<PAGE>   1
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                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



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

                     For the Period Ended September 30, 1998

                             Commission File 0-20889



                                  AVTEAM, INC.
             (Exact name of Registrant as specified in its charter)


                 FLORIDA                                   65-0313187
    (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                    Identification No.)


            3230 Executive Way                        
            Miramar, Florida                                 33025      
      (Address of principal executive offices)            (Zip Code)


       Registrant's telephone number, including area code: (954) 431-2359

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

       Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

       As of November 15, 1998, 10,665,739 shares of Class A Common Stock, par
value $.01 per share, of the Registrant were outstanding and 439,644 shares of
Class B Common Stock, par value $.01 per share, of the Registrant were
outstanding.




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<PAGE>   2


                           AVTEAM, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                        PAGE
                                                                                                        ----

PART I - FINANCIAL INFORMATION

<S>                                                                                                     <C>    
Item 1. Condensed Consolidated Financial Statements ...............................................     1 - 6

Condensed Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 ..............       1

Condensed Consolidated Statements of Income for the Nine Months Ended
September 30, 1998 and 1997 .......................................................................       2

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 .......................................................................       3

Notes to Condensed Consolidated Financial Statements ..............................................       4

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .....       7

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K ..........................................................      11

SIGNATURES ........................................................................................      12


</TABLE>


<PAGE>   3


                           AVTEAM, INC. AND SUBSIDIARY
                      Condensed Consolidated Balance Sheets
                                 (In thousands)

PART I   FINANCIAL INFORMATION
Item 1.  Financial Statements.

<TABLE>
<CAPTION>
                                                                                         SEPTEMBER 30,  DECEMBER 31,
                                                                                             1998           1997
                                                                                         -------------  ------------
                                                                                          (UNAUDITED)
<S>                                                                                        <C>            <C>     
ASSETS
Current assets:
Cash and cash equivalents ...........................................................      $  1,069       $ 18,676
Trade accounts receivable, net ......................................................         9,476          5,751
Inventory ...........................................................................        68,115         24,480
Prepaid expenses ....................................................................         1,881          1,153
Deposits ............................................................................         1,826            432
Deferred tax asset ..................................................................           161             80
                                                                                           --------       --------

Total current assets ................................................................        82,528         50,572

Revenue producing equipment, at cost ................................................        10,791          7,152
Accumulated depreciation ............................................................          (820)          (217)
                                                                                           --------       --------
                                                                                              9,971          6,935

Property and equipment, at cost .....................................................         2,774          1,543
Accumulated depreciation ............................................................          (958)          (605)
                                                                                           --------       --------
                                                                                              1,816            938

Other assets ........................................................................           279            509
                                                                                           --------       --------

Total assets ........................................................................      $ 94,594       $ 58,954
                                                                                           ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank ...............................................................      $ 26,500       $     --
Accounts payable ....................................................................         6,233            706
Accrued expenses ....................................................................         1,279          1,654
Customer deposits ...................................................................           695            344
Current portion of notes payable-lease financing ....................................           654            328
Current portion of capital lease obligations ........................................           129            115
                                                                                           --------       --------

Total current liabilities ...........................................................        35,490          3,147

Capital lease obligations, net of current portion ...................................            79            186

Notes payable - lease financing .....................................................         3,075          3,817

Shareholders' equity:
      Preferred stock, $.01 par value, 20,000,000 shares authorized, no shares issued
         or outstanding .............................................................            --             --
      Class A Common Stock, $.01 par value, 77,000,000 shares authorized,
         10,665,739 shares issued and outstanding ...................................           107            107
      Class B Common Stock, $.01 par value, 3,000,000 shares authorized, 439,644
         shares issued and outstanding ..............................................             4              4
      Additional paid-in capital ....................................................        47,444         47,444
      Retained earnings .............................................................         8,395          4,249
                                                                                           --------       --------

Total shareholders' equity ..........................................................        55,950         51,804
                                                                                           --------       --------

Total liabilities and shareholders' equity ..........................................      $ 94,594       $ 58,954
                                                                                           ========       ========



</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.






