United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

  ---------------------------------------------------------------------------

                                    Form 10-Q



   |X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

       For the quarterly period ended September 30, 1998

                                       OR

   |_| Transition Report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

       For the transition period from ________________ to _________________


  ---------------------------------------------------------------------------


                           BOEING CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)

  ---------------------------------------------------------------------------

     Delaware                       95-2564584                0-10795
(State or other jurisdiction     (I.R.S. Employer        (Commission File No.)
of Incorporation or              Identification No.)
Organization)


 4060 Lakewood Boulevard, 6th Floor - Long Beach, California 90808-1700
                    (Address of principal executive offices)

                                 (562) 627-3000
              (Registrant's telephone number, including area code)


  ---------------------------------------------------------------------------

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,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes |X| No |_|


Common shares outstanding at November 12, 1998:                 50,000 shares

Registrant meets the conditions set forth in General Instruction H(1)(a) and (b)
to Form 10-Q and is  therefore  filing  this Form  with the  reduced  disclosure
format.


<PAGE>


                                     Part I

Item 1.       Financial Statements

Boeing Capital Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                          September 30,       December 31,
(Dollars in millions, except stated value and par value)                       1998               1997
--------------------------------------------------------------------------------------------------------------
                                                                           (Unaudited)
<S>                                                                     <C>                <C>
ASSETS

    Financing receivables:
      Investment in finance leases                                      $       1,311.7    $       1,509.1
      Notes receivable                                                            451.5              269.0
                                                                        -------------------------------------
                                                                                1,763.2            1,778.1
      Allowance for losses on financing receivables                               (62.1)             (55.9)
                                                                        -------------------------------------
                                                                                1,701.1            1,722.2
    Cash and cash equivalents                                                      19.2               39.1
    Equipment under operating leases, net                                         825.9              922.2
    Equipment held for sale or re-lease                                            70.0                0.7
    Other assets                                                                   66.9               38.6
                                                                        -------------------------------------
                                                                        $       2,683.1    $       2,722.8
                                                                        =====================================

LIABILITIES AND SHAREHOLDER'S EQUITY
    Short-term notes payable                                            $         158.0    $         149.0
    Accounts payable and accrued expenses                                          16.3               49.1
    Accounts with Boeing, McDonnell Douglas and BCSC                               36.4               37.2
    Other liabilities                                                              75.9               97.2
    Deferred income taxes                                                         362.0              388.3
    Long-term debt:
       Senior                                                                   1,569.2            1,579.0
       Subordinated                                                                69.9               69.9
                                                                        -------------------------------------
                                                                                2,287.7            2,369.7
                                                                        -------------------------------------

    Commitments and contingencies - Note 3

    Shareholder's equity:
       Preferred stock - no par value; authorized 100,000 shares:
         Series A; $5,000 stated value; authorized, issued and
           outstanding 10,000 shares                                               50.0               50.0
       Common stock - $100 par value; authorized 100,000 shares;
         issued and outstanding 50,000 shares                                       5.0                5.0
       Capital in excess of par value                                              89.5               89.5
       Income retained for growth                                                 250.9              208.6
                                                                        -------------------------------------
                                                                                  395.4              353.1
                                                                        -------------------------------------
                                                                        $       2,683.1    $       2,722.8
                                                                        =====================================

See notes to consolidated financial statements.
</TABLE>



<PAGE>


Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Income and Income Retained for Growth
(Unaudited)
<TABLE>
<CAPTION>


                                                                  Three months ended               Nine months ended
                                                                     September 30,                   September 30,
(Dollars in millions)                                            1998             1997           1998            1997
===========================================================================================================================

OPERATING INCOME
<S>                                                         <C>              <C>             <C>            <C>
    Finance lease income                                    $        29.1    $       34.0    $       92.5   $      104.6
    Interest income on notes receivable                              10.3             6.3            25.2           19.9
    Operating lease income, net of depreciation expense              16.0            14.0            50.8           41.7
    Net gain on disposal or re-lease of assets                       12.0             6.5            27.2           10.6
    Other                                                             1.4             2.2             2.2            5.1
                                                            ---------------------------------------------------------------
                                                                     68.8            63.0           197.9          181.9
                                                            ---------------------------------------------------------------

