<PAGE>
 
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                            ______________________

                                   FORM 10-K
(Mark One)
    X  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
   ---                                                                          
       Act of 1934 for the fiscal year ended December 31, 1998 or

   ___ Transition report pursuant to section 13 or 15(d) of the Securities
       Exchange Act of 1934


                        COMMISSION FILE NUMBER:  1-7141

                            PS GROUP HOLDINGS, INC.
            (Exact name of registrant as specified in its charter)

               DELAWARE                                     33-0692068
    (State or other jurisdiction of                       (IRS employer
     incorporation or organization)                    identification no.)

 4370 LA JOLLA VILLAGE DRIVE, SUITE 1050
          SAN DIEGO, CALIFORNIA                                92122
 (Address of principal executive offices)                   (Zip code)

      Registrant's telephone number, including area code:  (619) 642-2999

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

         Title of each class           Name of each exchange on which registered
         -------------------           -----------------------------------------
     Common Stock - $1 par value                 New York Stock Exchange
                                                     Pacific Exchange


      Securities registered pursuant to Section 12(g) of the Act:  none.

                            ______________________

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

State the aggregate market value of the voting stock held by non-affiliates* of
the registrant.

                       $44,397,053 as of March 22, 1999

*Assumes Berkshire Hathaway Inc. (and its subsidiaries) and ESL Partners, L.P.,
owning approximately 19.9% and 19.7%, respectively, of the outstanding shares of
common stock of the Company on March 12, 1999, are not affiliates of the
Company.

   The number of shares of common stock outstanding as of March 22, 1999 was
                                  6,068,313.

                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE> 
<S>                                                                                         <C> 
Portions of Annual Report to Stockholders for the Year ended December 31, 1998............. PART I and PART II
Portions of Definitive Proxy Statement for the 1999 Annual Meeting of Stockholders.........           PART III
</TABLE> 

================================================================================
<PAGE>
 
                           FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this 1998 Form
10-K may be deemed forward-looking, such as: information relating to the future
prospects of the aircraft lessees of PS Group, Inc. (PSG), the aircraft leasing
subsidiary of PS Group Holdings, Inc. (the Company); the possible consequences
of any unscheduled return of aircraft under lease; the possibility of 1999 sales
of six BAe 146 aircraft owned by PSG or the potential future phase-out of six 
MD-80 aircraft owned by PSG from the fleet of the applicable lessee and the
impact of such sales or phase-out on PSG's financial condition, results of
operations, and net operating loss carryforwards; the potential liability for
environmental contamination at the San Francisco International Airport (SFIA),
the related cost of remediation and pending and potential litigation, and the
recoverability of any portion of this cost from third parties; the possibility
that future claims may be made regarding potential soil and groundwater
pollution at the Los Angeles International Airport, the Oakland International
Airport, or the Sacramento International Airport where PSG or PS Trading, Inc.
(PST) own fuel storage facilities and/or pipelines; the estimated income tax
liabilities due to the State of California for the tax years 1987 through 1990
and the estimated amounts due for other deferred tax liabilities; the tax
treatment of the Company's special distributions to stockholders in 1995, 1996,
1997, and 1998; the availability of certain tax benefits, and the amount of
otherwise-taxable income against which such benefits may be offset; the amount
of 1999 capital additions; the estimated fair value of oil and gas properties
owned by Statex Petroleum, Inc. (Statex), the oil and gas production and
development segment of the Company, that was used in computing the impairment
loss; the quantities of oil and gas reserves owned by Statex, and the related
future net cash inflows from oil and gas producing activities; the volatility of
the prices of crude oil and natural gas and the resultant effect on Statex
including its ability to remain in compliance with financial loan covenants
contained in its separate bank credit agreement and the Company's ability to pay
the principal and interest outstanding under this credit agreement if the bank
is unwilling to grant future waivers and declares the loan due and payable; and
the impact of Year 2000 issues on the Company. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, including, but not
limited to: the impact of the financial condition and results of operations of
the lessees of PSG's aircraft; the effect of any 1999 sales of BAe 146 aircraft
or the potential future phase-out of six MD-80 aircraft from the fleet of the
applicable lessee on the Company's financial condition, results of operations,
and net operating loss carryforwards; the uncertainties inherent in estimating
the cost of environmental remediation and related pending and potential
litigation at SFIA; the uncertainties arising from the potentiality for future
claims relating to pollution at three other airports; the possibility that the
final disposition of tax deficiencies asserted by the State of California will
involve litigation or will be for an amount in excess of the amount estimated by
the Company; the possibility of future adjustments to the deferred income tax
liability; the possibility that the ultimate tax treatment of the special
distributions to stockholders would be different than that determined by the
Company; the efficacy of the transfer restrictions on the Company's common stock
in preserving the Company's substantial tax benefits, the Company's ability to
realize such benefits, and the possible effect of the availability of such
benefits if stockholders of the Company do not vote to extend such transfer
restrictions beyond their scheduled expiration in the year 2000; the impact on
1999 cash flow and borrowings to finance capital additions if capital additions
vary from the current estimate; the impact of the actual quantities of oil and
gas reserves and the related impact of the volatility of the prices of crude oil
and natural gas on Statex, including the possibility of future impairment
losses, the possibility of future non-compliance with financial loan covenants
by Statex, and the possible inability of Statex to obtain waivers from its bank
with respect to such noncompliance; the impact on the business, financial
condition and results of operations of the Company if the Company or its
subsidiaries,