                                     Page 1

<PAGE>   4



                           AVTEAM, INC. AND SUBSIDIARY
                   Condensed Consolidated Statements of Income
                      (In thousands except per share data)

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                               SEPTEMBER 30,                  SEPTEMBER 30,
                                                                     ----------------------------  ----------------------------
                                                                          1998           1997          1998             1997
                                                                     ------------    ------------  ------------    ------------
                                                                               (UNAUDITED)                  (UNAUDITED)

<S>                                                                  <C>             <C>           <C>              <C>
Net sales .......................................................    $     14,765    $     13,269  $     48,982     $    32,201
Cost of sales ...................................................          10,471           9,718        35,475          22,686
                                                                     ------------    ------------  ------------    ------------

Gross profit ....................................................           4,294           3,551        13,507           9,515
Operating expenses ..............................................           2,098           1,900         6,108           4,887
                                                                     ------------    ------------  ------------    ------------

Income from operations ..........................................           2,196           1,651         7,399           4,628
Interest expense, net ...........................................             507             389           816             858
                                                                     ------------    ------------  ------------    ------------

Income before provision (credit) for income taxes ...............           1,689           1,262         6,583           3,770

Provision (credit) for income taxes:
Current .........................................................             581             427         2,518           1,561
Deferred ........................................................              50              32           (81)           (190)
                                                                     ------------    ------------  ------------    ------------
                                                                              631             459         2,437           1,371
                                                                     ------------    ------------  ------------    ------------

Net income ......................................................    $      1,058    $        803  $      4,146    $      2,399
                                                                     ============    ============  ============    ============

Net income per common equivalent share - basic ..................    $       0.10            0.16          0.37            0.48
                                                                     ============    ============  ============    ============

Weighted average number of common equivalent shares outstanding..      11,105,383       5,142,510    11,105,383       5,048,025
                                                                     ============    ============  ============    ============

Net income per common equivalent share - diluted ................    $       0.10    $       0.11  $       0.37    $       0.35
                                                                     ============    ============  ============    ============

Weighted average number of common equivalent shares
outstanding - diluted ...........................................      11,115,969       7,153,069    11,135,447       6,852,682
                                                                     ============    ============  ============    ============


</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.







                                     Page 2




<PAGE>   5



                           AVTEAM, INC. AND SUBSIDIARY
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                        NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                                     -----------------------
                                                                                       1998            1997
                                                                                     --------       --------
                                                                                          (UNAUDITED)
<S>                                                                                  <C>            <C>     
OPERATING ACTIVITIES
Net income ....................................................................      $  4,146       $  2,399
Adjustments to reconcile net income to net cash used in operating activities:
          Depreciation and amortization .......................................         1,242            269
          Bad debt expense ....................................................           (14)            99
          Deferred tax credit .................................................           (81)          (190)
          Changes in operating assets and liabilities:
                 Trade accounts receivable ....................................        (3,711)          (242)
                 Inventory ....................................................       (44,306)       (14,242)
                 Prepaid expenses and deposits ................................        (2,122)           184
                 Other assets .................................................           230           (360)
                 Accounts payable .............................................         5,527           (851)
                 Accrued expenses/customer deposits ...........................           (24)           346
                 Due to shareholders and affiliates ...........................            --            283
                                                                                     --------       --------

                          Net cash used in operating activities ...............       (39,113)       (12,305)

INVESTING ACTIVITIES
Purchases of revenue producing equipment ......................................        (8,039)          (672)
Purchases of property and equipment ...........................................        (1,231)          (478)
Net proceeds from sale of revenue producing equipment .........................         4,785             --
                                                                                     --------       --------

                          Net cash used in investing activities ...............        (4,485)        (1,150)

FINANCING ACTIVITIES
Payments on capital leases ....................................................           (93)           (52)
Net payments on notes payable .................................................        (2,563)           (36)
Net proceeds from notes payable financing .....................................         2,147             --
Net proceeds from short-term line of credit ...................................        26,500          8,507
Net proceeds from sale of preferred stock .....................................            --          5,000
Net proceeds from sale of common stock ........................................            --          2,294
Repayment of shareholder loan .................................................            --         (2,024)
                                                                                     --------       --------  

                         Net cash provided by financing activities ............        25,991         13,689
                                                                                     --------       --------

                         Net (decrease) increase in cash and cash equivalents..       (17,607)           234
                         Cash and cash equivalents at beginning of period .....        18,676             --
                                                                                     --------       --------
                         Cash and cash equivalents at end of period ...........      $  1,069       $    234
                                                                                     ========       ========

SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid .................................................................      $    868       $    460
                                                                                     ========       ========
Income taxes paid .............................................................      $  2,532       $     --
                                                                                     ========       ========
Office furniture and equipment acquired under capital leases ..................      $     --       $    112
                                                                                     ========       ======== 
Revenue producing assets acquired under lease financing .......................      $     --       $  4,274
                                                                                     ========       ========


</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.







