================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

Commission file number 0-22085
                       --------

                                LORAL ORION, INC.
     ---------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



                Delaware                               52-2008654  
           ----------------                         ---------------  
     (State or other jurisdiction of               (I.R.S. Employer
   incorporation or organization No. )              Identification)


2440 Research Boulevard, Suite 400, Rockville, Maryland           20850
-------------------------------------------------------         ---------
   (Address of principal executive offices)                     (Zip Code)

                                  301-258-8101
     ---------------------------------------------------------------------
               (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  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  [X]      No  [_]

THE REGISTRANT  MEETS THE  CONDITIONS SET FORTH IN GENERAL  INSTRUCTION H (1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING WITH THE REDUCED  DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION H (2) OF FORM 10-Q.


                                       1

<PAGE>
PART I.  FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                 MARCH 31,      DECEMBER 31,
                                                                                  1999             1998
                                                                                  ----             ----
                                                                                (Uaudited)          Note
                                     ASSETS
<S>                                                                             <C>             <C>        
Current assets:
   Cash and cash equivalents                                                    $    18,848     $    35,861
   Restricted assets                                                                 48,699          50,180
   Accounts receivable (less allowance for doubtful accounts of $1,420
     and $1,019 at March 31, 1999 and December 31, 1998, respectively                15,346          15,292
   Prepaid expenses and other current assets                                          3,735           4,299
                                                                                   --------         -------
Total current assets                                                                 86,628         105,632

Restricted and segregated assets                                                         --          22,675

Property and equipment at cost:
   Land                                                                                  74              74
   Satellite and related equipment                                                  263,188         263,188
   Telecommunications equipment                                                      35,608          35,630
   Furniture and computer equipment                                                   9,069           8,693
                                                                                   --------         -------
                                                                                    307,939         307,585
Less accumulated depreciation                                                       (50,123)        (38,706)

Satellite construction in progress, including capitalized
   interest of $27,532 and $20,198 at March 31, 1999
    and December 31, 1998, respectively                                             394,290         331,861
                                                                                   --------         -------
Net property and equipment                                                          652,106         600,740

Due from Loral                                                                           --           3,619
Costs in excess of net assets acquired associated
   with the Loral Merger, net                                                       604,896         608,015
Deferred income taxes                                                                53,503          53,915
Other assets, net                                                                    24,978          22,908
                                                                                   --------         -------
TOTAL ASSETS                                                                    $ 1,422,111    $  1,417,504
                                                                                ===========    ============
</TABLE>
---------
Note:  The December 31, 1998 balance sheet has been derived from the audited
consolidated financial statements at that date.


            See notes to condensed consolidated financial statements.

                                       2
<PAGE>

                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (IN THOUSANDS, EXCEPT SHARE AND PAR AMOUNTS)
                                   (CONTINUED)



<TABLE>
<CAPTION>
                                                                                 MARCH 31,      DECEMBER 31,
                                                                                  1999             1998
                                                                                  ----             ----
                                                                                (Uaudited)          Note
                      LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                            <C>               <C>        
Current liabilities:                                                            
   Current portion of long-term debt                                           $       2,014     $     1,826
   Accounts payable                                                                      597           2,035
   Accrued and other current liabilities                                              18,039          16,162
   Customer deposits                                                                   7,216           7,897
   Deferred revenue                                                                   36,009          35,841
   Interest payable                                                                   10,383          22,842
                                                                                   --------         -------
     Total current liabilities                                                        74,258          86,603

Long-term debt                                                                       939,249         931,669
Other long-term liabilities                                                              149             141
Due to Loral                                                                          34,091              --

Commitments and contingencies:
Stockholders' equity:
   Common stock, $.01 par value, 1,000 shares authorized; 100 shares
      outstanding at March 31, 1999 and December 31, 1998                                 --             --
   Capital in excess of par value                                                    481,791         481,791
   Unearned compensation                                                              (2,926)         (3,347)
   Accumulated other comprehensive income (loss)                                        (297)            616
   Accumulated deficit                                                              (104,204)        (79,969)
                                                                                   --------         -------
     Total stockholders' equity                                                      374,364         399,091
                                                                                   --------         -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $ 1,422,111    $  1,417,504
                                                                                 ===========    ============
</TABLE>
-----------

Note:  The December 31, 1998 balance sheet has been derived from the audited
consolidated financial statements at that date.

            See notes to condensed consolidated financial statements.



                                       3
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                 -----------------------------
                                                                                  MARCH 31, 1998
                                                                                   PREDECESSOR
                                                                 MARCH 31, 1999      COMPANY
                                                                 --------------    -----------
<S>                                                             <C>                <C>     
Service revenue                                                 $   22,538         $ 18,790

Operating expenses:
   Direct                                                            6,631            6,406
   Sales and marketing                                               5,902            5,790
   Engineering and technical services                                2,197            1,898
   General and administrative                                        3,738            3,707
   Depreciation and amortization                                    17,541           12,483
   Merger costs                                                         --           12,145
                                                                  --------         --------
     Total operating expenses                                       36,009           42,429
                                                                  --------         --------

Loss from operations                                               (13,471)         (23,639)

   Interest  income                                                  1,174            5,425
   Interest expense                                                (13,896)         (21,190)
   Other income (expense)                                              124             (287)
                                                                  --------         --------

Loss before income taxes                                           (26,069)         (39,691)

Income tax benefit                                                   1,834               --
                                                                  --------         --------

Net loss                                                           (24,235)         (39,691)

Preferred stock dividend, net of forfeitures                            --           (1,387)
                                                                  --------         --------

Net loss attributable to common stockholders                   $   (24,235)       $ (38,304)
                                                                 ==========       ===========

</TABLE>


            See notes to condensed consolidated financial statements.