                                      -1-
<PAGE>
 
or third parties with which they have material business relationships, are
unsuccessful in solving the Year 2000 issues in a timely manner; the impact of
economic conditions on each business segment; the impact of competition; the
impact of governmental legislation and regulation and possible future changes
therein; and other risks detailed in this 1998 Form 10-K and in other filings
the Company has made with the Securities and Exchange Commission. Should any of
such risks or uncertainties materialize or should other assumptions prove
incorrect, actual results or outcomes may vary materially from those
contemplated in such forward-looking statements. The Company does not undertake
to publicly update or revise its forward-looking statements.


                                    PART I

                               ITEM 1.  BUSINESS

                                    GENERAL

PRINCIPAL BUSINESSES

     The reportable segments of the Company, which are conducted through
subsidiaries, are aircraft leasing (PSG), oil and gas production and development
(Statex), and fuel storage and distribution (PST).

     In October 1997, PST completed the sale of  the assets of its wholesale
fuel sales division located in Sacramento, California.  This division was
primarily engaged in the sale of diesel fuel and gasoline.  In February 1998,
PST sold the assets of its aviation fuel sales division located in Dallas,
Texas. The sale of PST's fuel sales divisions has resulted in the discontinuance
of the fuel sales business segment.

     For general information with respect to the Company's businesses, reference
is made to pages 6 through 18 of the Company's Annual Report to Stockholders,
incorporated by reference herein (Exhibit 13).

REORGANIZATION AND RESTRICTIONS ON THE TRANSFER OF SHARES OF THE COMPANY

     On June 5, 1996, the Company and PSG completed a holding company
reorganization (the Reorganization).  As a result of the Reorganization, each
share of PSG was converted, on a tax-free basis, into one share of the Company.
The Reorganization did not result in any change in the consolidated financial
condition, business or assets of PSG.  The Reorganization was accounted for on
an historical cost basis and thus the financial statements for periods prior to
the Reorganization have not been restated and represent the consolidated
financial statements of PSG.  The sole purpose of the Reorganization was to help
preserve PSG's substantial net operating loss and investment tax credit
carryforwards and other tax benefits by decreasing the risk of an "ownership
change" for federal income tax purposes.  The Reorganization was intended to
accomplish this purpose by imposing certain restrictions on the transfer of
common shares of the Company.  In general, and subject to an exemption for
certain dispositions of shares by persons who were "pre-existing 5%
shareholders" (as defined in Article XI of the Company's Restated Certificate of
Incorporation) on June 5, 1996, the transfer restrictions prohibit, without
prior approval of the Board of Directors, the direct or indirect disposition or
acquisition of any stock of the Company by or to any holder who owns, or would,
as a result thereof, own (either directly or through the tax attribution rules)
5% or more of the stock upon such acquisition.  The transfer restrictions, by
their terms, are scheduled to expire 