                                     Page 3

<PAGE>   6


                           AVTEAM, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 1998

1.  GENERAL

         The accompanying unaudited condensed consolidated financial statements
of AVTEAM, Inc. and AVTEAM Aviation Field Services, Inc. (AAFS) (the "Company")
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the nine-month period
ended September 30, 1998 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in the Company's 1997
Annual Report on Form 10-K for the year ended December 31, 1997.

         The Company has in the past and may in the future experience
substantial fluctuations in its results of operations as a result of seasonal
effects. The Company believes that demand for aircraft engines, engine parts and
airframe components is seasonal, with increased demand during the summer months.
This seasonality exists because aircraft engine performance is directly related
to ambient temperature (as temperatures rise it is more difficult for aircraft
engines to perform properly). As a result, certain aircraft are removed from
service during the summer months due to the failure of those particular aircraft
engines to comply with certain exhaust gas temperature limitations. Aircraft
engines of the same type and model can have different performance capabilities.
The summer months also include peak travel periods during which aircraft
utilization levels are high. In addition, the timing of whole aircraft engine
sales, at greater unit purchase prices than the installed parts and components,
may cause significant fluctuations in the Company's quarterly results of
operations.

2.  SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

         The Company classifies as cash equivalents all highly liquid
investments with a maturity of three months or less at the time of purchase.

INVENTORY

         Inventory of aircraft engines is stated at the lower of specific cost
(including overhaul costs) or market. Initially, cost of sales of engine parts
from disassembled engines are recognized based on margins realized from recently
sold, similar groups of engine parts. Once the remaining parts have been fully
inspected and their condition has been determined, the cost of subsequent sales
of engine parts from that engine are determined using the relationship of the
remaining costs of that engine to estimated sales. Cost of sales for individual
parts purchased for resale are reflected based on the specific identification
method. Cost of sales of airframe components are recognized using margins based
on the relationship of cost to revenue estimates as determined by the Company
through the analysis of the market price of such airframe components.

REVENUE RECOGNITION

         Revenues from the sale of engine parts and airframe components are
recognized when shipped. Revenues from services are recognized upon completion
of performance. Revenues from the sale of aircraft engines are recognized when
title and risk of ownership are transferred to the customer, which generally is
upon shipment or customer pick-up. In certain instances prior to shipment or
customer pick-up, certain customers request the Company to hold aircraft engines
until the customer determines the most economical means of taking possession.
The Company records revenues under such circumstances only if: (1) payment is
received or is receivable within 30 days; (2) title and risk of ownership is
transferred to the customer; (3) the customer's request that the transaction be
on a bill-and-hold basis is in writing; (4) there is a fixed schedule for
delivery of the engines that is within 30 days of the sale; (5) the Company does
not have any specific performance obligations; (6) the engines are segregated
from other engines and are not subject to being used to meet other customer's
needs and (7) the engines are ready for shipment.


                                     Page 4

<PAGE>   7


                           AVTEAM, INC. AND SUBSIDIARY

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

REVENUE RECOGNITION (CONTINUED)

         The Company enters into consignment arrangements in which it warehouses
items, determines sales prices, arranges for shipment to customers, and collects
accounts receivable. The Company reflects sales under such arrangements in net
sales and the cost of such sales in cost of sales, since the Company bears the
risk of ownership once the items are sold.

WARRANTIES AND PRODUCT RETURNS

         The Company does not provide service warranties in addition to those
provided by repair facilities and as a result does not record accruals for
warranties. The Company has established programs which, under specific
conditions, enable its customers to return inventory. The effect of these
returns is estimated based on a percentage of sales and historical experience
and sales are recorded net of a provision for estimated returns.

ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE

         The Company buys inventory and revenue producing equipment from certain
of its customers and periodically offsets amounts owed to customers for
inventory and revenue producing equipment against the accounts receivable for
sales to such customers. For the nine months ended September 30, 1998, accounts
payable totaling approximately $4,972,000 were offset against accounts
receivable.

