FORM 10K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended                                 Commission File Number
December 31, 1998                                                  0-17785

                          AIRCRAFT INCOME PARTNERS L.P.
                          -----------------------------
             (Exact name of Registrant as specified in its charter)

         Delaware                                             13-3430508
         --------                                             ----------
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                            Identification Number)

 411 West Putnam Avenue, Suite 270, Greenwich, CT                06830
 ------------------------------------------------                -----
(Address of principal executive offices)                       (Zip Code)


Registrant's telephone number, including area code:      (203) 862-7444
                                                         ---------------

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

                                      NONE

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

                      UNITS OF LIMITED PARTNERSHIP INTEREST

         Indicate  by check mark  whether  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  [   ]

             There  is no  public  market  for the  Limited  Partnership  Units.
Accordingly,  information  with respect to the aggregate market value of Limited
Partnership Units held by non-affiliates of Registrant has not been supplied.

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

                                        Location in Form 10-K in which 
              Document                      Document is Incorporated
              --------                      ------------------------

Registrant's Prospectus, dated               Parts I, II and III
February 29, 1988, as supplemented
by Supplements dated May 20, 1988,           Exhibit Index: page IV-1
August 16, 1988, November 4, 1988, 
January 6, 1989 and February 28, 1989.
<PAGE>
PART I


Item 1.       Business

General

Registrant  was organized as a Delaware  limited  partnership on October 8, 1987
with Integrated Aircraft Fund Management Corp. (the "General  Partner"),  as its
general partner.

Commencing  February 29, 1988,  Registrant  offered a maximum of 500,000 limited
partnership units (the "Units") at an offering price of $500 per Unit. The Units
were registered under the Securities Act of 1933 (Registration No. 33-18891) and
sold  pursuant to a prospectus,  dated  February 29, 1988,  as  supplemented  by
supplements  dated May 20, 1988, August 16, 1988,  November 4, 1988,  January 6,
1989 and February 28, 1989 (the  "Prospectus").  The Prospectus is  incorporated
herein by reference (see Exhibit 28).  Registrant  terminated the offering as of
May 1, 1989, at which time it had accepted  subscriptions for a total of 385,800
Units, aggregating $192,900,000.  Registrant completed the investment of the net
proceeds of the offering on May 31, 1989.

Description of business

The aircraft owned by Registrant,  consisting of used commercial jet aircraft as
well as related  engines and other  aircraft  parts,  were  initially  leased to
various  lessees for terms  ranging from 17 to 88 months.  Through  December 31,
1998,  Registrant had acquired interests in 18 aircraft  (including an undivided
47.92231%  joint venture  interest in one  aircraft) at a cost of  approximately
$169,748,000  (inclusive of associated  acquisition fees).  Through December 31,
1998,  Registrant  had sold or disposed of 15 aircraft  with  original  purchase
prices aggregating approximately $148,277,000. (See below; Item 2, "Properties";
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations";  and Item 8, "Financial Statements and Supplementary Data" for a
more  detailed  description  of  business  developments,   the  acquisition  and
disposition of such aircraft.)

Of the 18 aircraft  originally  purchased by  Registrant,  at December 31, 1998,
Registrant had an interest in 3 of the aircraft which had an aggregate  original
cost   (inclusive  of  capitalized   major   additions  and   improvements)   of
approximately $21,471,000 (net carrying value of approximately $5,058,000).

Registrant's remaining aircraft portfolio consists of 3 McDonnell Douglas DC9-30
aircraft, all of which had been leased to Continental Airlines,  Inc. Two of the
aircraft  were  returned in September  1998 and the lease of the third  aircraft
expired in December 1998.

Registrant  is  attempting  to sell the 3  remaining  aircraft  as  promptly  as
possible  with a view towards  liquidating  Registrant's  entire  portfolio  and
winding up the business of Registrant prior to the end of 1999.

Through  November 2, 1994, the General Partner was a wholly owned  subsidiary of
Integrated Resources,  Inc. ("Integrated").  On November 3, 1994, as a result of
the consummation of the reorganization plan relating to Integrated's bankruptcy,
indirect  ownership of the General  Partner was  purchased  by Presidio  Capital
Corp.  ("Presidio").  On August 28, 1997,  an  affiliate  of  NorthStar  Capital
<PAGE>
Partners acquired all of the Class B shares of Presidio, the corporate parent of
the  General   Partner.   This   acquisition,   when  aggregated  with  previous
acquisitions,  caused NorthStar  Capital Partners to acquire indirect control of
the  General  Partner.  Presidio  was also party to an  Administrative  Services
Agreement with Wexford Management LLC ("Wexford")  pursuant to which Wexford was
responsible  for the day-to-day  management of Presidio and, among other things,
had authority to designate directors of the General Partner.

