<PAGE>
                            Exhibit 13



         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS


The  following  table  sets forth, for the periods  indicated,  the
percentages  of  operating expenses and other  items  to  operating
revenue:

<TABLE>
<CAPTION>
                                    1998     1997     1996
                                   ------------------------
<S>                                <C>      <C>      <C>
Operating revenue                  100.0%   100.0%   100.0%

Operating expenses and costs
 Salaries, wages and benefits       61.0%    60.8%    60.9%
 Operating supplies and expenses     8.0%     8.6%     8.2%
 Operating taxes and licenses        4.2%     4.1%     4.4%
 Insurance                           3.2%     3.0%     3.7%
 Communications and utilities        1.8%     1.7%     1.9%
 Depreciation and amortization       5.7%     6.0%     6.4%
 Rents and purchased transportation  5.9%     6.4%     6.2%
 Other                               4.1%     4.2%     4.6%
                                   ------------------------
  Total operating
   expenses and costs               93.9%    94.8%    96.3%
                                   ------------------------
Operating income                     6.1%     5.2%     3.7%
Interest expense                     1.6%     1.9%     2.0%
Other income, net                    0.2%     0.1%     0.1%
                                   ------------------------
Income before income taxes           4.7%     3.4%     1.8%
Income taxes                         1.9%     1.3%     0.7%
                                   ------------------------
Net income                           2.8%     2.1%     1.1%
                                   ========================
</TABLE>


RESULTS OF OPERATIONS
1998 COMPARED TO 1997
---------------------

Operating Revenue
-----------------
Operating revenue for 1998 was $986,286,000, up 13.3%, compared to
$870,319,000 for 1997.  The growth in operating revenue was
primarily the result of increased tonnage from new and existing
customers and increased revenue per hundred weight.

Tonnage handled by the Company during 1998 increased 9.2% over
levels handled during 1997.  This increase in tonnage was mainly a
result of the following:
- Effective January 1, 1998, the Company increased its all-points
  coverage to 28 states with the addition of the state of Michigan.
- The Company continued to increase its market penetration into
  existing service territories, particularly those geographic areas
  added during 1995, 1996 and 1997.  During 1995, the Company
  expanded its all-points coverage to the states of Colorado,
  Florida, Iowa, Nebraska, North Carolina, South Carolina
<PAGE>
  and Wisconsin.  1996 expansions included the states of Delaware,
  Maryland, Minnesota, Virginia and West Virginia.  Effective August
  4, 1997, all-points coverage was added to the state of New Mexico.
- The continued increase in intrastate tonnage following the
  deregulation of intrastate commerce effective January 1, 1995.
- Freight volumes handled with marketing partners in Alaska,
  Canada, Guam, Hawaii, Mexico and Puerto Rico continued to increase
  at a rapid pace.  The initial marketing partnership commenced in
  1996 with service to Canada and Mexico.  Puerto Rico was added in
  1997, with service to Alaska, Guam, and Hawaii added in 1998.

Revenue per hundred weight for 1998 was up 3.6% from levels
experienced in 1997.  Factors most impacting revenue per hundred
weight were:
- General rate increases of approximately 5.5% and 5.5% to 5.9%,
  effective January 1, 1998 and November 1, 1998, respectively.  The
  increases applied to the Company's interstate and intrastate common
  carrier freight rates published in its 5000 series tariff.  The
  Company derives approximately  50% of its revenue from the 5000
  tariff.  The remaining revenue is derived from contracts and
  guarantees, which are negotiated throughout the year.
- A fuel surcharge, included in revenue, was in effect during
  1997, but not in effect for the majority of 1998.  The Company
  initiated a fuel surcharge, in effect from September 16, 1996 until
  January 7, 1998, to help recover the increased costs of fuel.  This
  surcharge is tied to the Department of Energy's National Diesel
  Fuel Index and ranged from 0.7% to 1.6% during the time it was in
  effect.  The surcharge was designed to suspend at the time this
  national index moved below $1.15 per gallon.

Management expects that growth in operating revenue is sustainable
in the near term.  The major focus for growth in operating revenue
in the near term will be further penetration of existing markets.
In addition, on April 19, 1999, the Company will increase its
direct, all-points coverage to 30 states with the addition of
Pennsylvania and New Jersey.

Operating Expenses
------------------
Operating expenses as a percentage of operating revenue improved to
93.9% in 1998 from 94.8% in 1997.   This overall improvement was
primarily attributable to:
- Operating supplies and expenses as a percentage of operating
  revenue improved to 8.0% in 1998 from 8.6% in 1997.  This
  improvement primarily relates to lower diesel prices, which is
  partially offset by increased maintenance costs of equipment and
  facilities.  Management expects that maintenance costs will
  continue to gradually increase as the Company's fleet ages.
- Depreciation as a percentage of operating revenue improved to
  5.7% in 1998 from 6.0% in 1997.  This improvement was largely due
  to the increased usage of operating lease financing of revenue
  equipment.  Depreciation expense for 1998 was also reduced by a
  gain of approximately $965,000 recognized on revenue equipment
  disposals and recorded as a reduction of depreciation expense.
- Rents and purchased transportation as a percentage of operating
  revenue improved to 5.9% in 1998 from 6.4% in 1997.  The
  improvement was a result of three principal reasons:  1) Short-term
  transportation equipment rental declined as compared with 1997.
  The August 1997 strike by the International Brotherhood of
  Teamsters against United Parcel Service created an increase in
  freight volumes resulting in a temporary need for additional
  equipment.  2) During the third quarter of 1998 the Company
  decreased its utilization of owner operators in its pick up and
  delivery operations, and 3) the Company's usage of purchased
  transportation in selected line haul lanes has declined in relation
  to overall mileage.  These improvements were partially offset by
  increased usage of operating lease financing.  Management expects
  rents and purchased transportation as a percentage of operating
  revenue to remain at current levels.  The amount of rent expense,
  will however, be significantly impacted by future decisions as to
  the use of operating lease financing.  Those decisions will be
  dependent upon the overall costs of ownership versus lease
  financing available at the time of asset additions.
Improvements in operating expenses as a percentage of operating
revenue were partially offset by an increase in the following area:
<PAGE>
- Salaries, wages and benefits as a percentage of operating
  revenue increased to 61.0% in 1998 from 60.8% in 1997.  This
  increase was largely the result of significantly increased costs in
  the areas of workmen's compensation and health care.  The increase
  was partially offset by improvements made in salaries and wages
  resulting from ongoing educational programs and changes in
  operations providing productivity gains in the form of improved
  pickup and delivery density, increased line haul load factor and
  more direct line haul schedules.
  
