Exhibit 13

                   Consolidated Freightways Corporation
                             and Subsidiaries
                  Management's Discussion and Analysis of
               Financial Condition and Results of Operations


     Consolidated Freightways Corporation (the Company) improved  operating
income  for the second consecutive year as an independent company,  earning
$52.1  million in 1998.  This is a $6.8 million improvement over 1997 and a
$125.1  million improvement over the 1996 operating loss of $73.1  million.
This  increase  in  operating income reflects the success  of  management's
programs  to contain costs, improve freight mix and gain market  acceptance
of its higher yielding premium services. The 1998 results were accomplished
despite  a  2.6%  reduction in revenue. The improved performance  generated
cash  from operations of $56.3 million and $77.4 million for 1998 and 1997,
respectively. The 1996 results were adversely impacted by a reconfiguration
of the freight flow system.

     Earnings per basic share in 1998 were $1.16 compared with $0.92 in the
previous  year.   Both  1998 and 1997 include pre-tax non-cash  charges  of
$14.4  million and $14.3 million, respectively, for the issuance of  common
shares  to all eligible, full-time employees under the Company's restricted
stock  plan.  Excluding these charges, earnings per basic share were  $1.55
in 1998 compared with $1.31 in 1997.

     Revenues for 1998 declined 2.6% as total and less-than-truckload (LTL)
tonnage  declined 8.7% and 6.6%, respectively.  Yield management  programs,
shippers  diverting freight due to the perceived threat of a work  stoppage
early  in  the  year  and  the regionalization of  distribution  activities
contributed  to  the  lower tonnage levels.  The  decline  in  tonnage  was
partially  offset  by  improved revenue yields.  Net  revenue  per  hundred
weight  increased  6.4% over 1997 due to improved freight  mix,  growth  of
expedited  service offerings and general rate increases,  and  despite  the
elimination  of  a  fuel surcharge in early 1998.   In  1997,  revenue  per
hundred weight increased 6.2% over 1996 for the same reasons.  Coupled with
an LTL tonnage increase of 1.6%, 1997 revenues increased 7.1% over 1996.

     Salaries, wages and benefits decreased 4.2% in 1998 compared  to  1997
primarily due to lower business volumes. The 1998 expenses include a  $13.0
million signing bonus paid on signature of a new five year National  Master
Freight  Agreement, a significant savings over historical contractual  wage
increases.   The  1997 salaries, wages and benefits were 0.7%  higher  than
1996  reflecting  a  $30.0 million Teamster wage and benefit  increase,  an
increase  of  $21.1  million in incentive compensation for  non-contractual
employees,  a  $14.3  million  non-cash charge  related  to  the  Company's
restricted  stock  plan  and expenses associated  with  increased  business
levels.   The  Company  benefited in 1998 and 1997 from  increased  use  of
purchased  transportation  and the success of  workers'  compensation  cost
containment  programs.   The 1996 expenses were  adversely  impacted  by  a
reconfiguration of the freight flow system in late 1995, and include salary
and  benefits  for  administrative services which were  outsourced  to  the
former  parent  in  1997 and a $15.0 million charge  to  increase  workers'
compensation reserves.

     Operating  expenses  increased 1.0% in 1998,  despite  lower  business
volumes,  due  primarily  to expenses related to the  Company's  Year  2000
project  and  a  9.0%  increase in repair and maintenance  expense  on  the
Company's aging fleet.  Operating expenses increased 5.4% in 1997 over 1996
due to charges for outsourced administrative services that were included in
salaries,  wages  and benefits in 1996, as discussed above,  and  increased
repair  and  maintenance expense.  The Company benefited in 1998  and  1997
from  lower  fuel  costs  per  gallon and a higher  proportion  of  freight
transported via rail. Operating expenses in 1996 were adversely impacted by
a reconfiguration of the freight flow system in late 1995.

     Purchased  transportation increased 8.6% in  1998  over  1997  as  the
Company continued to maximize use of lower cost rail services.  Rail  miles
as  a percentage of total inter-city miles were 28.0% in 1998 compared with
27.9% in 1997. The increase also reflects a 2.2% increase in rail cost  per
mile  in  1998  as  well  as costs associated with  the  Company's  growing
PrimeTime  Service.   Purchased transportation increased 6.7% in 1997  over
1996 levels as rail miles increased from 26.0% of total inter-city miles.

     Operating taxes and licenses decreased 16.2% in 1998 from 1997 due  to
lower  business  volumes,  increased use of  rail  services  and  continued
reductions  in  property tax assessments on terminal properties.  Operating
taxes  and  licenses in 1997 decreased 2.9% from 1996 due to increased  use
of rail services and reduced property tax assessments.

     Claims  and  insurance decreased 12.5% in 1998 due to  lower  business
volumes  and continued improved claims experience over last year.    Claims
and  insurance increased 11.4% in 1997 over 1996 due to increased  business
volumes.

    Depreciation  expense  decreased 7.2%  and  17.5%  in  1998  and  1997,
respectively,  due  primarily to a higher proportion of  fully  depreciated
equipment.   Additionally,  $57.6  million  of   excess   properties   were
transferred to the former parent in December 1996.

    Other expense, net decreased $3.0 million and $1.4 million in 1998  and
1997,  respectively, due to increased investment income  on  the  Company's
short-term investments.  1996 includes interest expense on borrowings  from
the  former  parent,  which  is  included  in  Miscellaneous,  net  in  the
Statements of Consolidated Operations.

     The  Company's  effective income tax (benefit) rates differ  from  the
statutory  Federal rate due primarily to foreign and state taxes  and  non-
deductible items.

     During  1999  management will continue its emphasis  on  higher  yield
premium services including its PrimeTime Service, preventing and containing
claims  costs  and  improving  linehaul and city  operations.  This  should
contribute  to  a  third year of improved operating  performance  and  help
offset  contractual wage and benefit increases of approximately $14 million
and  amortization  of  approximately $5 million related  to  the
replacement  of  certain  operational  and  financial  systems  and
applications  for  Year  2000 compliance.  While management  is  optimistic
about  the  Company's long term prospects, several issues and uncertainties
may impact 1999 results.

     Declining Market Share: The Company is faced with a steady erosion  of
its  market share in its traditional greater than 1,500 miles   length- of-
haul  due to market trends such as the "regionalization" of freight due  to
just in time inventory practices, distributed warehousing and other changes
in  business processes.  Also contributing to this decline are new  longer
length-of-haul service offerings by regional and parcel carriers.  To enjoy
continued  growth, the Company must invest in its infrastructure to  become
more  competitive  in  shorter length-of-haul lanes  and  develop  services
tailored to customer needs.

     Price  Stability:  A  relatively robust  economy,  pricing  discipline
amongst  competitors  and  reduced industry  capacity  has  contributed  to
relative  price  stability over the last two years. A decline  in  economic
growth   and/or   competitive   action  through   price   discounting   may
significantly  impact  the Company's performance  through  a  reduction  in
revenue per hundredweight with minimal reduction in cost.

     Cyclicality  and  Seasonality: The less  than  truckload  industry  is
affected  by  the  state of the overall economy and seasonal  fluctuations,
which  affect  the amount of freight to be transported. Freight  shipments,
operating  costs  and  earnings are also affected  adversely  by  inclement
weather conditions.  The months of September, October and November of  each
year  usually have the highest business levels while the first quarter  has
the lowest.

