<PAGE>

                                          
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                                     FORM 10-Q
                                          
                                     (Mark one)
                                          
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES 
     EXCHANGE ACT OF 1934
                                          
                 For the quarterly period ended September 30, 1998
                                          
                                         OR

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

For the transition period from           to 
                              ----------    -----------

Commission file number  0-28428

                                 AIRNET SYSTEMS, INC.
                    ---------------------------------------------
                (Exact name of registrant as specified in its charter)

                 Ohio                                31-1458309
      -----------------------------------   ---------------------------------
          (State or other jurisdiction of         (I.R.S. Employer
          incorporation or organization)          Identification No.)


                  3939 International Gateway, Columbus, Ohio 43219
           ---------------------------------------------------------------
               (Address of principal executive offices)  (Zip Code)


                                  (614) 237-9777
           ---------------------------------------------------------------
                 (Registrant's telephone number, including area code)


                                    NOT APPLICABLE
           ---------------------------------------------------------------
                 (Former name, former address and former fiscal year,
                            if changed since last report)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by 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
                                              ---     ---

Common Shares, $.01 Par Value,
     Outstanding as of  November 5, 1998  - 11,370,987


<PAGE>


                                AIRNET SYSTEMS, INC.
                                          
                   FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1998
                                          
                                          
                                          
PART I:  FINANCIAL INFORMATION
<TABLE>
<S>                                                                             <C>
Item 1    Financial Statements (Unaudited)   

          Condensed Consolidated Balance Sheets as of September 30, 1998
          and December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . .3

          Condensed Consolidated Statements of Operations for the 
          three and nine months ended September 30, 1998 and 1997. . . . . . . . . 4

          Condensed Consolidated Statements of Cash Flows for 
          the nine months ended September 30, 1998 and 1997 . . . . . . . . . . . .5

          Notes to Condensed Consolidated Financial Statements . . . . . . . . . . 6

Item 2    Management's Discussion and Analysis of Financial
          Condition and Results of Operations. . . . . . . . . . . . . . . . . . . 9
     
Item 3    Quantitative and Qualitative Disclosures About Market Risk . . . . . . .13

PART II: OTHER INFORMATION

     Items 1 through 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
     
     Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
</TABLE>

                                          2

<PAGE>


                           PART I - FINANCIAL INFORMATION

                           ITEM I - FINANCIAL STATEMENTS


                                AIRNET SYSTEMS, INC.


                        CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                     SEPTEMBER 30,  DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE DATA)                       1998           1997
                                                    -------------- -------------
                                                     (Unaudited)
<S>                                                 <C>           <C>
ASSETS
Current assets:
     Cash and  cash equivalents                           $  -          $2,125 
     Accounts receivable:
        Trade, less allowances                          13,129          10,967 
        Shareholders, affiliates, and associates            56              86 
     Spare parts and supplies                            9,596           6,053 
     Deposits and other prepaids                         8,351           5,848 
                                                    -------------- -------------
Total current assets                                    31,132          25,079 

Net property and equipment                              75,320          67,578 

Other assets:
     Intangibles, net of accumulated amortization        9,019           5,426 
     Investment in partnerships and other                7,686           5,903 
                                                    -------------- -------------
Total assets                                          $123,157        $103,986 
                                                    -------------- -------------
                                                    -------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

     Accounts payable                                   $7,456          $4,033 
     Salaries and related liabilities                    1,188           1,606 
     Accrued expenses                                    1,483           1,311 
     Taxes payable                                           -           2,386 
     Deferred taxes                                      2,070             229 
     Current portion of notes payable                       24              24 
                                                    -------------- -------------
Total current liabilities                               12,221           9,589 

Notes payable, less current portion                     24,488           9,706 
Deferred taxes                                           6,275           4,431 
Shareholders' equity:
  Preferred shares, $.01 par value; 10,000,000 shares
    authorized; and no shares issued and outstanding         -               -
  Common shares, $.01 par value; 40,000,000 
    shares authorized; 12,753,400 shares issued 
    at September  30, 1998 and December 31, 1997           127             127 
  Additional paid-in-capital                            78,496          79,779 
  Retained earnings                                     12,913           5,787 
  Treasury shares, held at cost; 704,413 shares
    at September 30, 1998 and 263,570 shares at 
    December 31, 1997                                  (11,363)         (5,433)
                                                    -------------- -------------
Total shareholders' equity                              80,173          80,260 
                                                    -------------- -------------
Total liabilities and shareholders' equity            $123,157        $103,986 
                                                    -------------- -------------
                                                    -------------- -------------
</TABLE>

                                   3


SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>


                                        AIRNET SYSTEMS, INC.