                                      -2-
<PAGE>
 
immediately following the conclusion of the Company's annual meeting of
stockholders for the year 2000, unless the stockholders pass a resolution
extending such expiration date.
 
STATE OF INCORPORATION AND EXECUTIVE OFFICES

     The Company was incorporated in Delaware in 1996, and through the
Reorganization became the successor corporation to PSG.  PSG was incorporated in
Delaware in 1972 as the successor to a California corporation originally
incorporated in 1945. The Company has its principal executive offices at 4370 La
Jolla Village Drive, Suite 1050, San Diego, California, 92122; telephone number
(619) 642-2999.

INFORMATION ON REPORTABLE SEGMENTS

     Certain information required by "ITEM 1. BUSINESS" is incorporated by
reference from pages 6 through 18 of the Company's 1998 Annual Report to
Stockholders and Note 7 of the Notes to Consolidated Financial Statements
included in the Company's 1998 Annual Report to Stockholders, incorporated by
reference herein (Exhibit 13).  This incorporated information includes financial
information about the Company's reportable segments.  Additional disclosure is
made below in this Form 10-K under "CERTAIN ADDITIONAL INFORMATION."

CORPORATE EMPLOYEES

     As of December 31, 1998, the Company had no employees.  The corporate staff
of PSG consisted of 5 full-time employees (plus two part-time employees) who
manage the aircraft leasing operations and perform administrative functions
including administrative services to the Company.  The PSG corporate staff also
provides some administrative services to its subsidiaries for which it is
reimbursed.  None of the employees of PSG or its subsidiaries are covered by
union contracts.


                         CERTAIN ADDITIONAL INFORMATION

     The following information supplements the information incorporated by
reference herein from pages 6 through 18 of the Company's 1998 Annual Report to
Stockholders, incorporated by reference herein (Exhibit 13).

STATEX PETROLEUM, INC. (STATEX) - OIL AND GAS PRODUCTION AND DEVELOPMENT

     ACREAGE.  The following table sets forth, by state, Statex well ownership
and producing acreage as of December 31, 1998:

<TABLE>
<CAPTION>
                    Gross Wells       Net Wells       Producing Acres
                   -------------   --------------   -------------------
                      Oil    Gas      Oil     Gas     Gross         Net
                   ------ ------   ------ -------   -------     ------- 
     <S>           <C>    <C>      <C>    <C>       <C>         <C> 
     Louisiana               2               0.04        22           3
     New Mexico              1               0.07       120           8
     North Dakota      77            3.17            14,240         703
     Oklahoma           1   18       0.03    6.71     6,154       1,931
     Texas            182   26     143.59    3.40    20,277       1,418
     Wyoming            9            7.02             1,506       1,175
                   ----------------------------------------------------
        Total         269   47     153.81   10.22    42,319       5,238
</TABLE>

                                      -3-
<PAGE>
 
The following table sets forth, by states, undeveloped acreage ownership as of
December 31, 1998:

<TABLE>
<CAPTION>
                                             Acres
                                       -----------------
                                        Gross        Net
                                       -----------------
                 <S>                   <C>         <C>
                 Oklahoma               1,708        214
                 Texas                  3,778      2,298
                                       -----------------
                     Total              5,486      2,512
</TABLE>

     RISKS. Statex's operations are subject to all risks inherent in the
exploration for and production of oil and gas, including blowouts, cratering,
and fires, which could result in damage to or destruction of oil and gas wells
or formations, producing facilities or property, or could result in personal
injury or loss of life.  Such an event could result in substantial cost to
Statex and could have a material adverse effect upon its financial condition if
Statex is not fully insured against such risk.  Statex carries substantial
insurance coverage but may not be fully insured against all such risks.