                                       4
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                 -----------------------------
                                                                                  MARCH 31, 1998
                                                                                   PREDECESSOR
                                                                 MARCH 31, 1999      COMPANY
                                                                 --------------    -----------
<S>                                                                 <C>              <C>       
OPERATING ACTIVITIES
Net loss                                                            $ (24,235)       $ (39,691)
Adjustments to reconcile net loss to net cash provided by 
   (used in) operating activities:
   Deferred income tax provision                                          412               --
   Depreciation and amortization                                       17,541           12,483
   Amortization of deferred financing costs                                --              609
   Provision for bad debts                                                406              150
   Non-cash interest expense                                            8,210           10,070
   Other                                                                   --            1,644
Changes in operating assets and liabilities:
   Accounts receivable                                                 (3,475)          (1,408)
   Prepaid expenses and other current assets                              564              693
   Other assets                                                        (3,086)             201
   Accounts payable, accrued liabilities and other
     current liabilities                                                  439           (2,186)
   Interest payable                                                   (12,459)         (12,510)
   Customer deposits                                                    2,504               23
   Deferred revenue                                                        (3)             297
                                                                      ---------        ---------
Net cash used in operating activities                                 (13,182)         (29,625)

INVESTING ACTIVITIES
Increase in restricted and segregated assets                             (762)          (4,629)
Uses of and transfers from restricted and segregated assets            24,919           35,938
Satellite construction costs                                          (62,819)         (14,575)
Capital expenditures                                                     (354)          (3,805)
                                                                      ---------        ---------
Net cash provided by (used in) investing activities                   (39,016)          12,929

FINANCING ACTIVITIES
Due to Loral                                                           37,710               --
Proceeds from issuance of common stock, net of issuance costs              --            2,117
Repayment of senior notes and notes payable                              (290)            (254)
Payment of satellite incentive obligations                                (59)            (324)
Other                                                                  (2,176)          (1,051)
                                                                      ---------        ---------
Net cash provided by financing activities                              35,185              488

Net decrease in cash and cash equivalents                             (17,013)         (16,208)
Cash and cash equivalents at beginning of period                       35,861           70,009
                                                                      ---------        ---------
Cash and cash equivalents at end of period                         $   18,848        $  53,801
                                                                      =========        =========

            See notes to condensed consolidated financial statements.

</TABLE>

                                       5

<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                -----------------------------
                                                                                 MARCH 31, 1998
                                                                                  PREDECESSOR
                                                                MARCH 31, 1999      COMPANY
                                                                --------------    -----------
<S>                                                                 <C>           <C>         
  Preferred stock dividend, net of forfeitures                      $    --       $    (1,387)
                                                                    ========       =========== 
  
  Conversion of redeemable preferred stock to common stock               --           69,888
                                                                    ========       =========== 
 
  Conversion of Company common stock and stock options to Loral
    common stock as the result of the Loral Merger                       --          469,000
                                                                    ========       =========== 
  
  Conversion of subordinated debentures, accrued interest, and
    deferred financing costs to common  stock                            --           50,000
                                                                    ========       =========== 
 
  Issuance of common stock for preferred stock dividend                  --            5,458
                                                                    ========       =========== 

  Issuance of common stock and warrants                                  --            4,757
                                                                    ========       =========== 

  Interest paid                                                     $  25,479      $  25,237
                                                                    ========       =========== 
</TABLE>

            See notes to condensed consolidated financial statements.


                                       6
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



NOTE A.  BASIS OF PRESENTATION

ORGANIZATION AND BUSINESS

Loral Orion, Inc. (the "Company" or "Loral Orion"), is a holding company with no
assets or operations other than its investments in its subsidiaries. Through the
operations of its subsidiaries,  the Company's  principal  business is providing
satellite-based  communications services for private communications networks and
video  distribution and other satellite  transmission  services.  In 1998, Loral
Orion organized its business into two distinct operating segments as follows:

   Fixed  Satellite  Services:   Leasing  transponder   capacity  and  providing
   value-added  services  to  customers  for a  wide  variety  of  applications,
   including the distribution of broadcast programming, news gathering, business
   television,  distance learning and  direct-to-home  ("DTH")  services.  As of
   January 1, 1999, the Company's  fixed satellite  services  ("FSS") assets are
   managed by Loral Skynet, a division of Loral SpaceCom Corporation, and

   Data Services:  Providing  managed  communications  networks and Internet and
   intranet services, using transponder capacity on the Loral Skynet Telstar and
   Loral Orion fleets.

GENERAL

The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company  pursuant to the rules of the  Securities  and  Exchange
Commission  ("SEC") and, in the opinion of the Company,  include all adjustments
(consisting of normal recurring  accruals)  necessary for a fair presentation of
results of operations,  financial position and cash flows.  Certain  information
and footnote  disclosures  normally included in financial statements prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to such SEC rules.  The Company  believes that the disclosures
made are adequate to keep the information  presented from being misleading.  The
results  of  operations  for the  three  months  ended  March  31,  1999 are not
necessarily  indicative  of the results to be expected for the full year.  It is
suggested  that  these  financial  statements  be read in  conjunction  with the
Company's latest Annual Report on Form 10-K.

ACQUISITION OF THE COMPANY BY LORAL

On March 20, 1998,  Orion Network  Systems,  Inc.  ("Orion" or the  "Predecessor
Company") was acquired by Loral Space & Communications Ltd.  ("Loral"),  through
the merger (the "Merger") of a wholly owned  subsidiary of Loral,  with and into
Orion.  Loral  consummated  the  acquisition by issuing 18 million shares of its
common stock and assuming existing Orion vested options and warrants to purchase
1.4 million  shares of Loral common  stock  representing  an aggregate  purchase
price of $472.5 million.  Orion was the surviving  corporation of the Merger and
thereby became a subsidiary of Loral. At the effective date of the Merger, Loral
contributed its investment in Orion to Loral Space & Communications Corporation,
a wholly owned  subsidiary of Loral,  and Orion changed its name to "Loral Orion
Network Systems, Inc." The name has since been changed to "Loral Orion, Inc."

The consolidated financial statements for the three months ended March 31, 1998,
reflect the results of operations of the Predecessor  Company.  The consolidated
financial statements as of and for the three months ended March 31, 1999 reflect
the results of  operations  of Loral Orion,  Inc.  Hereafter,  references to the
"Company"  include  both Loral Orion,  Inc and its  predecessor,  Orion  Network
Systems, Inc.