EXPENSES
    Interest expense                                                 30.9            30.8            95.6           95.0
    Provision for losses                                              2.6             2.9             7.9            8.7
    Operating expenses                                                2.9             2.8             8.1            8.5
    Other                                                             4.1             0.7             7.9            4.0
                                                            ---------------------------------------------------------------
                                                                     40.5            37.2           119.5          116.2
                                                            ---------------------------------------------------------------
Income before provision for income taxes                             28.3            25.8            78.4           65.7
Provision for income taxes                                            4.6             9.2            23.1           23.7
                                                            ---------------------------------------------------------------
Net income                                                           23.7            16.6            55.3           42.0
Income retained for growth at beginning of period                   228.1           204.7           208.6          181.0
Dividends                                                            (0.9)           (0.9)          (13.0)          (2.6)
                                                            ---------------------------------------------------------------
Income retained for growth at end of period                 $       250.9   $       220.4   $       250.9  $       220.4
                                                            ===============================================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>

                                                                                             Nine months ended
                                                                                               September 30,
(Dollars in millions)                                                                     1998                1997
---------------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                                               <C>                  <C>
    Net income                                                                    $           55.3     $          42.0
    Adjustments to reconcile net income to net cash provided by (used in)
       operating activities:
         Depreciation expense - equipment under operating leases                              52.9                44.0
         Net gain on disposal or re-lease of assets                                          (27.2)              (10.6)
         Provision for losses                                                                  7.9                 8.7
         Change in assets and liabilities:
           Accounts with Boeing, McDonnell Douglas and BCSC                                   (0.8)               20.0
           Other assets                                                                      (28.3)                7.6
           Accounts payable and accrued expenses                                             (33.7)              (31.2)
           Other liabilities                                                                 (21.3)               10.0
           Deferred income taxes                                                             (26.3)               33.8
         Other, net                                                                           (0.9)               (0.6)
                                                                                  -----------------------------------------
                                                                                             (22.4)              123.7
                                                                                  -----------------------------------------
INVESTING ACTIVITIES
    Net change in short-term notes and leases receivable                                     (49.6)              101.7
    Purchase of equipment for operating leases                                               (72.4)             (128.7)
    Proceeds from disposition of equipment, notes and leases receivable                      290.6                87.6
    Collection of notes and leases receivable                                                163.1               183.6
    Acquisition of notes and leases receivable                                              (315.6)             (153.5)
                                                                                  -----------------------------------------
                                                                                              16.1                90.7
                                                                                  -----------------------------------------

FINANCING ACTIVITIES
    Net change in short-term borrowings                                                        9.0               (56.2)
    Debt having maturities more than 90 days:
       Proceeds                                                                              248.0                60.0
       Repayments                                                                           (258.5)             (217.9)
    Payment of cash dividends                                                                (12.1)               (1.7)
                                                                                  -----------------------------------------
                                                                                             (13.6)             (215.8)
                                                                                  -----------------------------------------
Net decrease in cash and cash equivalents                                                    (19.9)               (1.4)
Cash and cash equivalents at beginning of year                                                39.1                16.9
                                                                                  =========================================
Cash and cash equivalents at end of period                                        $           19.2     $          15.5
                                                                                  =========================================

See notes to consolidated financial statements.

</TABLE>

<PAGE>


Boeing Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)


Note 1 -- Basis of Presentation

Boeing Capital Corporation (formerly McDonnell Douglas Finance Corporation) (the
"Company") is a wholly-owned  subsidiary of Boeing Capital Services  Corporation
("BCSC"), a wholly-owned subsidiary of McDonnell Douglas Corporation ("McDonnell
Douglas"),  which in turn is wholly-owned by The Boeing Company ("Boeing").  The
accompanying  unaudited  consolidated financial statements have been prepared by
the Company in accordance  with  generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial  statements.  In  the  opinion  of  management  of  the  Company,  the
accompanying   consolidated   financial   statements   reflect  all  adjustments
(consisting of normal recurring  accruals) which are necessary to present fairly
the  consolidated  balance  sheets and the related  consolidated  statements  of
income and income  retained  for growth and cash flows for the  interim  periods
presented. Operating results for the nine-month period ended September 30, 1998,
are not necessarily  indicative of the results that may be expected for the year
ended December 31, 1998. The statements  should be read in conjunction  with the
notes to the consolidated  financial  statements  included in the Company's Form
10-K for the year ended December 31, 1997.