                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                           (Unaudited)

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED              NINE MONTHS ENDED
                                                         SEPTEMBER 30,                   SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA)                 1998            1997           1998            1997
                                                    ---------       ---------     ----------       ---------
<S>                                                 <C>              <C>            <C>             <C>
NET REVENUES
  Air transportation
     Check delivery                                  $24,311          $21,670        $70,097         $58,579
     Small package delivery                            5,006            4,251         13,316          11,877
  Fixed base operations                                  327              326            911           1,088
                                                    ---------       ---------     ----------       ---------
Total net revenues                                    29,644           26,247         84,324          71,544

COSTS AND EXPENSES

     Air transportation                               21,478           18,416         60,406          48,096
     Fixed base operations                               243              284            616             860
     Selling, general and administrative               3,399            1,525          8,340           5,605
                                                    ---------       ---------     ----------       ---------
Total costs and expenses                              25,120           20,225         69,362          54,561
                                                    ---------       ---------     ----------       ---------
Income from operations                                 4,524            6,022         14,962          16,983
Acquisition termination charge                             -                -          2,350               -
Interest expense                                         327               25            782              25
                                                    ---------       ---------     ----------       ---------
Income before income taxes                             4,197            5,997         11,830          16,958
Provision for income taxes                             1,678            2,399          4,704           6,763
                                                    ---------       ---------     ----------       ---------
Net income                                            $2,519           $3,598         $7,126        $10,195 
                                                    ---------       ---------     ----------       ---------
                                                    ---------       ---------     ----------       ---------

Net income per common share                            $0.20            $0.29          $0.57          $0.81 


Net income per common share - assuming dilution        $0.20            $0.28          $0.56          $0.80 
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                      4

<PAGE>



                               AIRNET SYSTEMS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED
                                                                           SEPTEMBER 30,
(IN THOUSANDS)                                                           1998         1997
                                                                    ----------     ----------
<S>                                                                  <C>          <C>
Operating activities
Net income                                                             $7,126        $10,195
Adjustments to reconcile net income to net cash
provided by operating activities:
  Depreciation                                                          7,490          6,598 
  Amortization of intangibles                                             610            246 
  Deferred taxes                                                        3,685          4,158 
  Provision for losses on accounts receivable                             105             42 
  Loss (gain) on disposition of assets                                     39            (88)
  Cash provided by (used in) operating assets and liabilities:
     Accounts receivable                                               (1,475)        (3,519)
     Spare parts and supplies                                          (3,543)        (1,155)
     Prepaid expenses                                                    (963)        (3,256)
     Accounts payable                                                   2,967          1,228 
     Accrued expenses                                                    (239)         1,172 
     Taxes payable                                                     (3,922)             -
     Salaries and related liabilities                                    (420)          (787)
     Other, net                                                        (1,998)          (288)
                                                                    ----------     ----------
Net cash provided by operating activities                               9,462         14,546 

Investing activities
Purchases of property and equipment                                   (15,100)       (15,452)
Payments for covenants not  to compete                                   (488)          (105)
Acquisition of Mercury Business Services, Inc., net of cash acquired   (1,761)             -
Acquisition of Pacific Air Charter, Inc., net of cash acquired              -           (210)
Acquisition of Data Air Courier, Inc., net of cash acquired               (34)        (4,049)
Proceeds from sales of property and equipment                              49            933 
                                                                    ----------     ----------
Net cash used in investing activities                                 (17,334)       (18,883)