The Merger was  accounted for as of March 31, 1998,  using the purchase  method.
Accordingly,  the consolidated  balance sheet at March 31, 1999 and December 31,
1998 reflects the push-down of the purchase price  allocations to the assets and
liabilities.  The purchase price represented $447.7 million in excess of Orion's
net book value,  which was primarily  allocated to costs in excess of net assets
acquired of $619.7  million,  and a fair value  adjustment of $153.4  million to
increase the carrying value of Orion's senior notes and senior  discount  notes.
In addition,  Loral agreed to assume  Orion's  unvested  employee stock options,
which resulted in a new measurement date and an unearned  compensation charge of
$4.3 million, to be amortized over the remaining vesting period of the options.

                                       7
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Had the  acquisition  of the Company  occurred on January 1, 1998, the unaudited
pro forma  sales,  operating  loss and net loss for the three months ended March
31,  1998 would have been  $18.8  million,  $15.8  million,  and $28.7  million,
respectively.  These  results,  which are based on various  assumptions  are not
necessarily  indicative  of what would have  occurred had the  acquisition  been
consummated on January 1, 1998.

COMPREHENSIVE INCOME

The  Company  follows  Statement  of  Financial  Accounting  Standards  No. 130,
Reporting  Comprehensive Income ("SFAS 130") for the reporting and disclosure of
comprehensive  income and its components.  SFAS 130 requires unrealized gains or
losses on the Company's foreign currency translation  adjustments to be included
in other comprehensive income (loss). Total comprehensive loss is as follows (in
thousands):
                                                     THREE MONTHS ENDED
                                               -----------------------------
                                                                MARCH 31, 1998
                                                                 PREDECESSOR
                                               MARCH 31, 1999      COMPANY
                                               --------------    -----------
Net loss                                        $  24,235        $  39,691
Cumulative translation adjustment                     913              --
                                                ---------        ----------
Total comprehensive loss                        $  25,148        $  39,691
                                                =========        ==========

EARNINGS PER SHARE

Earnings per share is not presented since it is not considered meaningful due to
the Merger with Loral and recapitalization of the Company.

NOTE B.  LONG-TERM DEBT

Long-term debt consists of the following (in thousands):



<TABLE>
<CAPTION>
                                                                         MARCH 31,     DECEMBER 31,
                                                                          1999            1998
                                                                          ----            ----
<S>                                                                      <C>           <C>        
Senior notes (net of premium of $63.1 million and $64.6 million     
   at March 31, 1999 and December 31, 1998, respectively)               $ 506,149     $   507,573
Senior discount notes (maturity value of $484 million)                    418,446         408,812
Notes payable - TT&C Facility                                               4,662           4,953
Satellite incentive obligations                                            11,317          11,376
Other                                                                         689             781
                                                                        ---------      ----------
   Total long-term debt                                                   941,263         933,495
       Less: current portion                                               (2,014)         (1,826)
                                                                        ---------      ----------
   Long-term debt less current portion                                $   939,249     $   931,669
                                                                        =========      ==========

</TABLE>


In connection  with the Merger,  Loral did not assume the Company's  outstanding
debt. Such debt remains  outstanding and is non-recourse to Loral.  The carrying
value of the Company's  Senior Notes and Senior  Discount Notes was increased to
reflect a fair value adjustment of $153.4 million in connection with the Merger,
based on quoted market prices at March 31, 1998.

                                       8
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE C.  INCOME TAXES

The Company is included in the  consolidated  U.S.  Federal income tax return of
Loral Space & Communications  Corporation.  Pursuant to a tax sharing  agreement
for 1999 with Loral Space & Communications Corporation,  the Company is entitled
to reimbursement  for the use of its tax losses when such losses are utilized by
the consolidated group. The Company recorded a receivable under this tax sharing
agreement of  approximately  $2.2  million and a deferred tax  provision of $0.4
million,  resulting  in a net tax benefit of $1.8  million for the three  months
ended March 31, 1999. The Company's effective tax benefit rate (7%) differs from
the federal statutory rate (35%), due to the valuation allowance established for
the  carryforward  of the current year tax loss  (22.2%) and the  non-deductible
amortization of costs in excess of net asset acquired  (5.8%).  The deferred tax
asset of $53.5  million on the  accompanying  balance  sheet arises from the tax
effect of the temporary  differences  between the carrying  amount of the Senior
Notes and the  Senior  Discount  Notes  payable  for  financial  and  income tax
purposes.

NOTE D.  SEGMENTS

The  Company's  two  operating  segments are fixed  satellite  services and data
services (see Note A).

In  evaluating  financial  performance,  management  uses  revenues and earnings
before  interest,  taxes and  depreciation  and  amortization  ("EBITDA") as the
measure of a segment's profit or loss.  Beginning January 1, 1999, the Company's
fixed  satellite  services  ("FSS")  assets are  managed by Loral  Skynet.  As a
result,  in 1999 the FSS segment  began leasing  satellite  capacity to the data
services segment for its use of Orion 1. See Note E.