     As  discussed  in  Footnote  8  in  the  Company's  1998  Consolidated
Financial  Statements,  the  Company  has  a  restricted  stock  plan.   If
performance  conditions are met, approximately 1,100,000 shares  of  common
stock  will be issued in December 1999, and compensation expense recognized
based on the then market price of the stock.  Based on the market price  of
the stock on December 31, 1998, the Company would recognize a $10.4 million
non-cash charge, net of related tax benefits.


Risk Factors

     The  Company is subject to market risks related to changes in interest
rates  and foreign currency exchange rates, primarily the Canadian  dollar.
Management  believes  that the impact on the Company's financial  position,
results  of  operations and cash flows from fluctuations in interest  rates
and or foreign currency exchange rates would not be material. Consequently,
management  does not currently use derivative instruments to  manage  these
risks; however, it may do so in the future.


Year 2000

     Management  has a formal plan in place through which it has identified
its  operational  and financial systems and applications  requiring  either
modification  or replacement for Year 2000 compliance.  Of  these  systems,
the  Company's on-line equipment and freight tracking system is deemed most
critical.   Based  upon  an assessment at December 31,  1998,  testing  and
modification of IT systems is approximately 55% complete while  testing  of
non-IT  embedded  systems  is  approximately 35%  complete.  1998  expenses
related  to Year 2000 modifications total $4.2 million and include  payroll
and payroll related costs as well as the costs of external consultants.  In
certain  cases, management has opted to replace rather than modify  certain
of  its systems and applications.  Costs associated with the replacement of
systems  and applications are capitalized.  As of December 31, 1998,  $15.0
million  has  been capitalized and includes hardware, software and  payroll
costs  as  well  as costs of external consultants.  Management  expects  to
spend  an  additional $22 million to convert its internal systems for  Year
2000  compliance.   Of  this amount, it is expected that  approximately  $5
million will be expensed and approximately $17 million will be capitalized.
These estimates may be revised based upon the results of continued testing.
Management expects that all Year 2000 system modifications and replacements
will be funded with cash from operations.

     Management  has engaged outside consultants as part of the process  of
assessing its Year 2000 risks.  Part of that assessment includes 3rd  party
compliance  readiness.   Management  has  identified  and  prioritized  its
critical  customers  and  key suppliers of products  and  services  and  is
currently   soliciting   written   responses   to   Year   2000   readiness
questionnaires.  Management will formulate contingency plans  as  necessary
based upon the results of those questionnaires.

     Management  anticipates having all of its internal systems  Year  2000
compliant  by mid-1999.  However, failure to convert the Company's  on-line
equipment and freight tracking system by the Year 2000 could result in  the
inability  to manage the flow of equipment and freight through  the  system
efficiently,  but would not preclude the delivery of freight. Additionally,
failure  to convert financial systems on a timely basis could result  in  a
return  to  manual  processes resulting in delayed  customer  billings  and
vendor  payments.  To the extent that the Company or its critical customers
and  key suppliers fail to achieve Year 2000 compliance, there could  be  a
material  adverse effect on the Company's business, results  of  operations
and financial position.


Liquidity and Capital Resources

     As  of  December 31, 1998, the Company had $123.1 million in cash  and
cash  equivalents.   Net  cash  flow from operations  for  the  year  ended
December  31,  1998  was  $56.3 million due primarily  to  net  income  and
depreciation  and amortization.  Capital expenditures for  the  year  ended
December  31,  1998 were $31.3 million compared with $22.7 million  in  the
prior  year.   Management expects capital expenditures to be  approximately
$120  million  for  1999, primarily for replacement revenue  equipment  and
upgrades to terminal properties.  It is anticipated that those expenditures
will  be  funded  with  cash  from operations,  supplemented  by  financing
arrangements if necessary.

     The  Company  entered  into  two operating lease  agreements  for  485
tractors and 27 trucks in the fourth quarter of 1998 for the replacement of
older  equipment.   Lease  payments in 1999 will total  approximately  $4.5
million.

     During  the  third quarter of 1998, the Company repurchased  1,448,174
shares of its common stock for $12.6 million.  Approximately one million of
the  repurchased  shares were issued under the Company's  restricted  stock
program.

     On  July  2,  1998  the Company amended its secured  credit  facility,
reducing the total facility from $225.0 million to $150.0 million.  Working
capital  borrowings are limited to $100.0 million while letters  of  credit
are  limited  to  $150.0 million.  Borrowings under  the  agreement,  which
expires  in 2000, bear interest based upon prime or LIBOR, adjusted  for  a
margin  dependent  on  the Company's financial performance.  The  amendment
reduced the margin and released all revenue equipment previously encumbered
under the original agreement.  Borrowings and letters of credit are secured
primarily by eligible accounts receivable.  The amendment further  provides
for  reduced  letter of credit and unused line fees, and  less  restrictive
financial  covenants.   As of December 31, 1998, the Company had no  short-
term  borrowings  and $74.6 million of letters of credit outstanding  under
this  facility.  The  continued availability of  funds  under  this  credit
facility  will  require  that  the Company comply  with  certain  financial
covenants, the most restrictive of which limits capital expenditures.   The
Company  is  in  compliance as of December 31, 1998 and expects  to  be  in
compliance with these covenants in 1999.

     As  of  December  31, 1998, the Company's ratio of long-term  debt  to
total  capital  was 5.4% compared with 5.8% as of December 31,  1997.   The
current ratio was 1.3 to 1 as of December 31, 1998 and 1997.


Inflation

     Significant  increases in fuel prices, to the  extent  not  offset  by
increases in transportation rates, would have a material adverse effect  on
the  profitability of the Company.  Historically, the Company has responded
to  periods  of  sharply higher fuel prices by implementing fuel  surcharge
programs  or  base  rate increases, or both, to recover  additional  costs.
However,  there  can  be  no assurance that the Company  will  be  able  to
successfully  implement  such  surcharges  or  increases  in  response   to
increased fuel costs in the future.


Other

     On April 13, 1998, the International Brotherhood of Teamsters ratified
a  new  five year  National  Master  Freight  Agreement  with  Consolidated
Freightways  Corporation  of Delaware, a wholly  owned  subsidiary  of  the
Company, and three other national motor freight carriers.

     The  Company  has  received notices from the Environmental  Protection
Agency  and others that it has been identified as a potentially responsible
party (PRP) under the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) or other Federal and state environmental statutes at
various  Superfund  sites.  Under CERCLA, PRP's are jointly  and  severally
liable  for  all  site remediation and expenses. Based  upon  cost  studies
performed   by   independent  third  parties,  the  Company  believes   its
obligations  with  respect to such sites would not have a material  adverse
effect on its financial condition or results of operations.

     Certain  statements  included  or  incorporated  by  reference  herein
constitute  "forward-looking statements" within the meaning of Section  27A
of  the  Securities  Act  of  1933, as amended,  and  Section  21E  of  the
Securities Exchange Act of 1934, as amended, and are subject to a number of
risks  and uncertainties.  Any such forward-looking statements included  or
incorporated  by reference herein should not be relied upon as  predictions
of   future  events.   Certain  such  forward-looking  statements  can   be
identified  by  the use of forward-looking terminology such as  "believes,"
"expects,"  "may,"  "will," "should," "seeks," "approximately,"  "intends,"
"plans," "pro forma," "estimates," or "anticipates" or the negative thereof
or other variations thereof or comparable terminology, or by discussions of
strategy,  plans  or  intentions.   Such  forward-looking  statements   are
necessarily dependent on assumptions, data or methods that may be incorrect
or  imprecise and they may be incapable of being realized.  In that regard,
the  following factors, among others, and in addition to matters  discussed
elsewhere  herein and in documents incorporated by reference herein,  could
cause  actual results and other matters to differ materially from those  in
such  forward-looking statements: changes in general business and  economic
conditions; increases in domestic and international competition and pricing
pressure;  increases  in fuel prices; uncertainty regarding  the  Company's
ability   to  improve  results  of  operations;  labor  matters,  including
shortages  of drivers and increases in labor costs; changes in governmental
regulation;  environmental and tax matters; increases in  costs  associated
with  the  conversion of financial and operational systems and applications
for  Year  2000 compliance and failure to convert all systems by  the  year
2000.  As a result of the foregoing, no assurance can be given as to future
results of operations or financial condition.