Financing activities
Exercise of stock options                                               1,837          1,757 
Net borrowings under the revolving credit facility                     14,800          5,000 
Repayment of long-term debt                                               (17)        (1,560)
Purchase of treasury shares                                           (10,873)        (5,762)
                                                                    ----------     ----------
Net cash provided by (used in) financing activities                     5,747           (565)
                                                                    ----------     ----------
Net decrease in cash                                                   (2,125)        (4,902)
Cash and cash equivalents at beginning of period                        2,125          9,631 

                                                                    ----------     ----------
Cash and cash equivalents at end of period                                 $0         $4,729 
                                                                    ----------     ----------
                                                                    ----------     ----------
</TABLE>

                                       5

<PAGE>
                              AIRNET SYSTEMS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


1.   BASIS OF PRESENTATION

AirNet Systems, Inc. and its subsidiaries (the "Company") operate a fully 
integrated national air transportation network which provides delivery 
service of time-critical shipments for customers in the U.S. banking industry 
and other industries requiring late night pickup with early morning delivery 
of small packages.  The Company also offers retail aviation fuel sales and 
related ground services for customers in Columbus, Ohio.  

The accompanying unaudited condensed consolidated financial statements 
include the accounts of AirNet Systems, Inc. and its subsidiaries.  These 
financial statements have been prepared in accordance with generally accepted 
accounting principles for interim financial information and with the 
instructions for Form 10-Q and Article 10 of Regulation S-X.  Accordingly, 
they do not include all information and footnotes required by generally 
accepted accounting principles for complete financial statements.  These 
financial statements should be read in conjunction with the year ended 
December 31, 1997 consolidated financial statements of AirNet Systems, Inc. 
contained in the Annual Report on Form 10-K (File No. 0-28428) for additional 
disclosures including a summary of the Company's accounting policies, which 
have not changed.

The financial information included herein reflects all adjustments 
(consisting of normal recurring adjustments) which are, in the opinion of 
management, necessary for a fair presentation of the results of interim 
periods.  Operating results for the three and nine months ended September 30, 
1998 are not necessarily indicative of the results to be expected for the 
year ending December 31, 1998.  

The preparation of the condensed consolidated 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 thereto.  Actual results could 
differ from those estimates.

2.   ACQUISITION TERMINATION CHARGE

On June 17, 1998, the Company announced that it had terminated an agreement 
to acquire Q International Courier, Inc. ("Quick").  The Company had incurred 
$2,350,000 of costs in conjunction with the planned acquisition, all of which 
were expensed upon the termination of the agreement. 

<PAGE>

3.   NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net 
income per share (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                     Three Months Ended   Nine Months Ended
                                                         September 30,       September 30,
                                                     -------------------  -----------------
                                                       1998      1997      1998      1997
                                                     --------  ---------  -------- --------
<S>                                                  <C>       <C>       <C>       <C>
Numerator:
  Net income                                          $2,519      3,598    $7,126   $10,195

Denominator:
  Basic - weighted average shares outstanding         12,384     12,579    12,499    12,612

  Diluted
    Stock options - associates, officers, directors       55        217       151       123
    Adjusted weighted average shares outstanding      12,439     12,796    12,650    12,735

Net income per share - basic                          $  .20     $  .29    $  .57    $  .81

Net income per share - assuming dilution              $  .20     $  .28    $  .56    $  .80
</TABLE>


4.   RECENT ACCOUNTING PRONOUNCEMENTS

The Company has historically capitalized costs related to start-up activities 
associated with new business initiatives, such as the introduction of the 
premium products line of business.  Costs associated with these initiatives, 
such as personnel costs, outside services and administrative support services 
were capitalized as start-up costs. The Company completed its start-up phase 
activities related to the premium products line of business and ceased 
capitalizing related start-up costs as of June 30, 1998.  The Company began 
the amortization of those costs effective July 1, 1998.  Capitalized start-up 
costs, which totaled $4,686,000 at June 30, 1998 are being amortized over 
five years under the straight line method.  At September 30, 1998, the 
unamortized balance, reflected in the other assets section of the balance 
sheet, totaled $4,458,000.  