On November 2, 1997, the Administrative  Services Agreement between Presidio and
Wexford expired. Effective November 3, 1997, Wexford and Presidio entered into a
new Administrative Services Agreement (the "ASA"), which expired on May 3, 1998.
Under the  terms of the ASA,  Wexford  provided  consulting  and  administrative
services to  Presidio  and its  affiliates,  including  the General  Partner and
Registrant.  Presidio also entered into a management  agreement  with  NorthStar
Presidio Management Company, LLC ("NorthStar Presidio").  Under the terms of the
management agreement,  NorthStar Presidio will provide the day-to-day management
of Presidio and its direct and indirect subsidiaries and affiliates.

Effective July 31, 1998, Presidio is indirectly  controlled by NorthStar Capital
Investment Corp. ("NorthStar"), a Maryland corporation.

Recent Developments

Year ended December 31, 1996

On April 15, 1996, Registrant sold to Southwest Airlines,  Inc.  ("Southwest") a
Boeing  737-200  Advanced  aircraft  leased to  Southwest.  Registrant  received
proceeds  of  approximately  $6,784,000,  net of an  associated  aircraft  sales
commission  and  other  related  costs.  The net  proceeds  from the  sale  were
distributed to the partners of Registrant in August 1996. The Southwest aircraft
was  originally   purchased  by  Registrant  in  July  1988  for   approximately
$12,804,000  inclusive of associated  acquisition  costs.  As of April 15, 1996,
when it was sold,  the net  carrying  value of the  aircraft  was  approximately
$3,216,000 (net of allowance for equipment impairment of $2,300,000).

Year ended December 31, 1997

On May 22, 1997, a Boeing 737-297 Advanced aircraft owned by Registrant was sold
to  an  unaffiliated  third  party  for  proceeds  of  approximately  $1,982,000
exclusive of selling expenses of approximately $60,000. The aircraft,  which was
formerly  leased to Aloha  Airlines,  Inc.  ("Aloha"),  had been off-lease since
October 15, 1996. At the time of the sale, the aircraft had a net carrying value
of approximately $1,290,000.

Year ended December 31, 1998

On March 31, 1998, a Boeing 737-2H4  aircraft owned by Registrant was sold to an
unaffiliated  third  party for  $3,500,000  exclusive  of  selling  expenses  of
approximately  $106,000.  The aircraft,  which was formerly leased to Southwest,
had been  off-lease  since January 1998. At the time of sale, the aircraft had a
net carrying value of approximately $1,141,000.

On May 19, 1998, a Boeing 737-297 Advanced aircraft owned by Registrant was sold
to an unaffiliated third party for proceeds of $4,100,000,  exclusive of selling
expenses of approximately  $124,000. The aircraft,  which was formerly leased to
Aloha had a net carrying value of approximately $2,617,000 at the time of sale.
<PAGE>
Between August 17, 1998 and September 23, 1998,  Registrant sold its interest in
two Boeing  737-200  aircraft,  four Boeing  727-200  aircraft  (inclusive of an
undivided  47.92231%  joint venture  interest in one aircraft) and one McDonnell
Douglas DC9-51 aircraft. Aside from the DC9-51 aircraft, the six aircraft had an
original  cost  of  approximately  $71,235,500,  represented  45.03%  of the net
carrying value of Partnership's  aircraft as of the end of June 30, 1998 and, at
the  time  of  sale,  had a net  carrying  value  of  approximately  $7,744,000.
Registrant's  interest in the DC9-51 aircraft  consisted of the right to receive
deferred payments of $2,529,900 related to a September 1, 1996 installment sale.
The sales were made to an  unaffiliated  third party for gross  sales  proceeds,
exclusive of closing costs, of $18,000,000.

Significant Lessees

During  1998,  Registrant's  revenues  from  aircraft  were  derived  from lease
payments from lessees.  None of such lessees were  affiliated  with  Registrant.
During the year ended  December 31, 1998,  lease payments due from the following
lessees were the source of 10% or more of Registrant's gross rental revenues:

              Continental Airlines, Inc.                                   40%
              American Trans Air, Inc.                                     27%
              Ladeco S.A.                                                  18%
              Continental Micronesia Inc.                                  14%

At December 31, 1998, all of Registrant's remaining equipment is off lease.