                                       9



<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summarized financial information  concerning the Company's operating segments is
as follows:

                        THREE MONTHS ENDED MARCH 31, 1999
                                   (UNAUDITED)
                                  (IN MILLIONS)


<TABLE>
<CAPTION>
                                                FIXED                      TOTAL
                                              SATELLITE        DATA       REPORTABLE    INTERSEGMENT
                                              SERVICES       SERVICES      SEGMENTS     ELIMINATIONS      CONSOLIDATED
                                              --------       --------      --------     ------------      ------------
<S>                                          <C>              <C>           <C>            <C>            <C>     
Revenue from external customers ......       $      7.3       $   15.2      $   22.5       $    --        $   22.5
Intersegment revenue .................              1.8            --            1.8          (1.8)             --
                                                -------       --------      ---------     --------        ---------
Gross revenue ........................       $      9.1       $   15.2      $   24.3       $  (1.8)       $   22.5
                                             ==========       ========      =========      =======        ========
EBITDA 1 .............................       $      6.3       $   (2.3)     $    4.0       $    --        $    4.0
Depreciation and amortization ........             14.2            3.3           17.5           --            17.5
                                             ==========       ========      =========      =======        ========
Loss from operations .................       $     (7.9)      $   (5.6)     $  (13.5)      $    --        $  (13.5)
                                             ==========       ========      =========      =======        ========
Total assets  ........................       $  1,349.4       $   72.7      $ 1,422.1      $    --        $1,422.1
                                             ==========       ========      =========      =======        ========
                                                                                                          
</TABLE>




                        THREE MONTHS ENDED MARCH 31, 1998
                               PREDECESSOR COMPANY
                                  (IN MILLIONS)

<TABLE>
<CAPTION>
                                                FIXED                      TOTAL
                                              SATELLITE        DATA       REPORTABLE    
                                              SERVICES       SERVICES      SEGMENTS        CONSOLIDATED
                                              --------       --------      --------        ------------

<S>                                          <C>              <C>          <C>              <C>      
Revenue from external customers ......       $      7.9       $ 10.9       $    18.8        $    18.8
                                             ==========       ========      =========       ===========
EBITDA (1)............................       $      5.1       $ (4.1)      $     1.0        $     1.0
Depreciation and amortization ........              9.6          2.9            12.5              12.5
Merger costs .........................               --           --              --              12.1
                                             ----------        --------      ---------
Loss from operations..................       $     (4.5)      $ (7.0)      $  (11.5)        $   (23.6)
                                             ==========       ========      =========      ============
Total assets  ........................       $  1,381.8       $ 49.4       $ 1,431.2        $  1,431.2
                                             ==========       ========      =========      ============

</TABLE>

---------
(1) EBITDA (which is equivalent to operating  income (loss) before  depreciation
    and  amortization  and  merger  costs) is  provided  because it is a measure
    commonly  used in the  communication  industry to analyze  companies  on the
    basis of operating  performance,  leverage and liquidity and is presented to
    enhance the  understanding  of Loral  Orion's  operating  results.  However,
    EBITDA  should  not be  construed  as an  alternative  to net  income  as an
    indicator of a company's operating performance, or cash flow from operations
    as a measure of a company's liquidity.  EBITDA may be calculated differently
    and, therefore,  may not be comparable to similarly titled measures reported
    by other companies.




                                       10
<PAGE>



                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE E. COMMITMENTS AND CONTINGENCIES

Orion 1 -- In November  1995, a portion of the Orion 1 satellite  experienced an
anomaly that resulted in a temporary service interruption, lasting approximately
two hours,  in the  dedicated  capacity  serving the  European  portion of Orion
Atlantic's  services.  Full service to all affected customers was restored using
redundant  equipment on the satellite.  The Company believes,  based on the data
and the Telesat  Report,  that,  because the redundant  component is functioning
fully in accordance with  specifications  and the performance  record of similar
components is strong,  the anomalous behavior is unlikely to affect the expected
performance of the satellite over its useful life.  Furthermore,  there has been
no effect on the Company's ability to provide services to customers. However, in
the event that the currently operating component fails, Orion 1 would experience
a significant loss of usable capacity. In such event, while the Company would be
entitled to insurance  proceeds of  approximately  $47 million as of March 1999,
and could lease replacement  capacity and function as a reseller with respect to
such capacity,  the loss of capacity would have a material adverse effect on the
Company.

Orion 2 -- During  the  second  quarter  of 1998,  the  Company  entered  into a
satellite procurement contract with Space Systems/Loral ("SS/L"), a wholly owned
subsidiary of Loral,  for the  construction  and launch of the Orion 2 satellite
for the  operation  in the  Atlantic  Ocean  region  at 12(0)  W.L.  (the  "SS/L
Conract").  The SS/L  Contract  provides  for  delivery  in-orbit of the Orion 2
satellite  aboard an Ariane 44L launch vehicle in the third quarter of 1999. The
SS/L  satellite  design  provides  for 38 Ku-band  transponder  with a footprint
covering  the  Eastern  United  States,   Southeastern   Canada,   Europe,   the
Commonwealth of Independent  States, the Middle East, North and South Africa and
South  America.  Loral Orion's cash will be used to fund the SS/L Contract up to
an amount  that,  will not exceed $202  million..  Any  requirements  to SS/L in
excess  of $202  million  for  Orion 2 will be  funded  with  additional  equity
contributed by Loral.

Orion 3 -- In January  1997,  the Company  entered into a satellite  procurement
contract with Hughes Space for the construction and launch of Orion 3, for which
construction  commenced in December 1996. The contract  provided for delivery in
orbit of  Orion 3, for a firm  fixed  price of $203  million,  excluding  launch
insurance and $8 million of incentive  payments.  Orion 3 will cover broad areas
of the Asia Pacific  region  including  China,  Japan,  Korea,  Southeast  Asia,
Australia, New Zealand, Eastern Russia and Hawaii. See Note G.









                                       11

<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In November 1996,  Orion entered into a contract with DACOM Corp.  ("DACOM"),  a
Korean communications company, under which, subject to certain conditions, DACOM
will purchase eight  dedicated  transponders  on Orion 3 for 13 years, in return
for approximately $89 million,  payable over a period from December 1996 through
seven months following the lease  commencement date for the transponders.  DACOM
has deposited funds with Orion in accordance with the contract.  As of March 31,
1999, Loral Orion had received  approximately $35 million from DACOM.  Orion had
an obligation  to maintain a letter of credit for seven months  beginning on the
lease commencement date in the amount of $44.8 million.  Payments are subject to
refund pending the successful launch and commencement of commercial operation of
Orion 3.