Other
-----
Interest expense as a percentage of operating revenue decreased to
1.6% in 1998, compared to 1.9% in 1997.  This improvement is
primarily the result of lower interest rates during 1998, as well
as 1998 debt levels that were relatively constant as compared with
an increased revenue base.

The effective tax rate of the Company was 40.6% for 1998, up from
39.2% for 1997.  This increase was primarily due to higher federal
tax rates applied to the increased level of 1998 taxable income.
The increased federal tax was partially offset by reduced state tax
expenses from state incentives on Company business expansions.  Net
income for 1998 was $27,501,000, up 54.5%, from $17,801,000 for
1997.


1997 Compared to 1996
---------------------

Operating Revenue
-----------------
Operating revenue for 1997 was $870,319,000, up 19.4%, compared to
$729,042,000 for 1996.  The growth in operating revenue was
primarily the result of increased revenue per hundred weight and
increased tonnage from new and existing customers.

Revenue per hundred weight for 1997 was up 6.8% from levels
experienced in 1996.  Factors contributing to the increase in
revenue per hundred weight were:
- A general rate increase of approximately 5.9% effective January
  1, 1997.  General rate increases initially affect approximately 45%
  of the Company's customers.  The remaining customers' rates are
  determined by contracts and guarantees and are negotiated
  throughout the year.
- The Company initiated a fuel surcharge beginning September 16,
  1996 to help recover the increased costs of fuel.  This surcharge
  is tied to the Department of Energy's National Diesel Fuel Index
  and was 0.7% for LTL shipments as of December 31, 1997.  The
  surcharge is designed to suspend at the time this national index
  moves below $1.15 per gallon.  Effective January 7, 1998, the fuel
  surcharge was suspended.
- The percentage of the Company's total revenue that was derived
  from truckload shipments (greater than 10,000 pounds) declined to
  5.7% during 1997 as compared to 6.7% during 1996.

Tonnage handled by the Company during 1997 increased 11.7% over
levels handled during 1996.  This increase in tonnage was mainly a
result of the following:
- The Company continued to increase its market penetration into
  existing service territories, particularly those geographic areas
  added during 1995 and 1996.  During 1995, the Company expanded its
  all-points coverage to the states of Colorado, Florida, Iowa,
  Nebraska, North Carolina, South Carolina and Wisconsin.  1996
  expansions included the states of Delaware, Maryland, Minnesota,
  Virginia and West Virginia.
- The continued increase in intrastate tonnage following the
  deregulation of intrastate commerce effective January 1, 1995.
- Effective August 4, 1997, the Company increased its all-points
  coverage to 27 states with the addition of the state of New Mexico.


<PAGE>
Operating Expenses
------------------
Operating expenses as a percentage of operating revenue improved to
94.8% in 1997 from 96.3% in 1996.   This overall improvement was
primarily attributable to:
- Salaries, wages and benefits as a percentage of operating
  revenue improved to 60.8% in 1997 from 60.9% in 1996.  This
  improvement was largely the result of the increased usage of
  purchased transportation.  However, salaries, wages and benefits as
  a percentage of operating revenue did not improve during 1997 to
  the degree anticipated by management.  Improvement in this area was
  slower than expected principally due to the following factors:  1)
  slower than anticipated productivity gains resulting from
  operational changes initiated during 1996 and continued during
  1997, 2) labor costs increased disproportionately in relation to
  operating revenue during the strike by the International
  Brotherhood of Teamsters against United Parcel Service during
  August of 1997, and 3) expenses incurred during 1997 to educate the
  workforce.
- Insurance as a percentage of operating revenue decreased to 3.0%
  in 1997 from 3.7% in 1996.  This improvement was largely due to
  improved experience involving vehicle accidents and cargo claims.
- Depreciation as a percentage of operating revenue improved to
  6.0% in 1997 from 6.4% in 1996.  This improvement was largely due
  to the increased usage of purchased transportation and off-balance
  sheet financing of revenue equipment.
- Other expenses as a percentage of operating revenue improved to
  4.2% in 1997 from 4.6% in 1996.  This improvement was mostly due to
  decreased hotel costs for line haul drivers.  The Company
  reconfigured its line haul network during the last half of 1996.
  The purpose of this reconfiguration was to place renewed emphasis
  on serving the regional and intrastate markets and to improve asset
  utilization.  One of the benefits of this reconfiguration was that
  line haul drivers were required to spend less time in hotels.
- Operating taxes and licenses as a percentage of operating
  revenue improved to 4.1% in 1997 from 4.4% in 1996.  There were two
  primary reasons for this improvement.  The first was fuel tax
  expense as a percent of operating revenue decreased because of the
  increased utilization of purchased transportation.  The second
  reason was that the line haul reconfiguration, coupled with the
  increased usage of purchased transportation, required few additions
  to the fleet during 1997.  Therefore, licensing expenses declined
  as a percentage of operating revenue.
These improvements in operating expenses as a percentage of
operating revenue were partially offset by increases in the
following areas:
- Operating supplies and expenses as a percentage of operating
  revenue increased to 8.6% in 1997 from 8.2% in 1996.  This increase
  primarily relates to increased maintenance costs of equipment and
  facilities.  Fuel expenses as a percentage of operating revenue
  declined moderately during 1997 as compared to 1996 due to overall
  lower diesel prices and the increased use of purchased
  transportation during 1997.
- Rents and purchased transportation as a percentage of operating
  revenue increased to 6.4% in 1997 from 6.2% in 1996.  This increase
  was primarily a result of the utilization of purchased
  transportation in selected lanes in order to improve asset
  utilization and decrease overall costs of operations.

Other
---------
Interest expense as a percentage of operating revenue decreased to
1.9% in 1997, compared to 2.0% in 1996.

The effective tax rate of the Company was 39.2% for 1997, up from
38.6% for 1996.  This increase was mostly due to increased federal
tax rates on higher levels of income.  Net income for 1997 was
$17,801,000, up 126.6%, from $7,856,000 for 1996.

LIQUIDITY AND CAPITAL RESOURCES
Capital requirements during 1998 consisted of $91,170,000 in
investing activities.  The Company invested $94,392,000 in capital
expenditures during 1998 comprised of $26,959,000 in additional
revenue equipment, $43,776,000 in new customer center facilities or
the expansion of existing facilities and $23,657,000 in other
equipment.  Management expects capital expenditures for the full
year of 1999 will be $100,000,000, primarily due to anticipated
investments in new and existing customer center facilities.
However, the actual amount of capital expenditures required in 1999
will be dependent on the growth rate
<PAGE>
of the Company, the timing and
size of future expansions of service territory, and progress in
site selection and construction of several customer center
projects.  At December 31, 1998, the Company had commitments for
land, customer centers, revenue and other equipment of
approximately $45,149,000.