Competition

The  equipment  leasing  industry,  particularly  as it relates to aircraft,  is
highly competitive. The aircraft leasing industry offers users an alternative to
the purchase of nearly every type of aircraft.  The competitive  conditions vary
considerably depending on the type of aircraft and the nature of the prospective
user.

Registrant has encountered severe competition in attempting to sell its aircraft
as they  have  come off lease  due to a  surplus  in the  market of  narrow-body
aircraft  similar  to the  types  owned by  Registrant.  The  substantial  costs
required to maintain and bring used aircraft into  compliance with FAA noise and
maintenance  requirements  adopted since 1990 are the primary factors which have
adversely  affected the narrow body aircraft market.  In addition,  Registrant's
aircraft also have to compete with newer, more  fuel-efficient  aircraft,  which
comply  with the  recently  adopted  FAA  noise  requirements.  Registrant  also
believes  that  as a  result  of the  factors  listed  above  there  has  been a
significant  decline in the re-sale  value of  narrow-body  aircraft of the type
owned by Registrant.

Registrant may need to use a portion of its operating  reserves  and/or its cash
flow, which would otherwise be available for distribution, to upgrade or enhance
its remaining  aircraft if Registrant  determines that such  expenditures are in
its best interest in order to maximize the resale value. Furthermore, because of
market conditions,  Registrant may be required to bear some of the related costs
of compliance  with  mandatory  federal  regulations  covering  maintenance  and
upgrading of aging aircraft.
<PAGE>
Employees

Registrant does not have any employees.  NorthStar  Presidio  currently performs
accounting,  secretarial,  transfer and administrative  services for Registrant.
NorthStar  Presidio also performed  similar services for other affiliates of the
Managing General Partner. Integrated Aircraft Fund Management Corp. ("IAFM"), an
indirect  subsidiary  of  Presidio,  manages  Registrant's  equipment  portfolio
pursuant to a management  agreement.  See Item 7,  "Management's  Discussion and
Analysis of Financial  Condition and Results of Operations",  Item 8, "Financial
Statements", Item 10, "Directors and Executive Officers of the Registrant", Item
11, "Executive  Compensation",  and Item 13, "Certain  Relationships and Related
Transactions".

Foreign Operations

During 1998,  Registrant  operated three aircraft in foreign  countries.  Two of
such aircraft were leased to Ladeco S.A., a Chilean  airline,  and were operated
primarily in South  America.  A third aircraft was leased to Air  Micronesia,  a
stand-alone air carrier  affiliated with  Continental  Airlines,  Inc., and such
aircraft was operated primarily in Southeast Asia. All of such leases expired in
1998. (See Item 8, "Financial Statements and Supplementary Data - Note 10")

Item 2.       Properties

The aircraft owned by Registrant as of March 1, 1999 (see "General" under Item 1
"Business" hereof) consists of the following:

                                                              Type of Ownership
Type of Equipment             Date of Purchase                   or Interest
-----------------             ----------------                   -----------

One McDonnell                 April 20, 1988                Full ownership, not
Douglas DC-9-32                                             subject to any lien.
aircraft

Two McDonnell Douglas         May 13, 1988                  Full ownership, not
DC-9-32 aircraft                                            subject to any lien.


Item 3.       Legal Proceedings

On  July  29,  1998,  Fieldstone  Private  Capital  Group,  L.P.  ("Fieldstone")
commenced an action in the Supreme Court of the State of New York, County of New
York, against,  among others,  Registrant and its General Partner. The complaint
sought,  among other things,  damages against Registrant and its General Partner
for the alleged failure to pay Fieldstone leasing and sales commissions.

In  February  1999,  the  parties  agreed to settle the  action.  As part of the
settlement   Registrant  paid   Fieldstone   leasing   commissions   aggregating
approximately  $347,000  and  Registrant  entered  into a  separate  remarketing
agreement  with  Fieldstone  with  respect  to  certain  aircraft  remaining  in
Registrant's portfolio.


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

None
<PAGE>
PART II


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

(a) There is no developed public market for the Units of the Registrant.

As of March 1, 1999,  there were  approximately  14,600 record holders of Units,
owning an aggregate of 385,805 Units.