Note 2 -- Credit Agreements and Long-Term Debt

The  provisions  of various  credit and debt  agreements  require the Company to
maintain a minimum net worth,  restrict  indebtedness,  and limit cash dividends
and other distributions. Under the most restrictive provision, $108.2 million of
the  Company's  income  retained  for  growth was  available  for  dividends  at
September 30, 1998.


Note 3 -- Commitments and Contingencies

On November 1, 1996, The Allen Austin Harris Group, Inc. (the "Plaintiff") filed
a complaint in the Superior Court of the State of California, County of Alameda,
against the Company,  McDonnell  Douglas,  McDonnell  Douglas Aerospace - Middle
East Limited and the Selah Group, Inc. (the "Defendants").  The Plaintiff, which
had hoped to establish a manufacturing plant abroad with various assistance from
the  Defendants,  seeks more than $57.0  million in alleged  damages  (primarily
consisting of lost profits) based on various  theories.  The Company believes it
has meritorious  defenses to all of the allegations,  but is unable to determine
at this stage of  discovery  if the  litigation  will have any  future  material
adverse effect on the Company's earnings, cash flow or financial position.

The  Company is a party to  litigation  in the  United  States  District  Court,
Southern District of Florida,  entitled  McDonnell  Douglas Finance  Corporation
adv. Aviaco International Leasing, Inc., Aviaco Traders International,  Inc. and
Craig  L.  Dobbin  with  Related  Counter-Claims  (collectively  referred  to as
"Aviaco").  The  foregoing  litigation  arose  out of an action  brought  by the
Company  in July 1991  seeking  remedies  on account  of  defaults  by the other
parties to the  litigation  under loan and related  documents  involving a $17.9
million loan made by the Company.  In January 1994, in response to the Company's
foreclosure  of two aircraft and a related  aircraft lease  agreement  which had
been collateral for the loan, Aviaco filed a counter-claim  against the Company,
asserting nine claims for alleged  damages based on various tort and contractual
theories relating to the Company's foreclosure.

The case  proceeded to jury trial on the three of nine claims which survived the
Company's  Motion for Summary  Judgment.  The case was  submitted to the jury on
October 16, 1997.  On October 17, 1997,  the jury returned a verdict in favor of
Aviaco awarding  aggregate  damages of  approximately  $12.2 million,  including
damages of  approximately  $10.0 million for the failure to exercise  reasonable
care with regard to the related lease agreement.

In December  1997,  the Company  filed a Motion for Judgment as a Matter of Law,
arguing, inter alia, to set aside the $10.0 million award as not being supported
by the record  evidence or by  applicable  law. On February 13, 1998,  the Judge
ruled in favor of the Company and set aside the $10.0 million award.

On March 2, 1998, the Judge entered a Final Judgment  against the Company in the
aggregate amount,  including prejudgment interest, of approximately $2.8 million
with post judgment  interest thereon at the rate of 5.42% per annum. Both Aviaco
and the Company have appealed from the Final Judgment to the United States Court
of Appeals for the Eleventh  Circuit.  Taking into account amounts  reserved for
this litigation,  the Company does not expect such litigation to have any future
material adverse effect on its earnings, cash flow or financial position.

A number of legal  proceedings  and  claims are  pending  or have been  asserted
against the Company.  A substantial  number of such legal proceedings and claims
are  covered  by third  parties,  including  insurance  companies.  The  Company
believes that the final outcome of such  proceedings  and claims will not have a
material adverse effect on its earnings, cash flow, or financial position.

On June 26,  1998,  Federal  Express  Corporation  ("Fedex")  gave notice to the
Company of its intention to terminate early (in late 1999) two lease  agreements
covering MD-11 aircraft which Fedex leases from the Company.  Even if the leases
are in fact  terminated  early,  the Company  does not  anticipate  any material
adverse  effect on its  earnings,  cash flow or financial  position  taking into
account current demand for the aircraft,  a guaranty from McDonnell  Douglas and
certain  other  contractual  rights  including  payments due to the Company upon
early  termination,  as well as a commitment  from another  airline to lease the
aircraft for a pre-determined rental amount.

