-share agreement and early termination of the Denver
     code-share agreement with UAL and other adjustments as discussed in note
     15.

15.  Other Operating Items

     Other operating items consist of the following expenses (income):

<TABLE>
<CAPTION>
                                                         SEPTEMBER 30
                                                      1998          1997
                                                        (IN THOUSANDS)

<S>                                                 <C>           <C> 
         Provision for non-renewal of the         
           WestAir and early termination of the
           Denver code-share agreements with UAL    $33,943        $72,100
         Cessation of Ft. Worth jet operations        4,000             --
         Settlement of shareholder lawsuit            2,500             --
         Settlement with manufacturer                    --         (5,220)
         Aircraft return provision                       --          1,004
                                                    -------       --------
                                                    $40,443        $67,884
                                                    =======       ========
</TABLE>


    The WestAir code-sharing agreement with UAL expired on May 31, 1998. On
    January 10, 1998, the Board of Directors approved a $72.1 million provision
    in Mesa's financial statements because Mesa had been notified by UAL that it
    would not renew WestAir's code-sharing agreement upon its expiration and
    management believed that it was probable that MAI would not operate in the
    Denver market for the duration of the Denver code-sharing agreement with
    UAL. The $72.1 million provision provided for 


                                       37
<PAGE>   38
     the estimated loss on the retirement or sale of aircraft, parts and
     equipment which are surplus to the needs of Mesa upon expiration and early
     termination of the code-share agreements. In addition, the provision
     includes an estimate for all other anticipated costs of discontinuation of
     the WestAir, Denver and Pacific Northwest operations. The restructuring
     provision consists of $26.3 million for the Denver intangibles; $39.5
     million for costs to sell or retire aircraft and related parts and
     equipment; and $6.3 million for severance and other costs.

     On January 22, 1998, Mesa received notice from UAL of the termination of
     the Company's code-sharing agreement covering the Denver system, Pacific
     Northwest and Los Angeles markets to be effective April 22, 1998. UAL also
     arbitrarily terminated WestAir's markets in the Pacific Northwest as of
     April 22, 1998. Mesa notified UAL that the Company considered the
     termination notice, although improper, wrongful and arbitrary, to be
     effective as of February 6, 1998, 15 days after issuance of the January
     22, 1998 termination notice in accordance with the termination provisions
     of the contract. All service to these markets was discontinued by April 22,
     1998. As a result of UAL's new code-sharing partners for these markets not
     needing the Company's aircraft and equipment associated with these
     operations, the Company recorded a $33.9 million loss provision in the
     quarter ended December 31, 1997, to provide for costs to dispose of certain
     aircraft, as well as other costs to shut down the Denver system.

     The Company recognized a loss provision of approximately $4.0 million
     during the quarter ended March 31, 1998, to provide for the expense of
     closing the facilities associated with the Ft. Worth independent jet
     operation and relocating the related aircraft.

     The restructuring provisions and the activity in the accruals during 1998,
     related to the UAL code-share agreements and the Ft. Worth operations, can
     be summarized as follows:

<TABLE>
<CAPTION>
                                                Provision                                           
                                 -----------------------------------------                          Balance
                                 September       December         March 31,       Provision        September
                                  30, 1997       30, 1997           1998           Utilized        30, 1998
                                  --------        --------        --------         --------         --------
<S>                               <C>            <C>              <C>             <C>              <C>   
Aircraft and related parts        $ 39,500        $ 21,943            --           $(34,172)        $ 27,271


Denver intangibles                  26,343            --              --            (26,343)            --


Severance and other                  6,257          12,000            --            (11,423)           6,834


Ft. Worth operations                  --              --             4,000           (3,723)             277
                                  --------        --------        --------         --------         --------


                                  $ 72,100        $ 33,943        $  4,000         $(75,661)        $ 34,382
                                  ========        ========        ========         ========         ========
</TABLE>



    Mesa believes these provisions will be adequate to cover the costs of
    terminating the WestAir agreement, shutting down the Denver United Express
    system and relocating aircraft from the Fort Worth operation.

    The aircraft return provision of $1.0 million in 1997 is related to the two
    Fokker-70 aircraft returned by Mesa to Daimler-Benz in August and September,
    1997.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

    None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names and ages of the directors and executive
officers of Mesa and certain additional information:



                                       38
<PAGE>   39
<TABLE>
<CAPTION>
                                                                                           DIRECTOR
     NAME                        AGE                 POSITION                               SINCE

<S>                              <C>         <C>                                           <C>
     Paul R. Madden               72         Chairman of the Board and Director              1997
     James E. Swigart             46         Vice Chairman of the Board and Director         1998
     Jonathan G. Ornstein         41         Chief Executive Officer and Director            1998
     Daniel J. Altobello          57         Director                                        1998
     Jack Braly                   57         Director                                        1993
     Herbert A. Denton            51         Director                                        1998
     Ronald R. Fogleman           56         Director                                        1998
     Maurice A. Parker            53         Director                                        1998
     Larry L. Risley              54         Chairman Emeritus and Director                  1983
     Blaine M. Jones              44         Treasurer and Chief Financial Officer           1998
     Steven E. Markhoff           32         Secretary                                       1998
</TABLE>


The directors hold office until the next annual meeting of shareholders and
until their successors are elected and qualified.

ITEM 11. EXECUTIVE COMPENSATION

The report of the Compensation Committee and the five-year Shareholder Return
Comparison and Performance Graph and related explanation and footnotes shall not
be incorporated by reference into any filings under the Securities Act of 1933,
as amended (the "Act"), or under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), notwithstanding statements made within Mesa's previous
filings that all subsequent filings, in whole or in part, include, without
limitation, this Form 10-K.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee consists of two non-employee directors of Mesa and
Jonathan Ornstein, and has responsibility for allocation of cash compensation
and options to senior executive officers of Mesa. The Compensation Committee
primarily administers Mesa's cash compensation plans, employee stock option
plans, and employee stock purchase plans. In those instances in which Rule 16b-3
of the Exchange Act requires grants or awards of stock options to be made by a
"disinterested" committee, the Compensation Committee is solely responsible for
the administration of such plans. The full Board of Directors regularly reviews
the Compensation Committee decisions relating to executive compensation.

The Board of Directors approved new levels of base compensation and related
structured bonus plan (the "Compensation Plan") and an Employee Stock Option
Plan (the "Stock Option Plan"), collectively the "Omnibus Plan," on December 1,
1995 and it was later approved by the shareholders of Mesa on April 8, 1996. The
Compensation Plan and Stock Option Plan were based on an independent
consultant's report on base pay and annual and long-term incentive compensation
with respect to 21 positions from four large carriers and three regional or
commuter airlines. In 1998, the compensation plan was terminated for all
executives with the exception of Jonathan Ornstein and Blaine Jones. The
employment contracts of Messrs. Ornstein and Jones provide for bonuses as
described herein. The Compensation Committee believes that the base salaries of
current executives are below industry average and is therefore studying
alternative compensation plans for the remainder of the executives.

Pursuant to the employment contracts of Messrs. Ornstein and Jones, salaries
have been capped. Bonuses are limited to prescribed percentages of base salary,
based upon the percentage growth in earnings per share ("EPS") of Mesa. Growth
in EPS is categorized at four levels: Minimum -- any growth in EPS during the
prior fiscal year; Threshold -- 7.0% to 12.9% growth in EPS; Target 13.0% to
17.9% growth in EPS; and Maximum -- 18.0% or greater growth in EPS.

Since salary and bonuses are capped, an integral part of the Plan is the
issuance of stock options on an annualized basis to key employees under the
Stock Option Plan.

The Stock Option Plan provides for options to be issued to officers and key
employees on an annualized basis, which vest at the rate of approximately
one-third per year. The options have a 10-year term and are subject to standard
option provisions such as are included 



                                       39
<PAGE>   40
in existing Company plans and exclude the requirement of continued employment
and provisions to deal with termination of employment due to retirement, death
or disability. Under the plan, options will be issued at the low selling price
of Mesa's Common Stock on the date of grant.

The total number of options granted under the Stock Option Plan in fiscal 1998
was 1,445,000.

The Compensation Committee believes that the issuance of stock options to
officers and key employees related to the appreciation of Mesa's Common Stock,
provides equitable incentives to increase the profitability of Mesa.

                                                  Compensation Committee

                                                  Daniel J. Altobello, Chairman

                                             

COMPENSATION SUMMARY OF EXECUTIVE OFFICERS

The following table sets forth certain compensation paid or accrued by Mesa
during the fiscal year ended September 30, 1998 to the Chief Executive Officer
and the four most highly compensated executive officers of Mesa whose total
annual salary and bonuses exceeded $100,000.

<TABLE>
<CAPTION>
                                                                              OTHER                                       
                                                                              ANNUAL                       ALL OTHER
                                                      SALARY     BONUS      COMPENSATION     OPTIONS    COMPENSATION (5)
NAME AND PRINCIPAL POSITION                  YEAR       ($)       ($)           ($)            (#)            ($)
---------------------------                  ----    --------  ---------   ------------      ---------  -------------
<S>                                          <C>    <C>        <C>         <C>               <C>        <C> 
Jonathan G. Ornstein                         1998    84,615(1)       ---          ---             ---             ---
    Chief Executive Officer                
Blaine M. Jones                              1998    46,154(2)       ---          ---             ---             ---
    Chief Financial Officer                
Arlo E. Clough                               1998   100,000          ---       17,666             ---             ---
     Senior Vice President of Maintenance                                
Archille R. Paquette                         1998   130,000     65,000(3)         ---             ---             ---
    President Air Midwest                  
Timothy L. Coon                              1998    18,462(2)       ---          ---             ---             ---
    Vice President USAirways               
Larry L. Risley                              1998   318,315          ---          ---             ---             ---
   Former Chairman of the Board              1997   350,000          ---          ---         150,000           4,750
   and Chief Executive Officer               1996   350,000      420,000          ---         150,000           4,750
J. Clark Stevens                             1998   239,852          ---          ---             ---             --- 
   Former Chief Operating Officer            1997   235,000          ---          ---          80,000           4,750
   and President                             1996   235,000      235,000          ---          80,000           4,750
</TABLE>
                                                                  
                              
----------
(1) Mr. Ornstein joined Mesa on May 1, 1998.  His annual salary is $200,000.