During the years  ended  December  31,  1998 and 1997,  Registrant  has made the
following cash  distributions with respect to the Units to holders thereof as of
the dates set forth below in the amounts set forth opposite such dates:

<TABLE>
<CAPTION>
   Distribution with respect to
   Quarter Ended                          Amount of Distribution Per Unit (1)
--------------------------------------------------------------------------------
                                               1998                  1997
                                               ----                  ----
<S>                                           <C>                   <C>   
    March 31                                  $   -                 $ 6.00
    June 30                                   $27.70                $10.00
    September 30                              $41.50                $ 4.50
    December 31                               $   -                 $    -
</TABLE>

 (1)     The amounts listed represent  distributions of cash from operations and
         cash from sales. (See Item 7, "Management's  Discussion and Analysis of
         Financial  Condition  and  Results  of  Operations",   for  information
         relating to Registrant's future distributions.)

(b) Not applicable.

<PAGE>
Item 6.       Selected Financial Data
<TABLE>
<CAPTION>
                                                         Year ended December 31,
                              --------------------------------------------------------------------------- 
                                   1998           1997            1996            1995            1994
                              -----------     -----------     -----------     -----------     ----------- 
<S>                           <C>             <C>             <C>             <C>             <C>          
Revenues (1) ............     $ 4,521,384     $ 8,231,951     $10,317,005     $12,372,475     $13,755,528
Net Income (Loss) (2) (3)     $11,331,319     $ 1,706,235     $ 5,988,174     $ 1,496,774     $   564,907

Net income (Loss)
Per Unit (2) (3) ........     $     26.43     $      3.98     $     13.97     $      3.49     $      1.32

Distribution Per Unit ...     $     69.20     $     20.50     $     40.50     $     32.00     $     31.00

Total Assets ............     $ 9,787,877     $30,567,247     $40,045,819     $52,365,622     $63,596,742
Total Partners' Equity ..     $ 9,247,440     $27,580,239     $34,661,785     $46,034,837     $58,255,574

</TABLE>

(1)  Included in this  amount is  $828,655,  $659,851,  $582,674,  $443,904  and
     $259,805 of interest  income for the years ended  December 31, 1998,  1997,
     1996, 1995 and 1994, respectively.  Additionally, revenues include $108,487
     and  $184,033  of other  income for the years ended  December  31, 1995 and
     1994, respectively.

(2)  Registrant provided allowances for equipment  impairments of $1,350,000 and
     $848,000 for the years ended December 31, 1998 and 1994,  respectively,  to
     recognize  the  loss  in  value  of  certain  aircraft.  No  allowance  was
     considered necessary for the years ended December 31, 1997, 1996 and 1995.

(3)  Included in these amounts are gains (losses) on the  disposition of various
     aircraft(s) of  $11,126,432,  $632,367,  and $5,222,948 for the years ended
     December 31, 1998, 1997 and 1996, respectively.  In addition, included is a
     gain of $1,001,731  which  resulted from the sale of marketable  securities
     during the year ended December 31, 1995.



Item 7.       Management's Discussion and Analysis of Financial Condition and 
              Results of Operations

Liquidity and Capital Resources


For the year ended December 31, 1998, cash  distributions  aggregated $69.20 per
Unit as compared to $20.50 per Unit with respect to the year ended  December 31,
1997.

During  1998,   Registrant  generated  cash  from  operations  of  approximately
$4,373,000,  or  approximately  $10.20 per Unit,  as compared  to  approximately
$8,892,000, or approximately $20.74 per Unit, during 1997. Additionally,  during
1998 Registrant  collected  proceeds from the sale of aircraft of  approximately
$25,160,000.
<PAGE>
At December 31, 1998, Registrant's cash reserves, inclusive the original working
capital (1% of original offering  proceeds),  was approximately  $3,725,000,  as
compared to  approximately  $6,386,000 at December 31, 1997.  The aggregate cash
reserves  were  comprised  of  approximately   $1,796,000,   which   represented
undistributed  cash from  operations  and cash from  sales,  as well as original
working capital of $1,929,000 (1% of original offering proceeds).

Registrant's  remaining  aircraft  portfolio consists of three McDonnell Douglas
DC9-30 aircraft, all of which had been leased to Continental Airlines,  Inc. Two
of the  aircraft  were  returned in  September  1998 and the third  aircraft was
returned in December 1998.

Registrant  is attempting  to sell the three  remaining  aircraft as promptly as
possible  with a view towards  liquidating  Registrant's  entire  portfolio  and
winding up the business of Registrant prior to the end of 1999.