                      CONSOLIDATED FREIGHTWAYS CORPORATION
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  December 31,
                            (Dollars in thousands)



                                                            1998       1997

ASSETS

Current Assets
  Cash and cash equivalents (Note 2)                   $  123,081  $  107,721
  Trade accounts receivable, net of
       allowances  (Note 2)                               292,463     310,601
  Other accounts receivable                                 9,195      10,300
  Operating supplies, at lower of average cost
      or market                                             7,561       8,741
  Prepaid expenses                                         40,335      39,696
  Deferred income taxes  (Notes 2 and 6)                    6,806      16,554
    Total Current Assets                                  479,441     493,613


Property, Plant and Equipment, at cost  (Note 2)
  Land                                                     78,218      78,227
  Buildings and improvements                              343,492     342,413
  Revenue equipment                                       562,624     559,610
  Other equipment and leasehold improvements              123,404     116,390
                                                        1,107,738   1,096,640
  Accumulated depreciation and amortization              (746,966)   (713,653)
                                                          360,772     382,987

Other Assets
  Deposits and other assets  (Note 2)                      32,199       9,468
  Deferred income taxes  (Notes 2 and 6)                   17,978      11,728
                                                           50,177      21,196

Total Assets                                           $  890,390  $  897,796


[FN]
        The accompanying notes are an integral part of these statements.



                     CONSOLIDATED FREIGHTWAYS CORPORATION
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  December 31,
                           (Dollars in thousands)



                                                     1998            1997

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Accounts payable                               $   84,861       $  83,127
  Accrued liabilities  (Note 3)                     187,528         212,644
  Accrued claims costs  (Note 2)                     72,942          82,023
  Federal and other income taxes  (Note 6)           14,173           7,706
    Total Current Liabilities                       359,504         385,500

Long-Term Liabilities
  Long-term debt   (Note 4)                          15,100          15,100
  Accrued claims costs  (Note 2)                    103,574         112,173
  Employee benefits (Note 7)                        117,236         115,220
  Other liabilities                                  28,258          26,356
    Total Liabilities                               623,672         654,349

Shareholders' Equity
Preferred stock, $.01 par value; authorized
      5,000,000 shares; issued none                       -               -
Common stock, $.01 par value; authorized
      50,000,000 shares; issued 23,066,905
      and 23,038,437 shares, respectively               231             230
Additional paid-in capital                           77,303          71,461
Accumulated other comprehensive loss                (11,565)         (6,572)
Retained earnings                                   204,919         178,573
Treasury stock, at cost  (477,686 and
      18,151 shares, respectively)                   (4,170)           (245)
  Total Shareholders' Equity                        266,718         243,447

Total Liabilities and Shareholders' Equity       $  890,390       $ 897,796


[FN]
       The accompanying notes are an integral part of these statements.




<TABLE>
<CAPTION>
                                  CONSOLIDATED FREIGHTWAYS CORPORATION
                                            AND SUBSIDIARIES
                                 STATEMENTS OF CONSOLIDATED OPERATIONS
                                         Years Ended December 31,
                             (Dollars in thousands except per share data)



                                                    1998              1997              1996
<S>                                            <C>               <C>               <C>
REVENUES                                       $  2,238,423      $ 2,299,075       $ 2,146,172

COSTS AND EXPENSES
    Salaries, wages and benefits                  1,445,899         1,509,665        1,498,707
    Operating expenses                              367,098           363,615          345,006
    Purchased transportation                        207,388           191,041          179,126
    Operating taxes and licenses                     61,090            72,882           75,083
    Claims and insurance                             55,804            63,741           57,214
    Depreciation                                     49,080            52,872           64,102
                                                  2,186,359         2,253,816        2,219,238
OPERATING INCOME (LOSS)                              52,064            45,259          (73,066)

OTHER INCOME (EXPENSE)
  Investment income                                   4,957             1,894              263
  Interest expense                                   (4,012)           (3,213)            (843)
  Miscellaneous, net  (Note 11)                      (1,192)           (1,958)          (4,131)
                                                       (247)           (3,277)          (4,711)


Income (loss) before income taxes (benefits)         51,817            41,982           (77,777)
Income taxes (benefits) (Note 6)                     25,471            21,623           (22,201)

NET INCOME (LOSS)                              $     26,346      $     20,359      $    (55,576)

Basic average shares outstanding (Note 2)        22,634,362        22,066,212        22,025,323
Diluted average shares outstanding (Note 2)      23,510,752        22,755,714        22,025,323

Basic Earnings (Loss) per Share: (Note 2)      $       1.16      $       0.92      $      (2.52)

Diluted Earnings (Loss) per Share: (Note 2)    $       1.12      $       0.89      $      (2.52)


<FN>
                     The accompanying notes are an integral part of these statements.
</TABLE>



<TABLE>
<CAPTION>



                           CONSOLIDATED FREIGHTWAYS CORPORATION
                                   AND SUBSIDIARIES
                          STATEMENTS OF CONSOLIDATED CASH FLOWS
                                Years Ended December 31,
                                 (Dollars in thousands)

                                                                        1998           1997         1996
<S>                                                                  <C>           <C>          <C>
Cash and Cash Equivalents, Beginning
  of Period                                                          $ 107,721     $  48,679    $  26,558

Cash Flows from Operating Activities
  Net income (loss)                                                     26,346        20,359      (55,576)
  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
    Depreciation and amortization                                       50,918        54,679       64,565
    Increase (decrease) in deferred income taxes (Note 6)                3,498        16,522      (35,634)
    (Gains) losses from property disposals, net                             94          (914)      (3,089)
    Issuance of common stock under restricted stock plan (Note 8)       14,449        14,297            -
    Changes in assets and liabilities:
      Receivables                                                       19,243       (32,152)     (34,484)
      Accounts payable                                                   1,734        (4,384)       1,199
      Accrued liabilities                                              (25,116)       25,377        4,612
      Accrued claims costs                                             (17,680)      (11,784)      22,531
      Income taxes                                                       6,467         3,623        2,715
      Employee benefits                                                  2,016         1,908        7,216
      Other                                                            (25,701)      (10,161)      28,490
Net Cash Provided by Operating Activities                               56,268        77,370        2,545

Cash Flows from Investing Activities
  Capital expenditures                                                 (31,271)      (22,674)     (48,203)
  Proceeds from sales of property                                        2,918         4,591        8,329
Net Cash Used by Investing Activities                                  (28,353)      (18,083)     (39,874)

Cash Flows from Financing Activities
  Purchase of treasury stock                                           (12,555)         (245)           -
  Former parent investment and advances, net  (Note 11)                      -             -       59,450
Net Cash Provided (Used) by Financing Activities                       (12,555)         (245)      59,450

Increase in Cash and Cash Equivalents                                   15,360        59,042       22,121

Cash and Cash Equivalents, End of Period                             $ 123,081     $ 107,721    $  48,679


Supplemental Disclosure
Cash paid for income taxes                                           $   15,104    $   6,399    $   4,099
Cash paid for interest                                               $      775    $   1,389    $     877