(2) Messrs. Jones and Coon commenced their employment with Mesa on May 1, 1998
and July 15, 1998, respectively. Each of their annual salaries is $100,000. 

(3) Bonuses are actually paid after the end of each fiscal year and reflect
performance for the prior year. As Mesa incurred a loss for fiscal 1997, no
bonuses were paid to its employees in fiscal 1998. Bonuses were paid to Mesa's
wholly owned subsidiary, Air Midwest, in fiscal 1998.

(4) As of December 31, 1998, Larry L. Risley owned 516,380 shares of Mesa Common
Stock and J. Clark Stevens owned no shares of Mesa Common Stock.

(5) These amounts represent both vested and non-vested Mesa contributions to the
individual named executive officer's 401(k) plan. Under Mesa's 401(k) plan,
employees may contribute up to 15% of their annual salary and bonus up to a
specified maximum. Mesa currently makes matching contributions equal to 50% of
employees' contribution (including officers) with a cap of 10% of the employees'
annual compensation. Contributions by Mesa to the 401(k) plans for the year
ended September 30, 1998 was $1,485,618.

OPTIONS



                                       40
<PAGE>   41
                        OPTION GRANTS IN LAST FISCAL YEAR


INDIVIDUAL GRANTS 
<TABLE>
<CAPTION>
                                         PERCENT OF                                      POTENTIAL REALIZABLE       
                          NUMBER OF         TOTAL                                        VALUE AT                  
                         SECURITIES       OPTIONS/                                       ASSUMED ANNUAL            
                         UNDERLYING         SARS                                         RATES OF                  
                          OPTIONS/       GRANTED TO                                        STOCK PRICE             
                            SARS          EMPLOYEES      EXERCISE OF                     APPRECIATION              
                           GRANTED         IN FISCAL     BASE PRICE      EXPIRATION      FOR OPTION TERM
       NAME                  (#)            YEAR          ($/SH)(4)         DATE            5% (5)              10% (5)
------------------     ---------------------------------------------------------------------------------  ------------
<S>                      <C>              <C>              <C>             <C>             <C>              <C>  
Jonathan G. Ornstein(1)    1,012,800        78.1%           6.60 - 8.25       03/12/08       19,769           4,800,232
Blaine M. Jones(2)           150,000        10.4%           7.82              04/12/08       48,671             772,307
Arlo E. Clough                    --          --             --                   --            --                   --
Archille R. Paquette              --          --             --                   --            --                   --
Timothy L. Coon                   --          --             --                   --            --                   --
Larry L. Risley                   --          --             --                   --            --                   --
J. Clark Stevens (3)          80,000          --            8.75              03/31/08          --              337,497
</TABLE>

(1) Of the total, 1,000,000 options were granted under the 1998 Key Officer
    Stock Option Plan, and 12,800 were granted under the 1994 Additional
    Directors' Stock Option Plan. The shares granted under the Key Officer
    Stock Option Plan are exercisable in annual 1/3 increments with 1/3
    vesting immediately on the grant date of March 12, 1998. The shares
    issued under the Additional Directors' Plan vest in annual 1/3
    increments beginning in January 1999.

(2) These options were granted under the 1998 Key Officer Stock Option Plan
    and are exercisable in annual 1/3 increments with 1/3 vesting
    immediately on the grant date of April 12, 1998.

(3) Subsequent to year-end, Mr. Stevens resigned as an officer of Mesa, and
    his options were purchased by the Company.

(4) The exercise price per share of the options listed in the table are not
    less than the fair market value of a share of Mesa Common Stock on the
    date of grant, as determined under the various Plans.

(5) Potential realizable values shown above represent the potential gains
    based upon annual compound stock price appreciation of 5% and 10% from
    September 30, 1998 through the full option term. The actual value
    realized, if any, on stock option exercises will be dependent upon
    overall market conditions and the future performance of Mesa and Mesa
    common stock. There is no assurance that the actual value realized will
    approximate the amounts reflected in this table.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                          NUMBER OF           
                                                                          UNEXERCISED             VALUE OF UNEXERCISED
                                                                          OPTIONS AT              IN-THE-MONEY OPTIONS
                                                                          SEPTEMBER 30, 1998      AT SEPTEMBER 30, 1998
                       SHARES ACQUIRED ON        VALUE REALIZED           EXERCISABLE/             EXERCISABLE/
         NAME          EXERCISE (#)                   ($)                 UNEXERCISABLE            UNEXERCISABLE (1)
------------------     ------------------        ------------------   ------------------          -----------------
<S>                    <C>                       <C>                  <C>                         <C> 
Jonathan G. Ornstein           --                      --              333,333/679,467                  0/0
Blaine M. Jones                --                      --               50,000/100,000                  0/0
Arlo E. Clough                 --                      --                     0/16,667                  0/0
Archille R. Paquette           --                      --               112,665/25,000                  0/0
Timothy L.Coon                 --                      --                          0/0                  0/0
Larry L. Risley                --                      --              950,000/800,000                  0/0
J. Clark Stevens (3)           --                      --              277,999/160,000                  0/0
</TABLE>

                                                       
EMPLOYMENT AGREEMENTS

Employment agreements have been entered into with the Chief Executive Officer,
Chief Financial Officer, Senior Vice-President of Maintenance and the President
of Air Midwest. The employment agreements with Jonathan Ornstein, Blaine Jones,
Arlo Clough and Archille Paquette provide for a term of two years from
inception.

COMPENSATION OF DIRECTORS

Each outside director receives a salary of $10,000 per year, along with the
payment of $1,000 per meeting attended in person; $500 for each committee
meeting attended in person; $500 for each telephone Board meeting attended and
reimbursement of all expenses associated with attending committee or Board of
Directors meetings. In addition, each outside director was granted 3,000 options
in fiscal 1998 pursuant to a stock option plan which automatically grants 3,000
options to each outside director on an annual basis.


                                       41
<PAGE>   42
Each outside director also participates in Mesa's Outside Directors Stock Option
Plan (the "Formula Plan"). Other than initial grants under this plan, grants
pursuant to the Formula Plan are contingent on improved returns for the
shareholders. Each outside director is granted 10,000 options as of the first
business day of the month following appointment to the Board. (The date of the
first grant of option is referred to herein as the "Initial Grant Date"). Each
outside director receives a grant of an additional 10,000 options (the "Second
Grant") if: (1) the director is still serving as a director of Mesa on the date
of the Second Grant; and (2) either the annual percentage increase in
shareholder return:

        (a) exceeds seven percent for any fiscal year within four years of the
Initial Grant Date (the "Target Percent"), provided that the effective date of
the grant shall be delayed until the second anniversary of the Initial Grant
Date if the Target Percent is achieved in the first two fiscal years following
the Initial Grant Date, or

        (b) exceeds an aggregate of 10 percent for any two consecutive fiscal
years within four years after the Initial Grant Date (the "Alternative Target
Percent").

Each outside director receives a third grant of an additional 10,000 options
(the "Third Grant") if: (1) the director is still serving as a director of Mesa
on the date of the Third Grant; and (2) either the annual percentage increase in
shareholder return:

        (a) exceeds seven percent for any fiscal year within six years of the
Initial Grant Date (the "Additional Target Percent"), provided that the
effective date of the grant shall be delayed until the fourth anniversary of the
Initial Grant Date if the Additional Target Percent is achieved in the first
four fiscal years following the Initial Grant Date, or

        (b) exceeds an aggregate of 10 percent for any two consecutive fiscal
years within six years after the Initial Grant Date (the "Additional Alternative
Target Percent").

Options granted to the outside directors on the Initial Grant Date become
exercisable one year after the Initial Grant Date and when the fair market value
(as defined by the Formula Plan) of the Common Stock has increased by three
percent from the Initial Grant Date.

All other options become exercisable immediately upon satisfaction of the
following conditions: six months after the date the option was granted, and when
the fair market value of the shares (as defined in the Formula Plan) has
increased by seven percent from the date the option was granted.

With respect to options granted on the Initial Grant Date, the exercise price of
the options granted under the Formula Plan may not be less than the fair market
value of the Common Stock on the date of the grant. With respect to options
granted on the Second Grant Date, the option price per share may not be less
than the fair market value of the shares on the last business day of the fiscal
year that Mesa achieves the Target Percent or the Alternative Target percent.
With respect to options granted on the Third Grant Date, the option price per
share may not be less than the fair market value of the shares as of the last
business day of the fiscal year that Mesa achieves the Additional Target percent
or the Additional Alternative Target percent.

Each director who is not an employee of Mesa also receives free travel on Mesa
for himself and certain family members and through arrangements with certain
major air carriers receives free or reduced-fare travel on those at no cost to
Mesa. Mesa believes that the directors' use of free air travel is "de minimis"
and therefore did not maintain any records of their travel during fiscal 1998.