The Company provided for its capital resource requirements in 1998
with cash from operations and financing activities.  Cash from
operations totaled $87,720,000 during 1998 compared to $76,284,000
provided by operations during 1997. Financing activities augmented
cash flow by $4,969,000 in 1998, utilizing two primary sources of
credit financing; the revolving line of credit and the Master Shelf
facility.
- The Company experiences periodic cash flow fluctuations common
  to the industry.  Cash outflows are heaviest during the first part
  of any given year while cash inflows are normally weighted towards
  the last two quarters of the year.  To smooth these fluctuations
  and to provide flexibility to fund future growth, the Company
  utilizes a variable-rate, unsecured revolving line of credit of
  $160,000,000 provided by Bank of America (agent), Chase Bank of
  Texas, N.A., Wachovia Bank, N.A., ABN-AMRO Bank N.V. and Bank One.
  At December 31, 1998, $70,000,000 was outstanding on the revolving
  line of credit, leaving $90,000,000 available for borrowing.  The
  Company also had $3,024,000 available under its short-term,
  unsecured revolving $15,000,000 line of credit with Bank of
  America.  This line of credit is also used to obtain letters of
  credit required for its self-insurance program.  At December 31,
  1998, the Company had borrowings on the line of credit outstanding
  of $8,000,000 and had obtained letters of credit totaling
  $3,976,000 for this purpose.
- To assist in financing longer-lived assets, the Company has an
  uncommitted Master Shelf Agreement with the Prudential Insurance
  Company of America which provides for the issuance of up to
  $140,000,000 in medium to long-term unsecured notes at an interest
  rate calculated at issuance.  At December 31, 1998, the Company had
  $125,250,000 outstanding under this facility.
Management expects that the Company's existing working capital and
its available lines of credit are sufficient to meet the Company's
commitments as of December 31, 1998, and to fund current operating
and capital needs.  However, if additional financing is required,
management believes it will be available.

The Company uses off-balance sheet financing in the form of
operating leases primarily in the following areas; land and
structures, revenue equipment and other equipment.  At December 31,
1998, future rental commitments on operating leases were
$113,359,000 (See Note 6 of the Notes to Consolidated Financial
Statements).  The Company prefers to utilize operating leases for
these areas and plans to use them in the future when such financing
is available and suitable.

YEAR 2000 ISSUES
The Company recognizes the Year 2000 problem and has developed a
Board of Director sponsored Project Plan that identifies all date
related issues relating to the Company's Information Technology
(IT) applications, end user supported applications, IT
infrastructure, embedded devices and business partners.  At year-
end 1998, all application modifications and infrastructure upgrades
were completed with the exception of modifications required of
certain document scanning systems.  Completion of the plan for this
application is expected by September 30, 1999.  Final testing and
production implementation of all other applications is expected to
be completed by June 30, 1999.  The Company's mission critical
systems, written in-house, are already Year 2000 ready.  At
December 31, 1998, Year 2000 ready upgrades were installed for all
purchased software.  The costs incurred specifically to address
Year 2000 readiness have not been and are not expected to become
material to the Company because many of the systems did not require
significant modifications to make them Year 2000 ready, were
replaced for other business reasons or were already Year 2000
ready.

The Company has initiated discussions with its significant
customers and suppliers to determine the extent to which the
Company's interface systems would be vulnerable to those third
parties' failure to remediate their own Year 2000 issues.  The
Company has not received written assurances from its significant
customers and suppliers that their systems will be timely converted
and would not have an adverse effect on the Company's systems.  It
is not possible at this time to quantify the amount of business
that might be lost or the costs that could be incurred by the
Company as a result of the Company's significant customers' and
suppliers' failure to remediate their Year 2000 Issues.
<PAGE>
To date, the Company has not established a contingency plan for
possible Year 2000 issues.  The Company will establish, where
needed, contingency plans based on our actual testing experience.
While the Company believes its efforts to address the Year 2000
Issue will be successful in avoiding any material adverse effect on
the Company's operations, it recognizes that failure to resolve
Year 2000 Issues on a timely basis could significantly limit its
ability to process its daily business transactions for a period of
time, especially if such failure is coupled with third party or
infrastructure failures.  Similarly, the Company could be
significantly affected by the failure of one or more significant
business partners or components of the infrastructure to conduct
their respective operations after 1999.  Adverse effects could
include, but are not limited to, loss of communication links with
customer centers, inability to process transactions, or engage in
similar normal business activities.

The foregoing statements regarding the Company's state of
readiness, costs of conversion, risks and contingency plans for
Year 2000 are based on management's current estimates and
evaluations using available information.  There can be no
assurances that management's estimates and evaluations will prove
to be accurate, and actual results could differ materially from
those currently anticipated.  Factors which might cause material
changes include, but are not limited to, the availability of Year
2000 personnel, the readiness of third parties and the Company's
ability to respond to unforeseen Year 2000 complications.

MARKET RISK
Market risks relating to the Company's operations result primarily
from changes in interest rates.  The Company does not use financial
instruments for trading purposes and is not a party to any
derivatives.  The following table provides information about the
Company's financial instruments that are sensitive to changes in
interest rates.  The table presents the Company's debt obligations,
principal cash flows, related weighted-average interest rates by
expected maturity dates and fair values.
<PAGE>
                     INTEREST RATE SENSITIVITY
               PRINCIPAL AMOUNT BY EXPECTED MATURITY
                       AVERAGE INTEREST RATE
<TABLE>
<CAPTION>
                                                                                   FAIR
(DOLLARS IN THOUSANDS)                                          THERE-             VALUE
                     1999    2000     2001     2002     2003    AFTER     TOTAL    12/31/98
-------------------------------------------------------------------------------------------
Liabilities

Long-term Debt, Including Current Portion
<S>                 <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
 Fixed Rate         $11,679  $12,974  $14,700  $12,666  $12,625  $83,150  $147,794 $161,923
 Avg. Interest Rate    7.88%    7.91%    7.92%    7.90%    7.93%    8.09%
 Variable Rate      $ 8,000  $     -  $     -  $     -  $70,000  $     -  $ 78,000 $ 78,000
 Avg. Interest Rate    5.68%    5.76%    5.66%    5.68%    5.70% 
-------------------------------------------------------------------------------------------
</TABLE>
ENVIRONMENTAL
At December 31, 1998, the Company had no outstanding inquiries with
any state or federal environmental agency.

INFLATION
Most of the Company's expenses are sensitive to inflation as
increases in inflation generally result in increased costs.  The
effect of inflation on the operating results of the Company was
minimal during 1998.

SEASONALITY
In the trucking industry, results of operations show a seasonal
pattern because customers reduce shipments during winter months.
In addition, the Company's operating expenses as a percentage of
operating revenues have historically been higher during the winter.