In April 1998, AcSEC issued Statement of Position No. 98-5, "Reporting on the 
Costs of Start-Up Activities".  This SOP will require all companies to 
write-off, as a cumulative effect of a change in accounting principle, any 
previously capitalized start-up costs.  This SOP will be effective for the 
Company in the first quarter of 1999.

In June 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement No. 131, "Disclosures About Segments of an Enterprise and Related 
Information". Statement No. 131, which will become effective for the 
Company's 1998 year end reporting, establishes requirements for reporting 
information about operating segments in annual and interim statements.  This 
statement may require a change in the Company's financial reporting; however, 
the extent of this change, if any, has not been determined.

                               7

<PAGE>

5.   ACQUISITION OF MERCURY BUSINESS SERVICES, INC.

On August 11, 1998, the Company acquired all of the outstanding common stock 
of Mercury Business Services, Inc. ("Mercury"), an express delivery 
management service located in Boston.  The Company accounted for the 
acquisition under the purchase method of accounting.  The purchase price of 
the acquisition included $2,000,000 of cash and 117,647 AirNet Common Shares 
and resulted in goodwill of $3,451,000, which will be amortized over 25 
years, and covenants not compete totaling $300,000.  The covenants not to 
compete will be amortized over the three year term of the agreements.  The 
acquired assets and assumed liabilities have been recorded at their estimated 
fair values as of August 11, 1998.  The Company's condensed consolidated 
financial statements for the three and nine months ended September 30, 1998 
include the results of the operations of Mercury since the purchase date.

6.   TREASURY STOCK

In August 1998, the Company implemented a stock repurchase program, with 
authorization to purchase up to $12,000,000 of its Common Shares.  During the 
quarter ended September 30, 1998, the Company purchased 680,700 Common 
Shares, at a total cost of $10,839,000.  

In October 1998, subsequent to the close of the quarter, the Company's 
authorization to purchase its Common Shares was increased to $20,000,000 by 
the Company's Board of Directors.  The Company bought an additional 678,000 
Common Shares for an additional $9,161,000, completing its buyback program.

                                8

<PAGE>

                                AIRNET SYSTEMS, INC.
                                          
             ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                        CONDITION AND RESULTS OF OPERATIONS


SAFE HARBOR STATEMENT

Certain matters discussed in this Form 10-Q, including, but not limited to, 
information regarding future economic performance and plans and objectives of 
the Company's management, are forward-looking statements which involve risks 
and uncertainties. When used in this document, the words "anticipate", 
"estimate", "expect", "may", "plan", "project" and similar expressions are 
intended to be among statements that identify forward-looking statements.  
Such statements involve risks and uncertainties such as the following, in 
addition to other factors not listed, which could cause actual results to 
differ materially from any such forward-looking statement:  potential changes 
by the Federal Aviation Administration ("FAA"), which could increase the 
regulation of the Company's business or the Federal Reserve, which could 
change the competitive environment of transporting canceled checks; adverse 
weather conditions; technological advances and increases in the use of 
electronic funds transfers; the effective detection and remediation of Y2K 
issues by the company and its key third party vendors, including the FAA's 
air traffic control system; the Company's ability to successfully complete 
and integrate acquisition targets; as well as other economic, competitive and 
domestic and foreign governmental factors affecting the Company's markets, 
prices and other facets of its operations.  Should one or more of these risks 
or uncertainties materialize, or should underlying assumptions prove 
incorrect, actual outcomes may vary materially from those indicated.  The 
Company undertakes no responsibility to update for changes related to these 
or any other factors that may hereafter occur.  

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED 
SEPTEMBER 30, 1997

Revenues were $29.6 million for the three months ended September 30, 1998, an 
increase of $3.4 million, or 12.9%, over the same period of 1997. Revenues 
from check delivery increased $2.6 million, or 12.2%.  Of the increase, $1.2 
million is attributable to price increases effective January 1, 1998, $0.4 
million is attributable to one additional flying day in the 1998 quarter and 
$1.0 million can be attributed to the acquisition of Data Air Courier, Inc. 
("Data Air"), a national transporter of canceled checks and small packages 
through a ground delivery network and the commercial airlines, in July 1997. 
Small package delivery revenue increased $0.8 million, or 17.8%.  The 
acquisition of Mercury Business Services, Inc., ("Mercury"), a Boston-based 
express delivery management service, accounted for a $1.0 million increase in 
the small package revenues. Revenues from LateNight and SameDay premium 
services increased $1.0 million. These increases were offset by decreases in 
Standard and Wholesale services of $1.1 million.