Directors hold office until the next annual meeting of shareholders or until
their successors are elected and qualified.

During fiscal 1998 Mesa paid legal fees and expenses aggregating approximately
$250,000 incurred in connection with the defense of a shareholders' derivative
action on behalf of Mesa and a class action suit, as a nominal defendant, the
directors of Mesa, a former director and a non-director officer. The aggregate
amount paid has not been allocated between Mesa and the individuals who are
being indemnified pursuant to indemnification agreements and Nevada law.

COMPENSATION COMMITTEE INTERLOCKS

Daniel J. Altobello, Jack Braly and Jonathan Ornstein all served as members of
the Compensation Committee during the fiscal year 



                                       42
<PAGE>   43
ended September 30, 1998. Mr. Ornstein assumed the duties President and Chief
Executive Officer on May 1, 1998. Neither Mr. Altobello nor Mr. Braly held any
executive officer position or other employment with Mesa prior to or during such
service.

FIVE-YEAR SHAREHOLDER RETURN COMPARISON

Set forth below is a graph comparing the five-year cumulative shareholder return
on the Common Stock of Mesa Air Group, Inc. against the five-year cumulative
total return on the CRSP Index for NASDAQ Stock Market (US Companies) and the
CRSP Index for NASDAQ Stocks (SIC 4510-4519) (an index composed of NASDAQ
companies engaged in air transportation, and includes regional airlines whose
stocks trade on NASDAQ) for the periods indicated. The graph assumes an initial
investment of $100.00 and reinvestment of dividends, if any.

                Comparison of Five-Year Cumulative Total Returns
                             Performance Report for
                              Mesa Air Group, Inc.

Company Index:      CUSIP       Ticker Class      Sic         Exchange

                  59047910       MESA             4510         NASDAQ

                                FISCAL YEAR-END IS 09/30/98

Market Index:                   NASDAQ Stock Market (US Companies)

Peer Index:                     NASDAQ Stocks (SIC 4510-4519 US Companies)
                                Air Transportation, Scheduled, and Air Courier 
                                Services

<TABLE>
<CAPTION>

Date          Company Index     Market Index        Peer Index
<S>               <C>             <C>                <C>     
09/30/93          100.00          100.00             100.00
10/29/93          94.194          102.247            105.149
11/30/93          86.452          99.201             103.275
12/31/93          91.613          101.966            98.621
01/31/94          92.903          105.061            103.788
02/28/94          102.581         104.080            100.130
03/31/94          105.806         97.681             95.581
04/29/94          74.839          96.412             94.077
05/31/94          61.935          96.649             84.817
06/30/94          50.968          93.114             80.785
07/29/94          54.839          95.025             91.217
08/31/94          39.355          101.084            94.214
09/30/94          34.194          100.826            84.327
10/31/94          41.935          102.806            84.169
11/30/94          47.419          99.396             75.219
12/30/94          47.097          99.674             72.272
01/31/95          33.226          100.243            75.737
02/28/95          32.258          105.544            92.095
03/31/95          31.613          108.674            102.362
04/28/95          31.613          112.098            115.321
05/31/95          33.548          114.989            116.371
06/30/95          47.097          124.308            142.841
07/31/95          56.129          133.446            145.161
08/31/95          54.839          136.151            140.519
09/29/95          52.581          139.281            154.026
10/31/95          49.032          138.477            161.991
11/30/95          46.774          141.729            189.063
12/29/95          46.452          140.974            175.736
01/31/96          41.613          141.667            157.722
02/29/96          61.290          147.059            172.249
03/29/96          55.484          147.544            187.221
04/30/96          63.226          159.781            175.527
05/31/96          68.387          167.118            160.938
</TABLE>                                
                            

                                       43
<PAGE>   44
<TABLE>
<S>            <C>          <C>             <C>   
06/28/96       61.290       159.585         155.068
07/31/96       46.452       145.354         139.800
08/30/96       50.968       153.498         145.202
09/30/96       47.097       165.238         137.872
10/31/96       47.742       163.412         127.346
11/29/96       50.968       173.514         145.257
12/31/96       34.839       173.358         137.372
01/31/97       34.194       185.678         126.579
02/28/97       32.903       175.408         128.112
03/31/97       31.532       163.954         132.246
04/30/97       27.419       169.080         133.644
05/30/97       25.806       188.242         147.572
06/30/97       27.742       194.007         141.118
07/31/97       28.387       214.484         149.718
08/29/97       26.452       214.157         140.946
09/30/97       33.226       226.814         153.896
10/31/97       27.742       215.072         165.837
11/30/97       28.387       216.150         156.181
12/31/97       25.484       212.688         169.619
1/30/98        34.839       219.362         197.196
2/28/98        42.119       239.949         210.163
3/31/98        47.119       248.795         216.082
4/30/98        41.290       253.007         203.882
5/31/98        41.936       239.121         187.412
6/30/98        41.936       255.982         186.642
7/30/98        40.645       253.187         168.659
8/31/98        24.113       203.670         135.870
09/30/98       25.806       231.741         133.292
</TABLE>                          

The index level for all series was set to 100.0 on 09/30/93.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of Mesa's Common Stock as of December 18, 1998 by all directors, by
each person who is known by Mesa to be the beneficial owner of more than five
percent of the outstanding Common Stock, by each executive officer named in the
Summary Compensation Table and by all directors and executive officers as a
group.

The number of shares beneficially owned by each director or executive officer is
determined under rules of the Securities and Exchange Commission (the
"Commission"), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of December 18, 1998 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such powers with his or her spouse) with
respect to the shares set forth in the following table and the address of the
listed beneficial owner is that of Mesa Air. In certain instances, the number of
shares listed includes, in addition to shares owned directly, shares held by the
spouse or children of the person, or by a trust or estate of which the person is
a trustee or an executor or in which the person may have a beneficial interest.

<TABLE>
<CAPTION>
                                         NUMBER OF 
                                         SHARES OF
                                         COMMON
                                         STOCK
                                         BENEFICIALLY
                                         OWNED
                                                       VESTED                     
NAME AND ADDRESS OF BENEFICIAL OWNER     SHARES       OPTIONS (1)  TOTAL (1)    PERCENT (1)
------------------------------------     ------------ -----------  ---------    -----------
<S>                                      <C>          <C>          <C>          <C> 
Larry L. Risley                           516,380      800,000     1,316,380       4.6%
                                         
Jack Braly                                    --        19,000        19,000       0.1%
                                         
Paul R. Madden                              5,000       13,000        18,000       0.1%
</TABLE>
                                         
                                         
                                         
                                       44
<PAGE>   45
<TABLE>
<S>                                         <C>              <C>             <C>              <C>    
Jonathan G. Ornstein (2)                     343,664          333,333          681,997          2.4%
                                                                                             
Blaine M. Jones                                  264           50,000           50,264          0.2%
                                                                                             
James E. Swigart (3)                         110,214               --          110,214          0.3%
                                                                                             
Daniel J. Altobello                            1,000               --            1,000           --
                                                                                             
Herbert A. Denton                                 --               --               --           --
                                                                                             
Ronald R. Fogleman                                --               --               --           --
                                                                                             
Marucie A. Parker                                 --               --               --           --
                                                                                             
Arlo E. Clough                                    --               --               --           --
                                                                                             
Archille R. Paquette                              --          122,665          122,665          0.4%
                                                                                             
Timothy L. Coon                                   --               --               --          0.0%
                                                                                                ----
                                                                                             
J. Clark Stevens                                  --               --               --          0.0%
2400 State Highway 121, #2501                                                                   ----
Euless, TX  76039                                                                            
                                                                                             
Barlow Partners II, LP                      1,785,513              --        1,785,513          6.3%
1954 Airport Rd., Suite 200                                                                  
Atlanta, GA  30341                                                                           
                                                                                             
Wisconsin Investment Board                  3,190,000              --        3,190,000         11.2%
121 E. Wilson St.                                                                          
Madison, Wisconsin 53702                                                                  
                                                                                             
Alliance Capital                            2,881,500              --        2,881,500         10.2%
1345 Avenue of the Americas, 39th                                                            
Floor                                                                                        
New York, NY  10105                                                                          
                                                                                             
Franklin Advisers                           2,497,000              --        2,497,000          8.8%
777 Mariners Blvd.                                                                           
San Mateo, CA  94404                                                                         
                                                                                             
Dimension Fund                              1,989,400              --        1,989,400          7.0%
1299 Ocean Ave., 11th Floor                                                                  
Santa Monica, CA  90401-1038                                                                 
                                                                                             
All directors and officers as a             981,522          1,337,998       2,319,520          8.2%
group                                                                                        
</TABLE>



                                       45
<PAGE>   46
----------
(1) Includes options vested on September 30, 1998. This table is based upon
information supplied by executive officers, directors and principal stockholders
and Schedules 13D and 13G filed with the SEC.

(2) Includes 326,267 shares of stock held in the name of Barlow Partners II,
L.P. and 17,397 shares of stock held in the name of Barlow Management, Inc. Mr.
Ornstein is a limited partner in Barlow Partners II, L.P. and a shareholder in
Barlow Management Inc. As such, he claims beneficial ownership of the shares
held by these entities to the extent of his proportional interest therein.
Barlow Management also is general partner for Barlow Partners II.