<FN>

                      The accompanying notes are an integral part of these statements.
</TABLE>




<TABLE>
<CAPTION>


                                                                  CONSOLIDATED FREIGHTWAYS CORPORATION
                                                                            AND SUBSIDIARIES
                                                           STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
                                                                         (Dollars in thousands)


                                                                                  Accumulated
                                                   Common Stock      Additional     Other                   Treasury
                                               Number of               Paid-in  Comprehensive    Retained    Stock,
                                                 Shares     Amount     Capital   Income (Loss)   Earnings   at cost      Total

 <S>                                         <C>          <C>         <C>         <C>           <C>       <C>          <C>
 Balance, December 31, 1995                  22,025,323   $    220    $ 57,174    $ (5,611)     $ 207,325 $      -       $ 259,108

 Comprehensive income (loss) (Note 2)
    Net loss                                          -          -           -           -        (55,576)       -       (55,576)
    Foreign currency translation adjustment           -          -           -         701              -        -           701
 Total comprehensive loss                                                                                                (54,875)
 Net cash infusion from former
    parent (Note 11)                                  -          -           -           -         59,450        -        59,450
 Net asset transfers to former
    parent (Note 11)                                  -          -           -           -        (52,985)       -       (52,985)

Balance, December 31, 1996                   22,025,323        220      57,174      (4,910)       158,214        -       210,698

 Comprehensive income (loss) (Note 2)
    Net income                                        -          -           -           -         20,359        -        20,359
    Foreign currency translation adjustment           -          -           -      (1,662)             -        -        (1,662)
 Total comprehensive income                                                                                               18,697
 Issuance of common stock under restricted
   stock plan (Note 8)                        1,013,114         10      14,287           -              -        -        14,297
 Purchase of 18,151 treasury shares                   -          -           -           -              -     (245)         (245)

Balance, December 31, 1997                   23,038,437        230      71,461      (6,572)       178,573     (245)      243,447

 Comprehensive income (loss) (Note 2)
    Net income                                        -          -           -           -         26,346        -        26,346
    Foreign currency translation adjustment           -          -           -      (4,993)             -        -        (4,993)
 Total comprehensive income                                                                                               21,353

 Purchase of 1,448,174 treasury shares                -          -           -           -              -  (12,555)      (12,555)
 Issuance of common stock under restricted
   stock plan (Note 8)                           28,468          1          23           -              -        -            24
 Issuance of 988,639 treasury shares under
      restricted stock plan (Note 8)                  -          -       5,819           -              -    8,630        14,449

Balance, December 31, 1998                   23,066,905   $    231    $ 77,303    $(11,565)     $ 204,919 $ (4,170)    $ 266,718

<FN>
                                     The accompanying notes are an integral part of these statements.
</TABLE>






                   CONSOLIDATED FREIGHTWAYS CORPORATION
                             AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Organization

      Consolidated  Financial  Statements and Basis  of  Presentation:  The
accompanying  consolidated financial statements  include  the  accounts  of
Consolidated Freightways Corporation and its wholly owned subsidiaries (the
Company).  The Company, incorporated in the state of Delaware, consists  of
Consolidated  Freightways  Corporation  of  Delaware,  a  nationwide  motor
carrier, and its Canadian operations, including Canadian Freightways, Ltd.,
Epic  Express, Milne & Craighead, Canadian Sufferance Warehouses, Blackfoot
Logistics,  and other related businesses; Redwood Systems,  a  third  party
logistics  provider;  and the Leland James Service Corporation  (LJSC),  an
administrative service provider. The Company primarily provides  less-than-
truckload  transportation and supply chain management  services  throughout
the  United  States, Canada and Mexico, and international freight  services
between the United States and more than 80 countries.

      The  Company was a wholly owned subsidiary of CNF Transportation Inc.
(the  former parent) through December 1, 1996.    On December 2, 1996,  the
Company  was  spun-off  in a tax-free distribution  (the  Distribution)  to
shareholders.   The  amounts  included  in  the  accompanying  consolidated
financial  statements  through December 1, 1996 are based  upon  historical
amounts  included in the consolidated financial statements  of  the  former
parent  and  are presented as if the Company had operated as an independent
stand-alone  entity, except that it has not been allocated any  portion  of
the former parent's consolidated borrowings or interest expense thereon.


2.  Principal Accounting Policies

     Recognition of Revenues: Transportation freight charges are recognized
as  revenue when freight is received for shipment.  The estimated costs  of
performing  the  total  transportation services  are  then  accrued.   This
revenue recognition method does not result in a material difference from in-
transit or completed service methods of recognition.

      Cash  and  Cash  Equivalents:  The Company  considers  highly  liquid
investments with an original maturity of three months or less  to  be  cash
equivalents.

      Trade Accounts Receivable, Net: Trade accounts receivable are net  of
allowances of $11,413,000  and $7,467,000 as of December 31, 1998 and 1997,
respectively.

      Property,  Plant  and Equipment: Property, plant  and  equipment  are
depreciated  on  a straight-line basis over their estimated  useful  lives,
which  are generally 25 years for buildings and improvements, 6 to 10 years
for  tractor  and  trailer  equipment and 3 to  10  years  for  most  other
equipment.   Leasehold improvements are amortized over the shorter  of  the
terms of the respective leases or the useful lives of the assets.

      Expenditures  for equipment maintenance and repairs  are  charged  to
operating  expenses  as  incurred; betterments are capitalized.   Gains  or
losses on sales of equipment are recorded in operating expenses.

      Software  Costs:  The  Company adopted  the  provisions  of  American
Institute of Certified Public Accountants (AICPA) Statement of Position 98-
1  (SOP  98-1) "Accounting for the Costs of Computer Software Developed  or
Obtained   for  Internal  Use"  effective  January  1,  1998.    SOP   98-1
standardizes which costs related to computer software developed or obtained
for internal use are to be capitalized and those that are to be expensed as
incurred.   Prior  to  adoption of this statement, the Company  capitalized
only  the  costs of purchased software while costs of internally  developed
software  were expensed.  The Company capitalized $17,574,000 of  purchased
and  internally  developed software costs in the year  ended  December  31,
1998.    These  costs  are  included in Other Assets  on  the  Consolidated
Balance Sheet and are being amortized over 5 years.

      Income  Taxes: The Company follows the liability method of accounting
for income taxes.

      Accrued Claims Costs: The Company provides for the uninsured costs of
medical,  casualty,  liability, vehicular, cargo and workers'  compensation
claims.  Such costs are estimated each year based on historical claims  and
unfiled  claims relating to operations conducted through December 31.   The
actual costs may vary from estimates based upon trends of losses for  filed
claims  and  claims  estimated to be incurred.  The  long-term  portion  of
accrued  claims  costs  relates primarily to workers'  compensation  claims
which are payable over several years.

      Translation  of  Foreign  Currency: Local  currencies  are  generally
considered to be the functional currencies outside the United States.   The
Company translates the assets and liabilities of its foreign operations  at
the exchange rate in effect at the balance sheet date.  Income and expenses
are  translated  using  the  average exchange rate  for  the  period.   The
resulting  translation  adjustments are  reflected  in  the  Statements  of
Consolidated  Shareholders' Equity.  Transactional  gains  and  losses  are
included in results of operations.

      Interest Expense: The interest expense presented in the Statements of
Consolidated  Operations  is  related  to  industrial  revenue  bonds,   as
discussed  in  Note 4 "Debt", and long-term tax liabilities.  The  interest
expense  as  presented  for  the  year  ended  December  31,  1996  is  not
necessarily  intended to reflect the expense that would have been  incurred
had  the  Company  been  an independent stand-alone company  prior  to  the
Distribution.