     GOVERNMENTAL REGULATION AND ENVIRONMENTAL ISSUES.  Statex's operations are
affected from time to time in varying degrees by political developments and
federal and state laws and regulations.  In particular, oil and gas production
operations are affected by tax and other laws relating to the petroleum
industry, changes in such laws and constantly changing administrative
regulations.  In addition, oil and gas operations are subject to regulation,
interruption and termination by governmental authorities for environmental
issues and other considerations.  Additionally, in most, if not all, areas where
Statex conducts activities, there are statutory provisions regulating the
production of oil and gas. These provisions allow administrative agencies to
promulgate rules in connection with the operation and production of both oil and
gas wells, including the method of developing new fields, spacing of wells and
the maximum daily production allowable for both oil and gas wells and various
environmental issues.

     ECONOMIC AND COMPETITIVE FACTORS AFFECTING STATEX.  Statex is engaged
primarily in the production and sale of crude oil and natural gas.  Statex has
literally hundreds of competitors, most of which are larger and have greater
resources than Statex.  Oil and natural gas are fungible commodities and, as
such, the prices Statex receives for its products are directly related to the
open market price for such products at the time of sale.  These prices generally
fluctuate and are for the most part controlled by the laws of supply and demand.
The price for oil is particularly driven by worldwide production and demand.
Statex has virtually no control over the establishment of prices for its
products.  To the extent there should be an oversupply of product and resulting
lower prices, Statex's revenues and operating results would be negatively
impacted.

PS TRADING, INC. (PST) -- FUEL STORAGE AND DISTRIBUTION

     RISKS. PST's operations are subject to all risks inherent in the business
of jet fuel storage and distribution including fuel contamination, spillage, and
distribution accidents, which could result in damage to or destruction of
property, or could result in personal injury or loss of life.  Such an event
could result in substantial cost to PST.  PST carries limited insurance coverage
but may not be fully insured against all such risks.  All of PST's facilities
are located and operated on airports under provisions of leases or operating
permits.  Such leases and permits have provisions to terminate operations and in
some cases remove PST's facilities if the airport constructs new facilities or
decides to modify the fueling systems.

                                      -4-
<PAGE>
 
     GOVERNMENTAL REGULATION AND ENVIRONMENTAL ISSUES.  PST's operations are
affected from time to time in varying degrees by political developments and
federal and state laws and regulations.  In particular, fuel storage and
distribution operations are affected by tax and other laws relating to the
petroleum industry, changes in such laws and constantly changing administrative
regulations.  In addition, fuel storage and distribution operations are subject
to regulation, interruption, and termination by governmental authorities for
environmental issues and other considerations.  Additionally, in most, if not
all, areas where PST conducts activities, there are statutory provisions
regulating fuel storage and distribution. These provisions allow administrative
agencies to promulgate rules in connection with the operation of fuel storage
and distribution facilities including effective capacity, configuration, and
testing and safety requirements as well as various environmental issues.

     Since PSG or PST own fuel storage facilities or pipelines at San Francisco
International Airport (SFIA), Los Angeles International Airport, Oakland
International Airport, and Sacramento International Airport, it is possible that
future claims may be made against PSG or PST regarding potential soil and
groundwater pollution.  See "ITEM 3. LEGAL PROCEEDINGS" as to environmental
claims at SFIA. PST operates at locations served by other companies including
major airlines, oil companies, and airports, most of which have greater
financial resources and higher levels of operations at the locations served than
PST.


                       EXECUTIVE OFFICERS OF THE COMPANY

     The following table sets forth the names, ages, and certain additional
information concerning the executive officers of the Company.