(3) Includes 103,256 shares of stock held in the name of Barlow Partners II,
L.P. and 6,958 shares of stock held in the name of Barlow Management, Inc. Mr.
Swigart is a limited partner in Barlow Partners II, L.P. and a shareholder in
Barlow Management Inc. As such, he claims beneficial ownership of the shares
held by these entities to the extent of his proportional interest therein.
Barlow Management also is general partner for Barlow Partners II.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In August 1998, Mesa entered into a letter agreement with Barlow Partners, L.P.
("Barlow") pursuant to which Barlow agreed to act as CCAIR's exclusive financial
advisor with respect to possible business combinations involving CCAIR. Under
the terms of that agreement, Barlow is entitled to receive a fee from CCAIR
equal to two percent (2%) of the aggregate consideration paid by Mesa upon the
closing of the merger transaction. In addition, Barlow has an economic interest
in CCAIR by virtue of its ownership of CCAIR common stock. According to a
Schedule 13-D filed by Barlow with the Securities and Exchange Commission
("SEC"), Barlow owns 538,617 shares of CCAIR common stock and has the right to
acquire 150,000 shares of CCAIR common stock pursuant to the terms of a Warrant
previously issued to Barlow. Jonathan G. Ornstein, a member of the Board of
Directors and the President and Chief Executive Officer of Mesa, and James E.
Swigart, also a director of Mesa, are limited partners of Barlow. As a result of
their limited partnership interest in Barlow, Messrs. Ornstein and Swigart
report that they beneficially own 414,700 shares and 128,417 shares,
respectively, of the CCAIR common stock held by Barlow (excluding their interest
in the Warrant).

On January 9, 1997, one of Mesa's wholly owned subsidiaries, FCA, Inc., entered
into a distributorship agreement ("the Distributor Agreement") with Sino
Swearingen Aircraft Company, L. P. (SSAC) for the distribution of corporate
jets. The Distributor Agreement grants FCA distribution rights in the states of
Colorado, Louisiana, New Mexico and Texas for sale of SSAC aircraft and parts.
The Distributor Agreement also requires FCA to maintain a retail sales area,
hangar and maintenance facility, with appropriate staff, and an adequate supply
of spare parts at a general aviation airport strategically located within FCA's
distribution area. FCA has agreed to purchase eight aircraft from SSAC with
delivery dates beginning in the first quarter of 1999 and ending in the first
quarter of 2001. The current purchase price of each aircraft is approximately
$4.2 million and is subject to change by SSAC. FCA is required to make progress
payments to SSAC on each aircraft as follows: upon execution of the purchase
agreement, $75,000; 365 days prior to delivery date, $50,000; 180 days prior to
delivery date, $150,000; at delivery, approximately $3.9 million (based upon the
current purchase price) reduced by the distributors' profit. In total, FCA is
presently obligated to purchase eight aircraft for approximately $33.5 million
at current prices. FCA is also obligated to purchase an adequate supply of parts
to support aircraft sold in the distribution area. In February 1997, FCA made
progress payments of $600,000 to SSAC against its purchase order for eight
aircraft. SSAC has subsequently notified FCA that the delivery schedule for the
eight aircraft will be delayed until the fourth quarter of calendar year 1999.
The Distributor Agreement may be terminated by either party, upon 90 days'
notice, on January 9, 2000, or annually thereafter, and is cancelable by mutual
agreement of the parties or unilaterally by SSAC. The Chief Executive Officer of
SSAC, Mr. Jack Braly, is a member of the Board of Directors of Mesa Air Group,
Inc.

Mesa will enter into future business arrangements with related parties only
where such arrangements are approved by a majority of disinterested directors
and are on terms at least as favorable as available from unaffiliated third
parties.

PART IV

ITEM 14. EXHIBITS, SCHEDULES AND REPORTS ON FORM 8-K



                                       46
<PAGE>   47
(A) Documents filed as part of this report:

  1. Reference is made to consolidated financial statement schedules in item 8
hereof.

        2.     Reports on Form 8-K

               None

    3. Exhibits

               The following exhibits are either filed as part of this report or
are incorporated herein by reference from documents previously filed with the
Securities and Exchange Commission:

<TABLE>
<CAPTION>
   EXHIBIT                                                                      
    NUMBER               DESCRIPTION                                           REFERENCE
    ------               -----------                                           ---------
<S>                      <C>                                                   <C>     
     2.1                 Plan and Agreement of Merger of Mesa Air              Filed as Exhibit 2.1 to Registrant's Form 10-K for
                         Group, Inc. into Mesa Holding, Inc. dated             the fiscal year ended September 30, 1996,
                         September 16, 1996                                    incorporated herein by reference

     3.1                 Articles of Incorporation of Mesa Air Holdings,       Filed as Exhibit 3.1 to Registrant's Form 10-K for
                         Inc. dated May 28, 1996                               the fiscal year ended September 30, 1996,
                                                                               incorporated herein by reference

     3.2                 Bylaws of Mesa Air Group, Inc., as amended            Filed as Exhibit 3.2 to Registrant's Form 10-K for
                                                                               the fiscal year ended September 30, 1996,
                                                                               incorporated herein by reference

     4.1                 Form of Common Stock certificate                      Filed as Exhibit 4.5 to Amendment No. 1 to
                                                                               Registrant's Form S-18, Registration No. 33-11765
                                                                               filed March 6, 1987, incorporated herein by
                                                                               reference

     4.2                 Form of Common Stock certificate (issued after        Filed as Exhibit 4.8 to Form S-1, Registration No.
                         November 12, 1990)                                    33-35556 effective December 6, 1990,
                                                                               incorporated herein by reference

     4.8                 Form of Employee Non-Incentive Stock Option           Filed as Exhibit 4.12 to Registrant's Form 10-K for
                         Plan, dated as of June 2, 1992                        the fiscal year ended September 30, 1992,
                                                                               Commission File No. 33-15495, incorporated herein
                                                                               by reference

     4.9                 Form of Non-Incentive Stock Option issued under       Filed as Exhibit 4.13 to Registrant's Form 10-K for
                         Mesa Airlines, Inc. Employee Non-Incentive            the fiscal year ended September 30, 1992,
                         Stock Option Plan, dated as of June 2, 1992           Commission File No. 33-15495, incorporated herein
                                                                               by reference

    4.10                 Form of Mesa Airlines, Inc. Outside                   Filed as Exhibits 4.1, 4.2 and 4.3 to
                         Directors Stock Option Plan, dated as of              Registration No. 33-09395 effective August 1,
                         March 9, 1993                                         1996

    4.11                 Form of Stock Option issued under Mesa                Filed as Exhibit 4.4 to Registration No.
                         Airlines, Inc. Outside Director's Stock               33-09395 effective August 1, 1996
                         Option Plan, dated as of March 9, 1993

    4.12                 Form of Mesa Airlines, Inc. Additional                Filed as Exhibit 4.5 to Registration No.
                         Outside Directors Stock Option Plan dated as          33-09395 effective August 1, 1996
                         of December 9, 1994

    4.13                 Form of Non-Qualified Stock Option Issued             Filed as Exhibit 4.6 to Registration No.
                         Under Mesa Airlines, Inc. Additional Outside          33-09395 effective August 1, 1996
                         Directors' Stock Option Plan
</TABLE>


                                       47
<PAGE>   48
<TABLE>
<S>                      <C>                                                   <C>                    
    4.14                 Form of Mesa Air Group, Inc. Restated and             Filed as Exhibit 4.1 to Registration No.
                         Amended Employee Stock Option Plan dated              33-02791 effective April 24, 1996
                         April 23, 1996

    4.15                 Form of Non-Qualified Stock Option issued             Filed as Exhibit 4.2 to Registration No.
                         under Mesa Air Group, Inc. Restated and               33-02791 effective April 24, 1996
                         Amended Employee Stock Option Plan dated
                         April 23, 1996

    4.16                 Form of Qualified Stock Option issued under           Filed as Exhibit 4.3 to Registration No.
                         Mesa Air Group, Inc. Restated and Amended             33-02791 effective April 24, 1996
                         Employee Stock Option Plan dated April 23,
                         1996

    10.17                Agreement between Beech Aircraft Corporation          Filed as Exhibit 10.30 to Form S-1,
                         and Mesa Airlines, Inc., dated April 30, 1990         Registration No. 33-35556 effective December 6,
                                                                               1990, incorporated herein by reference

    10.18                Sublease Agreement between Air Midwest, Inc.          Filed as Exhibit 10.32.1 to Form S-1,
                         and Mesa Airlines, Inc., dated April 27,              Registration No. 33-35556 effective December 6,
                         1990 for Embraer Brasilia aircraft 120.180            1990, incorporated herein by reference

    10.20                Agreement between Air Midwest, Inc. and Mesa          Filed as Exhibit 10.32.3 to Form S-1,
                         Airlines, Inc., dated February 27, 1990, for          Registration No. 33-35556 effective December 6,
                         purchase of four Embraer Brasilia aircraft            1990, incorporated herein by reference

    10.21                Letter Agreement between McDonnell Douglas            Filed as Exhibit 10.32.4 to Form S-1,
                         Finance Corporation, Air Midwest, Inc. and            Registration No. 33-35556 effective December 6,
                         Mesa Airlines, Inc., dated March 19, 1990,            1990, incorporated herein by reference
                         as amended, regarding lease and sublease of
                         four Embraer Brasilia aircraft

    10.22                Sublease Agreement between Air Midwest Inc.           Filed as Exhibit 10.32.5 to Form S-1,
                         and Mesa Airlines, Inc., dated July 26,               Registration No. 33-35556 effective December 6,
                         1990, for Embraer Brasilia aircraft 120.193           1990, incorporated herein by reference

