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 March 31, 1997

                                       OR

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

      For the transition period from ________________ to _________________


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


                      MCDONNELL DOUGLAS FINANCE CORPORATION
             (Exact name of registrant as specified in its charter)

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

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

     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 May 14, 1997:                       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>


                                Table of Contents




                                                                        Page

Part I          Financial Information

    Item 1.     Financial Statements........................................3

    Item 2.     Management's Analysis of Results of Operations *............8

Part II         Other Information

    Item 1.     Legal Proceedings...........................................8

    Item 2.     Changes in Securities **

    Item 3.     Defaults Upon Senior Securities **

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

    Item 5.     Other Information...........................................9

    Item 6.     Exhibits and Reports on Form 8-K...........................10











----------------
   * Management's  Analysis  of  Results  of  Operations  included  in  lieu  of
     Management's  Discussion and Analysis of Financial Condition and Results of
     Operations,  which is omitted  pursuant to General  Instruction  H(1)(a) to
     Form 10-Q.

  ** Omitted pursuant to General Instruction H (1)(b) to Form 10-Q.


<PAGE>


                                     Part I

Item 1.         Financial Statements

McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>

                                                                               March 31,           December 31,
(Dollars in millions, except stated value and par value)                         1997                  1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                   <C>    
ASSETS
    Financing receivables:
       Investment in finance leases                                          $     1,614.1         $     1,631.2
       Notes receivable                                                              295.2                 308.9
                                                                         -------------------------------------------
                                                                                   1,909.3               1,940.1
       Allowance for losses on financing receivables                                 (52.1)                (48.6)
                                                                         -------------------------------------------
                                                                                   1,857.2               1,891.5
    Cash and cash equivalents                                                         11.9                  16.9
    Equipment under operating leases, net                                            662.5                 689.5
    Equipment held for sale or re-lease                                               27.4                  14.0
    Accounts with McDonnell Douglas and MDFS                                           6.2                   -
    Other assets                                                                      41.2                  41.7
                                                                         -------------------------------------------
                                                                             $     2,606.4         $     2,653.6
                                                                         ===========================================

LIABILITIES AND SHAREHOLDER'S EQUITY
    Short-term notes payable                                                 $       142.4         $       161.3
    Accounts payable and accrued expenses                                             17.2                  47.7
    Other liabilities                                                                 94.9                  90.0
    Deferred income taxes                                                            350.5                 340.2
    Long-term debt:
       Senior                                                                      1,584.2               1,594.1
       Subordinated                                                                   79.8                  94.8
                                                                         -------------------------------------------
                                                                                   2,269.0               2,328.1
                                                                         -------------------------------------------

    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                                                    192.9                 181.0
                                                                         -------------------------------------------
                                                                                     337.4                 325.5
                                                                         ===========================================
                                                                             $     2,606.4         $     2,653.6
                                                                         ===========================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Statement of Income and Income Retained for Growth
<TABLE>
<CAPTION>

                                                                                     Three months ended
                                                                                          March 31,
(Dollars in millions)                                                             1997                 1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                  <C>    
OPERATING INCOME
      
    Finance lease income                                                      $        35.6        $        28.2
    Interest income on notes receivable                                                 7.0                  5.9
    Operating lease income, net of depreciation expense                                13.7                 12.0
    Net gain on disposal or re-lease of assets                                          2.8                  8.1
    Other                                                                               1.6                  1.2
                                                                          ------------------------------------------
                                                                                       60.7                 55.4
                                                                          ------------------------------------------

EXPENSES
    Interest expense                                                                   33.2                 26.9
    Provision for losses                                                                3.5                  3.4
    Operating expenses                                                                  3.1                  3.1
    Other                                                                               1.0                  0.5
                                                                          ------------------------------------------
                                                                                       40.8                 33.9
                                                                          ------------------------------------------
Income before provision for income taxes                                               19.9                 21.5
Provision for income taxes                                                              7.2                  7.7
                                                                          ------------------------------------------
Net income                                                                             12.7                 13.8
Income retained for growth at beginning of year                                       181.0                135.7
Dividends                                                                              (0.8)                (0.9)
                                                                          ------------------------------------------
Income retained for growth at end of period                                   $       192.9        $       148.6
                                                                          ==========================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>