<TABLE> 
<CAPTION> 
                                Age on
                               March 1,      Positions with the Company  
      Name                      1999         and Principal Occupation     
------------------------      ---------      ------------------------------------------------
<S>                           <C>            <C>   
Lawrence A. Guske                54          Vice President - Finance and Chief
                                             Financial Officer of the Company since January 15,
                                             1996, Vice President - Finance and Chief Financial
                                             Officer of PSG since 1987.

Charles E. Rickershauser, Jr.    70          Chairman of the Board, Chief Executive
                                             Officer and a director of the Company since January 15,
                                             1996, Chairman of the Board of PSG since 1991, a
                                             director of PSG since 1984 and Chief Executive Officer
                                             of PSG since October 1994.

Johanna Unger                    50          Vice President, Secretary, and
                                             Controller of the Company since January 15, 1996, Vice
                                             President and Controller of PSG since 1988 and
                                             Secretary of PSG since 1994.
</TABLE> 

                                      -5-
<PAGE>
 
     There are no family relationships between any of the Company's executive
officers. Each of the Company's executive officers is elected annually and
serves at the pleasure of the Board of Directors.

 
                              ITEM 2.  PROPERTIES

                 EXECUTIVE OFFICES AND OTHER GROUND FACILITIES

     The Company's executive offices and principal administrative offices
consist of 3,000 square feet located at 4370 La Jolla Village Drive, Suite 1050,
San Diego, California under a five-year lease entered into by PSG that expires
in June 2001.  Current base rent is $67,000 per year.

     Statex leases approximately 5,000 square feet for executive offices at 1801
Royal Lane, Suite 110, Dallas, Texas under a lease that expires in August 2000.
Base rent is $52,000 for 1999 and $37,000 for 2000.  For information regarding
Statex oil and gas properties see "Statex Petroleum, Inc. (Statex) - Oil and Gas
Production and Development" under "ITEM 1. BUSINESS."

     The Company believes that its present properties are adequate for its
business in light of its current operations.

                               FLIGHT EQUIPMENT

     The aircraft owned by PSG as of March 1, 1999 are listed in the following
table:

       Type of Aircraft                     Number Owned
       ----------------                     ------------

       British Aerospace BAe 146-200         6 (a)
       McDonnell Douglas MD-80               7 (b)
       Boeing 737-300                        2 (c)


     (a)  These aircraft are all leased to US Airways, Inc. (US Airways) for
          terms expiring in 2000.
     (b)  Six MD-80s are leased to US Airways for terms expiring from 1999 to
          2004 and one is leased to Continental Airlines, Inc. (Continental) for
          a term expiring at the beginning of 2008.
     (c)  One aircraft is leased to Continental for a term expiring at the
          beginning of 2008 and one aircraft is leased to America West Airlines,
          Inc. for a term expiring in 2006.


                          ITEM 3.  LEGAL PROCEEDINGS

     As previously reported in the Company's Form 10-K for the year ended
December 31, 1997, the City and County of San Francisco (CCSF), on July 11,
1997, filed a complaint in the Superior Court, State of California, County of
San Francisco, against various present and former tenants who had operated fuel
storage and other facilities at SFIA seeking to recover costs incurred in
connection with the investigation and clean-up of contamination in and around
SFIA.  The action was removed to the United States District Court for the
Northern District of California and is now captioned City and County of San
Francisco v. ARCO, et. al., U.S. District Court, N. D. Cal., Case No. C97-2965
CAL (the CCSF Action).  For additional information with respect to this action
and two related cross actions, see Note 4 of the Notes 

                                      -6-
<PAGE>
 
to Consolidated Financial Statements included in the Company's 1998 Annual
Report to Stockholders, incorporated by reference herein (Exhibit 13).

     The Company is unable to determine whether any of the claims mentioned
above will ultimately have any material adverse consequences to it beyond the
approximately $4.6 million (representing the unspent balance of the remediation
liabilities recorded in 1997 and 1996) of environmental remediation liability
recorded as of December 31, 1998 described in Note 4 of the Notes to
Consolidated Financial Statements included in the Company's 1998 Annual Report
to Stockholders, incorporated by reference herein (Exhibit 13).