    10.23                Lease Agreement between McDonnell Douglas             Filed as Exhibit 10.32.6 to Form S-1,
                         Finance Corporation and Mesa Airlines, Inc.,          Registration No. 33-35556 effective December 6,
                         dated July 26, 1990, for Embraer Brasilia             1990, incorporated herein by reference
                         aircraft 120.193

    10.24                Sublease Agreement between Air Midwest Inc.           Filed as Exhibit 10.32.7 to Form S-1,
                         and Mesa Airlines, Inc., dated September 26,          Registration No. 33-35556 effective December 6,
                         1990, for Embraer Brasilia aircraft 120.203           1990, incorporated herein by reference

    10.25                Lease Agreement between McDonnell Douglas             Filed as Exhibit 10.32.8 to Form S-1,
                         Finance Corporation and Mesa Airlines, Inc.,          Registration No. 33-35556 effective December 6,
                         dated September 26, 1990, for Embraer                 1990, incorporated herein by reference
                         Brasilia aircraft 120.203

    10.27                Expanded Partner Agreement between United             Filed as Exhibit 19.3 to Registrant's Form 10-Q
                         Air Lines, Inc., and Mesa Airlines, Inc.,             for the quarterly period ended June 30, 1990,
                         dated February 15, 1990                               Commission File No. 0-15495, incorporated
                                                                               herein by reference

    10.29                Form of Directors' and Officers'                      Filed as Exhibit 10.41 to Form S-1,
                         Indemnification Agreement                             Registration No. 33-35556 effective December 6,
                                                                               1990, incorporated herein by reference

    10.31                Agreement Relating to the Settlement of               Filed as Exhibit 10.45 to Form S-1,
                         Interline Accounts through Airlines Clearing          Registration No. 33-35556 effective December 6,
                         House, Inc., between Airlines Clearing                1990, incorporated herein by reference
                         House, Inc. and Mesa Airlines, Inc., dated
                         September 2, 1981

    10.32                Agreement between Beech Aircraft Corporation          Filed as Exhibit 10.42 to Form 10-K for fiscal
                         and Mesa Airlines, Inc., dated September 18,          year ended September 30, 1991, Commission File
</TABLE>



                                       48
<PAGE>   49
<TABLE>
<S>                      <C>                                                   <C>                                      
                         1991                                                  No. 0-15495, incorporated herein by reference

    10.33                Agreement between USAirways, Inc. and Air             Filed as Exhibit 10.43 to Form 10-K for fiscal
                         Midwest, Inc.                                         year ended September 30, 1991, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.34                Agreement between USAirways, Inc. and                 Filed as Exhibit 10.44 to Form 10-K for fiscal
                         FloridaGulf Airlines, Inc.                            year ended September 30, 1991, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.35                Sublease agreement between Trans States               Filed as Exhibit 10.45 to Form 10-K for fiscal
                         Airlines, Inc. and Air Midwest, Inc.                  year ended September 30, 1992, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.37                Agreement between Beech Aircraft                      Filed as Exhibit 10.47 to Form 10-K for fiscal
                         Corporation, Beech Acceptance Corporation,            year ended September 30, 1992, Commission File
                         Inc. and Mesa Airlines, Inc., dated August            No. 0-15495, incorporated herein by reference
                         21, 1992

    10.38                Agreement between America West Airlines,              Filed as Exhibit 10.48 to Form 10-K for fiscal
                         Inc. and Mesa Airlines, Inc.                          year ended September 30, 1992, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.39                Agreement between United Air Lines, Inc. and          Filed as Exhibit 10.49 to Form 10-K for fiscal
                         WestAir Commuter Airlines, Inc. (WestAir)             year ended September 30, 1992, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.40                Plan and Agreement to Merge between Mesa              Filed as Exhibit A to Form S-4 Registration No.
                         Airlines, Inc., Mesa Acquisition Corporation          33-45638, effective April 17, 1992, incorporated
                         and WestAir Holding, Inc., dated February 7,          herein by reference 1992.

    10.41                Certificate of Public Convenience and                 Filed as Exhibit 10.1(a) to WestAir Holding,
                         Necessity for WestAir Commuter Airlines, Inc.         Inc.'s Registration Statement on Form S-1,
                                                                               Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.42                Air Carrier Operating Certificate for WestAir         Filed as Exhibit 10. to WestAir Holding, Inc.'s
                                                                               Registration Statement on Form S-1, Commission
                                                                               File No. 33-24316, incorporated herein by
                                                                               reference

    10.46                Original Agreement to Lease dated as of               Filed as Exhibit 10.44 to WestAir Holding,
                         April 27, 1987 between NPA, Inc. ("NPA") and          Inc.'s Registration Statement on Form S-1,
                         British Aerospace, Inc. ("BAe") with a                Commission File No. 33-24316, incorporated
                         Letter to FG Holdings, Inc. ("FGH") dated             herein by reference
                         March 11, 1988 and Amendment No. 1 to
                         Agreement to Lease dated as of March 3, 1988
                         between BAe and FGH

    10.47                Side Letter Agreement to NPA from JACO dated          Filed as Exhibit 10.48 to WestAir Holding,
                         June 4, 1987                                          Inc.'s Registration Statement on Form S-1,
                                                                               Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.49                Employment Agreement dated as of September            Filed as Exhibit 10.51(b) to WestAir Holding,
                         1, 1988 between WestAir and Maurice J.                Inc.'s Registration Statement on Form S-1,
                         Gallagher Jr.                                         Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.50                Aviation Land and Building Lease and                  Filed as Exhibit 10.164 to the Pre-effective
                         Agreement between City of Fresno, California          Amendment No. 1, filed October 19, 1988, to
                         and WestAir dated January 7, 1986                     WestAir Holding, Inc.'s Registration Statement
                                                                               on Form S-1, Commission File No. 33-24316,
                                                                               incorporated herein by reference

    10.51                Airport Operating Permit between Airport              Filed as Exhibit 10.67 to WestAir Holding,
                         Commission of City and County of San                  Inc.'s Registration Statement on Form S-1,
</TABLE>



                                       49
<PAGE>   50
<TABLE>
<S>                      <C>                                                   <C>
                         Francisco and WestAir                                 Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.58                Promissory Note to Textron for spare parts            Filed as Exhibit 10.80 to WestAir Holding,
                         as executed by WestAir, dated December 30,            Inc.'s Form 10-K dated December 31, 1988,
                         1988                                                  Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.59                Agreement to lease Jetstream model 3101               Filed as Exhibit 2.1 to WestAir Holding, Inc.'s
                         aircraft and Jetstream model 3201                     Form 8-K filed June 8, 1989, Commission
                         aircraft File between BAe and WestAir,                No. 33-24316,incorporated herein by reference
                         dated May 11, 1989


    10.60                Amendment to Agreement to Lease dated May             Filed as Exhibit 10.38 to WestAir Holding,
                         11, 1989 between WestAir and BAe, dated               Inc.'s Form 10-K for the year ended December
                         February 15, 1990                                     31, 1989, Commission File No. 33-24316,
                                                                               incorporated herein by reference

    10.61                Amended and Restated Stock Purchase                   Filed as Exhibit 10.42(a) to WestAir Holding,
                         Agreement, dated September 30, 1991 among             Inc.'s Form 10-K for the year ended December
                         WestAir Holding, Inc., WestAir Commuter               31, 1991, Commission File No. 33-24316,
                         Airlines, Inc. and Atlantic Coast Airlines,           incorporated herein by reference
                         Inc., relating to the sale of the Atlantic
                         Coast division of WestAir Commuter Airlines,
                         Inc.

    10.65                Agreement of Purchase and Sales of Assets by          Filed as Exhibit 10.90 to Mesa Airlines, Inc.
                         and among Crown Airways, Inc., Phillip R.             Form 10-K for the year ended September 30,
                         Burnaman, A. J. Beiga and Mesa Airlines,              1994, Commission File No. 0-15495
                         Inc., dated as of December 16, 1993

    10.66                Supplemental Agreement  No. 9/03/94                   Filed as Exhibit 10.66 to Mesa Airlines, Inc.
                         Beechcraft 1900 D Airliner Acquisition                Form 10-K for the year ended September 30,
                         Master Agreement between Mesa Airlines,               1994, Commission File No. 0-15495
                         Inc., Beech Aircraft Corporation and Beech
                         Acceptance Corporation, Inc., dated as of
                         September 23, 1994

    10.67                Form of Lease Agreement between Beech                 Filed as Exhibit 10.67 to Mesa Airlines, Inc.
                         Acceptance Corporation, Inc. and Mesa                 Form 10-K for the year ended September 30,
                         Airlines, Inc.,  negotiated September 30,             1994, Commission File No. 0-15495
                         1994 for all prospective 1900 D Airliner
                         leases.

    10.68                Asset Purchase Agreement dated July 29, 1994          Filed as Exhibit 10.68 to Mesa Airlines, Inc.
                         among Pennsylvania Commuter Airlines, Inc.,           Form 10-K for the year ended September 30,
                         d.b.a. Allegheny Commuter Airlines, USAirways         1994, Commission File No. 0-15495
                         Leasing and Services, Inc., and Mesa
                         Airlines, Inc.