Trans World Airlines,  Inc. ("TWA")  accounted for $166.6 million (6.4% of total
Company  portfolio)  and $196.6  million  (7.3% of total  Company  portfolio) at
September  30,  1998,  and December 31,  1997,  respectively.  TWA  continues to
operate under a reorganization  plan,  confirmed by the United States Bankruptcy
Court in 1995, that  restructured its indebtedness and leasehold  obligations to
its  creditors.  In addition,  TWA continues to face  financial and  operational
challenges.  McDonnell  Douglas  provides  guaranties to the Company for certain
obligations  of TWA under the various lease  agreements  between the Company and
TWA. At September 30, 1998, the maximum aggregate coverage under such guaranties
was $33.3 million.  As of the date hereof,  TWA is current on its obligations to
the Company. If, however, TWA were to default on its obligations to the Company,
this could have a material  adverse effect on the Company's  future earnings and
cash flow.

The Company's lease agreements with P.T. Garuda Indonesia ("Garuda") relating to
two MD-11 aircraft have been terminated and the aircraft, which were returned by
Garuda in July 1998,  have been sold to Boeing for an  aggregate  sales price of
$162.8 million, which resulted in a gain to the Company of $3.3 million.

In July 1998, the Company  terminated early a lease agreement  covering one used
DC-10-30 aircraft.  The Company has repossessed such aircraft and is remarketing
it. Taking into account a guaranty from McDonnell  Douglas,  this transaction is
not expected to have a material adverse effect on the Company's  earnings,  cash
flow or financial position.

The Company had leased six Embraer EMB-120  aircraft to Westair.  As a result of
Westair's  cessation of operations at the end of May 1998, the lease  agreements
for such  aircraft have been  terminated  and the aircraft have been returned to
the  Company.  The  Company is  preparing  to  remarket  the  aircraft  and this
transaction  is not expected to have a material  adverse effect on the company's
earnings, cash flow or financial position.

The $100.0 million used aircraft  purchase bridge facility made available by the
Company to AirTran Airlines  ("AirTran"),  formerly ValuJet  Airlines,  Inc., in
1995, was reduced in maximum scope to $50.0 million by mutual  agreement  during
the third quarter of 1996. This facility expires upon delivery to AirTran of the
first scheduled new Boeing 717-200 (formerly MD-95) aircraft, presently expected
to occur in 1999. Borrowings under this agreement must be repaid within 180 days
and the interest rate is based on the London Interbank  Offering Rate ("LIBOR").
There were no amounts  outstanding under this agreement at September 30, 1998 or
December 31, 1997.

At September 30, 1998, the Company had  commitments to provide leasing and other
financing totaling $195.8 million.

In  conjunction  with  prior  asset  dispositions  and  certain  guaranties,  at
September  30,  1998,  the Company  was  subject to a maximum  recourse of $55.1
million.  Based on trends to date,  any losses  related to such exposure are not
expected by the Company to be significant.

The Company  leases  aircraft  under capital leases which have been subleased to
others.  At September 30, 1998, the Company had guaranteed the repayment of $5.4
million in capital lease obligations associated with a 50% partner.


Item 2.       Management's Analysis of Results of Operations

-------------------------------------------------------------------------------
Forward-Looking Information Is Subject to Risk and Uncertainty

From  time to  time,  the  Company  may make  certain  statements  that  contain
projections  or  "forward-looking"   information  (as  defined  in  the  Private
Securities  Litigation  Reform Act of 1995) that involve  risk and  uncertainty.
Certain statements in this Form 10-Q,  particularly those in Note 3 of the Notes
to Consolidated Financial Statements, Item 2 of Part I and Items 1 and 5 of Part
II,  may  contain  forward-looking  information.  The  subject  matter  of  such
statements may include, but not be limited to, the effects on the Company of the
Boeing-McDonnell  Douglas merger and the Year 2000 date  conversion,  as well as
future  earnings,  costs,  expenditures,  losses,  residual  values and  various
business   environment   trends.   In  addition  to  those   contained   herein,
forward-looking  statements  and  projections  may be made by  management of the
Company orally or in writing including,  but not limited to, various sections of
the Company's  filings with the  Securities  and Exchange  Commission  under the
Securities Act of 1933 and the Securities Exchange Act of 1934.