Agreements  with  Loral  Skynet -  During  the  fourth  quarter  of 1998,  Loral
completed its  integration  plan for Loral Orion and  transferred  management of
Loral  Orion's  satellite  capacity  leasing and  satellite  operations to Loral
Skynet,  effective  January 1, 1999. Orion and Loral Skynet, a division of Loral
SpaceCom Corporation,  which in turn is a wholly-owned subsidiary of Loral, have
entered into agreements  (the "Loral Skynet  Agreements")  effective  January 1,
1999,  whereby  Loral  Skynet  provides  to Orion  (i)  marketing  and  sales of
satellite  capacity  services on the Orion satellite network and related billing
and  administration  of  customer  contracts  for  those  services  (the  "Sales
Services")  and (ii)  telemetry,  tracking  and control  services  for the Orion
satellite  network  (the  "Technical  Services",  and  together  with the  Sales
Services,  the "Services").  Orion is charged Loral Skynet's costs for providing
these services plus a 5 percent administrative fee.

Litigation  -- On November 9, 1996,  Orion and Skydata  Corporation  ("Skydata")
executed a letter with respect to the  settlement in full of pending  litigation
and arbitration related to a patent dispute. As part of the settlement,  Skydata
granted Orion (and its affiliates) an unrestricted,  world-wide  paid-up license
to make,  have made,  use or sell  products or methods  under the patent and all
other  corresponding  continuation and reissue  patents.  Orion has paid Skydata
$437,000 during 1997 and 1998 as part of this settlement.

Loral Orion is party to various  litigation  arising in the normal course of its
operations.  In the opinion of  management,  the  ultimate  liability  for these
matters,  if any,  will not have a  material  adverse  effect  on Loral  Orion's
financial position or results of operations.

NOTE F.  RECLASSIFICATIONS

Certain prior period  amounts have been  reclassified  to conform to the current
period presentation.

NOTE G.  SUBSEQUENT EVENT

On May 4, 1999, the Company's  Orion 3 broadcast  video and data  communications
satellite  was placed  into a  lower-than-expected  orbit  after its launch on a
Boeing Delta III rocket from Cape Canaveral Air Station,  Florida.  According to
Boeing,  the Delta III's second stage  apparently  failed to complete its second
stage burn,  and, as a result,  the satellite,  manufactured by Hughes Space and
Communications  Corporation,  achieved  an orbit  well below the  planned  final
altitude.  Data from the  satellite  is still  being  received  and  analyzed to
determine the cause of the failure.  Based on current  information,  however, it
appears unlikely that the satellite will be usable.

The  satellite  and launch were fully  insured for  approximately  $265 million.
DACOM  Corporation,  a Korean  communications  company which had purchased eight
transponders on Orion 3 for a total of $89 million, had already made prepayments
of approximately $35 million to the Company.  Under Loral Orion's agreement with
DACOM,  the amount  prepaid is subject to refund in the event that Orion 3 fails
to commence  commercial  operation by June 30, 1999. In addition,  Loral Orion's
debt covenants require that the insurance proceeds be used to build and launch a
replacement  satellite  within 15 months of receipt of such proceeds,  or to pay
down such debt (see Note B). The  Company is  currently  evaluating  its options
with regard to this matter.  During 1999,  expected earnings from Orion 3, which
will now not be received,  will be offset,  in part, by reduced  depreciation as
well as reduced interest expense and operating costs.


                                       12
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Except for the historical information contained herein, the matters discussed in
this Management's  Discussion and Analysis of Financial Condition and Results of
Operations,  and  elsewhere in this Form 10-Q,  are  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.  In addition,
from time to time,  Loral Orion or their  representatives  have made or may make
forward-looking   statements,   orally  or  in  writing.   Such  forward-looking
statements may be included in, but are not limited to,  various  filings made by
Loral Orion with the Securities and Exchange Commission,  press releases or oral
statements  made by or with the approval of an authorized  executive  officer of
Loral Orion.  Actual  results could differ  materially  from those  projected or
suggested  in any  forward-looking  statements  as a result of a wide variety of
factors or conditions.  See the section of Loral Orion,  Inc's. Annual Report on
Form 10-K for the fiscal year ended December 31, 1998,  entitled  "Certain Facts
That May Effect Future Results".

GENERAL

Loral Orion,  Inc. (the  "Company" or "Loral  Orion"),  formerly  known as Loral
Orion Network  Systems,  Inc., is a holding company with no assets or operations
other than its  investments in its  subsidiaries.  Through the operations of its
subsidiaries,  the  Company's  principal  business is providing  satellite-based
communications   services   for  private   communications   networks  and  video
distribution  and other satellite  transmission  services.  In 1998, Loral Orion
organized its business into two distinct operating segments as follows:

   Fixed  Satellite  Services:   Leasing  transponder   capacity  and  providing
   value-added  services  to  customers  for a  wide  variety  of  applications,
   including the distribution of broadcast programming, news gathering, business
   television,  distance learning and  direct-to-home  ("DTH")  services.  As of
   January 1, 1999, the Company's  fixed satellite  services  ("FSS") assets are
   managed by Loral Skynet, a division of Loral SpaceCom Corporation, and

   Data Services:  Providing  managed  communications  networks and Internet and
   intranet services, using transponder capacity on the Loral Skynet Telstar and
   Loral Orion fleets.

No  restrictions  exist  on the  ability  of the  subsidiaries  of  Loral  Orion
("Subsidiary  Guarantors")  other  than  inconsequential  subsidiaries,  to  pay
dividends  or make  other  distributions  to the  Company,  except to the extent
provided by law generally  (e.g.,  adequate capital to pay dividends under state
corporate laws).

ORION 2

Orion 2. The Company  entered into a satellite  procurement  contract with Space
Systems/Loral  ("SS/L"), a wholly owned subsidiary of Loral SpaceCom Corporation
for the  construction  and launch of the Orion 2 satellite  for operation in the
Atlantic  Ocean  region at  12(degree)  W.L.  (the  "SS/L  Contract").  The SS/L
Contract  provides  for  delivery  in-orbit  of the Orion 2 aboard an Ariane 44L
launch vehicle in the third quarter of 1999. The SS/L satellite  design provides
for 38 Ku-band transponders with a footprint covering the Eastern United States,
Southeastern Canada,  Europe, the Commonwealth of Independent States, the Middle
East, North and South Africa and South America.