Total costs and expenses, were $25.1 million for the three months ended 
September 30, 1998, an increase of $4.9 million, or 24.2%, over the same 
period in 1997, resulting in income from operations of $4.5 million for the 
three months ended September 30, 1998 compared to $6.0 million for the same 
period of 1997.  Air transportation expenses were up $3.1 million, or 16.7%.  
Selling, general and administrative expenses increased $1.9 million, or 
122.9%, for the three month period. 

                               9

<PAGE>

The increase in air transportation costs was partly a result of the 
acquisitions of Data Air, which was acquired mid third quarter of 1997, and 
Mercury.  In addition, the Company has experienced a shortage of pilots, 
requiring the use of back-up charter operators at an increased costs of $0.6 
million.  Health insurance costs were up $0.4 million due to a historically 
high level of insurance claims. The costs associated with shipping packages 
on commercial airlines increased $0.5 million over the same quarter of 1997 
due to the addition of Mercury.  Mercury transports a significant portion of 
its packages through third party integrators and other freight forwarders.  
Ground courier costs increased $0.6 million due to the Data Air acquisition, 
of which only two months of the 1997 quarter are reflected in the balances 
due to the timing of the acquisition, and a general increase in the size of 
the ground infrastructure required to handle the increased weekend bank 
business and small package business.  Fuel expense remained flat over the 
1997 quarter.  A decrease in fuel prices offset an increase in aircraft hours 
flown.  Aircraft maintenance costs increased $0.4 million due an increase in 
the number of aircraft flown, from 111 at September 30, 1997 to 118 at 
September 30, 1998, and the overall increase in flight hours.

Selling, general and administrative expense increased partly due to the fact 
the Company capitalized $0.3 million of certain sales and marketing costs 
associated with the start up of the premium services in the third quarter of 
1997.  In the third quarter of 1998, the Company began amortizing those costs 
under the straight line method over five years, resulting in a $0.2 million 
expense for the quarter. 

Interest costs were $0.3 million for the quarter ended September 30, 1998.  
The Company began borrowing on its line of credit in September 1997, after 
being essentially debt free since its initial public offering in May 1996.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997

Revenues were $84.3 million for the nine months ended September 30, 1998, an 
increase of $12.8 million, or 17.9%, over the same period of 1997.  Revenues 
from check delivery increased $11.5 million, or 19.7%.  Of the increase, $3.2 
million is attributable to price increases effective January 1, 1998, $0.4 
million is due to one extra flying day in the 1998 period and $6.9 million 
can be attributed to the acquisitions of Data Air and Pacific Air Charter, 
Inc. ("PAC").  The balance is due to increased business activity and 
increases in total weight shipped. Small package delivery revenue increased 
$1.4 million, or 12.1%.  The acquisition of Mercury accounted for a $1.0 
million increase in the small package revenues.  Revenues from LateNight and 
SameDay premium services increased $3.1 million.  These increases were offset 
by decreases in Standard and Wholesale services of $2.8 million.

Total costs and expenses, prior to the acquisition termination charge and 
interest expense,  were $69.4 million for the nine months ended September 30, 
1998, an increase of $14.8 million, or 27.1%, over the same period in 1997, 
resulting in income from operations of $15.0 million for the nine months 
ended September 30, 1998 compared to $17.0 million for the same period of 
1997.  Air transportation expenses were up $12.3 million, or 25.6%.  Selling, 
general and administrative expenses increased $2.7 million, or 48.8%, for the 
nine month period. In addition, the Company incurred a $2.4 million charge in 
connection with the write off of costs associated with the efforts to 
acquire Quick in the second quarter of 1998.  The agreement to acquire Quick 
was terminated in June 1998. 