Actual results and trends in the future may differ materially from projections
depending on a variety of factors including, but not limited to, the effects on
the Company of the Boeing-McDonnell Douglas merger and the Company's 
relationship with Boeing, as well as strategic decisions relating to the
Company to be made by Boeing, the capital equipment requirements of United
States and foreign businesses, capital availability and cost, changes in law
and tax benefits, the tax position of Boeing (including the applicability of 
the alternative minimum tax), competition from other financial institutions,
the Company's successful execution of internal operating plans and Year 2000
date  conversion  plans,  the  impact  of  Year  2000  issues  on the  Company's
customers,  vendors and service  providers,  defaults by  customers,  regulatory
uncertainties and legal proceedings.
-------------------------------------------------------------------------------


Finance lease income  decreased $12.1 million (11.6%) compared to the first nine
months  of 1997,  primarily  attributable  to the sale of an MD-11  aircraft  in
September  of 1997,  the sale of three MD-82  aircraft in December of 1997,  the
sale of two MD-82  aircraft  in June 1998 and the sale of two MD-11  aircraft in
August 1998.

Operating lease income increased $9.1 million (21.8%) compared to the first nine
months of 1997, primarily  attributable to the operating lease financing of four
used Boeing aircraft during the last four months of 1997.

Interest on notes receivable  increased $5.3 million (26.6%) from the first nine
months of 1997,  primarily  attributable  to an  increase in volume in the notes
receivable portfolio of $212.8 million in the first nine months of 1998.

Gain on disposal or re-lease of assets increased $16.6 million (156.6%) from the
first nine months of 1997, primarily attributable to $4.9 million of income from
the sale of two TWA  aircraft in June of 1998,  $3.3  million of income from the
sale of two Garuda  aircraft to Boeing in August 1998 and $3.1 million of income
from the sale of an executive jet in August 1998,  with the  remaining  increase
attributable  to other  sales  within the  commercial  aircraft  and  commercial
equipment leasing portfolios.

Other income  decreased $2.9 million (56.9%) from the first nine months of 1997,
primarily  attributable to prepayment fees of $1.9 million received in the third
quarter of 1997 and commercial  equipment  leasing residual value guarantee fees
of $1.2 million received in the first nine months of 1997.

Other expenses  increased $3.9 million (97.5%) compared to the first nine months
of 1997,  primarily  attributable to maintenance  expenses of approximately $2.5
million incurred in 1998 on an aircraft that was repossessed in March of 1997.

Year 2000 Date Conversion

The Year 2000 issue exists because many computer  systems and  applications  use
two-digit  date fields to designate a year.  As the century date change  occurs,
date-sensitive  systems may recognize the year 2000 as 1900, or not at all. This
inability  to  recognize  or properly  treat the year 2000 may cause  systems to
process financial and operational information incorrectly.

The Company has assessed  (and  continues to  re-assess)  the impact of the Year
2000 issue on its information technology systems. In 1996, the Company initiated
a conversion from its existing lease administration  system to programs that the
Company has been advised are Year 2000 compliant.  This  conversion  project has
not yet been  completed  although  the  majority  of the tasks  involved in such
project  have been  accomplished  and it is expected  that the  project  will be
completed before the end of the first quarter of 1999. If the conversion project
is not  completed  before the end of 1999,  the  Company's  operations  could be
adversely  and  materially  affected.   The  Company  has  begun  to  develop  a
contingency  plan for the possible  unavailability  of its lease  administration
system, but has not commenced creating a contingency plan for any other possible
Year 2000 problems. The Company intends to develop contingency plans relating to
possible Year 2000 problems beginning in the first half of 1999.

Although  the  Company  does not  consider  it likely  that  Year 2000  problems
inherent  within its information  technology  systems will result in significant
operational  problems,  the possibility of such problems cannot be discounted at
this time.  The  Company is  retaining  an outside  consultant  to assist in its
ongoing assessment of its computer system's vulnerability to Year 2000 problems.
Also, the Company's  preliminary estimate that it will complete its overall Year
2000  project by the third  quarter of 1999 is  subject to the  findings  of the
Company's ongoing assessment.

With  respect  to  non-information  technology  systems,  the  Company  has  not
undertaken an assessment of possible Year 2000 problems.  The Company intends to
assess  possible  Year 2000  problems  relating  to  non-information  technology
systems in the first quarter of 1999.