ORION 3

On May 4, 1999, the Company's  Orion 3 broadcast  video and data  communications
satellite  was placed  into a  lower-than-expected  orbit  after its launch on a
Boeing Delta III rocket from Cape Canaveral Air Station,  Florida.  According to
Boeing,  the Delta III's second stage  apparently  failed to complete its second
stage burn,  and, as a result,  the satellite,  manufactured by Hughes Space and
Communications  Corporation,  achieved  an orbit  well below the  planned  final
altitude.  Data from the  satellite  is still  being  received  and  analyzed to
determine the cause of the failure.  Based on current  information,  however, it
appears unlikely that the satellite will be usable.



                                       13
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The  satellite  and launch were fully  insured for  approximately  $265 million.
DACOM  Corporation,  a Korean  communications  company which had purchased eight
transponders on Orion 3 for a total of $89 million, had already made prepayments
of approximately $35 million to the Company.  Under Loral Orion's agreement with
DACOM,  the amount  prepaid is subject to refund in the event that Orion 3 fails
to commence  commercial  operation by June 30, 1999. In addition,  Loral Orion's
debt covenants require that the insurance proceeds be used to build and launch a
replacement  satellite  within 15 months of receipt of such proceeds,  or to pay
down such debt (see Note B). The  Company is  currently  evaluating  its options
with regard to this matter.  During 1999,  expected earnings from Orion 3, which
will now not be received,  will be offset,  in part, by reduced  depreciation as
well as reduced interest expense and operating costs.

Satellite  Launch  and  Operation  Risk.  There  can be no  assurance  that  the
Company's satellites will be successfully launched or operate in accordance with
their  design.  While the Company  intends to procure  launch  insurance for its
satellites,  a total or partial loss of a satellite will involve delays and loss
of revenue,  which may impair the Company's  ability to service its indebtedness
and such insurance will not protect the Company against  business  interruption,
loss or delay of  revenues  or similar  losses and may not fully  reimburse  the
Company for its expenditures.

RESULTS OF OPERATIONS

On March 20,  1998,  Orion was  acquired  by Loral Space &  Communications  Ltd.
("Loral"),  through the merger (the  "Merger") of a wholly owned  subsidiary  of
Loral,  Loral  Satellite  Corporation,  with and into Orion.  (See Note A to the
condensed   consolidated   financial   statements.)   In  order  to  provide  an
understanding  of the Company,  the results of  operations  discusses the actual
results for the three months ended March 31, 1999 with the pro forma results for
the three months ended March 31, 1998 of the Predecessor  Company. The pro forma
results  of  operations  for the three  months  ended  March 31,  1998 have been
presented  to give the effect as of January 1, 1998,  of the Merger  with Loral,
and the Exchange, the Orion Merger, and the Financings (the "Transactions"),  as
described in Note 1 in the Company's  latest Annual Report on Form 10-K. The pro
forma  results of operations  does not purport to present the actual  results of
operations  of the Company had the  Transactions  in fact occurred on January 1,
1998 nor is it indicative  of the results of operations  that may be achieved in
the future.

As a result of these  Transactions,  the pro forma  adjustments  resulted  in an
increase in depreciation and amortization expenses of approximately $4.4 million
for the three months ended March 31, 1998.  This increase  primarily  relates to
amortization  expense for cost in excess of net assets acquired  associated with
the Loral  Merger.  The pro forma  results for 1998 also include a $12.1 million
adjustment to eliminate  merger costs.  Pro forma interest expense for the three
months ended March 31, 1998 includes an  adjustment to decrease  expense by $3.2
million.  The  decrease in interest  expense is  primarily  attributable  to the
amortization  of bond  premium  relating to the fair value  adjustments  and the
elimination  of  interest  expense  on the  debentures  as a result of the Loral
Merger.

In  evaluating  financial  performance,  management  uses  revenues and earnings
before interest, taxes, depreciation and amortization ("EBITDA") as a measure of
a segment's  profit or loss.  The  following  discussion  of revenues and EBITDA
reflects the results of Loral  Orion's  operating  segments for the three months
ended March 31, 1999 and the pro forma three months  ended March 31,  1998.  See
Note  D to  the  condensed  consolidated  financial  statements  for  additional
information on segment results.






                                       14
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

OPERATING REVENUES (IN MILLIONS):

                                                                PRO FORMA
                                                          THREE MONTHS ENDED
                                                             MARCH 31, 1998
                                   THREE MONTHS ENDED        PREDECESSOR      
                                     MARCH 31, 1999            COMPANY      
                                     --------------            -------      

Fixed satellite services  ........     $    9.1              $     7.9
Data services  ...................         15.2                   10.9
Intersegment elimination .........         (1.8)                   --
                                         -------              ---------
Operating revenues ...............     $   22.5              $    18.8
                                       ========              =========


EBITDA (1) (IN  MILLIONS):
                                                                PRO FORMA
                                                          THREE MONTHS ENDED
                                                             MARCH 31, 1998
                                   THREE MONTHS ENDED        PREDECESSOR      
                                     MARCH 31, 1999            COMPANY      
                                     --------------            -------      
                                                      
Fixed satellite services .........    $     6.3              $     5.1
Data services  ...................         (2.3)                  (4.1)
                                         -------              ---------
EBITDA............................    $     4.0              $     1.0
                                       ========              =========



--------
(1) Pro forma EBITDA  (which is  equivalent  to operating  income  (loss) before
    depreciation and amortization) is provided because it is used as the measure
    of segment  profit or loss and because it is a measure  commonly used in the
    communications  industry  to  analyze  companies  on the basis of  operating
    performance,  leverage  and  liquidity  and  is  presented  to  enhance  the
    understanding of Loral Orion's operating results. However, EBITDA should not
    be construed as an  alternative to net income as an indicator of a company's
    operating  performance,  or cash flow  from  operations  as a  measure  of a
    company's  liquidity.  EBITDA may be calculated  differently and, therefore,
    may not be  comparable  to  similarly  titled  measures  reported  by  other
    companies.