     Earnings per Share: Basic earnings per share are calculated using only
the  weighted  average shares outstanding for the period. Diluted  earnings
per  share  include the dilutive effect of the Company's restricted  stock.
See Footnote 8, "Stock Compensation Plans."

     The following charts reconcile basic to diluted earnings per share for
the years ended December 31, 1998, 1997 and 1996:

(Dollars in thousands except per share amounts)

                                                Weighted         Earnings
                              Net Income         Average          (Loss)
     Years Ended                (Loss)           Shares         Per Share

     December 31, 1998
      Basic                    $ 26,346       22,634,362        $ 1.16
      Dilutive effect
         of restricted stock         --          876,390         (0.04)
      Diluted                  $ 26,346       23,510,752        $ 1.12

     December 31, 1997
      Basic                    $ 20,359       22,066,212        $ 0.92
      Dilutive effect
         of restricted stock         --          689,502         (0.03)
      Diluted                  $ 20,359       22,755,714        $ 0.89

     December 31, 1996
      Basic                    $(55,576)      22,025,323        $(2.52)
      Dilutive effect
         of restricted stock         --               --            --
      Diluted                  $(55,576)      22,025,323        $(2.52)


      Comprehensive  Income: The Company adopted  the  provisions  of
Statement  of  Financial Accounting Standards (SFAS)  No.  130,  "Reporting
Comprehensive Income" in 1998.  Comprehensive income includes  all  changes
in  equity during a period except those resulting from investments  by  and
distributions  to owners. Comprehensive income (loss) for the  years  ended
December  31,  1998,  1997  and  1996 is presented  in  the  Statements  of
Consolidated Shareholders' Equity.

      Estimates:  Management makes estimates and assumptions when preparing
the  financial statements in conformity with generally accepted  accounting
principles.  These estimates and assumptions affect the amounts reported in
the  accompanying  financial statements and notes thereto.  Actual  results
could differ from those estimates.

      Recent  Accounting  Pronouncements: The  AICPA  issued  Statement  of
Position  98-5  "Reporting  on  the Costs of  Start-Up  Activities."   This
statement  requires that the costs of start-up activities and  organization
costs  be expensed as incurred. The statement is effective for fiscal years
beginning  after  December  15,  1998.  Management  does  not  expect  that
adoption  of  this  standard will have a material effect on  the  Company's
financial position or results of operations.

      The  Financial Accounting Standards Board (FASB) issued SFAS No.  133
"Accounting  for  Derivative  Instruments and  Hedging  Activities."   This
statement  establishes  accounting and reporting standards  for  derivative
instruments. It requires that an organization recognize all derivatives  as
either  assets  or  liabilities on the balance  sheet  at  fair  value  and
establishes  the  timing  of recognition of the gain/loss  based  upon  the
derivatives'  intended use.  This statement is effective for  fiscal  years
beginning after June 15, 1999.  Management does not expect that adoption of
this  standard  will  have  a material effect on  the  Company's  financial
position or results of operations.

       Reclassification:   Certain  amounts  in  prior   years'   financial
statements   have  been  reclassified  to  conform  to  the  current   year
presentation.


3. Accrued Liabilities

     Accrued liabilities consisted of the following as of December 31:

                                               1998         1997
    (Dollars in thousands)

     Accrued payroll and benefits            $ 88,173     $101,665
     Other accrued liabilities                 54,184       59,378
     Accrued union health and welfare          21,857       22,281
     Accrued taxes other than income taxes     14,045       19,854
     Accrued incentive bonus                    9,269        9,466
     Total accrued liabilities               $187,528     $212,644


4. Debt

      Long-term  debt consisted of $15,100,000 of industrial revenue  bonds
with  rates  between  5.15%  and 5.25% as of  December  31,  1998.   Annual
maturities  and sinking fund requirements of long-term debt as of  December
31,  1998  are as follows: $0 in 1999; $0 in 2000; $0 in 2001; $0 in  2002;
$1,000,000 in 2003 and $14,100,000 in 2004.

      During 1998 the Company amended its secured credit facility, reducing
the  total facility from $225.0 million to $150.0 million. Working  capital
borrowings  are  limited  to $100.0 million while  letters  of  credit  are
limited  to $150.0 million.  Borrowings under the agreement, which  expires
in  2000,  bear interest based upon prime or LIBOR, adjusted for  a  margin
dependent on the Company's financial performance. The amendment reduced the
margin  and released all revenue equipment previously encumbered under  the
original agreement.  Borrowings and letters of credit are secured primarily
by  eligible  accounts  receivable.  The  amendment  further  provides  for
reduced  letter  of  credit  and unused line  fees,  and  less  restrictive
financial  covenants.   As of December 31, 1998, the Company had no  short-
term  borrowings  and $74.6 million of letters of credit outstanding  under
this  facility.  The  continued availability of  funds  under  this  credit
facility  will  require  that  the Company comply  with  certain  financial
covenants, the most restrictive of which limits capital expenditures.   The
Company  is  in  compliance as of December 31, 1998 and expects  to  be  in
compliance with these covenants in 1999.

      Based  on interest rates currently available to the Company for  debt
with  similar  terms and maturities, the fair value of long-term  debt  was
equivalent to book value as of December 31, 1998.  As of December 31, 1997,
the fair market value exceeded book value by 10.6%.


5. Leases

      The  Company  is obligated under various non-cancelable  leases  that
expire at various dates through 2013.

      Future  minimum  lease  payments under all  leases  with  initial  or
remaining  non-cancelable lease terms in excess of one year as of  December
31, 1998, are $25,649,000 in 1999, $20,001,000 in 2000, $7,482,000 in 2001,
$6,121,000 in 2002, $5,006,000 in 2003, and $9,622,000 thereafter.

     Rental expense for operating leases is comprised of the following:

                                      1998        1997      1996
(Dollars in thousands)

      Minimum rentals               $37,953     $38,558   $47,146
      Less sublease rentals          (1,809)     (2,102)   (1,029)
      Net rental expense            $36,144     $36,456   $46,117

6. Income Taxes

     The components of pretax income (loss) and income taxes (benefits) are
as follows:

                                       1998       1997        1996
     (Dollars in thousands)

     Pretax income (loss)
       U.S. corporations             $ 38,115   $ 31,296   $ (86,829)
       Foreign corporations            13,702     10,686       9,052
       Total pretax income (loss)    $ 51,817   $ 41,982   $ (77,777)

     Income taxes (benefits)
       Current
         U.S. Federal                $ 14,244   $   (296)  $  11,014
         State and local                2,025         88      (2,048)
         Foreign                        5,704      5,309       4,467
                                       21,973      5,101      13,433

      Deferred
         U.S. Federal                   2,615     14,526     (35,098)
         State and local                  660      1,884        (536)
         Foreign                          223        112           -
                                        3,498     16,522     (35,634)
   Total income taxes (benefits)     $ 25,471   $ 21,623   $ (22,201)


     Deferred tax assets and liabilities in the Consolidated Balance Sheets
are  classified  based  on  the related asset  or  liability  creating  the
deferred  tax.  Deferred taxes not related to a specific asset or liability
are  classified  based  on  the  estimated period  of  reversal.   Although
realization  is  not assured, management believes it more likely  than  not
that all deferred tax assets will be realized.