The total cost of the Year 2000 project is being funded  through  operating cash
flows, and based on the Company's  assessment to date, is not expected to have a
material  adverse  effect on the  Company's  earnings,  cash  flow or  financial
position.

No assurance  can be given,  however,  that Year 2000  problems of third parties
(such as vendors,  customers  and other  financial  institutions  with which the
Company  does  business)  will not  materially  impact  operations  or operating
results.  The Company is only in the  preliminary  stage of attempting to assess
the Year 2000  readiness of such third parties whose lack of Year 2000 readiness
could result in a material adverse impact on the Company.  The Company presently
expects  to  have  completed  this  assessment  (subject  to  cooperation  where
necessary from such third parties) by the end of the first quarter of 1999.

This entire discussion of Year 2000 issues contains forward-looking  information
which is subject to uncertainty  and risk. See  "Forward-Looking  Information is
Subject to Risk and Uncertainty" at the outset of this Item 2.


                                     Part II

Item 1.       Legal Proceedings

On November 1, 1996, The Allen Austin Harris Group, Inc. (the "Plaintiff") filed
a complaint in the Superior Court of the State of California, County of Alameda,
against the Company,  McDonnell  Douglas,  McDonnell  Douglas Aerospace - Middle
East Limited and the Selah Group, Inc. (the "Defendants").  The Plaintiff, which
had hoped to establish a manufacturing plant abroad with various assistance from
the  Defendants,  seeks more than $57.0  million in alleged  damages  (primarily
consisting of lost profits) based on various  theories.  The Company believes it
has meritorious  defenses to all of the allegations,  but is unable to determine
at this stage of  discovery  if the  litigation  will have any  future  material
adverse effect on the Company's earnings, cash flow or financial position.

The  Company is a party to  litigation  in the  United  States  District  Court,
Southern District of Florida,  entitled  McDonnell  Douglas Finance  Corporation
adv. Aviaco International Leasing, Inc., Aviaco Traders International,  Inc. and
Craig  L.  Dobbin  with  Related  Counter-Claims  (collectively  referred  to as
"Aviaco").  The  foregoing  litigation  arose  out of an action  brought  by the
Company  in July 1991  seeking  remedies  on account  of  defaults  by the other
parties to the  litigation  under loan and related  documents  involving a $17.9
million loan made by the Company.  In January 1994, in response to the Company's
foreclosure  of two aircraft and a related  aircraft lease  agreement  which had
been collateral for the loan, Aviaco filed a counter-claim  against the Company,
asserting nine claims for alleged  damages based on various tort and contractual
theories relating to the Company's foreclosure.

The case  proceeded to jury trial on the three of nine claims which survived the
Company's  Motion for Summary  Judgment.  The case was  submitted to the jury on
October 16, 1997.  On October 17, 1997,  the jury returned a verdict in favor of
Aviaco awarding  aggregate  damages of  approximately  $12.2 million,  including
damages of  approximately  $10.0 million for the failure to exercise  reasonable
care with regard to the related lease agreement.

In December  1997,  the Company  filed a Motion for Judgment as a Matter of Law,
arguing, inter alia, to set aside the $10.0 million award as not being supported
by the record  evidence or by  applicable  law. On February 13, 1998,  the Judge
ruled in favor of the Company and set aside the $10.0 million award.

On March 2, 1998, the Judge entered a Final Judgment  against the Company in the
aggregate amount,  including prejudgment interest, of approximately $2.8 million
with post judgment  interest thereon at the rate of 5.42% per annum. Both Aviaco
and the Company have appealed from the Final Judgment to the United States Court
of Appeals for the Eleventh  Circuit.  Taking into account amounts  reserved for
this litigation,  the Company does not expect such litigation to have any future
material adverse effect on its earnings, cash flow or financial position.

A number of legal  proceedings  and  claims are  pending  or have been  asserted
against the Company.  A substantial  number of such legal proceedings and claims
are  covered  by third  parties,  including  insurance  companies.  The  Company
believes that the final outcome of such  proceedings  and claims will not have a
material adverse effect on its earnings, cash flow, or financial position.


Item 2.       Changes in Securities and Use of Proceeds

Omitted pursuant to instruction H(2).


Item 3.       Defaults Upon Senior Securities

Omitted pursuant to instruction H(2).


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

Omitted pursuant to instruction H(2).