                                       15
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Revenue and  Backlog.  Total  revenues for the three months ended March 31, 1999
were $22.5  million  compared to $18.8  million  for the pro forma three  months
ended March 31, 1998,  an increase of $3.7 million or 20 percent.  This increase
is  primarily  attributable  to  the  private  communications  network  services
operations, which included the addition of 99 customer sites in service compared
to the same period in 1998.

At March 31, 1999, the Company had backlog  (representing  future revenues under
contract) of  approximately  $328.4 million  compared to $285.9 million at March
31, 1998, an increase of 15 percent.  Revenue from customer  contract backlog is
typically earned over two to five years.

Direct Expenses.  Direct expenses for the three months ended March 31, 1999 were
$6.6 million compared to $6.4 million for the pro forma three months ended March
31, 1998, an increase of $0.2 million or 3 percent.  This increase was primarily
attributable  to  Internet  access and  terrestrial  link  charges.  These costs
support the Worldcast  Internet  access  product  ("Worldcast"),  which provides
international internet connectivity through the Orion 1.

Sales and Marketing Expenses. Sales and marketing expenses were $5.9 million for
the three months  ended March 31, 1999,  as compared to $5.8 million for the pro
forma three  months  ended  March 31,  1998,  an  increase of $0.1  million or 2
percent.

Engineering and Technical Services Expenses.  Engineering and technical services
expenses for the three months ended March 31, 1999 were $2.2 million compared to
$1.9 million for the pro forma three  months ended March 31, 1998.  The increase
is primarily due to additional salaries associated with support of Worldcast.

General Administrative  Expenses.  General and administrative expenses were $3.7
million for the three months ended March 31, 1999 and the pro forma three months
ended March 31, 1998.

Depreciation and  Amortization.  Depreciation  and amortization  expense for the
three months ended March 31, 1999 was $17.5  million  compared to $16.8  million
for the pro forma three months ended March 31, 1998, an increase of $0.7 million
or 4 percent.  The increase  primarily  resulted from  additions to property and
equipment to service the Company's operations.

Interest.  Interest income was $1.2 million for the three months ended March 31,
1999,  compared to $5.4  million for the pro forma three  months ended March 31,
1998.  The decrease was due to the  reduction in the balance of  segregated  and
restricted funds in 1999, which were used for the construction of satellites and
to fund interest payments on the Company's senior notes.  Interest expense,  net
of  capitalized  interest of $7.3 million and $3.3  million,  respectively,  was
$13.9  million for the three months ended March 31, 1999,  and $18.0 million for
the pro forma  three  months  ended  March 31,  1998.  The  decrease in interest
expense is due to additional  capitalized interest costs attributable to the two
satellites under construction, amortization of bond premium relating to the fair
value adjustments and the elimination of interest expense on the debentures as a
result of the Loral Merger.

 Income Taxes. The Company is included in the  consolidated  U.S. Federal income
tax  return  of Loral  Space &  Communications  Corporation.  Pursuant  to a tax
sharing  agreement for 1999 with Loral Space & Communications  Corporation,  the
Company is  entitled  to  reimbursement  for the use of its tax losses when such
losses are  utilized by the  consolidated  group.  The  Company  has  recorded a
receivable under this tax sharing agreement of approximately  $2.2 million and a
deferred tax provision of $0.4  million,  resulting in a net tax benefit of $1.8
million for the three  months  ended March 31,  1999.  The deferred tax asset of
$53.5  million on the  accompanying  balance sheet arises from the tax effect of
the temporary  differences  between the carrying  amount of the Senior Notes and
the Senior Discount Notes payable for financial and income tax purposes.


                                       16

<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Net Loss.  As a result of the above,  the Company  incurred  net losses of $24.2
million and $28.7  million for the three months ended March 31, 1999 and the pro
forma three months ended March 31, 1998.

RESULTS BY OPERATING SEGMENT

Fixed Satellite Service

FSS  revenue  for the  three  months  ended  March  31,  1999 was  $9.1  million
(including $1.8 million in  intersegment  revenue) versus $7.9 million for three
months  ended March 31,  1998.  EBITDA for the three months ended March 31, 1999
was $6.3 million, or 69 percent of revenues,  versus $5.1 million, or 65 percent
of revenues, for the three months ended March 31, 1998. Capital expenditures for
the three months ended March 31, 1999, were approximately $63.4 million.

Data Services

Revenues for the data services segment for the three months ended March 31, 1999
were approximately $15.2 million versus $10.9 million for the three months ended
March 31, 1998,  primarily  from Loral Orion's  corporate  data  networking  and
Internet and  intranet  services  businesses.  EBITDA for the three months ended
March 31, 1999 was a loss of approximately  $2.3 million (including $1.8 million
of  charges  from FSS for  leasing  capacity  on Orion 1)  versus a loss of $4.1
million for the three months ended March 31, 1998. Capital  expenditures for the
three months ended March 31, 1999 were approximately $0.3 million.

LIQUIDITY AND CAPITAL RESOURCES

Existing Capital Resources.  As of March 31, 1999, the Company had cash and cash
equivalents of $18.8 million and restricted assets of $48.7 million, placed in a
pledged  account  (to  pre-fund  the next two  interest  payments  on the Senior
Notes).

Based upon its current  expectations for growth, the Company anticipates it will
have  additional  funding  requirements  over the next  three  years to fund the
purchase of VSATs, Senior Note interest payments, other capital expenditures and
other operating  needs.  Interest charges on the Senior Notes are fully provided
for by  restricted  cash  through  January  2000.  The  Company  does not have a
revolving credit facility.  Accordingly, the Company will need to secure funding
from Loral, or raise  additional  financing.  Sources of additional  capital may
include public or private debt, equity financings or strategic  investments.  To
the extent  that the  Company  seeks to raise  additional  debt  financing,  the
Indentures  limit  the  amount  of such  additional  debt  (under a  variety  of
provisions  contained  in such  Indentures)  and prohibit the Company from using
Orion 1 or Orion 2 or the  insurance  proceeds  from Orion 3 as  collateral  for
indebtedness for money borrowed.  If the Company requires  additional  financing
and is unable to obtain such financing from Loral or from outside sources in the
amounts and at the times needed, there would be a material adverse effect on the
Company.