RECENT EVENTS
On January 11, 1999, the Company announced that on April 19, 1999,
it will increase its direct, all-points coverage to 30 states with
the addition of Pennsylvania and New Jersey.  Intrastate, regional
and interregional service will be provided by the opening of eleven
customer centers.
<PAGE>
         American Freightways Corporation and Subsidiaries
                                 
                    Consolidated Balance Sheets

               (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>                                 
                                            DECEMBER 31
                                           1998      1997
                                         --------  --------
<S>                                      <C>       <C>
ASSETS                                            
Current assets:                                   
 Cash and cash equivalents (Note 10)     $  3,274  $  1,755
 Trade receivables, less allowance for              
  doubtful accounts (1998--$1,937,
  1997--$1,774)                            94,464    78,700
 Operating supplies and inventories         4,139     2,882
 Prepaid expenses                          11,318     8,671
 Deferred income taxes (Note 4)            19,089    13,306
 Income taxes receivable                    2,763         1
                                         --------  --------
                                 
Total current assets                      135,047   105,315
                                                  
Property and equipment (Notes 3 and 6):           
 Land and structures                      214,061   186,033
 Revenue equipment                        389,867   374,982
 Service, office and other equipment      136,160   114,075
 Land improvements                          3,600     2,973
 Construction in progress                  34,017    21,113
 Accumulated depreciation
  and amortization                       (272,960) (230,870)
                                         --------  --------
                                          504,745   468,306
Other assets:                                     
 Bond funds (Notes 3 and 10)                  896       878
 Other                                      1,373     1,074
                                         --------  --------
                                            2,269     1,952
                                         --------  --------
                                         $642,061  $575,573
                                         ========  ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                            DECEMBER 31
                                           1998      1997
                                         --------  --------
<S>                                      <C>       <C>
LIABILITIES AND SHAREHOLDERS' EQUITY              
Current liabilities:                              
 Trade accounts payable                  $ 16,766  $ 12,910
 Accrued expenses (Note 2)                 70,809    54,114
 Current portion of long-term debt         19,679    11,497
                                         --------  --------
Total current liabilities                 107,254    78,521
                                                  
Long-term debt, less current portion              
 (Notes 3 and 10)                         206,115   210,411
                                                  
Deferred income taxes (Note 4)             72,678    59,225
                                                  
Shareholders' equity (Notes 3, 5, 7 and 8):
 Common stock, par value $.01 per share;            
  authorized 250,000 shares; issued and             
  outstanding 31,695 shares in 1998 and             
  31,568 in 1997                              317       316
 Additional paid-in capital               106,053   104,832
 Retained earnings                        149,769   122,268
 Treasury stock, at cost; 15 shares in              
  1998 and 0 in 1997                         (125)        -
                                         --------  --------
                                          256,014   227,416
Commitments (Note 6)       
                                         --------  --------
                                         $642,061  $575,573
                                         ========  ========
</TABLE>
See accompanying notes.
<PAGE>
         American Freightways Corporation and Subsidiaries
                                 
                 Consolidated Statements of Income
               (In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31
                                     1998      1997      1996
                                   --------  --------  --------
<S>                                <C>       <C>       <C>
Operating revenue                  $986,286  $870,319  $729,042
                                                    
Operating expenses and costs:                       
 Salaries, wages and benefits       601,813   528,695   444,041
 Operating supplies and expenses     79,219    75,085    59,640
 Operating taxes and licenses        41,687    35,339    31,827
 Insurance                           31,964    26,327    27,113
 Communications and utilities        17,361    14,907    13,822
 Depreciation and amortization       55,712    52,596    46,918
 Rents and purchased transportation  58,093    55,215    44,844
 Other                               40,227    36,899    33,728
                                   --------  --------  --------
                                    926,076   825,063   701,933
                                   --------  --------  --------
Operating income                     60,210    45,256    27,109

Other income (expense):
 Interest expense                   (15,530)  (16,256)  (14,708)
 Interest income                        307       247       137                                      247
 Gain (loss) on disposal of assets    1,203       (52)       90
 Other, net                             117        83       166
                                   --------  --------  --------
                                    (13,903)  (15,978)  (14,315)
                                   --------  --------  --------
Income before income taxes           46,307    29,278    12,794

Federal and state income
 taxes (Note 4):
 Current (credit)                    11,136     5,310    (3,093)
 Deferred                             7,670     6,167     8,031
                                   --------  --------  --------
                                     18,806    11,477     4,938
                                   --------  --------  --------
Net income                         $ 27,501  $ 17,801  $  7,856
                                   ========  ========  ========
Per share (Notes 1 and 8):                          
 Net income-basic                  $   0.87  $   0.57  $   0.25

 Net income-assuming dilution      $   0.87  $   0.56  $   0.25
                                   ========  ========  ========
                                                    
Average shares outstanding
 (Notes 1 and 8):
 Basic                               31,624    31,372    31,070
                                                    
 Assuming dilution                   31,689    31,672    31,266
                                   ========  ========  ========                                                     
</TABLE>
See accompanying notes.
<PAGE>
         American Freightways Corporation and Subsidiaries
                                 
          Consolidated Statements of Shareholders' Equity

<TABLE>
<CAPTION>
                               COMMON STOCK   ADDITIONAL                 
                               -------------
                                       PAR    PAID-IN   RETAINED TREASURY     
                               SHARES  VALUE  CAPITAL   EARNINGS STOCK    TOTAL
                               -------------------------------------------------
                                               (In Thousands)
                                                                        
<S>                            <C>     <C>   <C>       <C>       <C>    <C>
Balances at January 1, 1996    30,931  $309  $ 98,514  $ 96,611  $   -  $195,434
 Stock option
  and purchase plans              311     3     3,005         -      -     3,008
 Net income                         -     -         -     7,856      -     7,856
                               -------------------------------------------------
Balances at December 31, 1996  31,242   312   101,519   104,467      -   206,298
 Stock option and                                                
  and purchase plans              326     4     3,313         -      -     3,317
 Net income                         -     -         -    17,801      -    17,801
                               -------------------------------------------------
Balances at December 31, 1997  31,568   316   104,832   122,268      -   227,416
 Stock option                                                
  and purchase plans              127     1     1,221         -      -     1,222
 Purchase of 15 treasury                                          
  shares                            -     -         -         -   (125)    (125)
 Net income                         -     -         -    27,501      -    27,501
                               -------------------------------------------------
Balances at December 31, 1998  31,695  $317  $106,053  $149,769  $(125) $256,014
                               =================================================
</TABLE>
See accompanying notes.
<PAGE>
         American Freightways Corporation and Subsidiaries
                                 
               Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31
                                     1998      1997      1996
                                   ----------------------------
                                          (IN THOUSANDS)
<S>                                <C>       <C>       <C>
OPERATING ACTIVITIES                                  
Cash received from customers       $968,497  $856,742  $714,932
Cash paid to suppliers and
 employees                         (851,762) (763,134) (641,956)
Interest received                       307       247       137
Interest paid                       (15,438)  (15,635)  (14,413)
Income taxes (paid) received        (13,884)   (1,936)    4,552
                                   ----------------------------
Net cash provided by operating                        
activities                           87,720    76,284    63,252
                                                      
INVESTING ACTIVITIES                                  
Proceeds from sales of equipment      3,222     2,483     2,631
Capital expenditures                (94,392)  (67,880)  (107,383)

                                   -----------------------------
Net cash used by investing
 activities                         (91,170)  (65,397)  (104,752)
                                                      
FINANCING ACTIVITIES                                  
Proceeds from notes payable and                       
 long-term borrowings                45,657    55,400    78,000
Principal payments on long-term
 debt                               (41,771)  (71,731)  (37,392)
Proceeds from issuance of common
 stock                                1,208     2,805     2,644
Purchase of treasury stock             (125)        -         -
                                   ----------------------------
Net cash provided (used) by                           
 financing activities                 4,969   (13,526)   43,252
                                   ----------------------------
Net increase (decrease) in cash                       
 and cash equivalents                 1,519    (2,639)    1,752
Cash and cash equivalents at
 beginning of year                    1,755     4,394     2,642
                                   ----------------------------
Cash and cash equivalents at end                      
of year                            $  3,274  $  1,755  $  4,394
                                   ============================
</TABLE>
<PAGE>
         American Freightways Corporation and Subsidiaries
                                 
         Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                                         1998     1997     1996
                                        -------------------------
                                             (IN THOUSANDS)
<S>                                     <C>      <C>      <C>
RECONCILIATION OF NET INCOME TO NET                 
 CASH PROVIDED BY OPERATING ACTIVITIES:
Net income                              $27,501  $17,801  $ 7,856
Adjustments to reconcile net income                     
 to net cash provided by operating
 activities:
  Depreciation                           55,654   52,484   46,811
  Amortization                               58      112      107
  Provision for losses on accounts                        
   receivable                             2,142    1,633    1,721
  Current tax effect of exercise of                       
   stock options                             14       27      188
  (Gain) loss on sale of equipment       (1,203)      52      (90)
  Casualty loss on destroyed equipment      280      153      135
  Deferred income taxes                   7,670    6,167    8,031
  Changes in operating assets and                         
   liabilities:
   Trade receivables                    (17,906) (13,660) (14,275)
   Operating supplies and inventories    (1,257)    (389)    (357)
   Prepaid expenses                      (2,647)  (4,023)     856
   Income taxes receivable               (2,762)   3,096    1,271
   Other assets                            (375)     259      417
   Trade accounts payable                 3,856    3,485   (1,107)
   Accrued expenses                      16,695    8,836   11,688
                                        -------------------------
Total adjustments                        60,219   58,483   55,396
                                        -------------------------
Net cash provided by operating         
activities                              $87,720  $76,284  $63,252
                                        =========================
</TABLE>
See accompanying notes.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements include the accounts of
American Freightways Corporation and its subsidiaries
(collectively, the "Company"). All significant intercompany
accounts and transactions have been eliminated.

BUSINESS

The Company primarily operates as a regional and an interregional,
scheduled, for hire, less-than-truckload motor carrier, serving all
points in 28 contiguous states from a network of 223 customer
centers. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral. Historically,
credit losses have been within management's expectations.

USE OF ESTIMATES

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.

REVENUE RECOGNITION

The Company recognizes revenue and direct shipment costs upon the
delivery of the related freight.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. For financial reporting
purposes, the cost of such property is depreciated principally by
the straight-line method over the estimated useful lives of 3 to 12
years for revenue and service equipment, 15 to 40 years for
structures and improvements and 3 to 10 years for furniture and
office equipment. For tax reporting purposes, accelerated
depreciation or applicable cost recovery methods are used. Gains
and losses are recognized in the year of disposal.  Gains or losses
on revenue equipment are recorded as adjustments to depreciation
expense.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INSURANCE

As of December 31, 1998, the Company was generally self-insured up
to specified limits for workers compensation and cargo loss and
damage claims.  In the states of Colorado, Delaware, Iowa,
Maryland, Michigan, Minnesota, Nebraska, New Mexico, Texas and
Wisconsin, however, workers' compensation claims are insured under
a $1,000,000 deductible plan. In the state of North Dakota,
workers' compensation claims are insured under the mandatory state
plan as private plans are not permitted.

General and automobile liability claims are insured with a
retention limit of $1,000,000 per occurrence, with excess coverage
on a fully insured basis providing catastrophic coverage.

INCOME TAXES

Deferred income taxes are accounted for under the liability method.
Deferred income tax assets and liabilities reflect the effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting and the amounts used for income
tax purposes.

EARNINGS PER SHARE

The Company calculates earnings per common share in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share" which was issued by the Financial Accounting
Standards Board in 1997.  SFAS No. 128 requires the use and
disclosure of two methods for calculating earnings per share:

   Earnings per share-basic is computed based on the weighted
   average number of shares outstanding during each year.
   
   Earnings per share-assuming dilution is computed based on the
   weighted average number of shares outstanding during each year,
   adjusted to include common stock equivalents attributable to
   dilutive stock options.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings per share amounts for 1996 have been restated to conform
to SFAS No. 128 requirements.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.

STOCK-BASED COMPENSATION

The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option
grants in accordance with Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", and
accordingly, recognizes no compensation expense for the stock
option grants.

IMPAIRMENT OF ASSETS

The Company accounts for any impairment of its long-lived assets
using SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of."  Under SFAS
No. 121, impairment losses are recognized when information
indicates the carrying amount of long-lived assets, identifiable
intangibles and goodwill related to those assets will not be
recovered through future operations or sale.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company adopted SFAS No. 130, "Reporting of Comprehensive
Income" in 1998.  Because the Company had no other items of
comprehensive income, the impact of adoption was not material.

The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which requires public business
enterprises to report financial and descriptive information about
its reportable segments.  The Company has one business segment.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In March 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use".
Under the SOP, qualifying computer software costs are required to
be capitalized and amortized against income over the software's
estimated useful life.  The SOP is effective for fiscal years
beginning after December 15, 1998.  The Company does not anticipate
that the adoption of SOP 98-1 will have a material effect on
earnings or the financial position of the Company.

In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities."  The Statement is effective for all quarters of fiscal
years beginning after June 15, 1999 and establishes accounting and
reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability at
its fair value.  The Company does not anticipate that the adoption
of SFAS No. 133 will have a material effect on earnings or the
financial position of the Company.

RECLASSIFICATIONS

Certain amounts previously reported in 1997 and 1996 have been
reclassified to conform with the 1998 presentation.