PROPERTY AND EQUIPMENT

         Property and equipment (including assets under capital leases) is
carried at cost and is depreciated using accelerated and straight-line methods
over the lesser of the lease terms or the estimated useful lives of the assets.
The lives used are as follows:

         Office furniture and equipment.............................  3-7 years
         Warehouse and transport equipment..........................  5-7 years
         Leasehold improvements.....................................  3-5 years

REVENUE PRODUCING EQUIPMENT

         Revenue producing equipment is comprised of engines and aircraft leased
to users on a short-term basis. Such engines and aircraft are carried at cost
and are depreciated using the straight-line method over periods between five and
ten years to a 15% residual value. Four of such engines are the subject of a
sale/leaseback arrangement. The proceeds under the arrangement are recorded as a
financing obligation and will be reduced by payments under the lease over its
five-year term. The lease agreement provides the Company with an option to
terminate the lease and to repurchase the engines at any time after one year at
varying rates based on the original sales price.

CONCENTRATION OF CREDIT RISK

         Accounts receivable are primarily from domestic and foreign passenger
airlines, freight and package carriers, charter airlines, aircraft leasing
companies and service providers to such companies. The Company performs ongoing
evaluations of its trade accounts receivable customers, monitors its exposure
for credit losses and sales returns and does not require collateral.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



                                     Page 5

<PAGE>   8


                           AVTEAM, INC. AND SUBSIDIARY

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET INCOME PER COMMON SHARE

         In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" which requires the Company to replace its presentation of
primary earnings per share with a presentation of basic earnings per share and
requires dual presentation of basic and diluted earnings per share on the face
of the income statement. The principal difference required by the new statement
and the new interpretation required by the Securities and Exchange Commission is
the inclusion of the 2,414,286 shares of preferred stock only from their date of
issue until their conversion to common shares on October 30, 1997, the date of
the Company's initial public offering, for the purposes of calculating diluted
earnings per share only. Previously these shares were included in the
calculation of both primary and fully diluted earnings per share for all periods
presented.

The following table sets forth the computation of basic and diluted net income
and net income per share:

<TABLE>
<CAPTION>
                                                              Three Months                        Nine Months
                                                           Ended September 30,                Ended September 30,
                                                      ----------------------------      ----------------------------
                                                         1998              1997             1998             1997
                                                      -----------      -----------      -----------      -----------
                                                              (UNAUDITED)                       (UNAUDITED)

<S>                                                   <C>              <C>              <C>              <C>        
Numerator:
       Net income ..............................      $ 1,058,000      $   803,000      $ 4,146,000      $ 2,399,000
                                                      ===========      ===========      ===========      ===========
Denominator:
       Denominator for basic net income
       per share-weighted average shares .......       11,105,383        5,142,510       11,105,383        5,048,025
                                                      -----------      -----------      -----------      -----------
Effect of dilutive securities
       Convertible preferred stock .............               --        2,010,559               --        1,804,657
       Employee stock options ..................           10,586               --           30,064               --
                                                      -----------      -----------      -----------      -----------
Dilutive potential common shares ...............           10,586        2,010,559           30,064        1,804,657
                                                      -----------      -----------      -----------      -----------
       Denominator for diluted earnings per
       share - adjusted weighted average
       shares and assumed conversions ..........       11,115,969        7,153,069       11,135,447        6,852,682
                                                      ===========      ===========      ===========      ===========
Net income per common share - basic ............      $      0.10      $      0.16      $      0.37      $      0.48
                                                      ===========      ===========      ===========      ===========
Net income per common share - diluted ..........      $      0.10      $      0.11      $      0.37      $      0.35
                                                      ===========      ===========      ===========      ===========

</TABLE>


DEPOSITS AND CUSTOMER DEPOSITS

        The Company has entered into various contracts for the purchase and sale
of whole engines. Occasionally, these contracts require a substantial
down-payment to fix the consideration of such engines and to allow the time to
perform due diligence work.  These deposits are refundable.

3.       NOTES PAYABLE TO BANK

         On April 30, 1998, the Company, as borrower, and AAFS, as guarantor,
entered into a Credit Agreement (the "Credit Agreement") with a syndicate of
lenders led by NationsBank, N.A., as administrative agent (the "Lenders"),
pursuant to which the Lenders agreed to make available to the Company a
revolving credit facility (the "Revolving Credit Facility") in the maximum
aggregate principal amount of up to $70.0 million. The Revolving Credit Facility
consists of (i) a working capital revolving loan facility (the "Working Capital
Revolving Loan Facility") in the aggregate principal amount of up to $45.0
million and a (ii) an acquisition revolving loan facility (the "Acquisition
Revolving Loan Facility") in the aggregate principal amount of up to $25.0
million. The Working Capital Revolving Loan Facility is being used by the
Company to finance working capital, capital expenditures and general corporate
purposes. The Acquisition Revolving Loan Facility will be used by the Company to
finance acquisitions permitted under the Credit Agreement. Borrowings under the
Credit Agreement are secured by a senior security interest in all of the assets
of the Company. The Company may borrow, repay and re-borrow funds under the
Credit Agreement