                                10

<PAGE>

Air transportation costs increased primarily as a result of the acquisitions 
of Data Air, PAC and Mercury and AirNet's emphasis on building its 
operational infrastructure in anticipation of growth in the small package 
delivery area. The costs associated with shipping packages on commercial 
airlines and other integrators and freight forwarders increased $3.0 million 
over the same period of 1997 primarily due to the additions of Data Air and 
Mercury. Ground courier costs increased $4.8 million and courier vehicle 
costs were up $0.4 million due to the Data Air acquisition and the build up 
of the infrastructure. Depreciation expense increased $0.9 million due to the 
increased size of the Company's aircraft fleet, which grew from 98 aircraft 
at January 1, 1997 to 118 aircraft at September 30, 1998, an increased fleet 
of ground vehicles and improved management information and telecommunications 
systems. Fuel expense increased $0.3 million, or 3.4%, due to increased 
flying hours, offset by lower fuel prices.  Maintenance expense increased 
$0.6 million due to the increase in hours flown in the first nine months of 
1998 compared to the same period of 1997.

Selling, general and administrative expense increased partly due to the 
implementation of a sales commission plan for small package delivery services 
and due to the addition of staff required to handle the administrative 
functions and general costs associated with the Data Air and PAC acquisitions.

Interest costs were $0.8 million for the nine months ended September 30, 
1998. The Company began borrowing on its line of credit in September 1997, 
after being essentially debt free since its initial public offering in May 
1996.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW FROM OPERATING ACTIVITIES.   Net cash flow from operating 
activities was $9.5 million for the nine months ended September 30, 1998, 
compared to $14.5 million for the same period in 1997.  The decrease is due 
to $2.0 million of costs associated with start-up activities, the $2.7 
million purchase of an aircraft held for resale, $2.4 million of acquisition 
costs incurred in 1998 and the reduction of the deferred tax asset in 1997.

CURRENT CREDIT ARRANGEMENTS. The Company maintains a credit agreement with a 
bank that provides a $50.0 million, five year, unsecured revolving credit 
facility. The credit agreement limits the availability of funds to certain 
specified percentages of accounts receivable, inventory and the wholesale 
value of aircraft and equipment.  In addition, the agreement requires the 
maintenance of certain minimum net worth and cash flow levels, imposes 
certain limitations on payments of dividends, restricts the amount of 
additional debt and requires prior bank approval for certain acquisitions.  
At September 30, 1998, the Company had borrowed $24.3 million under the 
credit facility, which was a $14.8 million increase from the December 31, 
1997 balance. 

INVESTING ACTIVITIES.  Capital expenditures totaled $15.1 million for the nine
months ended september 30, 1998, compared to $15.5 million for the same period
in 1997.  Approximately $3.7 million was incurred in connection with the
purchase of 6 new aircraft, $9.3 million was incurred for aircraft inspections,
major engine overhauls and related flight equipment and the remainder was
incurred primarily for delivery vehicles and information systems related
equipment. The company anticipates it will have approximately $20.0 million in
total capital expenditures in 1998, excluding any acquisitions of new
businesses.  The company anticipates it will continue to acquire aircraft and
flight equipment as necessary to maintain growth and continue offering quality
service to its customers.  

On June 17, 1998, the company announced that it had terminated an agreement to
acquire quick.  The company had incurred $2.4 million of acquisition related
costs in conjunction with the original merger plan, all of which were expensed
upon the termination of the agreement.

                                 11

<PAGE>

On August 11, 1998, the company acquired all of the outstanding common stock of
Mercury Business Services, Inc. ("Mercury"), an express delivery management
service located in Boston.  The Company accounted for the acquisition under the
purchase method of accounting.  The purchase price of the acquisition included
$2 million of cash and 117,647 Airnet Common Shares.

The Company anticipates that operating cash and capital expenditure 
requirements will continue to be funded by cash flow from operations, cash on 
hand and bank borrowings.

SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS

The Company's operations historically have been somewhat seasonal and 
somewhat dependent on the number of banking holidays falling during the week. 
Because financial institutions are currently the Company's principal 
customers, the Company's air system is scheduled around the needs of 
financial institution customers.  When financial institutions are closed, 
there is no need for the Company to operate a full system.  The Company's 
fiscal quarter ending December 31, is often the most impacted by bank 
holidays (including Thanksgiving and Christmas) recognized by its primary 
customers.  When these holidays fall on Monday through Thursday, the 
Company's revenue and net income are adversely affected. The Company's annual 
results fluctuate as well.

Operating results are also affected by the weather.  The Company generally 
experiences higher maintenance costs during its fiscal quarter ending March 
31. Winter weather requires additional costs for de-icing, hangar rental and 
other aircraft services.  The Company's cash flows are also influenced by the 
budget cycles of its primary customers.  Many financial institutions have 
calendar year budget cycles and desire to pay for December services prior to 
year end.  This results in increased cash flows for the Company's fiscal 
quarter ending December 31, but decreased cash flows in January and February.

YEAR 2000 ("Y2K") IMPACT ON INFORMATION SYSTEMS AND OPERATIONS

The Company relies heavily on its own information systems, as well as certain 
third parties (including, among others, fuel suppliers, commercial airlines, 
administrative support providers, vendors and suppliers) whose Y2K 
non-compliance could have either a material or adverse effect on the 
Company's business, financial conditions or results of operations, or involve 
a safety risk to team members or customers.  

The Company has completed an assessment and testing of its internal systems 
(IT and non-IT systems) for Y2K compliance.  No changes or improvements to 
the systems were required as a result of the assessment and testing, which 
cost the Company less than $0.1 million, paid from the operating cash flows 
of the Company.

The Company is actively addressing the Y2K status of third parties that it 
heavily relies on for operational and administrative purposes.  The Company 
has developed a plan to assess and  track the Y2K readiness of its key 
vendors.  The plan includes:  assessing vendor compliance status initially 
through questionnaires, tracking vendor progress toward compliance, 
developing contingency plans, including identifying alternate suppliers, and 
follow-up to non-responses on questionnaires.  The assessment phase of the 
plan is approximately 80% complete as of September 30, 1998.  A contingency 
plan is expected to be in place by March 31, 1999.  

                                12

<PAGE>

The Company has also performed a review of its aircraft to ensure operational 
compliance with Y2K date-sensitive components.  Based on representations from 
manufacturers, the Company believes its aircraft and related components are 
in compliance with such measures. However, the Company is aware that the FAA 
has announced that it is currently encountering difficulties in modifying 
certain of its operating systems for compliance with Y2K issues.  The FAA has 
indicated that most of the air traffic control systems at tier one and tier 
two airports in the United States, which are the primary airports that the 
Company flies in and out of, are currently Y2K compliant. The Company will 
continue to monitor the FAA's progress in assessing and correcting Y2K issues 
at the remaining airports to determine the need and extent of a contingency 
plan for air operations, which would likely include rerouting aircraft from 
non-Y2K compliant airports through compliant airports.  If the FAA is not 
able to detect and correct remaining Y2K problems in the appropriate time 
frame, it could result in a material adverse affect on the Company's ability 
to schedule and execute aircraft arrivals and departures from affected 
airports. 

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  Not 
Applicable.

                               13

<PAGE>

                        AIRNET SYSTEMS, INC.

                     PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.

          Not Applicable.

Item 2.   Changes in Securities and Use of Proceeds.

          On August 11, 1998, the Company acquired Mercury Business Services, 
          Inc. ("Mercury").  In connection with this transaction, the Company 
          issued 117,647 Common Shares to the former shareholders of Mercury.
          The Common Shares issued were valued at $15.50 per share, or 
          $1,823,529 in the aggregate.  The Common Share issued to the former
          Mercury shareholders were not registered under the Securities Act of 
          1933 in reliance upon the exemption from registration provided by 
          Section 4(6) for sales to accredited investors.