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

None.


                                    PART II

     The information required by Items 5 through 8 of this Part II is hereby
incorporated by reference from page 1 and the pages 12 through 43 of the
Company's 1998 Annual Report to Stockholders, incorporated by reference herein
(Exhibit 13).

     ITEM 5.       Market for Registrant's Common Equity and Related Stockholder
                   Matters

     ITEM 6.       Selected Financial Data

     ITEM 7./(1)/  Management's Discussion and Analysis of Financial Condition
                   and Results of Operation

     ITEM 8.       Financial Statements and Supplementary Data

(1)  Item 7.A, "Quantitative and Qualitative Disclosures about Market Risk" is
               not applicable.


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

     Not applicable.


                                   PART III

     The information required by Items 10 through 13 of this Part III, is hereby
incorporated by reference from the Company's definitive Proxy Statement which
will be filed with the Securities and Exchange Commission on or before April 26,
1999.  Certain information concerning the Executive Officers of the Company is
included in Part I, supra, under "EXECUTIVE OFFICERS OF THE COMPANY."

     ITEM 10.  Directors and Executive Officers of the Registrant.

                                      -7-
<PAGE>
 
     ITEM 11.  Executive Compensation.

     ITEM 12.  Security Ownership of Certain Beneficial Owners and Management.

     ITEM 13.  Certain Relationships and Related Transactions.



                                    PART IV

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

(a)  Financial Statements, Financial Statement Schedules, and Exhibits

     1. Financial Statements:  See Index to Financial Statements, Page F-1.
     2. Financial Statements Schedules Required Under Item 8 and paragraph (d)
        of Item 14:  None.
     3. Exhibits:  See Index to Exhibits following Page F-2.

(b)  Reports on Form 8-K
 
     None.


                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


     DATED: March 25, 1999.

                               PS GROUP HOLDINGS, INC.   
                               (Registrant)


                               By: /s/ Lawrence A. Guske

                               ____________________________________

                               LAWRENCE A. GUSKE  
                               Vice President - Finance
                               and Chief Financial Officer

                                      -8-
<PAGE>
 
      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.  Each person whose signature
appears below hereby authorizes Lawrence A. Guske and Johanna Unger, and each of
them, as attorneys-in-fact, on his or her behalf, individually and in each
capacity stated below, to sign and file any amendment to this Form 10-K Annual
Report.


<TABLE> 
<CAPTION> 
      SIGNATURE                            TITLE                      DATE
      ---------                            -----                      ----
<S>                                  <C>                           <C> 
/s/  C. E. Rickershauser, Jr.        Chairman of the Board,        March 25, 1999
---------------------------------    
(C. E. Rickershauser, Jr.)           Chief Executive Officer                                     

/s/  J. P. Guerin                    Vice Chairman of the Board    March 25, 1999
---------------------------------                                                          
(J. P. Guerin)
 
/s/  Lawrence A. Guske               Vice President -              March 25, 1999
---------------------------------    
(Lawrence A. Guske)                  Finance and Chief    
                                     Financial Officer    
                                     (principal financial 
                                      officer)         
                               
/s/  Johanna Unger                   Vice President, Controller,   March 25, 1999
--------------------------------     
(Johanna Unger)                      and Secretary (principal 
                                     accounting officer)       
/s/ Robert M. Fomon                                                
--------------------------------     
(Robert M. Fomon)                    Director                      March 25, 1999
                                             
/s/ William H. Borthwick                                           
--------------------------------     
(William H. Borthwick)               Director                      March 25, 1999 
                                             
/s/ Steven D. Broidy                                               
--------------------------------     
(Steven D. Broidy)                   Director                      March 25, 1999
                                             
/s/  Donald W. Killian, Jr.                                        
--------------------------------     
(Donald W. Killian, Jr.)             Director                      March 25, 1999
                                             