2. ACCRUED EXPENSES
<TABLE>
<CAPTION>
                                          1998     1997
                                         ----------------
                                          (In Thousands)
<S>                                      <C>      <C>
Accrued salaries, wages and benefits     $25,546  $24,476
Taxes other than income                    7,098    3,910
Accident liability, cargo loss and                 
 damage, health, and workers'             33,892   23,194
 compensation claims reserves
Other                                      4,273    2,534
                                         ------------------
                                         $70,809  $54,114
                                         ==================
</TABLE>
<PAGE>
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
                                          1998      1997
                                        ------------------
                                          (In Thousands)           
<S>                                     <C>       <C>
Bonds payable (1)                       $  6,360  $  6,700
Revolving credit agreements (2)           78,000    63,000
Mortgage notes (3)                           801       958
Unsecured senior notes (4)               140,250   151,250
Other-computer equipment (5)                 383         -
                                        ------------------
                                         225,794   221,908
Less current portion                     (19,679)  (11,497)
                                        ------------------
                                        $206,115  $210,411
                                        ==================
</TABLE>
(1)Represents the Company's liability under a loan agreement with
   Arkansas Development Finance Authority, issuer of economic
   development revenue bonds to construct customer centers and a
   general office facility. The loan agreement provides that the
   Company will make payments sufficient to pay the principal and
   interest on the bonds. The bonds include a $370,000 term bond
   due in 1999 and a $5,990,000 term bond due in 2009. The bonds
   bear interest at fixed rates of 8.25% and 8.50%, respectively,
   and are collateralized by land and structures with a net book
   value of $7,721,000 at December 31, 1998. The loan agreement
   requires that certain bond service funds be maintained. As of
   December 31, 1998, there was $896,000 in a debt service reserve
   fund. Mandatory annual sinking fund redemption payments began
   in 1995.

(2)The revolving credit agreements at December 31, 1998, include an
  unsecured revolving credit agreement which provides for
  available borrowings of $160,000,000. Borrowings under this
  revolving credit agreement at December 31, 1998 totaled
  $70,000,000. The term of this agreement extends to April 1, 2003
  (unless terminated or renewed). Interest is applied to
  outstanding borrowings at variable interest rates based on the
  London Interbank rate or the prime rate. The weighted average
  rate on outstanding borrowings at December 31, 1998 was 6.12%.
  The agreement contains covenants which limit, among other
  things, indebtedness, loans, investments and dividend payments,
  as well as require the Company to meet certain financial tests.
  The Company pays an annual commitment fee based on the unused
  commitment. At December 31, 1998, the commitment fee was
  0.1875%.  As of December 31, 1998, the amount available for
  additional borrowing under this line of credit was $90,000,000.
<PAGE>
   The Company also has $15,000,000 of available borrowings and
   letters of credit at December 31, 1998, under a separate
   unsecured revolving credit agreement. The terms of this
   agreement provide for borrowings up to $15,000,000 at a rate of
   interest agreed upon at the time of any borrowings. Borrowings
   outstanding at December 31, 1998 totaled $8,000,000 with an
   interest rate of 6.63%.  This agreement matures March 31, 1999,
   unless terminated or renewed.  At December 31, 1998, the
   Company had utilized this line of credit to obtain letters of
   credit totaling $3,976,000.

(3)Mortgage notes are due monthly or annually to November 2003 at
   an average interest rate of 8.30%. The notes are collateralized
   by land and structures with a net book value of $4,452,000 at
   December 31, 1998.

(4)Includes an unsecured senior note for $15,000,000 payable in
   equal annual installments of $5,000,000 through November 2001.
   The note bears interest at a fixed rate of 8.91% payable semi-
   annually.

   Also includes seven notes totaling $125,250,000; all issued
   under an unsecured and uncommitted $140,000,000 Master Shelf
   Agreement with the following characteristics:
<TABLE>
<CAPTION>
         OUTSTANDING                     INTEREST
          PRINCIPAL        MATURITY DATE   RATE
         ---------------------------------------
         <C>               <C>             <C>
         $ 5,250,000       August 2000     6.25%
           4,000,000       October 2000    6.00
           6,000,000       April 2001      7.55
          15,000,000       January 2005    8.85
          20,000,000       June 2005       6.92
          25,000,000       May 2006        7.51
          50,000,000       April 2012      8.11
</TABLE>
   All notes have fixed interest rates, payable quarterly. These
   note agreements contain covenants which limit, among other
   things, loans, indebtedness, investments and dividend payments,
   and require the Company to meet certain financial tests.

(5)Represents the Company's liability under a loan agreement with
   IBM Credit Corporation.  Payments are due monthly until June
   2001.  The note bears interest at 5.51%
<PAGE>
Annual maturities on long-term debt are $19,679,000 in 1999,
$12,974,000 in 2000, $14,700,000 in 2001, $12,666,000 in 2002,
$82,625,000 in 2003 and $83,150,000 thereafter.

Interest costs of $1,044,000, $831,000 and $1,655,000 in 1998,
1997, and 1996, respectively, were capitalized as part of the
construction cost of certain property and equipment.

4. FEDERAL AND STATE INCOME TAXES

Significant components of the Company's deferred tax liabilities
and assets as of December 31, 1998 and 1997, respectively, are as
follows:
<TABLE>
<CAPTION>
                                               1998     1997
                                              ----------------
                                              (In Thousands)
<S>                                           <C>      <C>
Noncurrent deferred tax liabilities:    
 Tax over book depreciation                   $74,361  $70,983
 Alternative minimum tax credit carryover           -  (10,525)
 State loss and credit carryovers              (1,683)  (1,233)
                                              ----------------
Net noncurrent deferred tax liabilities       $72,678  $59,225
                                              ================
                                                     
Current deferred tax assets:                         
 Accrued expenses not deductible until paid   $18,498  $12,826
 Allowance for doubtful accounts                  507      437
 Revenue recognition differences                1,016      767
                                              ----------------
Total current deferred tax assets              20,021   14,030
                                                     
Current deferred tax liabilities:                    
 Prepaid expenses                                (932)    (724)
                                              ----------------
Net current deferred tax assets               $19,089  $13,306
                                              ================
</TABLE>
<PAGE>
The reconciliation between the effective income tax rate and the
statutory federal income tax rate is presented in the following
table:
<TABLE>
<CAPTION>
                                          1998    1997    1996
                                         -----------------------
                                             (In Thousands)
<S>                                      <C>     <C>     <C>
Income tax at the statutory federal
 rate of 35%                             $16,207 $10,247 $ 4,478
Federal income tax effects of:                          
 State income taxes                         (666)   (552)   (280)
 Nondeductible expenses                      480     405     340
 Effects of rates on taxable income                
  above (below) $15,000,000                  882    (150)   (400)
 Other                                         -     (49)      -
                                         -----------------------
Federal income taxes                      16,903   9,901   4,138
State income taxes                         1,903   1,576     800
                                         -----------------------
                                         $18,806 $11,477 $ 4,938
                                         =======================
Effective income tax rate                   40.6%   39.2%   38.6%
                                         =======================
</TABLE>
Tax benefits of stock option and purchase plans recorded as paid-in
capital and which did not reduce income tax expense amounted to
$14,000, $512,000 and $364,000 in 1998, 1997 and 1996,
respectively.