    10.69                Letter Agreement in Principle dated as of             Filed as Exhibit 10.69 to Mesa Airlines, Inc.
                         October 16, 1994 among Air Wisconsin, Inc.,           Form 10-K for the year ended September 30,
                         United Air Lines Inc. and Mesa Airlines,              1994, Commission File No. 0-15495
                         Inc. (Certain portions deleted pursuant to
                         request for confidential treatment)
                         (Referred to erroneously as Exhibit 10.94 in
                         letter asking for confidential treatment to
                         Securities and Exchange Commission dated
                         12-23-94 from Chapman & Cutler)

    10.70                Subscription Agreement between AmWest                 Filed as Exhibit 10.70 to Mesa Airlines, Inc.
                         Partners, L.P. and Mesa Airlines, Inc. dated          Form 10-K for the year ended September 30,
                         as of June 28, 1994                                   1994, Commission File No. 0-15495

    10.71                Omnibus Agreement                                     Filed as Exhibit 10.71 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
</TABLE>


                                       50
<PAGE>   51
<TABLE>
<S>                      <C>                                                   <C>    
                                                                               1994, Commission File No. 0-15495

    10.72                Aircraft Purchase and Sale Agreement                  Filed as Exhibit 10.72 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.73                Expendable and Rotable Spare Parts and Sale           Filed as Exhibit 10.73 to Mesa Air Group, Inc.
                         Agreement                                             Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.74                United Express Agreement Amendment                    Filed as Exhibit 10.74 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.75                Side Letter Agreement                                 Filed as Exhibit 10.75 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.76                First Amendment to Omnibus Agreement                  Filed as Exhibit 10.76 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.77                Operating Lease Agreement                             Filed as Exhibit 10.77 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.78                Item 3. Legal Proceedings - Form 10-K dated           Filed as Exhibit 10.78 to Mesa Air Group, Inc.
                         September 30, 1994                                    Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.79                Purchase Agreement B95-7701-PA-200 between            Filed as Exhibit 10.79 to Mesa Air Group, Inc.
                         Bombardier Inc. and Mesa Airlines, Inc.               Form 10-Q for the quarter ended March 31, 1995,
                                                                               Commission File No. 0-15495

    10.81                Letter of Understanding between Mesa Air              Filed as Exhibit 10.81 to Mesa Air Group, Inc.
                         Group, Inc. and Raytheon Aircraft Company             Form 10-Q for the quarter ended March 31, 1996,
                         (RAC) dated April 12, 1996.                           Commission File No. 0-15495

    10.82                Supplemental Agreement No. 05/22/96,                  Filed as Exhibit 10.82 to Mesa Air Group, Inc.
                         Beechcraft 1900D Airliner Acquisition Master          Form 10-Q for the quarter ended March 31, 1997,
                         Agreement between Mesa Air Group, Inc.,               Commission File No. 0-15495
                         Raytheon Aircraft Company and Raytheon
                         Aircraft Credit Corporation

    10.83                Bombardier Regional Aircraft Division                 Filed as Exhibit 10.83 to Mesa Air Group, Inc.
                         Purchase Agreement CRJ-0351 between                   Form 10-Q for the quarter ended December 31,
                         Bombardier Inc. and Mesa Air Group, Inc.              1996, Commission File No. 0-15495

    10.84                Aircraft Option Exercise B97-7701-RJTL-3492L          Filed as Exhibit 10.84 to Mesa Air Group, Inc.
                         dated as of August 15, 1997 between Mesa Air          Form 10-Q for the quarter ended December 31,
                         Group, Inc. and Bombardier Inc.  (Request             1997, Commission File No. 0-15495
                         for confidential treatment submitted to SEC.)

    10.85                Bombardier Regional Aircraft Division                 Filed as Exhibit 10.85 to Mesa Air Group, Inc.
                         Settlement Agreement B97-7701-RJTL-3493L              Form 10-Q for the quarter ended December 31,
                         dated as of August 15, 1997 between Mesa Air          1997, Commission File No. 0-15495
                         Group, Inc. and Bombardier Inc.  (Request
                         for confidential treatment submitted to SEC.)

    10.86                Service Agreement dated as of November 11,            Filed as Exhibit 10.86 to Mesa Air Group, Inc.
                         1997 between Mesa Airlines, Inc. and US               Form 10-Q for the quarter ended December 31,
                         Airways, Inc. (Request for confidential               1997, Commission File No. 0-15495
                         treatment submitted to SEC.)


    10.87                Letter Agreement dated as of March 26, 1998 between   Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                         Mesa Airlines, Inc. and America West Airlines,        10-Q for the quarter ended March 31, 1997,
                         Inc.  (Request for confidential treatment submitted   Commission File No. 0-15495.
                         to SEC.)
</TABLE>


                                       51
<PAGE>   52
<TABLE>
<S>                     <C>                                                   <C> 
    10.88               Employment Agreement dated as of March 13, 1998,      Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                        between Mesa Air Group, Inc. and Jonathan G.          10-Q for the quarter ended March 31, 1998,
                        Ornstein                                              Commission File No. 0-15495.

    10.89               Form of Employment Agreement dated as of January 5,   Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                        1998 entered into by and between Mesa Air Group,      10-Q for the quarter ended March 31, 1998,
                        Inc. and Gary E. Risley, W. Stephen Jackson, J.       Commission File No. 0-15495.
                        Clark Stevens and various other officers of Mesa
                        and its subsidiaries

    10.90               Letter Agreement dated as of February 4, 1998         Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                        between Mesa Air Group, Inc. and Larry L. Risley      10-Q for the quarter ended March 31, 1998,
                                                                              Commission File No. 0-15495.

     23.1               Independent Auditors' Consent of KPMG LLP             Filed herewith
</TABLE>


Pursuant to the requirements of Section 13 or 15(d) 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.

                             MESA AIR GROUP, INC.

                             By:     /s/ Jonathan G. Ornstein
                                     -------------------
                                    Jonathan G. Ornstein
                                    President and Chief Executive Officer

                             By:     /s/ Blaine M. Jones
                                    ----------------------
                                    Blaine M. Jones
                                    Chief Financial Officer and Treasurer


Dated:       January 11, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


<TABLE>
<S>                                      <C>                                                  <C> 
    /s/ Paul R. Madden                   Chairman of the Board and Director                   January 11, 1999
    ------------------                                                                    
    Paul R. Madden                                                                        
                                                                                          
    /s/ James E. Swigart                 Vice Chairman of the Board and  Director             January 11, 1999
    --------------------                                                                   
    James E. Swigart                                                                      
                                                                                          
    /s/ Jonathan G. Ornstein             President and Chief Executive Officer and Director   January 11, 1999
    ------------------------                                                              
    Jonathan G. Ornstein                                                                  
                                                                                          
    /s/ Blaine M. Jones                  Chief Financial Officer and Treasurer                January 11, 1999
    -------------------                                                                   
    Blaine M. Jones                                                                       
                                                                                          
    /s/ Steven E. Markhoff               Secretary                                            January 11, 1999
    ----------------------                                                                
    Steven E. Markhoff                                                                    
                                                                                          
    /s/ Daniel J. Altobello              Director                                             January 11, 1999
    -----------------------                                                               
    Daniel J. Altobello                                                                   
                                                                                          
    /s/ Jack Braly                       Director                                             January 11, 1999
    --------------                                                                        
    Jack Braly                                                                            
                                                                                          
    /s/ Herbert A. Denton                Director                                             January 11, 1999
    ---------------------                                                                 
    Herbert A. Denton                                                                     
</TABLE>


                                       52
<PAGE>   53
<TABLE>
<S>                                      <C>                                              <C> 
    /s/ Ronald R. Fogleman               Director                                         January 11, 1999
    ----------------------                                                                
    Ronald R. Fogleman                                                                    
                                                                                          
    /s/ Maurice A. Parker                Director                                         January 11, 1999
    ---------------------                                                                 
    Maurice A. Parker                                                                     
                                                                                          
    /s/Larry L. Risley                   Chairman Emeritus of the Board and Director      January 11, 1999
    ------------------                                                                    
    Larry L. Risley                                                                       
</TABLE>
                                                                      



                                       53
<PAGE>   54
                                 EXHIBIT INDEX



<TABLE>
<CAPTION>
   EXHIBIT                                                                      
    NUMBER               DESCRIPTION                                           REFERENCE
    ------               -----------                                           ---------
<S>                      <C>                                                   <C>     
     2.1                 Plan and Agreement of Merger of Mesa Air              Filed as Exhibit 2.1 to Registrant's Form 10-K for
                         Group, Inc. into Mesa Holding, Inc. dated             the fiscal year ended September 30, 1996,
                         September 16, 1996                                    incorporated herein by reference

     3.1                 Articles of Incorporation of Mesa Air Holdings,       Filed as Exhibit 3.1 to Registrant's Form 10-K for
                         Inc. dated May 28, 1996                               the fiscal year ended September 30, 1996,
                                                                               incorporated herein by reference

     3.2                 Bylaws of Mesa Air Group, Inc., as amended            Filed as Exhibit 3.2 to Registrant's Form 10-K for
                                                                               the fiscal year ended September 30, 1996,
                                                                               incorporated herein by reference

     4.1                 Form of Common Stock certificate                      Filed as Exhibit 4.5 to Amendment No. 1 to
                                                                               Registrant's Form S-18, Registration No. 33-11765
                                                                               filed March 6, 1987, incorporated herein by
                                                                               reference

     4.2                 Form of Common Stock certificate (issued after        Filed as Exhibit 4.8 to Form S-1, Registration No.
                         November 12, 1990)                                    33-35556 effective December 6, 1990,
                                                                               incorporated herein by reference

     4.8                 Form of Employee Non-Incentive Stock Option           Filed as Exhibit 4.12 to Registrant's Form 10-K for
                         Plan, dated as of June 2, 1992                        the fiscal year ended September 30, 1992,
                                                                               Commission File No. 33-15495, incorporated herein
                                                                               by reference