                                     Page 6


<PAGE>   9


                           AVTEAM, INC. AND SUBSIDIARY

3.  NOTES PAYABLE TO BANK (CONTINUED)

until April 30, 2001. The Credit Agreement requires the Company to make certain
mandatory prepayments of principal and interest. The Credit Agreement contains
certain restrictions, including restrictions on (i) incurring debt, (ii)
declaring or paying any dividend or other distribution on account of any class
of stock of the Company, (iii) creating liens on the Company's properties or
assets, (iv) entering into a merger or other business combination or (v) a
change in control (as defined in the Credit Agreement). As of September 30,
1998, the Company has drawn an aggregate of $26.5 million under the Working
Capital Revolving Loan Facility and no funds were drawn under the Acquisition
Revolving Loan Facility. At October 1, 1998, the Company had additional
availability of approximately $10.7 million under the Working Capital Revolving
Loan Facility.

4.  SUBSEQUENT EVENT

        On October 12, 1998, AVTEAM Engine Repair Corp., a Florida corporation
and a wholly owned subsidiary of the Company ("AVTEAM Sub"; and together with
the Company, the "Purchaser"), entered into an Asset Purchase Agreement (the
"Purchase Agreement") with M&M Aircraft Services, Inc., a Florida corporation
(the "Seller"), and its shareholders, pursuant to which the Purchaser agreed to
purchase from the Seller substantially all of the assets and assume certain
liabilities of the Seller for an aggregate purchase price payable at closing of
$30,000,000 and the issuance of 350,000 shares of Class A Common Stock, par
value $.01 per share, of AVTEAM (the "Acquisition"). The Seller, based in
Medley, Florida, operates a privately held jet engine overhaul operation, which
specializes in the maintenance, overhaul and repair of Pratt & Whitney JT8D
aircraft engines. The purchase price was determined in arms-length negotiations
between the Purchaser and the Seller. The Acquisition will be financed from the
Company's existing $70,000,000 credit facility with NationsBank, N.A. (the
"Credit Facility"). The closing of the Purchase Agreement is subject to the
satisfaction or waiver of certain closing conditions on or before December 31,
1998 (the "Closing Conditions"), including among others, the receipt of certain
consents and approvals, including those approvals required by the Federal
Aviation Administration, Joint Aviation Authorities and AVTEAM's lender under
the Credit Facility and no material adverse changes having occurred in the
financial condition, assets, business, prospects or results of operations of the
Seller between the date of the Purchase Agreement and the closing date.


FINANCIAL INFORMATION

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

         The Company is a global supplier of aftermarket aircraft engines,
engine parts and airframe components. The Company supplies its products to other
aftermarket suppliers, independent repair facilities, aircraft operators and
original equipment manufacturers. Beginning in April 1997, the Company, through
its wholly owned subsidiary, AVTEAM Aviation Field Services, Inc. ("AAFS"),
began providing certain on-wing maintenance and repair and borescope services.





                                     Page 7







<PAGE>   10


                           AVTEAM, INC. AND SUBSIDIARY

RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated certain items
contained in the Company's statements of operations expressed as a percentage of
net sales:

<TABLE>
<CAPTION>
                                                 Three Months              Nine Months
                                              Ended September 30,      Ended September 30,
                                              -------------------     -------------------
                                               1998        1997        1998        1997
                                              -----        ------     -----        ------

<S>                                             <C>         <C>         <C>         <C> 
          Net sales .....................       100%        100%        100%        100%
          Cost of sales .................        71          73          73          70
                                               ----        ----        ----        ----
          Gross profit ..................        29          27          27          30
          Operating expenses ............        14          14          12          15
                                               ----        ----        ----        ----
          Income from operations ........        15          13          15          15
          Interest expense, net .........        (4)         (3)         (2)         (3)
                                               ----        ----        ----        ----
          Income before income taxes ....        11          10          13          12
          Provision for income taxes ....         4           4           5           4
                                               ----        ----        ----        ----

          Net income ....................         7%          6%          8%          8%
                                               ====        ====        ====        ====

</TABLE>

         NET SALES. Net sales increased 11.1% to $14.8 million for the third
quarter of 1998 from $13.3 million for the third quarter of 1997. For the first
nine months of 1998, net sales increased 52.1% to $49.0 million from $32.2
million for the first nine months of 1997. The increase for the third quarter is
primarily due to increased sales of engine parts and airframe components offset
somewhat by lower revenue from whole engine transactions as the Company declined
to cut prices to match unusually low prices offered by competitors. Instead, the
Company elected to retain its engines in inventory for future sales.
Year-to-date sales primarily increased as a result of increased whole engine
revenue and sales of airframe components arising from the disassembly of
recently purchased whole aircraft.