                                                                                Three months ended March 31,
(Dollars in millions)                                                             1997                 1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                  <C> 
OPERATING ACTIVITIES
         
    Net income                                                                $        12.7        $        13.8
    Adjustments to reconcile net income to net cash provided by
       (used in) operating activities:
       Depreciation expense - equipment under operating leases                         14.7                 13.2
       Net gain on disposal or re-lease of assets                                      (2.8)                (8.1)
       Provision for losses                                                             3.5                  3.4
    Change in assets and liabilities:
       Accounts with McDonnell Douglas and MDFS                                        (6.2)                (3.5)
       Other assets                                                                     0.5                 (5.4)
       Accounts payable and accrued expenses                                          (31.3)               (25.9)
       Other liabilities                                                                4.9                  0.4
       Deferred income taxes                                                           10.3                  5.5
    Other, net                                                                         (1.3)                (1.2)
                                                                          ------------------------------------------
                                                                                        5.0                 (7.8)
                                                                          ------------------------------------------
INVESTING ACTIVITIES
    Net change in short-term notes and leases receivable                               (0.2)               (29.5)
    Purchase of equipment for operating leases                                         (3.7)              (224.0)
    Proceeds from disposition of equipment, notes and leases receivable                 7.3                 53.0
    Collection of notes and leases receivable                                          73.2                 29.8
    Acquisition of notes and leases receivable                                        (42.8)              (104.9)
                                                                          ------------------------------------------
                                                                                       33.8               (275.6)
                                                                          ------------------------------------------

FINANCING ACTIVITIES
    Net change in short-term borrowings                                               (18.9)                89.4
    Debt having maturities more than 90 days:
       Proceeds                                                                        60.0                262.2
       Repayments                                                                     (84.9)               (65.3)
                                                                          ------------------------------------------
                                                                                      (43.8)               286.3
                                                                          ------------------------------------------
Increase (decrease) in cash and cash equivalents                                       (5.0)                 2.9
Cash and cash equivalents at beginning of year                                         16.9                 12.6
                                                                          ==========================================
Cash and cash equivalents at end of period                                    $        11.9        $        15.5
                                                                          ==========================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


McDonnell Douglas Finance Corporation and Subsidiaries
Notes to Consolidated Financial Statements


Note 1 -- Basis of Presentation

McDonnell  Douglas  Finance   Corporation  (the  "Company")  is  a  wholly-owned
subsidiary of McDonnell  Douglas  Financial  Services  Corporation  ("MDFS"),  a
wholly-owned  subsidiary of McDonnell Douglas Corporation ("McDonnell Douglas").
The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial   statements.   In  the  opinion  of  management,   the   accompanying
consolidated financial statements reflect all adjustments  (consisting of normal
recurring  accruals)  which are  necessary  to present  fairly the  consolidated
balance  sheet and the  related  consolidated  statements  of income  and income
retained for growth and cash flows for the interim periods presented.  Operating
results for the  three-month  period  ended  March 31, 1997 are not  necessarily
indicative  of the results that may be expected for the year ended  December 31,
1997.  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, 1996.

Certain 1996 amounts have been reclassified to conform to the 1997 presentation.


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, $69.4 million of
the  Company's  income  retained for growth was available for dividends at March
31, 1997.


Note 3 -- Commitments and Contingencies

On November 1, 1996, The Allen Austin Harris Group, Inc.  ("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 and that the litigation will
have  no  material  adverse  effect  on the  Company's  earnings,  cash  flow or
financial condition.

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.