                                       17
<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


OTHER MATTERS

IMPACT OF YEAR 2000

The  Company  is  evaluating  the  potential  effect  of the  year  2000  on its
information processing systems. it is not known at this time what modifications,
if any, will be required.  All costs  associated with any  modification  will be
expensed as incurred.

The Company's  Year 2000 Program is proceeding on schedule.  The Year 2000 Issue
is the result of computer  programs  which were written  using two digits rather
than four to  signify a year  (i.e.,  the year 1999 is  denoted  as "99" and not
"1999").  Computer programs written using only two digits may recognize the year
2000 as the year 1900. This could result in a system failure or  miscalculations
causing disruption of operations.

The Company has  implemented  a Year 2000 program (the "Year 2000  Program") for
its  internal  products,  system  and  equipment,  as well as for key vendor and
customer  supplied  products,  systems and  equipment.  As part of the Year 2000
Program,  the Company is assessing  the Year 2000  capabilities  of, among other
things, its satellite,  ground equipment,  research and development  activities,
and facility management systems. The Year 2000 Program consists of the following
phases:  Inventory of Year 2000 items,  Assessment  (including  prioritization),
Remediation  (including  modification,  upgrading and replacement),  Testing and
Auditing.  This five-step  program is divided into six major  sections  covering
both information and non-information technology systems: 1) business systems, 2)
technical systems, 3) products and services, 4) imbedded  hardware/firmware,  5)
vendor  supplied  products and 6) customer  provided  products.  As of March 31,
1999, the Company has completed  approximately 98 percent of the inventory phase
and  approximately  90 percent of its assessment  phase.  The Company expects to
complete  the first four  phases,  through the testing  phase,  of the Year 2000
Program  during  the third  quarter of 1999,  which is prior to any  anticipated
material  impact on the  operations of the Company.  The fifth phase,  the audit
phase,  commenced in January 1999,  and is expected  continue  through the third
quarter of 1999 to accommodate re-audits if necessary.

Both internal and external resources are being utilized to execute the Company's
plan.  The program to address Year 2000 has been underway  since July 1997.  The
incremental  costs  incurred  through  March 31,  1999,  for this  effort by the
Company was approximately  $50,000. Based on the efforts of the Company to date,
the  Company  anticipates   additional  incremental  expenses  of  approximately
$105,000 will be incurred to substantially complete the effort.

Based upon the  accomplishments to date, no contingency plans are expected to be
needed.  As risks  are  identified,  contingency  plans  will be  developed  and
implemented as necessary.  However, because of the progress achieved to date and
the  Company's  expectations  that its Year 2000 program  will be  substantially
complete in the third quarter of calendar  1999, the Company  believes  adequate
time will be available to insure  alternatives  can be  developed,  assessed and
implemented  prior to a Year 2000 issue having a material negative impact on the
operations  of the  Company.  However,  there  can  be no  assurance  that  such
modifications and conversions, if required, will be completed on a timely basis.

The cost of the  program  and the dates on which the  Company  believes  it will
substantially  complete Year 2000  modifications  are based on management's best
estimates.  Such estimates  were derived using software  surveys and programs to
evaluate  calendar date  exposures and numerous  assumptions  of future  events,
including the continued availability of certain resources, third-party year 2000
readiness and other factors.  Because none of these estimates can be guaranteed,
actual results could differ  materially  and adversely  from those  anticipated.
Specific  factors  that  might  cause an  adjustment  of costs  are:  number  of
personnel  trained in this area,  the ability to locate and correct all relevant
computer  codes,  the ability to  validate  supplier  certification  and similar
uncertainties.


                                       18

<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The Company's  failure to remediate a material Year 2000 problem could result in
an interruption or failure of certain basic business operations.  These failures
could  materially  and  adversely  effect the Company's  results of  operations,
liquidity and financial  condition.  The Company is also assessing the Year 2000
readiness  of  key  third-party   suppliers.   Information  requests  have  been
distributed  to such suppliers and replies are being  evaluated.  If the risk is
deemed  material,  on-site  visits to suppliers  will be conducted to verify the
adequacy of the information received. However, due to the general uncertainty of
the  Year  2000  problem,  including  uncertainty  with  regard  to  third-party
suppliers and customers, the Company is unable to determine at this time whether
the  consequences of Year 2000 failures will have an adverse  material impact on
the  Company's  results of  operations,  liquidity or financial  condition.  The
Company's  Year 2000  Program  is  expected  to have  considerably  reduced  the
Company's  level of  exposure  in  regard  to  third-party  supplier  Year  2000
problems.  There can be no assurance  given that the Company's Year 2000 Program
will be  successful  in avoiding any  interruption  or failure of certain  basic
business  operations,  which may have a material adverse effect on the Company's
results of operations or financial position.

ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting Standards Board issued Statement No. 133
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which
requires  that all  derivative  instruments  be recorded on the balance sheet at
their fair value.  Changes in the fair value of  derivatives  are recorded  each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge  transaction and, if it is, the type
of hedge  transaction.  The Company has not yet  determined  the impact that the
adoption  of SFAS 133 will  have on its  earnings  or  financial  position.  The
Company is required to adopt SFAS 133 on January 1, 2000.


<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)


PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

              27  Financial Data Schedule

         (b) Reports on Form 8-K:

              None.












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<PAGE>
                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)


SIGNATURE

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

                              LORAL ORION, INC.
                              ----------------------------
                              (Registrant)

Date:  May  17, 1999                                                            
                              --------------------------------------------------
                              Richard J. Townsend
                              Senior Vice President and Chief Financial Officer
                              (Principal Financial Officer and Registrant's
                               Authorized Officer)






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