      The  components  of  deferred  tax  assets  and  liabilities  in  the
Consolidated Balance Sheets as of December 31 relate to the following:

                                                    1998       1997
     (Dollars in thousands)

     Deferred taxes - current
     Assets
       Reserves for accrued claims costs          $ 19,740   $ 23,079
       Other reserves not currently deductible       7,358      4,282

     Liabilities
        Unearned revenue, net                       (8,871)    (9,346)
        Employee benefits                          (11,421)    (1,461)
     Total deferred taxes - current                  6,806     16,554

     Deferred taxes - non current
     Assets
       Reserves for accrued claims costs            39,865     43,675
       Employee benefits                            27,469     22,934
       Retiree health benefits                      24,016     24,054
       Federal net operating loss and
              credit carryovers                         --      1,743

     Liabilities
       Depreciation                                (57,899)   (63,937)
       Tax benefits from leasing transactions      (12,383)   (13,875)
       Other                                        (3,090)    (2,866)
     Total deferred taxes - non current             17,978     11,728

           Net deferred taxes                     $ 24,784   $ 28,282

     Income taxes (benefits) varied from the amounts calculated by applying
the U.S. statutory income tax rate to the pretax income (loss) as set forth
in the following reconciliation:

                                           1998      1997      1996

     U.S. statutory tax rate               35.0%     35.0%    (35.0)%
     State income taxes (benefits),
       net of federal income
       tax benefit                          3.8       4.7      (2.0)
     Foreign taxes in excess of
       U.S. statutory rate                  2.2       4.0       1.7
     Non-deductible operating
       expenses                             3.5       3.8       2.6
     Fuel tax credits                      (0.4)     (0.6)     (0.4)
     Foreign tax credits                     --      (0.2)      0.7
     Other, net                             5.1       4.8       3.9
       Effective income tax rate           49.2%     51.5%    (28.5)%


      The  cumulative  undistributed  earnings  of  the  Company's  foreign
subsidiaries,  totaling $53.0 million as of December  31,  1998,  which  if
remitted   may  be  subject  to  withholding  tax,  have  been   reinvested
indefinitely   in   the   respective  foreign   subsidiaries'   operations.
Therefore, no provision has been made for any U.S tax applicable to foreign
subsidiaries' earnings.  Taxes paid to foreign jurisdictions on distributed
foreign  earnings may be used, in whole or in part, as credits against  the
U.S. tax. The amount of withholding tax that would be payable on remittance
of the undistributed earnings would be $2.6 million.


7.   Employee Benefit Plans

      The  Company  adopted  the  provisions of SFAS  No.  132  "Employers'
Disclosures  About  Pensions and Other Postretirement  Benefits"  in  1998.
This  standard  revises  employers' disclosures  about  pension  and  other
postretirement   plans   but  does  not  change  expense   recognition   or
measurement.   Prior year disclosures have been restated  to  conform  with
current year presentation.

      The Company maintains a non-contributory defined benefit pension plan
(the Pension Plan) covering the Company's non-contractual employees in  the
United  States.   The Company's annual pension provision and  contributions
are  based  on an independent actuarial computation. The Company's  funding
policy  is  to  contribute the minimum required tax-deductible contribution
for  the  year. However, it may increase its contribution above the minimum
if  appropriate to its tax and cash position and the Pension Plan's  funded
status.   Benefits  under the Pension Plan are based on  a  career  average
final  five-year pay formula. Approximately 92% of the Pension Plan  assets
are  invested  in  publicly  traded stocks and  bonds.   The  remainder  is
invested in temporary cash investments and real estate funds.

     The following information sets forth the Company's pension liabilities
included  in  Employee Benefits in the Consolidated Balance  Sheets  as  of
December 31:


(Dollars in thousands)                                 1998      1997

Change in Benefit Obligation
    Benefit obligation at beginning of period       $243,869   $213,992
    Service cost                                       7,252      5,975
    Interest cost                                     18,661     17,172
    Benefit payments                                 (10,424)    (9,589)
    Actuarial loss                                    17,725     13,685
    Plan amendments                                       --      2,634
    Benefit obligation at end of period             $277,083   $243,869


Change in Fair Value of Plan Assets
    Fair  value  of  plan assets at
      beginning  of  period                         $244,286   $213,787
    Actual return on plan assets                      34,536     35,853
    Benefit payments                                 (10,424)    (9,589)
    Transfer from former parent                           --      4,235
    Fair value of plan assets at end of period      $268,398   $244,286


Funded Status of the Plan
    Funded status at end of  year                   $ (8,685)  $    417
    Unrecognized net actuarial gain                  (41,738)   (49,484)
    Unrecognized prior service cost                    6,999      8,056
    Unrecognized net transition asset                 (5,518)    (6,621)
    Accrued Pension Plan Liability                  $(48,942)  $(47,632)



                                                      1998        1997

Weighted-average assumptions as of December 31,
Discount rate                                          7.0%       7.5%
Expected return on plan assets                         9.5%       9.5%
Rate of compensation increase                          4.5%       5.0%



Net pension cost includes the following:

(Dollars in thousands)                    1998      1997      1996

Components of net pension cost
    Service cost                      $  7,252    $  5,975   $  7,055
    Interest  cost                      18,661      17,172     16,596
    Expected return on plan assets     (22,758)    (20,196)   (18,447)
    Amortization of:
     Transition asset                   (1,103)     (1,104)    (1,119)
     Prior service cost                  1,057       1,057      1,158
     Actuarial gain                     (1,799)     (2,484)      (127)
Total net pension cost                $  1,310    $    420   $  5,116


      The  Company's Pension Plan includes a program to provide  additional
benefits for compensation excluded from the basic Pension Plan.  The annual
provision  for  this plan is based upon independent actuarial  computations
using  assumptions consistent with the Pension Plan.  As  of  December  31,
1998  and  1997, the liability was $1,492,000 and $1,177,000.  The  pension
cost  was $315,000, $175,000 and $429,000 for the years ended December  31,
1998, 1997 and 1996.

      Approximately 82% of the Company's domestic employees are covered  by
union-sponsored, collectively bargained, multi-employer pension plans.  The
Company   contributed  and  charged  to  expense  $123,882,000   in   1998,
$126,606,000  in  1997,  and $116,712,000 in 1996  for  such  plans.  Those
contributions  were made in accordance with negotiated labor contracts  and
generally were based on time worked.

      The Company maintains a retiree health plan that provides benefits to
non-contractual employees at least 55 years of age with 10 years or more of
service.  The retiree health plan limits benefits for participants who were
not  eligible to retire before January 1, 1993, to a defined dollar  amount
based  on age and years of service and does not provide employer-subsidized
retiree  health  care benefits for employees hired on or after  January  1,
1993.
       The   following   information  sets  forth   the   Company's   total
postretirement  benefit liabilities included in Employee  Benefits  in  the
Consolidated Balance Sheets as of December 31:



(Dollars in thousands)                                 1998       1997

Change in Benefit Obligation
    Benefit obligation at beginning of period       $ 46,776   $ 44,401
    Service cost                                         434        409
    Interest cost                                      4,121      3,472
    Benefit payments                                  (3,882)    (2,880)
    Actuarial loss                                    12,434      1,374
    Benefit obligation at end of period             $ 59,883   $ 46,776


Change in Fair Value of Plan Assets
    Fair value of plan assets at
       beginning of period                          $     --   $     --
    Company contributions                              3,882      2,880
    Benefit payments                                  (3,882)    (2,880)
    Fair  value  of  plan  assets at
       end of period                                $     --   $     --


Funded Status of the Plan
    Funded status at end of  year                   $ (59,883) $ (46,776)
    Unrecognized net actuarial gain                    (5,252)   (17,853)
    Unrecognized prior service credit                    (308)      (352)
    Accrued Postretirement Benefit Liability        $ (65,443) $ (64,981)



                                                      1998        1997

Weighted-average assumptions as of December 31,
Discount rate                                         7.0%        7.5%



      For  measurement purposes, a 5.5% annual increase in the  per  capita
cost  of  covered  health care benefits was assumed  for  1999.    This  is
assumed to be the ultimate rate.