         GROSS PROFIT. Gross profit increased 20.9% to $4.3 million for the
third quarter of 1998 from $3.6 million for the third quarter of 1997. For the
first nine months of 1998, gross profit increased 42.0% to $13.5 million from
$9.5 million for the first nine months of 1997. Gross margin increased to 29.1%
for the third quarter of 1998 from 26.8% for the third quarter of 1997. Gross
margin decreased to 27.5% for the first nine months of 1998 from 29.5% for the
first nine months of 1997. The margin increase for the third quarter is as a
result of higher margins on whole engine revenue and from sales of airframe
components. The margin decrease for the year is as a result of the increase in
sales of higher thrust whole engines, which result in lower margins than the
sale of aircraft engine parts and airframe components. Total whole engine sales
accounted for 27.3% of the Company's net sales for the third quarter of 1998 and
35.6% of the Company's net sales for the nine months of 1998.

         OPERATING EXPENSES. Operating expenses increased 4% to $2.1 million for
the third quarter of 1998 from $1.9 million for the third quarter of 1997. For
the first nine months of 1998, operating expenses increased 25.0% to $6.1
million from $4.9 million for the first nine months of 1997. The expense
increases are primarily attributed to increased personnel expense resulting from
additional staffing in the Florida headquarters office, increased insurance
expense as a result of higher inventory levels and volume of shipments,
additional occupancy costs associated with the acquisition of an additional
50,000 square feet of rental warehouse and office space, and increased investor
relations expenses as a result of being a publicly-owned company. Operating
expenses as a percentage of net sales decreased to 14.2% for the third quarter
of 1998 from 14.3% for the third quarter of 1997. For the first nine months of
1998, operating expenses as a percentage of net sales decreased to 12.4% from
15.2% for the first nine months of 1997. The decreases in operating expenses as
a percentage of net sales are primarily attributed to net sales increasing at a
higher rate than operating expenses.

         NET INTEREST EXPENSE. Net interest expense increased 30.3% to $507,000
for the third quarter of 1998 from $389,000 for the third quarter of 1997. For
the first nine months of 1998, net interest expense decreased 4.9% to $816,000
from $885,000 for the nine months of 1997. Net interest expense, as a percentage
of net sales, increased to 3.4% for the third quarter of 1998 from 2.9% for the
third quarter of 1997. For the first nine months of 1998, net interest expense
as a percentage of net sales decreased to 1.7% from 2.7% of net sales for the
first nine months of 1997. The increased interest expense is as a result of
higher average borrowing levels in order to purchase additional inventory for
sale.



                                     Page 8



<PAGE>   11


                           AVTEAM, INC. AND SUBSIDIARY



LIQUIDITY AND CAPITAL RESOURCES

         Historically, the Company's primary sources of liquidity have been from
financing activities and cash flow generated by operations and, to a lesser
extent, from consignment sales. During the first nine months of 1998, the
Company used approximately $39.1 million in operating activities, principally
for the purchase of inventory. Net cash provided by financing activities,
derived primarily from the sale of common stock in 1997, was $29.7 million. In
May 1997, the Company launched a program in conjunction with third-party
financing sources under which the Company leases aircraft engines to its
customers, which has increased the Company's liquidity and provides working
capital for the purchase of additional aircraft engines.