/s/  Gordon C. Luce                                                
--------------------------------     
(Gordon C. Luce)                     Director                      March 25, 1999
</TABLE> 

                                      -9-
<PAGE>
 
/s/ Christopher H.B. Mills           Director                  March 25, 1999
--------------------------------     
(Christopher H.B. Mills)                      
                                              
                                              
/s/ Joseph S. Pirinea                Director                  March 25, 1999
--------------------------------     
(Joseph S. Pirinea)

                                      -10-
<PAGE>
 
                            PS GROUP HOLDINGS, INC.
                         INDEX TO FINANCIAL STATEMENTS
                                 [ITEM 14(A)]


<TABLE>
<CAPTION>
                                                                  Page Reference
                                                       -----------------------------------
                                                                               Annual
                                                                             Report to
                                                       Form 10-K            Stockholders
                                                       ---------            ------------
<S>                                                    <C>                  <C>  
Report of Ernst & Young LLP, independent auditors                                41
 
Consolidated Statements of Financial Position -                                  19
  December 31, 1998 and 1997                                   

Consolidated Statements of Operations -                                          20
  Years Ended December 31, 1998, 1997 and 1996                 
                                                               
Consolidated Statements of Cash Flows -                                          21
 Years Ended December 31, 1998, 1997 and 1996                  

Consolidated Statements of Stockholders' Equity -                                22
 Years Ended December 31, 1998, 1997 and 1996

Notes to Consolidated Financial Statements                                  23 - 37
                                                          
Supplementary Information:                                
 Quarterly Financial Information (unaudited)                                37 - 38    
 Oil and Gas Operations (unaudited)                                         38 - 40       

Consent of Ernst & Young LLP, independent auditors           F-2
</TABLE>

   All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

   The consolidated statements of financial position of PS Group Holdings, Inc.
at December 31, 1998 and 1997 and the related statements of operations, cash
flows, and stockholders' equity and the report of Ernst & Young LLP, independent
auditors, are set forth on the pages indicated above in the Annual Report to
Stockholders of PS Group Holdings, Inc. for the year ended December 31, 1998 and
are incorporated herein by reference.

                                      F-1
<PAGE>
 
              CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



We consent to the incorporation by reference in this Annual Report (Form 10-K)
of PS Group Holdings, Inc. of our report dated February 5, 1999, included in the
1998 Annual Report to Stockholders of PS Group Holdings, Inc.


 
 
                                                   /s/ Ernst & Young LLP

                                                   ERNST & YOUNG  LLP


San Diego, California
March 25, 1999

                                      F-2
<PAGE>
 
                               INDEX TO EXHIBITS

(2)       Plan of Reorganization - Restated Agreement and Plan of Reorganization
          dated January 31, 1996 among PS Group, Inc., the Company and PSG
          Merger Subsidiary. (Incorporated by reference from the Company's
          prospectus filed with the SEC on April 17, 1996 as part of the
          Company's Registration Statement on Form S-4 [Registration Statement
          No. 333-00821] filed on February 9, 1996, as supplemented by
          supplements dated May 1, May 14, and May 22, 1996.)

(3)(i)    Articles of Incorporation - Restated Certificate of Incorporation,
          effective May 30, 1997. (Incorporated by reference to Exhibit 99.1 to
          the Company's Form 8-K filed on May 30, 1997.)

(3)(ii)   Bylaws - Restated Bylaws as amended effective May 30, 1997.
          (Incorporated by reference to Exhibit 99.4 to the Company's Form 8-K
          filed on May 30, 1997.)