Item 3.   Defaults Upon Senior Securities.  Not Applicable

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

          (a)  The Annual Meeting of Shareholders of the Company (the "Annual 
          Meeting") was held on August 19, 1998.  At the close of business on 
          the record date July 3, 1998, 12,594,170 Common Shares were 
          outstanding and entitled to vote at the Annual Meeting.  At the Annual
          Meeting, 11,224,837 or 89.1% of the outstanding Common Shares entitled
          to vote, were represented in person or by proxy.
     
          (b)  Directors elected at the Annual Meeting:

<TABLE>
          <S>             <C>                   <C>                    <C>
                             Gerald G. Mercer
          For:            11,202,330
          Withheld:           22,507             Broker non-vote:       -0-

                             Eric P. Roy
          For:            11,202,340
          Withheld:           22,497             Broker non-vote:       -0-

                             Roger D. Blackwell
          For:            11,202,740
          Withheld:           22,097             Broker non-vote:       -0-

                             Tony C. Canonie, Jr.
          For:            11,202,740
          Withheld:           22,097             Broker non-vote:       -0-

                             Russell M. Gertmenian
          For:            11,202,740
          Withheld:           22,097             Broker non-vote:       -0-

                             J. F. Keeler, Jr.             
          For:            11,202,740
          Withheld:           22,097             Broker non-vote:       -0-
</TABLE>

                               14

<PAGE>

     (c) See Item 4(b) for voting results for directors.
     
     Proposal to amend and restate the AirNet Systems, Inc. 1996 Incentive Stock
     Plan:

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

          For:       9,630,318     Abstain:              607,016
          Against:     987,503     Broker Non-vote:            0
</TABLE>

     (d) Not applicable.

Item 5.   Other Information.  

          Based upon the past practices of the Company, the Company intends to
          hold its 1999 Annual Meeting of shareholders on or about Wednesday,
          May 12, 1999.  Shareholders of the company seeking to bring business
          before the 1999 Annual Meeting of Shareholders, or to nominate
          candidates for election as directors at such Annual Meeting of
          Shareholders, must provide timely notice thereof in writing.  To be
          timely, a shareholder's notice mist be delivered to or mailed and
          received at the principal executive offices of the Company not less
          than 60 days nor more than 90 days prior to the meeting; provided,
          however, that in the event that less than 70 days' notice or prior
          public disclosure of the date of the 1999 annual meeting is given or
          made to the shareholders, notice by the shareholder to be timely must
          be received no later than the close of business on the tenth day
          following the day on which such notice of the date of the 1999 Annual
          Meeting was mailed or such public disclosure was made.  The Company's
          Code of Regulations specify certain requirements for a shareholder's
          notice to be in proper written form.   The foregoing requirements will
          not, however, prevent any shareholder from submitting a shareholder
          proposal in compliance with rule 14a-8 of the Securities Exchange Act
          of 1934.  Pursuant to rule 14a-8, proposals by shareholders intended
          to be presented at the 1999 Annual Meeting of Shareholders must be in
          the form specified in that rule and received by the Secretary of the
          Company no later than December 8, 1998.

                                   15

<PAGE>

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

          (a)  EXHIBITS:
          
     Exhibit No.                          Description    
     -----------    ---------------------------------------------------------
     Exhibit 10     Airnet Systems, Inc. Amended and Restated 1996 Incentive
                    Stock Plan (reflect amendments through November 9, 1998)
     
     Exhibit 27     Financial Data Schedule
     
     
          (b)  Reports on Form 8-K:
          
               No Reports on Form 8-K were filed during the three months ended
               September 30, 1998.

                                    16

<PAGE>

                           AIRNET SYSTEMS, INC.
                                          
                              SIGNATURES



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




Dated:  November 11, 1998     By:  /s/ Eric P. Roy     
                                   -------------------------
                                   Eric P. Roy, 
                                   Executive Vice President
                                   (Duly Authorized Officer)
                                   (Principal Financial Officer)

                                     17

<PAGE>

                                          
                           AIRNET SYSTEMS, INC.
                                          
                            INDEX TO EXHIBITS


Exhibit No.                        Description

    10         AirNet Systems, Inc. Amended and Restated 1996 Incentive Stock
               Plan (reflects amendments through November 9, 1998)

    27         Financial Data Schedule.  Filed herewith.

                                     18