         On April 30, 1998, the Company, as borrower, and AAFS, as guarantor,
entered into a Credit Agreement (the "Credit Agreement") with a syndicate of
lenders led by NationsBank, N.A., as administrative agent (the "Lenders"),
pursuant to which the Lenders agreed to make available to the Company a
revolving credit facility (the "Revolving Credit Facility") in the maximum
aggregate principal amount of up to $70.0 million. The Revolving Credit Facility
consists of (i) a working capital revolving loan facility (the "Working Capital
Revolving Loan Facility") in the aggregate principal amount of up to $45.0
million and a (ii) an acquisition revolving loan facility (the "Acquisition
Revolving Loan Facility") in the aggregate principal amount of up to $25.0
million. The Working Capital Revolving Loan Facility is being used by the
Company to finance working capital, capital expenditures and general corporate
purposes. The Acquisition Revolving Loan Facility will be used by the Company to
finance acquisitions permitted under the Credit Agreement. Borrowings under the
Credit Agreement are secured by a senior security interest in all of the assets
of the Company. The Company may borrow, repay and re-borrow funds under the
Credit Agreement until April 30, 2001. The Credit Agreement requires the Company
to make certain mandatory prepayments of principal and interest. The Credit
Agreement contains certain restrictions, including restrictions on (i) incurring
debt, (ii) declaring or paying any dividend or other distribution on account of
any class of stock of the Company, (iii) creating liens on the Company's
properties or assets, (iv) entering into a merger or other business combination
or (v) a change in control (as defined in the Credit Agreement). As of September
30, 1998, the Company has drawn an aggregate of $26.5 million under the Working
Capital Revolving Loan Facility and no funds were drawn under the Acquisition
Revolving Loan Facility. At October 1, 1998, the Company had additional
availability of approximately $10.7 million under the Working Capital Revolving
Loan Facility.

         On October 12, 1998, AVTEAM Engine Repair Corp., a Florida corporation
and a wholly owned subsidiary of the Company, ("AVTEAM Sub", and together with
the Company, the "Purchaser"), entered into an Asset Purchase Agreement (the
"Purchase Agreement") with M&M Aircraft Services, Inc., a Florida corporation
(the "Seller"), and its shareholders pursuant to which the Purchaser agreed to
purchase from the Seller substantially all of the assets and assume certain
liabilities of the Seller for an aggregate purchase price payable at closing of
$30,000,000 and the issuance of 350,000 shares of Class A Common Stock, par
value $.01 per share of AVTEAM (the "Acquisition"), $25.0 million of the cash
portion of the purchase price for the Acquisition will be financed through the
use of all of the available borrowings under the Acquisition Revolving Loan
Facility. The remaining $5.0 million cash portion of the purchase price,
including the assumption of certain liabilities of the Seller for the
Acquisition will be financed through available borrowings under the Credit
Facility. As a result, AVTEAM is currently considering obtaining additional
capital for its business activities after the Acquisition. Without obtaining
such capital, AVTEAM may not be able to acquire inventory for resale at the rate
experienced in the past.

         On July 25, 1997, the Company entered into an agreement with
NationsBanc Leasing Corporation ("NBLC") whereby the Company sold three Pratt &
Whitney JT8D engines to NBLC for approximately $4.3 million and subsequently
leased-back such engines for a period of five years at fixed monthly payments.
On April 23, 1998, the Company added an additional two JT8D engines to this
agreement. Net proceeds were approximately $2.1 million. The Company, at its
option, may repurchase any of these engines at a predetermined percentage of the
original leased amount. The proceeds from the sale of these engines were used by
the Company to reduce the outstanding balance of its credit facility with
NationsBank. On February 18, 1998, the Company repurchased one of the engines in
order to sell it to a third party leasing company.

         On November 3, 1997, the Company completed an initial public offering
of 4,500,000 shares of its Class A Common Stock at an offering price of $8.50
per share. Of the shares of Class A Common Stock offered thereby, 3,033,000
shares were sold by the Company and 1,467,000 shares were sold by Sragowicz
Foundation, Inc. On December 3, 1997, the Company sold an additional 330,325
shares of its Class A Common Stock at an offering price of $8.50 per share price
upon the exercise of an underwriters' over-allotment option (collectively, the



                                     Page 9


<PAGE>   12


                           AVTEAM, INC. AND SUBSIDIARY



LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

"Offering"). The Company received aggregate net proceeds from the Offering of
approximately $25.6 million. Of this amount, $12.5 million was used to repay
outstanding indebtedness, $200,000 was used for payment of accrued compensation
and the remainder is being used for working capital and general corporate
purposes, including the purchase of surplus aircraft and aircraft engines,
engine parts and airframe components for the Company's inventory.

         The Company has established a capital expenditure budget of
approximately $1.75 million during 1998, including approximately $750,000 for
additional engine tooling in the Company's disassembly operations, approximately
$150,000 for enhancements to the Company's management information systems,
approximately $400,000 for warehouse improvements, approximately $300,000 for
additional leasehold improvements related to planned increases in personnel,
approximately $100,000 for additional equipment to be utilized by AAFS and
$50,000 for additional office furniture and equipment.