     4.9                 Form of Non-Incentive Stock Option issued under       Filed as Exhibit 4.13 to Registrant's Form 10-K for
                         Mesa Airlines, Inc. Employee Non-Incentive            the fiscal year ended September 30, 1992,
                         Stock Option Plan, dated as of June 2, 1992           Commission File No. 33-15495, incorporated herein
                                                                               by reference

    4.10                 Form of Mesa Airlines, Inc. Outside                   Filed as Exhibits 4.1, 4.2 and 4.3 to
                         Directors Stock Option Plan, dated as of              Registration No. 33-09395 effective August 1,
                         March 9, 1993                                         1996

    4.11                 Form of Stock Option issued under Mesa                Filed as Exhibit 4.4 to Registration No.
                         Airlines, Inc. Outside Director's Stock               33-09395 effective August 1, 1996
                         Option Plan, dated as of March 9, 1993

    4.12                 Form of Mesa Airlines, Inc. Additional                Filed as Exhibit 4.5 to Registration No.
                         Outside Directors Stock Option Plan dated as          33-09395 effective August 1, 1996
                         of December 9, 1994

    4.13                 Form of Non-Qualified Stock Option Issued             Filed as Exhibit 4.6 to Registration No.
                         Under Mesa Airlines, Inc. Additional Outside          33-09395 effective August 1, 1996
                         Directors' Stock Option Plan
</TABLE>
<PAGE>   55
<TABLE>
<S>                      <C>                                                   <C>                    
    4.14                 Form of Mesa Air Group, Inc. Restated and             Filed as Exhibit 4.1 to Registration No.
                         Amended Employee Stock Option Plan dated              33-02791 effective April 24, 1996
                         April 23, 1996

    4.15                 Form of Non-Qualified Stock Option issued             Filed as Exhibit 4.2 to Registration No.
                         under Mesa Air Group, Inc. Restated and               33-02791 effective April 24, 1996
                         Amended Employee Stock Option Plan dated
                         April 23, 1996

    4.16                 Form of Qualified Stock Option issued under           Filed as Exhibit 4.3 to Registration No.
                         Mesa Air Group, Inc. Restated and Amended             33-02791 effective April 24, 1996
                         Employee Stock Option Plan dated April 23,
                         1996

    10.17                Agreement between Beech Aircraft Corporation          Filed as Exhibit 10.30 to Form S-1,
                         and Mesa Airlines, Inc., dated April 30, 1990         Registration No. 33-35556 effective December 6,
                                                                               1990, incorporated herein by reference

    10.18                Sublease Agreement between Air Midwest, Inc.          Filed as Exhibit 10.32.1 to Form S-1,
                         and Mesa Airlines, Inc., dated April 27,              Registration No. 33-35556 effective December 6,
                         1990 for Embraer Brasilia aircraft 120.180            1990, incorporated herein by reference

    10.20                Agreement between Air Midwest, Inc. and Mesa          Filed as Exhibit 10.32.3 to Form S-1,
                         Airlines, Inc., dated February 27, 1990, for          Registration No. 33-35556 effective December 6,
                         purchase of four Embraer Brasilia aircraft            1990, incorporated herein by reference

    10.21                Letter Agreement between McDonnell Douglas            Filed as Exhibit 10.32.4 to Form S-1,
                         Finance Corporation, Air Midwest, Inc. and            Registration No. 33-35556 effective December 6,
                         Mesa Airlines, Inc., dated March 19, 1990,            1990, incorporated herein by reference
                         as amended, regarding lease and sublease of
                         four Embraer Brasilia aircraft

    10.22                Sublease Agreement between Air Midwest Inc.           Filed as Exhibit 10.32.5 to Form S-1,
                         and Mesa Airlines, Inc., dated July 26,               Registration No. 33-35556 effective December 6,
                         1990, for Embraer Brasilia aircraft 120.193           1990, incorporated herein by reference

    10.23                Lease Agreement between McDonnell Douglas             Filed as Exhibit 10.32.6 to Form S-1,
                         Finance Corporation and Mesa Airlines, Inc.,          Registration No. 33-35556 effective December 6,
                         dated July 26, 1990, for Embraer Brasilia             1990, incorporated herein by reference
                         aircraft 120.193

    10.24                Sublease Agreement between Air Midwest Inc.           Filed as Exhibit 10.32.7 to Form S-1,
                         and Mesa Airlines, Inc., dated September 26,          Registration No. 33-35556 effective December 6,
                         1990, for Embraer Brasilia aircraft 120.203           1990, incorporated herein by reference

    10.25                Lease Agreement between McDonnell Douglas             Filed as Exhibit 10.32.8 to Form S-1,
                         Finance Corporation and Mesa Airlines, Inc.,          Registration No. 33-35556 effective December 6,
                         dated September 26, 1990, for Embraer                 1990, incorporated herein by reference
                         Brasilia aircraft 120.203

    10.27                Expanded Partner Agreement between United             Filed as Exhibit 19.3 to Registrant's Form 10-Q
                         Air Lines, Inc., and Mesa Airlines, Inc.,             for the quarterly period ended June 30, 1990,
                         dated February 15, 1990                               Commission File No. 0-15495, incorporated
                                                                               herein by reference

    10.29                Form of Directors' and Officers'                      Filed as Exhibit 10.41 to Form S-1,
                         Indemnification Agreement                             Registration No. 33-35556 effective December 6,
                                                                               1990, incorporated herein by reference

    10.31                Agreement Relating to the Settlement of               Filed as Exhibit 10.45 to Form S-1,
                         Interline Accounts through Airlines Clearing          Registration No. 33-35556 effective December 6,
                         House, Inc., between Airlines Clearing                1990, incorporated herein by reference
                         House, Inc. and Mesa Airlines, Inc., dated
                         September 2, 1981

    10.32                Agreement between Beech Aircraft Corporation          Filed as Exhibit 10.42 to Form 10-K for fiscal
                         and Mesa Airlines, Inc., dated September 18,          year ended September 30, 1991, Commission File
</TABLE>
<PAGE>   56
<TABLE>
<S>                      <C>                                                   <C>                                      
                         1991                                                  No. 0-15495, incorporated herein by reference

    10.33                Agreement between USAirways, Inc. and Air             Filed as Exhibit 10.43 to Form 10-K for fiscal
                         Midwest, Inc.                                         year ended September 30, 1991, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.34                Agreement between USAirways, Inc. and                 Filed as Exhibit 10.44 to Form 10-K for fiscal
                         FloridaGulf Airlines, Inc.                            year ended September 30, 1991, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.35                Sublease agreement between Trans States               Filed as Exhibit 10.45 to Form 10-K for fiscal
                         Airlines, Inc. and Air Midwest, Inc.                  year ended September 30, 1992, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.37                Agreement between Beech Aircraft                      Filed as Exhibit 10.47 to Form 10-K for fiscal
                         Corporation, Beech Acceptance Corporation,            year ended September 30, 1992, Commission File
                         Inc. and Mesa Airlines, Inc., dated August            No. 0-15495, incorporated herein by reference
                         21, 1992

    10.38                Agreement between America West Airlines,              Filed as Exhibit 10.48 to Form 10-K for fiscal
                         Inc. and Mesa Airlines, Inc.                          year ended September 30, 1992, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.39                Agreement between United Air Lines, Inc. and          Filed as Exhibit 10.49 to Form 10-K for fiscal
                         WestAir Commuter Airlines, Inc. (WestAir)             year ended September 30, 1992, Commission File
                                                                               No. 0-15495, incorporated herein by reference

    10.40                Plan and Agreement to Merge between Mesa              Filed as Exhibit A to Form S-4 Registration No.
                         Airlines, Inc., Mesa Acquisition Corporation          33-45638, effective April 17, 1992, incorporated
                         and WestAir Holding, Inc., dated February 7,          herein by reference 1992.

    10.41                Certificate of Public Convenience and                 Filed as Exhibit 10.1(a) to WestAir Holding,
                         Necessity for WestAir Commuter Airlines, Inc.         Inc.'s Registration Statement on Form S-1,
                                                                               Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.42                Air Carrier Operating Certificate for WestAir         Filed as Exhibit 10. to WestAir Holding, Inc.'s
                                                                               Registration Statement on Form S-1, Commission
                                                                               File No. 33-24316, incorporated herein by
                                                                               reference

    10.46                Original Agreement to Lease dated as of               Filed as Exhibit 10.44 to WestAir Holding,
                         April 27, 1987 between NPA, Inc. ("NPA") and          Inc.'s Registration Statement on Form S-1,
                         British Aerospace, Inc. ("BAe") with a                Commission File No. 33-24316, incorporated
                         Letter to FG Holdings, Inc. ("FGH") dated             herein by reference
                         March 11, 1988 and Amendment No. 1 to
                         Agreement to Lease dated as of March 3, 1988
                         between BAe and FGH

    10.47                Side Letter Agreement to NPA from JACO dated          Filed as Exhibit 10.48 to WestAir Holding,
                         June 4, 1987                                          Inc.'s Registration Statement on Form S-1,
                                                                               Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.49                Employment Agreement dated as of September            Filed as Exhibit 10.51(b) to WestAir Holding,
                         1, 1988 between WestAir and Maurice J.                Inc.'s Registration Statement on Form S-1,
                         Gallagher Jr.                                         Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.50                Aviation Land and Building Lease and                  Filed as Exhibit 10.164 to the Pre-effective
                         Agreement between City of Fresno, California          Amendment No. 1, filed October 19, 1988, to
                         and WestAir dated January 7, 1986                     WestAir Holding, Inc.'s Registration Statement
                                                                               on Form S-1, Commission File No. 33-24316,
                                                                               incorporated herein by reference