Net post retirement cost includes the following:

(Dollars in thousands)                    1998        1997        1996

Components of net benefit cost
     Service cost                      $   434     $   409      $   540
     Interest  cost                      4,121       3,472        4,000
     Amortization of:
      Prior service credit                 (44)        (43)         (41)
      Actuarial gain                      (167)       (980)         (62)
Total net benefit cost                 $ 4,344     $ 2,858      $ 4,437


      Assumed health care cost trend rates have a significant effect on the
amounts  reported for the health care plan.  A one-percentage point  change
in  the  assumed  health  care cost trend rates would  have  the  following
effects:

(Dollars in thousands)
                                                1%                1%
                                             Increase          Decrease

Effect on total of service and interest
    cost components                            $193             $(196)
Effect on the postretirement benefit
    obligation                               $2,582           $(2,630)


      The  Company's  non-contractual employees in the  United  States  are
eligible to participate in the Company's Stock and Savings Plan.  This is a
401(k)  plan  that allows employees to make contributions that the  Company
matches  with  common  stock up to 50% of the  first  three  percent  of  a
participant's  basic  compensation.  The Company's contribution,  which  is
charged as an expense, totaled $2,088,000 in 1998, $1,993,000 in 1997,  and
$1,926,000 in 1996.

      The Company has adopted various plans relating to the achievement  of
specific  goals  to  provide  incentive bonuses for  designated  employees.
Total  incentive  bonuses  earned  by the  participants  were  $24,493,000,
$25,690,000 and $4,614,000 for the years ended December 31, 1998, 1997  and
1996, respectively.


8.  Stock  Compensation Plans

      The  Company has a Stock Option and Incentive Plan (the  Plan)  under
which  shares  of  restricted stock were granted to its regular,  full-time
employees.   During  December 1996,  2,146,450 shares  were  granted  at  a
weighted average price of $7.475 per share.  In 1997, 1,057,027 shares were
granted  at  a  weighted average price of $15.31 per share,  and  in  1998,
78,874  shares  were granted at a weighted average price  of  $12.20.   The
shares  vest over three years from the date of the original grant  and  are
contingent   upon  the  Company's  stock  price  achieving   pre-determined
increases  over  the grant price for 10 consecutive trading days  following
each  year. All restricted stock awards entitle the participant credit  for
any  dividends. Compensation expense is recognized based upon  the  current
market  price and the extent to which performance criteria are  being  met.
As of December 1998 and December 1997, restrictions on approximately
two-thirds of the shares  lapsed.  Accordingly, the Company recognized
non-cash  charges  of $14,449,000  and $14,297,000, respectively.
The Company has  approximately 1,077,000  granted  but  unissued shares  of
restricted  stock  for  which compensation  expense  will be recognized
over future  vesting  periods  as appropriate. As of December 31, 1998,
those shares had an aggregate  market value  of  $17,097,000.  The Company
has 137,325 shares remaining  reserved under the Plan.

      The Plan also allows for officers, non-employee directors and certain
designated employees to be granted options to purchase common stock of  the
Company.   The terms of the options will be set at the date of  grant.   No
options have been granted as of December 31, 1998.

      In  1995,  the FASB issued SFAS No. 123, "Accounting for  Stock-Based
Compensation." Adoption of this statement is optional, and the Company  has
opted  to account for stock-based compensation in accordance with  APB  25,
"Accounting  for Stock Issued to Employees."  Had the Company adopted  SFAS
No.  123,  pro forma net income for the year ended December 31, 1998  would
have  been  $29.8  million or $1.32 per basic share and $1.27  per  diluted
share. Pro forma net income for the year ended December 31, 1997 would have
been  $16.6  million or $0.75 per basic share and $0.73 per diluted  share.
This statement would have had an immaterial effect on the net loss for  the
year ended December 31, 1996.


[9.  Contingencies

      This footnote has been intentionally omitted.  Please refer to Part II,
Item 8 "Financial Statements and Supplementary Data" in the Company's 1998
Form 10-K for the text of this footnote.]




10. Segment and Geographic Information

     The Company adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" in 1998.  This statement
requires  the presentation of financial information on the same basis  that
it  is  used  within  an organization to evaluate segment  performance  and
allocate   resources.    It  also  requires  enhanced   disclosures   about
geographic, product and service information.

     The Company operates in a single industry segment, primarily providing
less-than-truckload  transportation and supply  chain  management  services
throughout the United States, Canada and Mexico, and international  freight
services  between  the  United  States and more  than  80  countries.   The
following  information  sets  forth  revenues  and  long  lived  assets  by
geographic location.  Revenues are attributed to geographic location  based
upon  the location of the customer.   No one customer provides 10% or  more
of total revenues.

Geographic Information

(Dollars in thousands)
                        1998                 1997                  1996
                               Long                 Long                 Long
                              Lived                Lived                 Lived
                 Revenues    Assets   Revenues    Assets    Revenues    Assets

United States  $2,117,415  $332,912  $2,173,588  $359,961  $2,037,997  $392,428
Canada            121,008    27,860     125,487    23,026     108,175    24,260
Total          $2,238,423  $360,772  $2,299,075  $382,987  $2,146,172  $416,688



11. Related Party Transactions

      The  Company  is  party to a Transition Services Agreement  with  its
former  parent under which the former parent provides information  systems,
data   processing,  computer,  communications  and  certain  administrative
services.   The agreement expires December 2, 1999.  The Company  pays  for
services  on  an  arm's  length negotiated basis.    For  the  years  ended
December  31,  1998  and  1997,  the Company was  charged  $21,100,000  and
$22,649,000  for  services under the agreement.  For the  period  from  the
Distribution date to December 31, 1996, the Company was charged $2,600,000.
As  of  December  31,  1998,  the Company is in  the  process  of  assuming
responsibility for most administrative services and has entered into a five-
year  out-sourcing  agreement with a third party for  information  systems,
data processing, computer and communications services.

      The Company is also party to an agreement with its former parent that
provides  for the allocation of taxes and certain liabilities arising  from
periods prior to the Distribution.  See Footnote 9, "Contingencies."

     As of December 31, 1998, the Company has pledged $22.0 million of real
properties and $13.5 million of letters of credit to its former parent  for
uninsured  workers' compensation and employer's liability  claims  incurred
prior to the Distribution and guaranteed by the former parent.  The pledged
collateral  is  reduced  over  time as the  Company's  pending  claims  are
resolved.

      The  Company  received certain corporate support  services  from  the
former  parent,  namely accounting, finance, legal and  treasury  services,
prior to the Distribution.  Costs were allocated to the Company using  both
incremental and proportional methods on a revenue and capital basis.    For
the  period  from January 1, 1996 to the Distribution date, the charge  was
$10,600,000  and  is included in Operating Expenses in  the  Statements  of
Consolidated  Operations.     The  Company  believes  that  the  allocation
methods  used provided the Company with a reasonable share of such expenses
and  approximates  amounts that would have been incurred  had  the  Company
operated on an independent, stand-alone basis.

      Miscellaneous, net, in the Statement of Consolidated  Operations  for
the year ended December 31, 1996 includes $6,115,000 of interest expense on
advances from the former parent prior to the Distribution.