         The Company's prinicipal working capital requirements relate to the
acquisition of inventory and carrying of accounts receivable. Upon consummation
of the Acquisition, working capital will also be used for AVTEAM Sub's capital
expenditures.

SEASONALITY

         The Company believes that demand for aircraft engines, engine parts and
airframe components is seasonal, with increased demand during the summer months.
This seasonality exists because aircraft engine performance is directly related
to ambient temperature (as temperatures rise it is more difficult for aircraft
engines to perform properly). As a result, certain aircraft engines are removed
from service during the summer months due to the failure of those particular
aircraft engines to comply with exhaust gas temperature limitations. Aircraft
engines of the same type and model can have different performance capabilities.
The summer months also include peak travel periods during which aircraft
utilization levels are high. In addition, the timing of whole aircraft engines
sold, which have a substantially greater purchase price than the installed parts
and components, may cause significant fluctuations in the Company's quarterly
operating results. The Company has in the past and may in the future experience
substantial quarterly fluctuations in sales as a result of these seasonal
effects.

IMPACT OF YEAR 2000

         The Company believes that it has prepared its computer systems and
related software to accommodate data sensitive information relating to the Year
2000. The Company expects that any additional costs related to ensuring such
systems and software to be Year 2000-compliant will not be material to the
financial condition or results of operations of the Company. In addition, the
Company is discussing with its vendors and customers the possibility of any
difficulties which may affect the Company as a result of its vendors and
customers ensuring that their computer systems and software are Year
2000-compliant. To date, no significant concerns have been identified. However,
there can be no assurance that no Year 2000-related computer operating problems
or expenses will arise with the Company's computer systems and software or in
the computer systems and software of the Company's vendors and customers.

RISKS RELATING TO FORWARD-LOOKING STATEMENTS

         Except for the historical information contained in this report on Form
10-Q, the matters discussed in this report on Form 10-Q are "forward-looking
statements" within the meaning of the federal securities law and are not
guarantees of future performance. For a variety of reasons, the Company's actual
results could differ materially from any forward-looking statements made in this
report on Form 10-Q. Among the factors that could cause actual results to differ
from predicted or expected results are the following: the Company's ability to
effectively integrate acquired companies and the effects of increased
indebtedness as a result of the Company's acquisitions; a decline in the demand
for aftermarket aircraft engines, engine parts and airframe components, which
could materially adversely affect the Company's revenues; the availability of
aircraft engines, engine parts and airframe components for resale, which could
hamper the company's ability to maintain adequate levels of inventory and meet
customer demand; the possibility that regulatory changes and unforeseen events
could impact the Company's ability to provide products and services to its
customers; existing competition from national and regional competitors and the
condition of the airline industry, which could result in pricing, supply and
demand, and other pressures on profitability and market share; and other risks
and uncertainties set forth in the Company's filings with the Securities and




                                     Page 10


<PAGE>   13


                           AVTEAM, INC. AND SUBSIDIARY

RISKS RELATING TO FORWARD-LOOKING STATEMENTS (CONTINUED)

Exchange Commission, including but not limited to the Company's prospectus dated
October 30, 1997, for its initial public offering and the Company's annual
report on Form 10-K for the year ended December 31, 1997. Consequently, the
reader is cautioned to consider all forward-looking statements in light of the
risks to which they are subject.

PART II  OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

     EXHIBIT NUMBER        DESCRIPTION
     --------------        -----------

          27.1    Financial Data Schedule for the period ended             
                  September 30, 1998

         (b)      Reports on Form 8-K

                  The Company filed a Form 8-K on October 15, 1998.













                                     Page 11


<PAGE>   14



                                   SIGNATURES



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


                                     AVTEAM, Inc.


                                                             
Date:  November 16, 1998             By:  /s/   DONALD A. GRAW
                                         ---------------------------------------
                                         Donald A. Graw
                                         President and Chief Executive Officer



                                           
Date:  November 16, 1998             By:  /s/   MARK S. KOONDEL
                                         ---------------------------------------
                                         Mark S. Koondel
                                         Chief Financial Officer and Treasurer
















                                     Page 12

<PAGE>   15



                                  EXHIBIT INDEX




EXHIBIT NUMBER             DESCRIPTION
--------------             -----------

     27.1                  Financial Data Schedule for the period ended 
                           September 30, 1998