Item 5.       Other Information

Summarized below is information on the effects of the  Boeing-McDonnell  Douglas
merger, borrowing operations,  portfolio balances, new business volume, analysis
of allowance for losses on financing receivables and credit loss experience, and
receivable write-offs, net of recoveries by segment.

The Effects of the Boeing-McDonnell Douglas Merger

On August 1, 1997, the Boeing-McDonnell  Douglas merger was consummated pursuant
to an Agreement and Plan of Merger dated as of December 14, 1996,  among Boeing,
West  Acquisition  Corp.,  a  wholly-owned  subsidiary  of Boeing  ("Sub"),  and
McDonnell  Douglas  (the  "Merger  Agreement").  Under the  terms of the  Merger
Agreement,  Sub was  merged  into  McDonnell  Douglas,  with  McDonnell  Douglas
surviving as a wholly-owned subsidiary of Boeing.

The many possible ramifications of strategic decisions to be made by Boeing with
respect  to  the  Company  are  currently  unknown  and,  therefore,  cannot  be
quantified at this time. Boeing is conducting a review of the operations and the
strategic value of the Company,  which review could lead to a decision to divest
all or part of the Company's  assets or to sell the Company's  stock,  presently
held indirectly by Boeing.

Borrowing Operations

Prior to the third quarter of 1998,  the Company  issued  $300.0  million of the
$400.0  million  aggregate  principal  amount of  medium-term  notes  which were
authorized  for issuance in October 1997 at interest rates ranging from 5.73% to
6.58% and with maturities  ranging from 10 months to 11 years. On July 31, 1998,
the Company  authorized an additional $500.0 million  (resulting in an aggregate
of $600.0 million  authorized,  but unissued) of medium-term notes to be offered
and sold from time to time in the Company's discretion pursuant to the Company's
public shelf  registration  (SEC Registration No.  333-37635).  During the third
quarter of 1998,  the  Company  issued  $163.0  million of such  $600.0  million
medium-term  notes,  at  interest  rates  ranging  from  5.73% to 6.22% and with
maturities  ranging  from 10 months to 7 years.  During the third  quarter,  the
Company's borrowing rates were increased by virtue of a significant  increase in
the spreads  required to be paid by the Company over rates for  comparable  U.S.
Treasury Notes.  Such higher rates can reasonably be expected to have a negative
impact on the Company's competitiveness as a financier on transactions where the
Company is unable to pass  through to  customers  such  increased  rates.  These
increased  borrowing spreads and consequent higher interest rates were caused by
a variety of factors,  including without  limitation the Company's credit rating
downgrade and outlook change  discussed  below, the uncertainty of the Company's
strategic fit at Boeing, as well as general financial market conditions.

The Company,  as of September 30, 1998, has $96.2 million in aggregate  deposits
in  Japanese  banks for the  purpose of  defeasing  certain  obligations  of the
Company under Japanese leveraged leases of aircraft.  Currently,  these deposits
cannot  be moved to  other  financial  institutions  without  significant  cost.
However,  as of the date hereof,  all such banks  holding such  deposits held an
investment  grade rating from either  Standard & Poor's  Corporation  or Moody's
Investors Services.

On June 8, 1998,  Standard & Poor's  Corporation  announced  that it lowered its
credit  ratings on Boeing and the Company.  The ratings of the Company's  senior
unsecured debt and subordinated  debt were lowered from AA to AA- and AA- to A+,
respectively.  The  outlook  for the  Company  was  deemed  to be  "developing."
Standard & Poor's  stated  that  ratings  "could be raised if [the  Company]  is
retained as a  continuing  operation of Boeing Co.  Ratings  could be lowered if
[the Company] is divested to a weaker entity."

On  September  15,  1998,  Moody's  Investors  Services  placed  Boeing  and the
Company's  debt ratings on review for possible  downgrade.  The current  Moody's
ratings  for  the  Company's  senior  unsecured  debt,   subordinated  debt  and
commercial paper are A3, Baa1 and Prime-1, respectively.