      In connection with the Distribution, certain real properties, with an
aggregate  net book value of $57,574,000, and net liabilities of $4,589,000
were transferred to the former parent.



Management Report on Responsibility for Financial Reporting

The management of Consolidated Freightways Corporation has
prepared the accompanying financial statements and is
responsible for their integrity.  The statements were
prepared in accordance with generally accepted accounting
principles, after giving consideration to materiality, and
are based on management's best estimates and judgements.
The other financial information in the annual report is
consistent with the financial statements.
     Management has established and maintains a system of
internal control. Limitations exist in any control structure
based on the recognition that the cost of such system should
not exceed the benefits derived.  Management believes its
control system provides reasonable assurance as to the
integrity and reliability of the financial statements, the
protection of assets from unauthorized use or disposition,
and the prevention and detection of fraudulent financial
reporting.  The system of internal control is documented by
written policies and procedures that are communicated to
employees. The Company's independent public accountants test
the adequacy and effectiveness of the internal controls.
     The board of directors, through its audit committee
consisting of three independent directors, is responsible
for engaging the independent accountants and assuring that
management fulfills its responsibilities in the preparation
of the financial statements.  The Company's financial
statements have been audited by Arthur Andersen LLP,
independent public accountants.  Arthur Andersen LLP has
access to the audit committee without the presence of
management to discuss internal accounting controls, auditing
and financial reporting matters.

/s/W. Roger Curry
W. Roger Curry
President and Chief Executive Officer

/s/David F. Morrison
David F. Morrison
Executive Vice President and
Chief Executive Officer

/s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and Controller



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders and Board of Directors of
Consolidated Freightways Corporation:

We have audited the accompanying consolidated balance sheets of
Consolidated Freightways Corporation (a Delaware corporation) and
subsidiaries as of December 31, 1998 and 1997, and the related
statements of consolidated operations, cash flows and shareholders'
equity for each of the three years in the period ended December 31,
1998.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Consolidated Freightways Corporation and subsidiaries as of
December 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting
principles.

As explained in Note 2 to the consolidated financial statements,
effective January 1, 1998, the Company changed its method of
accounting for the costs of internal use software to reflect adoption
of American Institute of Certified Public Accountants Statement of
Position No 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use."


/s/Arthur Andersen LLP
Portland, Oregon,
  January 25, 1999



<TABLE>
<CAPTION>


                                         CONSOLIDATED FREIGHTWAYS CORPORATION
                                                   AND SUBSIDIARIES
                                               Quarterly Financial Data
                                                     (Unaudited)
                                    (Dollars in thousands except per share data)


                                            March 31         June 30          September 30         December 31
                                        <C>              <C>                  <C>                <C>
1998 - Quarter Ended

     Revenues                                $545,648          $551,841            $571,231            $569,703
     Operating income                          14,800            15,506              17,397               4,361 (a)
     Income before income taxes                14,319            15,557              17,566               4,375
     Income taxes                               7,302             8,084               8,335               1,750
     Net income                                 7,017             7,473               9,231               2,625
     Basic earnings per share                    0.30              0.32                0.41                0.12
     Diluted earnings per share                  0.29              0.31                0.41                0.11
     Market price range                 $13.00-$18.50    $12.875-$19.75       $7.625-$14.00       $7.50-$18.375


                                             March 31          June 30          September 30         December 31

1997 - Quarter Ended

     Revenues                                $545,633          $578,623            $603,253            $571,566
     Operating income (loss)                    8,537            16,676              24,340              (4,294)(b)
     Income (loss) before income
        taxes (benefits)                        7,999            15,331              23,383              (4,731)
     Income taxes (benefits)                    4,745             8,413              11,600              (3,135)
     Net income (loss)                          3,254             6,918              11,783              (1,596)
     Basic earnings (loss) per share             0.15              0.31                0.53               (0.07)
     Diluted earnings (loss) per share           0.15              0.31                0.51               (0.07)
     Market price range                  $7.00-$12.25    $10.00-$16.813       $13.75-$18.50      $11.875-$18.438

<FN>
(a)  Includes $14.4 million non-cash charge for the issuance of common stock under the Company's
        restricted stock plan.
(b)  Includes $14.3 million non-cash charge for the issuance of common stock under the Company's
        restricted stock plan.
</TABLE>




<TABLE>
<CAPTION>


Five Year Financial Summary

Consolidated Freightways Corporation
   And Subsidiaries
Years Ended December 31,
(Dollars in thousands except per share data)
(Unaudited)
                                                   1998            1997             1996               1995             1994
<S>                                          <C>             <C>              <C>               <C>                <C>
SUMMARY OF OPERATIONS
Revenues                                     $  2,238,423    $  2,299,075     $  2,146,172      $   2,106,529      $ 1,936,412
Operating income (loss)                            52,064(a)       45,259(b)       (73,066)(c)        (42,786)(d)      (47,743)
Depreciation and amortization                      50,918          54,679           64,565             63,902           73,443
Investment income                                   4,957           1,894              263                756              497
Interest expense                                    4,012           3,213              843                918              880
Income (loss) before income taxes (benefits)       51,817          41,982          (77,777)           (43,798)         (44,478)
Income taxes (benefits)                            25,471          21,623          (22,201)           (13,889)         (14,274)
Net income (loss)                                  26,346          20,359          (55,576)           (29,909)         (32,116)
Cash from operations                               56,268          77,370            2,545             41,772           33,739

PER SHARE
Basic earnings (loss)                                1.16            0.92            (2.52)             (1.36)           (1.46)
Diluted earnings (loss)                              1.12            0.89            (2.52)             (1.36)           (1.46)
Shareholders' equity                                11.81           10.58             9.57              11.76             9.70

FINANCIAL POSITION
Cash and cash equivalents                         123,081         107,721           48,679             26,558           23,116
Property, plant and equipment, net                360,772         382,987          416,688            501,311          452,878
Total assets                                      890,390         897,796          857,087            866,698          852,510
Capital expenditures                               31,271          22,674           48,203            111,962           32,120
Long-term debt                                     15,100          15,100           15,100             15,100           15,100
Shareholders' equity                              266,718         243,447          210,698            259,108          213,579

RATIOS AND STATISTICS
Current ratio                                    1.3 to 1        1.3 to 1         1.1 to 1           1.0 to 1         1.1 to 1
Net income (loss) as % of revenues                    1.2%           0.9%           (2.6)%             (1.4)%           (1.7)%
Effective income tax rate                            49.2%          51.5%          (28.5)%            (31.7)%          (32.1)%
Long-term debt as % of
    total capitalization                              5.4%           5.8%             6.7%               5.5%             6.6%
Return on average invested capital                   26.2%          24.9%          (27.8)%            (17.1)%          (17.1)%
Return on average shareholders' equity               13.9%          12.9%          (21.2)%            (12.7)%          (13.4)%
Average shares outstanding                      22,634,362     22,066,212       22,025,323         22,025,323       22,025,323
Market price range                            $7.50-$19.75   $7.00-$18.50     $6.00-$9.125                n/a              n/a
Number of shareholders                              34,350         31,650           13,500                n/a              n/a
Number of employees                                 21,000         21,600           20,300             20,200           22,000

<FN>
(a)  Includes $14.4 million non-cash charge for the issuance of common stock under the Company's restricted stock plan.
(b)  Includes $14.3 million non-cash charge for the issuance of common stock under the Company's restricted stock plan.
(c)  Includes $15.0 million non-cash charge for the increase in workers' compensation reserve.
(d)  Includes approximately $26 million of costs related to implementation of the Business Accelerator System.

</TABLE>