5. EMPLOYEE BENEFIT AND COMPENSATION PLANS

STOCK PURCHASE PLAN

The Company maintains a stock purchase plan covering substantially
all employees of the Company. A total of 487,454 shares of common
stock remain reserved for issuance under this plan at December 31,
1998. Each year, an eligible employee can purchase the greater of
200 shares or $1,200 of stock. The price per share is 85% of the
lower of the fair market value at the date of grant or the date of
exercise, which is one year from the date of grant.
<PAGE>
Shares have been issued during 1996, 1997 and 1998 as follows:
<TABLE>
<CAPTION>
                                  NUMBER OF    PER SHARE
ISSUE DATE                        SHARES       EXERCISE
                                  ISSUED       PRICE
--------------------------------------------------------
<S>                               <C>           <C>
April 30, 1996                     90,284       $12.86
October 31, 1996                  100,622         8.39
April 30, 1997                     71,557        12.01
October 31, 1997                   87,397         8.29
April 30, 1998                     59,297        10.20
October 31, 1998                   70,318         7.23
</TABLE>
During 1998 employees enrolled for options to purchase 224,321
shares under the plan. In accordance with plan provisions, the
shares must be purchased during 1999.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

The 1993 Stock Option Plan provides for the issuance of qualified
or nonqualified options to purchase common stock of the Company,
and the awarding of stock appreciation rights payable in shares or
cash. The stock appreciation rights currently outstanding were
issued in 1993 and are payable only in cash. No option or right may
be issued for less than the fair market value of the stock on the
date of grant. The options and rights vest over a five year period
from the date of grant and will expire if not exercised after ten
years from the date of grant. The Company also reserves shares for
issuance under the Chairman Stock Option Plan and the Nonemployee
Director Stock Option Plans.
<PAGE>
Collective activity within the plans is summarized as follows:
<TABLE>
<CAPTION>
                                    STOCK       SHARES                 WEIGHTED
                                 APPRECIATION   UNDER                  AVERAGE
                                    RIGHTS      OPTION    PRICE RANGE  PRICE
                                  ---------------------------------------------
<S>                               <C>        <C>        <C>             <C>
Outstanding at January 1, 1996    138,290    1,497,780  $ 3.00 -$22.13  $12.86
Granted                                 -      309,000   10.32 - 10.47   15.69
Exercised                          (3,660)    (140,210)   4.25 - 13.07    6.46
Canceled                          (11,580)    (100,800)   6.32 - 21.38   13.66
                                  ---------------------------------------------
Outstanding at December 31, 1996  123,050    1,565,770    3.00 - 22.13   12.93
Granted                                 -      414,200   11.00 - 15.94   11.16
Exercised                         (20,940)    (176,340)   3.00 - 17.88    8.36
Canceled                          (11,460)    (204,460)   6.31 - 21.38   12.92
                                  ---------------------------------------------
Outstanding at December 31, 1997   90,650    1,599,170    3.00 - 22.13   13.06
Granted                                 -      515,550    9.69 - 11.31   10.12
Exercised                               -      (13,080)   6.31 -  7.63    7.50
Canceled                           (3,600)     (93,850)   6.31 - 22.13   12.58
                                  ---------------------------------------------
Outstanding at December 31, 1998   87,050    2,007,789  $ 3.00 -$22.13  $12.33
                                  =============================================
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable options:
<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING          OPTIONS EXERCISABLE
                    ---------------------------------  ---------------------
                                                                   
                                 WEIGHTED             
 RANGE OF                        AVERAGE     WEIGHTED               WEIGHTED
 EXERCISE              NUMBER    REMAINIING  AVERAGE                AVERAGE
  PRICES            OUTSTANDING  LIFE        EXERCISE  NUMBER       EXERCISE 
                                 (YEARS)     PRICE     EXERCISABLE  PRICE
----------------------------------------------------------------------------
<C>                 <C>           <C>        <C>       <C>          <C>
$3-$5                  18,000      0.3       $ 3.00       18,000    $  3.00
$5-$10                195,280      5.0         8.26      115,280       7.27
$10-$15             1,505,320      6.1        11.54      725,267      12.64
$15-$20               127,410      5.3        17.77       96,477      17.84
Greater than $20      161,780      5.5        21.38       96,060      21.38
                    ------------------                 ---------
Total               2,007,790      5.8                 1,051,084   
                    ==================                 =========
</TABLE>
<PAGE>
The number of shares of common stock reserved for granting future
options under these plans was 864,870, 1,460,950 and 1,686,770, at
December 31, 1998, 1997, and 1996, respectively. At December 31,
1998, options were exercisable to purchase 1,051,084 shares.

There was no benefit or expense related to the change in value of
stock appreciation rights for 1998, 1997 or 1996.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations in accounting for
its stock option plans and, accordingly, does not recognize
compensation expense. If the Company had elected to recognize
compensation expense based on the fair value of options granted at
grant date as prescribed by SFAS No. 123, "Accounting for Stock-
Based Compensation", net income and earnings per share-assuming
dilution would have been reduced to the pro forma amounts indicated
in the table below:
<TABLE>
<CAPTION>
(in thousands except per share amounts)     1998     1997     1996
                                           ---------------------------
<S>                                        <C>      <C>      <C>
Net income - as reported                   $27,501  $17,801  $ 7,856
Net income - pro forma                      26,219   16,951    6,799
Earnings per share-assuming dilution
 - as reported                                0.87     0.56     0.25
Earnings per share-assuming dilution
 - pro forma                               $  0.83  $  0.54  $  0.22
</TABLE>
The pro forma effect on net income for the years presented is not
representative of the pro forma effect on net income in future
years because it does not take into consideration pro forma
compensation expense related to grants made prior to 1995.