Trans World Airlines,  Inc. ("TWA")  accounted for $245.6 million (9.6% of total
Company portfolio) and $249.5 million (9.5% of total Company portfolio) at March
31, 1997 and December 31, 1996. 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  due in  part to an
airliner  crash in July 1996 and  turnover  of key  management,  which  occurred
during 1996.  Additionally,  TWA's independent  auditors included an explanatory
paragraph in their  "Independent  Auditors'  Report" for TWA's December 31, 1996
financial  statements  expressing  "substantial  doubt"  about TWA's  ability to
continue  as a going  concern.  McDonnell  Douglas  provides  guaranties  to the
Company under the various lease agreements between the Company and TWA. At March
31,  1997,  the  maximum  aggregate  coverage  under such  guaranties  was $44.6
million.  In addition,  McDonnell  Douglas provides  supplemental  guaranties in
favor of the  Company for up to an  additional  $10.0  million of the  Company's
financings to TWA. These guaranties supplement individual guaranties provided by
McDonnell Douglas with respect to certain of the Company's  financings to TWA to
the  extent  that the  estimated  fair  market  value of the  financings  (after
applying  the  individual  guaranties)  is less than the net asset  value of the
financings on the Company's  books.  The  supplemental  guaranties  terminate in
March 1998, but may be extended  under certain  limited  circumstances.  TWA has
reported  relatively low cash reserves as of March 31, 1997. The  reorganization
plan and TWA's current  financial  condition  have not had and,  assuming  TWA's
financial  condition does not further  deteriorate  such that TWA ceases to make
timely  payments on its  obligations to the Company,  are not expected to have a
material  adverse  effect on the  Company's  earnings,  cash flow,  or financial
position.

A United States-based operator of commuter aircraft is in arrears in the payment
of rent under the lease of two Embraer Brasilia commuter  aircraft.  The airline
is discussing with the Company a proposal for repayment of the delinquent  sums.
The net asset  value of the  aircraft  leased to this  airline at March 31, 1997
totaled $14.7 million.  Taking into account the available  allowance for losses,
the Company does not expect to suffer a material adverse impact on its earnings,
cash flow, or financial condition on the account of this transaction.

A Canadian  airline to which the  Company has made a secured  loan has  deferred
payment of  approximately  $0.2 million in interest  payments.  The  outstanding
balance of the loan, which is secured by a DHC-8-100 aircraft,  was $4.5 million
at March 31,  1997.  Taking into  account the  collateral  value of the aircraft
securing  the loan,  the  Company  does not expect  this loan to have a material
adverse effect on the Company's earnings, cash flow or financial position.

At March 31,  1997,  the Company had  commitments  to provide  leasing and other
financing totaling $104.2 million.

The $50.0  million  aircraft  purchase  bridge  facility  made  available by the
Company to ValuJet Airlines,  Inc.  ("ValuJet") expires upon delivery to ValuJet
of the first scheduled new McDonnell Douglas 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 March 31,  1997 or
December 31, 1996.

In conjunction with prior asset  dispositions and certain  guarantees,  at March
31, 1997, the Company was subject to a maximum recourse of $71.6 million.  Based
on trends to date,  the Company's  loss related to such exposure is not expected
to be significant.

The Company  leases  aircraft  under capital leases which have been subleased to
others.  At March 31, 1997,  the Company had  guaranteed  the  repayment of $7.0
million in capital lease obligations associated with a 50% partner.


Item 2.       Management's Analysis of Results of Operations

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) and  involve  risk and  uncertainty.
Certain  statements  in  this  Form  10-Q,  and  particularly  in  Note 3 to the
financial  statements  set  forth in Item 1 of Part I, and in Item 1 of Part II,
may contain forward-looking  information.  The subject matter of such statements
may include,  but not be limited to, the  consummation  of the  Boeing-McDonnell
Douglas merger and its possible effects, 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  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 timing and
consummation   of  the   Boeing-McDonnell   Douglas  merger  and  the  Company's
relationship with McDonnell Douglas as well as its new ultimate shareholder, the
capital  equipment   requirements  of  U.S.  and  foreign  businesses,   capital
availability and cost,  changes in law and tax benefits,  competition from other
financial institutions, the Company's successful execution of internal operating
plans, defaults by customers, regulatory uncertainties, and legal proceedings.

Finance lease income  increased  $7.4 million  (26.2%) from the first quarter of
1996,  primarily  attributable to the financings of two MD-11 aircraft funded in
late  December  1996 and the March 1996  financing of two MD-90  aircraft  under
finance lease agreements.

Interest on notes  receivable  increased  $1.1  million  (18.6%)  from the first
quarter of 1996,  primarily  attributable to increased volume in 1996 within the
commercial equipment leasing portfolio.

Operating lease income  increased $1.7 million (14.2%) from the first quarter of
1996,  primarily  attributable to the March 1996 financing of two MD-11 aircraft
under operating lease agreements.

Net gain on disposal or re-lease of assets  decreased $5.3 million  (65.4%) from
the first quarter of 1996,  attributable  primarily to decreased equipment sales
within the commercial equipment leasing portfolio.