Portfolio Balances

Portfolio balances for the Company's financial reporting segments are summarized
as follows:
<TABLE>
<CAPTION>

                                                                             September 30,       December 31,
(Dollars in millions)                                                             1998               1997
                                                                           ---------------------------------------
Aircraft Financing
    Boeing/McDonnell Douglas aircraft financing
<S>                                                                        <C>                <C>              
       Finance leases                                                      $           781.0  $           964.9
       Operating leases                                                                451.5              495.2
       Notes receivable                                                                 83.6               61.9
                                                                           --------------------------------------
                                                                                     1,316.1            1,522.0
                                                                           --------------------------------------
    Other commercial aircraft financing
       Finance leases                                                                  134.6              133.3
       Operating leases                                                                 32.6               51.9
       Notes receivable                                                                  3.9                4.3
                                                                           --------------------------------------
                                                                                       171.1              189.5
                                                                           --------------------------------------
Commercial Equipment Leasing
    Finance leases                                                                     396.1              410.9
    Operating leases                                                                   341.8              375.0
    Notes receivable                                                                   362.1              190.7
                                                                           --------------------------------------
                                                                                     1,100.0              976.6
                                                                           --------------------------------------
Other                                                                                    1.9               12.2
                                                                           --------------------------------------
                                                                           $         2,589.1  $         2,700.3
                                                                           ======================================
</TABLE>


New Business Volume

New business volume is summarized as follows:
<TABLE>
<CAPTION>

                                                                                     Nine months ended
                                                                                       September 30,
(Dollars in millions)                                                            1998               1997
                                                                           --------------------------------------
<S>                                                                        <C>               <C>               
Boeing/McDonnell Douglas aircraft financing                                $            69.8 $             81.2
Other commercial aircraft financing                                                     22.5                -
Commercial equipment leasing                                                           281.0              188.1
                                                                           --------------------------------------
                                                                           $           373.3 $            269.3
                                                                           ======================================
</TABLE>


Analysis of Allowance for Losses on Financing Receivables and Credit Loss
Experience

<TABLE>
<CAPTION>
                                                                             September 30,       December 31,
(Dollars in millions)                                                            1998                1997
<S>                                                                        <C>               <C>
     of year                                                               $        55.9     $       48.6
Provision for losses                                                                 7.9             11.5
Write-offs, net of recoveries                                                       (0.1)            (2.5)
Other                                                                               (1.6)            (1.7)
                                                                           ----------------------------------
Allowance for losses on financing receivables at end of
    period                                                                 $        62.1     $       55.9
                                                                           ==================================

Allowance as percent of total portfolio                                              2.4%             2.1%

Net write-offs as percent of average portfolio                                        - %             0.1%

More than 90 days delinquent:
    Amount of delinquent installments                                      $         0.6     $        1.8
    Total receivables due from delinquent obligors                                  11.4             15.5
    Total receivables due from delinquent obligors
       as a percentage of total portfolio                                            0.4%             0.6%

</TABLE>

Receivable Write-offs, Net of Recoveries by Segment
<TABLE>

The  following  table  summarizes  the  write-offs  (recoveries)  of each of the
Company's continuing businesses:

<CAPTION>
                                                                                        Nine months ended
                                                                                          September 30,
(Dollars in millions)                                                              1998                   1997
                                                                           ---------------------------------------------
<S>                                                                            <C>                   <C>        
Commercial aircraft financing                                                  $         -           $         -
Commercial equipment leasing                                                            (0.1)                 (0.3)
                                                                           ---------------------------------------------
                                                                               $        (0.1)        $        (0.3)
                                                                           =============================================
</TABLE>


Item 6.       Exhibits and Reports on Form 8-K

A.    Exhibits

         Exhibit 12 Computation of Ratio of Income to Fixed Charges.

         Exhibit 27 Financial Data Schedule.

B.    Reports on Form 8-K

     A report on Form 8-K was filed on August 3, 1998,  to report  under Item 5,
     exhibits in connection  with the  Registration  Statement on Form S-3 (File
     No.  333-37635)  filed  by the  Company  with  the  Securities  &  Exchange
     Commission.



<PAGE>



                                   Signatures


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



                                     Boeing Capital Corporation


November 12, 1998                    /s/ STEVEN W. VOGEDING
                                     __________________________________
                                     Steven W. Vogeding
                                     Vice President and Chief Financial
                                     Officer (Principal Financial Officer) and
                                     Registrant's Authorized Officer




                                     /s/ MAURA R. MIZUGUCHI
                                     __________________________________
                                     Maura R. Mizuguchi
                                     Controller (Principal Accounting Officer)