The fair value of options was estimated as of the date of grant
using the Black-Scholes option-pricing model with the following
assumptions:
<TABLE>
<CAPTION>
                                1998               1997               1996
                         Option    Purchase  Option   Purchase  Option  Purchase
                          Plans     Plans     Plans    Plans      Plans  Plans
                         -------------------------------------------------------
<S>                     <C>        <C>     <C>        <C>     <C>        <C>
Expected dividend yield         0%      0%         0%      0%         0%      0%
Expected stock price                                             
 volatility                  33.8%   38.5%      29.8%   34.9%      26.9%   30.6%
Risk-free interest rate      5.62%   4.63%      6.06%   5.69%      5.42%   5.54%
Expected life of options 4.3 years  1 year  4.4 years  1 year  4.4 years  1 year
Weighted average                                                 
 value per option            $3.68   $2.58      $3.87   $3.65      $3.29   $2.84
</TABLE>
<PAGE>
RETIREMENT PLAN

The Company maintains a profit sharing plan for the benefit of all
eligible employees. The plan qualifies under Section 401(k) of the
Internal Revenue Code thereby allowing eligible employees to make
tax deferred contributions to the plan. The plan permits, at the
discretion of the Board of Directors, elective and matching
employer contributions. During 1998, the Company made elective
contributions of 2 1/2% of each eligible participant's compensation,
in addition to a 25% match of the first 6% of compensation
contributed by participants.  The Company's contributions to the
plan totaled $12,717,000, $10,786,000 and $8,313,000 for 1998, 1997
and 1996, respectively.

6. LEASES AND COMMITMENTS

Rent expense, exclusive of amounts related to purchased
transportation, totaled approximately $31,324,000 for 1998,
$25,054,000 for 1997 and $26,118,000 for 1996.  The future minimum
rental commitments under noncancelable operating leases having
initial or remaining terms in excess of one year as of December 31,
1998 are as follows:
<TABLE>
<CAPTION>
                                             REVENUE    OTHER
                        TOTAL    STRUCTURES  EQUIPMENT  EQUIPMENT
                        ---------------------------------------
                                   (In Thousands)
<C>                     <C>       <C>        <C>       <C>
1999                    $ 31,716  $  5,189   $ 14,316  $ 12,211
2000                      29,903     2,887     14,316    12,700
2001                      19,148     1,796     13,539     3,813
2002                      15,297     1,303     13,787       207
2003                      10,117       713      9,404         -
Thereafter                 7,178     1,653      5,525         -
                        ---------------------------------------
                        $113,359  $ 13,541   $ 70,887  $ 28,931
                        =======================================
</TABLE>
Certain leases have renewal options for periods from one to five
years at the fair rental value of the related property at renewal.
Certain of the lease agreements contain fixed price purchase
options. The lease agreements require the lessee to pay property
taxes, maintenance and operating expenses.

Commitments for land, customer centers and revenue equipment
(including the cost to complete construction in progress)
aggregated approximately $45,149,000 at December 31, 1998.
<PAGE>
7. COMMON STOCK

On August 17, 1998, the Company declared a dividend of one common
share purchase right ("Right") for each outstanding share of common
stock, ("Common Shares") of the Company at August 31, 1998 and
generally to shares issuable after that date.  The Rights are not
currently exercisable and will automatically trade with the common
stock.  However, if a person or group acquires more than 15% of the
Common Shares or announces a tender or exchange offer for more than
15% of the Common Shares, the Rights will become exercisable and
each right holder (other than the prospective acquiror) may use the
Rights to purchase $25 worth of Common Shares at one half of the
then market price.  The Rights will expire on August 17, 2003,
unless extended or earlier redeemed.

8. EARNINGS PER SHARE

Net income for purposes of basic earnings per share and earnings
per share-assuming dilution was $27,501,000, $17,801,000 and
$7,856,000 for the years 1998, 1997 and 1996, respectively. A
reconciliation of average shares outstanding for both computations
is presented below:
<TABLE>
<CAPTION>
                                                 1998    1997    1996
                                                ---------------------
                                                    (In Thousands)
<S>                                             <C>     <C>     <C>
Average shares outstanding-basic                31,624  31,372  31,070
Effect of dilutive stock options                    65     300     196
                                                ----------------------
Average shares outstanding-assuming dilution    31,689  31,672  31,266
                                                ======================
</TABLE>
Antidilutive stock options are not included in the earnings per
share calculation. Average antidilutive options were 1,545,000,
489,000 and 921,000 for 1998, 1997 and 1996, respectively.
<PAGE>
9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED
                                MARCH     JUNE    SEPTEMBER  DECEMBER
                                 31        30        30         31
                               --------------------------------------
                               (In Thousands, Except Per Share Data)
1998                                                    
<S>                            <C>       <C>       <C>       <C>
Operating revenue              $230,649  $246,402  $254,047  $255,188
Operating expenses and costs    221,344   230,515   236,835   237,382
Net income                        3,172     7,658     8,191     8,480
Net income per share:     
     Basic                          .10       .24       .26       .27
     Assuming dilution         $    .10  $    .24  $    .26  $    .27
                                                        
Average shares outstanding:
     Basic                       31,568    31,612    31,639    31,679
     Assuming dilution           31,625    31,752    31,670    31,710
</TABLE>
<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED
                               MARCH      JUNE    SEPTEMBER  DECEMBER
                                31         30        30         31
                               --------------------------------------
                               (In Thousands, Except Per Share Data)
1997                                                    
<S>                            <C>       <C>       <C>       <C>
Operating revenue              $193,051  $219,088  $233,760  $224,419
Operating expenses and costs    186,649   203,516   216,775   218,122
Net income                        1,458     6,986     7,895     1,462
Net income per share:      
     Basic                          .05       .22       .25       .05
     Assuming dilution         $    .05  $    .22  $    .25  $    .05
                                                        
Average shares outstanding:
     Basic                       31,258    31,301    31,414    31,515
     Assuming dilution           31,490    31,597    31,811    31,790
</TABLE>
<PAGE>
10. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:

Cash and cash equivalents - the carrying amount reported in the
consolidated balance sheets for cash and cash equivalents
approximates fair value.

Bond funds - the Company's debt service reserve fund is invested in
money market funds and the carrying amount reported in the
consolidated balance sheets for bond funds approximates fair value.

Long-term debt - the fair values of the Company's long-term debt
are estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.

The carrying amounts and fair values of the Company's financial
instruments at December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
                              CARRYING       FAIR
                              AMOUNT         VALUE
                              ----------------------
1998                                    
<S>                           <C>           <C>
Cash and cash equivalents     $  3,274      $  3,274
Bond funds                         896           896
Long-term debt                 225,794       239,923
                                        
1997                                    
Cash and cash equivalents     $  1,755      $  1,755
Bond funds                         878           878
Long-term debt                 221,908       232,777
</TABLE>
<PAGE>




         Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Shareholders
American Freightways Corporation

We have audited the accompanying consolidated balance sheets of
American Freightways Corporation and subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 consolidated
financial position of American Freightways Corporation and
subsidiaries at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.

/s/Ernst & Young LLP
Little Rock, Arkansas
January 20, 1999