    10.51                Airport Operating Permit between Airport              Filed as Exhibit 10.67 to WestAir Holding,
                         Commission of City and County of San                  Inc.'s Registration Statement on Form S-1,
</TABLE>
<PAGE>   57
<TABLE>
<S>                      <C>                                                   <C>
                         Francisco and WestAir                                 Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.58                Promissory Note to Textron for spare parts            Filed as Exhibit 10.80 to WestAir Holding,
                         as executed by WestAir, dated December 30,            Inc.'s Form 10-K dated December 31, 1988,
                         1988                                                  Commission File No. 33-24316, incorporated
                                                                               herein by reference

    10.59                Agreement to lease Jetstream model 3101               Filed as Exhibit 2.1 to WestAir Holding, Inc.'s
                         aircraft and Jetstream model 3201                     Form 8-K filed June 8, 1989, Commission
                         aircraft File between BAe and WestAir,                No. 33-24316,incorporated herein by reference
                         dated May 11, 1989


    10.60                Amendment to Agreement to Lease dated May             Filed as Exhibit 10.38 to WestAir Holding,
                         11, 1989 between WestAir and BAe, dated               Inc.'s Form 10-K for the year ended December
                         February 15, 1990                                     31, 1989, Commission File No. 33-24316,
                                                                               incorporated herein by reference

    10.61                Amended and Restated Stock Purchase                   Filed as Exhibit 10.42(a) to WestAir Holding,
                         Agreement, dated September 30, 1991 among             Inc.'s Form 10-K for the year ended December
                         WestAir Holding, Inc., WestAir Commuter               31, 1991, Commission File No. 33-24316,
                         Airlines, Inc. and Atlantic Coast Airlines,           incorporated herein by reference
                         Inc., relating to the sale of the Atlantic
                         Coast division of WestAir Commuter Airlines,
                         Inc.

    10.65                Agreement of Purchase and Sales of Assets by          Filed as Exhibit 10.90 to Mesa Airlines, Inc.
                         and among Crown Airways, Inc., Phillip R.             Form 10-K for the year ended September 30,
                         Burnaman, A. J. Beiga and Mesa Airlines,              1994, Commission File No. 0-15495
                         Inc., dated as of December 16, 1993

    10.66                Supplemental Agreement  No. 9/03/94                   Filed as Exhibit 10.66 to Mesa Airlines, Inc.
                         Beechcraft 1900 D Airliner Acquisition                Form 10-K for the year ended September 30,
                         Master Agreement between Mesa Airlines,               1994, Commission File No. 0-15495
                         Inc., Beech Aircraft Corporation and Beech
                         Acceptance Corporation, Inc., dated as of
                         September 23, 1994

    10.67                Form of Lease Agreement between Beech                 Filed as Exhibit 10.67 to Mesa Airlines, Inc.
                         Acceptance Corporation, Inc. and Mesa                 Form 10-K for the year ended September 30,
                         Airlines, Inc.,  negotiated September 30,             1994, Commission File No. 0-15495
                         1994 for all prospective 1900 D Airliner
                         leases.

    10.68                Asset Purchase Agreement dated July 29, 1994          Filed as Exhibit 10.68 to Mesa Airlines, Inc.
                         among Pennsylvania Commuter Airlines, Inc.,           Form 10-K for the year ended September 30,
                         d.b.a. Allegheny Commuter Airlines, USAirways         1994, Commission File No. 0-15495
                         Leasing and Services, Inc., and Mesa
                         Airlines, Inc.

    10.69                Letter Agreement in Principle dated as of             Filed as Exhibit 10.69 to Mesa Airlines, Inc.
                         October 16, 1994 among Air Wisconsin, Inc.,           Form 10-K for the year ended September 30,
                         United Air Lines Inc. and Mesa Airlines,              1994, Commission File No. 0-15495
                         Inc. (Certain portions deleted pursuant to
                         request for confidential treatment)
                         (Referred to erroneously as Exhibit 10.94 in
                         letter asking for confidential treatment to
                         Securities and Exchange Commission dated
                         12-23-94 from Chapman & Cutler)

    10.70                Subscription Agreement between AmWest                 Filed as Exhibit 10.70 to Mesa Airlines, Inc.
                         Partners, L.P. and Mesa Airlines, Inc. dated          Form 10-K for the year ended September 30,
                         as of June 28, 1994                                   1994, Commission File No. 0-15495

    10.71                Omnibus Agreement                                     Filed as Exhibit 10.71 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
</TABLE>
<PAGE>   58
<TABLE>
<S>                      <C>                                                   <C>    
                                                                               1994, Commission File No. 0-15495

    10.72                Aircraft Purchase and Sale Agreement                  Filed as Exhibit 10.72 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.73                Expendable and Rotable Spare Parts and Sale           Filed as Exhibit 10.73 to Mesa Air Group, Inc.
                         Agreement                                             Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.74                United Express Agreement Amendment                    Filed as Exhibit 10.74 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.75                Side Letter Agreement                                 Filed as Exhibit 10.75 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.76                First Amendment to Omnibus Agreement                  Filed as Exhibit 10.76 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.77                Operating Lease Agreement                             Filed as Exhibit 10.77 to Mesa Air Group, Inc.
                                                                               Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.78                Item 3. Legal Proceedings - Form 10-K dated           Filed as Exhibit 10.78 to Mesa Air Group, Inc.
                         September 30, 1994                                    Form 10-Q for the quarter ended December 31,
                                                                               1994, Commission File No. 0-15495

    10.79                Purchase Agreement B95-7701-PA-200 between            Filed as Exhibit 10.79 to Mesa Air Group, Inc.
                         Bombardier Inc. and Mesa Airlines, Inc.               Form 10-Q for the quarter ended March 31, 1995,
                                                                               Commission File No. 0-15495

    10.81                Letter of Understanding between Mesa Air              Filed as Exhibit 10.81 to Mesa Air Group, Inc.
                         Group, Inc. and Raytheon Aircraft Company             Form 10-Q for the quarter ended March 31, 1996,
                         (RAC) dated April 12, 1996.                           Commission File No. 0-15495

    10.82                Supplemental Agreement No. 05/22/96,                  Filed as Exhibit 10.82 to Mesa Air Group, Inc.
                         Beechcraft 1900D Airliner Acquisition Master          Form 10-Q for the quarter ended March 31, 1997,
                         Agreement between Mesa Air Group, Inc.,               Commission File No. 0-15495
                         Raytheon Aircraft Company and Raytheon
                         Aircraft Credit Corporation

    10.83                Bombardier Regional Aircraft Division                 Filed as Exhibit 10.83 to Mesa Air Group, Inc.
                         Purchase Agreement CRJ-0351 between                   Form 10-Q for the quarter ended December 31,
                         Bombardier Inc. and Mesa Air Group, Inc.              1996, Commission File No. 0-15495

    10.84                Aircraft Option Exercise B97-7701-RJTL-3492L          Filed as Exhibit 10.84 to Mesa Air Group, Inc.
                         dated as of August 15, 1997 between Mesa Air          Form 10-Q for the quarter ended December 31,
                         Group, Inc. and Bombardier Inc.  (Request             1997, Commission File No. 0-15495
                         for confidential treatment submitted to SEC.)

    10.85                Bombardier Regional Aircraft Division                 Filed as Exhibit 10.85 to Mesa Air Group, Inc.
                         Settlement Agreement B97-7701-RJTL-3493L              Form 10-Q for the quarter ended December 31,
                         dated as of August 15, 1997 between Mesa Air          1997, Commission File No. 0-15495
                         Group, Inc. and Bombardier Inc.  (Request
                         for confidential treatment submitted to SEC.)

    10.86                Service Agreement dated as of November 11,            Filed as Exhibit 10.86 to Mesa Air Group, Inc.
                         1997 between Mesa Airlines, Inc. and US               Form 10-Q for the quarter ended December 31,
                         Airways, Inc. (Request for confidential               1997, Commission File No. 0-15495
                         treatment submitted to SEC.)


    10.87                Letter Agreement dated as of March 26, 1998 between   Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                         Mesa Airlines, Inc. and America West Airlines,        10-Q for the quarter ended March 31, 1997,
                         Inc.  (Request for confidential treatment submitted   Commission File No. 0-15495.
                         to SEC.)
</TABLE>
<PAGE>   59
<TABLE>
<S>                     <C>                                                   <C> 
    10.88               Employment Agreement dated as of March 13, 1998,      Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                        between Mesa Air Group, Inc. and Jonathan G.          10-Q for the quarter ended March 31, 1998,
                        Ornstein                                              Commission File No. 0-15495.

    10.89               Form of Employment Agreement dated as of January 5,   Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                        1998 entered into by and between Mesa Air Group,      10-Q for the quarter ended March 31, 1998,
                        Inc. and Gary E. Risley, W. Stephen Jackson, J.       Commission File No. 0-15495.
                        Clark Stevens and various other officers of Mesa
                        and its subsidiaries

    10.90               Letter Agreement dated as of February 4, 1998         Filed as Exhibit 10.86 to Mesa Air Group, Inc. Form
                        between Mesa Air Group, Inc. and Larry L. Risley      10-Q for the quarter ended March 31, 1998,
                                                                              Commission File No. 0-15495.

     23.1               Independent Auditors' Consent of KPMG LLP             Filed herewith
</TABLE>