(10)      Material Contracts:
          (a)  Form of Indemnity Agreement with the Directors and Officers of
               the Company. (Incorporated by reference to Exhibit 10.1 to the
               Company's Registration Statement on Form S-4 [Registration
               Statement No. 333-00821] filed on February 9, 1996.)
          (b)  Retirement Plan for Corporate Officers of PSA, Inc. (now PS
               Group, Inc.) and Participating Subsidiaries effective March 12,
               1984, amending and restating the Retirement Plan for Corporate
               Officers of Pacific Southwest Airlines. (Incorporated by
               reference to Exhibit 10(d) to PSG's 1994 Annual Report on Form 
               10-K.)
          (c)  Split Dollar Insurance Agreement dated as of January 1, 1986
               between PS Group, Inc. (PSG) and Lawrence A. Guske. This
               Agreement is substantially identical in all material respects to
               the Split Dollar Insurance Agreement between PSG and Johanna
               Unger. (Incorporated by reference to Exhibit 10(c) to the
               Company's 1997 Annual Report on Form 10-K.)
          (d)  Employment Agreement dated January 15, 1988 between PSG and
               Lawrence A. Guske. This Agreement is substantially identical in
               all material respects to the Employment Agreement between PSG and
               Johanna Unger. (Incorporated by reference to Exhibit 10(f) to the
               Company's 1996 Annual Report on Form 10-K.)
          (e)  Amendment dated April 1, 1989 to Employment Agreement between PSG
               and Lawrence A. Guske. This Amendment is substantially identical
               in all material respects to Amendment to Employment Agreement
               between PSG and Johanna Unger. (Incorporated by reference to
               Exhibit 10(g) to the Company's 1996 Annual Report on Form 10-K.)
          (f)  Letter dated January 30, 1996 from Charles E. Rickershauser, Jr.
               to Lawrence A. Guske relating to the relationship between the
               Employment Agreement referred to in Exhibit 10(b) and the
               Reorganization. This Letter is substantially identical in all
               material respects to the Letter between Charles E. Rickershauser,
               Jr. and Johanna Unger. (Incorporated by reference to Exhibit
               10(h) to the Company's 1996 Annual Report on Form 10-K.)
          (g)  Letter dated February 8, 1999 from Charles E. Rickershauser, Jr.
               to Lawrence A. Guske clarifying the definition of "Change of
               Control" found in the Employment Agreement referred to in Exhibit
               10(b) and the Reorganization. This Letter is substantially
               identical in all material respects to the Letter between Charles
               E. Rickershauser, Jr. and Johanna Unger.


                                    Index-1
<PAGE>
 
          (h)  Amended and Restated Split Dollar Life Insurance Agreement dated
               as of January 1, 1999 between PSG and Janet Rickershauser
               (daughter of Charles E. Rickershauser, Jr.).
          (i)  Further Amended and Restated Executive Retirement Agreement
               between PSG and Charles E. Rickershauser, Jr. dated as of March
               25, 1999.
          (j)  Agreement dated December 14, 1990 between Berkshire Hathaway Inc.
               (Berkshire) and PSG relating to Berkshire's acquisition of PSG's
               Common Stock. (Incorporated by reference to Exhibit 10(i) to the
               Company's 1996 Annual Report on Form 10-K.)

(12)      Statement of Computation of Ratios.

(13)      Annual report to stockholders - Inside front cover, page 1, and all
          the pages following the Letter to Stockholders.

(21)      Subsidiaries of the registrant.

(23)      Consent of independent auditors (see page F-2 of Item 14(a) of this
          Form 10-K). 

(27)      Financial data schedule.


EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Matters relating to executive compensation plans and arrangements can be found
within the index to exhibits as follows:  (10)(a), (10)(b), (10)(c), (10(d),
(10)(e), (10)(f), (10)(g), (10)(h), and (10)(i).

ALL EXHIBITS INCORPORATED BY REFERENCE ON OR AFTER JUNE 5, 1996 ARE FILED IN PS
GROUP HOLDINGS, INC. DOCUMENTS (COMMISSION FILE NUMBER 1-7141); EXHIBITS
INCORPORATED BY REFERENCE BEFORE JUNE 5, 1996 ARE FILED IN PSG DOCUMENTS (SAME
COMMISSION FILE NUMBER AS PS GROUP HOLDINGS, INC.).

                                    Index-2