Interest expense  increased $6.3 million (23.4%) from the first quarter of 1996,
attributable  to a higher  level of debt  borrowings  in  1997,  resulting  from
increased financing activity in 1996.



                                     Part II

Item 1.       Legal Proceedings

 On November 1, 1996, The Allen Austin Harris Group, Inc.  ("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 and that the litigation will
have  no  material  adverse  effect  on the  Company's  earnings,  cash  flow or
financial condition.

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 5.       Other Information

Information on the Company's 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 business unit are summarized below.

Portfolio Balances

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

                                                                               March 31,         December 31,
(Dollars in millions)                                                             1997               1996
------------------------------------------------------------------------------------------------------------------

<S>                                                                            <C>                <C>     
Aircraft Financing
  McDonnell Douglas aircraft financing
   
     Finance leases                                                            $   1,122.2        $   1,132.6
     Operating leases                                                                380.6              402.0
     Notes receivable                                                                 78.0               82.9
                                                                           ---------------------------------------
                                                                                   1,580.8            1,617.5
                                                                           ---------------------------------------
  Other commercial aircraft financing
     Finance leases                                                                  136.1              136.9
     Operating leases                                                                 54.8               56.0
     Notes receivable                                                                  4.5                4.5
                                                                           ---------------------------------------
                                                                                     195.4              197.4
                                                                           ---------------------------------------
Commercial equipment leasing
  Finance leases                                                                     355.7              361.7
  Operating leases                                                                   227.0              231.5
  Notes receivable                                                                   170.4              176.6
                                                                           ---------------------------------------
                                                                                     753.1              769.8
                                                                           ---------------------------------------
Other                                                                                 42.5               44.9
                                                                           ---------------------------------------
                                                                               $   2,571.8        $   2,629.6
                                                                           =======================================
</TABLE>


New Business Volume

New business  volume for the  Company's  two business  segments is summarized as
follows:
<TABLE>
<CAPTION>

                                                                               Three months        Year ended
                                                                             ended March 31,      December 31,
                                                                           --------------------------------------
(Dollars in millions                                                               1997               1996

<S>                                                                            <C>                  <C>        
McDonnell Douglas aircraft financing                                           $       1.6          $     475.3
Commercial equipment leasing                                                          31.3                392.0
                                                                           --------------------------------------
                                                                               $      32.9          $     867.3
                                                                           ======================================

</TABLE>

Analysis of Allowance for Losses on Financing Receivables and Credit Loss
Experience
<TABLE>
<CAPTION>

                                                                                March 31,         December 31,
                                                                           ---------------------------------------
(Dollars in millions)                                                             1997                1996
<S>                                                                            <C>                 <C>   
Allowance for losses on financing receivables at beginning
  of year                                                                      $     48.6          $     42.3
Provision for losses                                                                  3.5                14.2
Write-offs, net of recoveries                                                         0.2                (6.0)
Other                                                                                (0.2)               (1.9)
                                                                           ---------------------------------------
Allowance for losses on financing receivables at end of
  period                                                                       $     52.1          $     48.6
                                                                           =======================================

Allowance as percent of total portfolio                                               2.0%                1.8%

Net write-offs (recoveries) as percent of average portfolio                          (0.4)%               0.3%

More than 90 days delinquent:
  Amount of delinquent installments                                            $      1.9          $      2.1
  Total receivables due from delinquent obligors                                      3.4                23.4
  Total receivables due from delinquent obligors
     as a percentage of total portfolio                                               0.1%                0.9%

</TABLE>

Receivable Write-offs, Net of Recoveries by Business Unit

The  following  table  summarizes  the loss  experience of each of the Company's
continuing businesses:
<TABLE>
<CAPTION>

                                                                            Three months ended       Year ended
                                                                                March 31,           December 31,
(Dollars in millions)                                                              1997                 1996
                                                                           ------------------------------------------
<S>                                                                            <C>                  <C>        
Commercial aircraft financing                                                  $         -          $         -
Commercial equipment leasing                                                            (0.2)                 0.3
                                                                           ------------------------------------------
                                                                               $        (0.2)       $         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

     None.


                                   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.



                             McDonnell Douglas Finance Corporation


May 14, 1997                 /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)