It may be necessary for  Registrant to use a portion of its operating  reserves,
which would otherwise be available for distribution, to upgrade or enhance these
aircraft or related engines if Registrant  determines that such expenditures are
in its best interests in order to maximize resale value. Furthermore, because of
market conditions,  Registrant may be required to bear some of the related costs
of compliance with recent mandatory federal regulations covering maintenance and
upgrading of aging aircraft.  Registrant's ability to make distributions will be
impacted by its obligations to pay such costs.

Registrant's reserves should be sufficient to pay its operating expenses.

Of the 18 aircraft  originally  purchased by  Registrant,  at December 31, 1998,
Registrant  had an interest in 3 of the aircraft,  which had an original cost of
approximately $21,471,000 (net book value of approximately $5,058,000).


On May 22, 1997, a Boeing 737-297 Advanced aircraft owned by Registrant was sold
to  an  unaffiliated  third  party  for  proceeds  of  approximately  $1,982,000
exclusive of selling expenses of approximately $60,000. The aircraft,  which was
formerly  leased to Aloha had been off-lease since October 15, 1996. At the time
of sale, the aircraft had a net carrying value of approximately $1,290,000.

On November 15, 1997, the lease of a Boeing 737-200 Advanced  aircraft leased to
Aloha expired in accordance  with the terms of the lease.  On May 19, 1998,  the
aircraft was sold to an  unaffiliated  third party for  proceeds of  $4,100,000,
exclusive of selling expenses of approximately  $124,000. The aircraft had a net
carrying value of approximately $2,617,000 at the time of sale.

On March 31, 1998, a Boeing 737-2H4  aircraft owned by Registrant was sold to an
unaffiliated  third  party for  proceeds  of  $3,500,000  exclusive  of  selling
expenses of approximately  $106,000. The aircraft,  which was formerly leased to
Southwest,  had been  off-lease  since January  1998.  At the time of sale,  the
aircraft had a net carrying value of approximately $1,141,000.

Between August 17, 1998 and September 23, 1998,  Registrant sold its interest in
two Boeing  737-200  aircraft,  four Boeing  727-200  aircraft  (inclusive of an
undivided  47.92231%  joint venture  interest in one aircraft) and one McDonnell
Douglas DC9-51 aircraft. Aside from the DC9-51 aircraft, the six aircraft had an
original  cost  of  approximately  $71,235,500,  represented  45.03%  of the net
<PAGE>
carrying value of Registrant's  aircraft as of June 30, 1998 and, at the time of
sale,  had  a net  carrying  value  of  approximately  $7,744,000.  Registrant's
interest  in the DC9-51  aircraft  consisted  of the right to  receive  deferred
payments of  $2,529,900  related to a September 1, 1996  installment  sale.  The
sales were made to unaffiliated third party for gross sales proceeds,  exclusive
of closing costs of $18,000,000.

In  September  1996 and July  1998,  Registrant  received  proposed  notices  of
assessment  from the State of Hawaii  with  respect  to  general  excise  tax of
approximately  $1,923,000  (including interest and penalties) for the years 1991
through  1997.  The state is alleging that  Registrant  owes GET with respect to
rents received from Aloha and Hawaiian  Airlines,  Inc.  ("Hawaiian")  under the
leases between Registrant and each of the airlines.

The leases  with both Aloha and  Hawaiian  provide for full  indemnification  of
Registrant for such taxes,  but the bankruptcy of Hawaiian may relieve  Hawaiian
of its  indemnification  obligation for any periods prior to September 21, 1993,
when Hawaiian and its affiliates sought bankruptcy protection.  In any event, it
is  Registrant,  as taxpayer,  which is ultimately  liable for the GET, if it is
applicable.

The State of Hawaii has never previously  applied the GET to rentals received by
a lessor of aircraft where the lessor's only contact with the State of Hawaii is
the fact that it has  leased its  aircraft  to  airlines  which are based in the
state.  Aloha and Hawaiian,  as well as Registrant,  have separately engaged tax
counsel and both airlines are cooperating with Registrant to vigorously  contest
the proposed assessments.

Final notices of assessment  have not yet been issued.  Although there can be no
assurance that the contest of the  assessments  will be  successful,  Registrant
believes that the state's position on the  applicability of GET in this instance
is without  merit.  Registrant has not recorded any liability as a result of the
proposed notices of assessment.

Inflation has not had any material  effect on  Registrant's  revenues  since its
inception nor does  Registrant  anticipate  any material  effect on its business
from this factor.

Registrant  provided  allowances for equipment  impairment of $1,350,000 for the
year ended  December 31, 1998.  No allowance  was  considered  necessary for the
years ended December 31, 1997 and 1996.

Year 2000 compliance

The  Year  2000   compliance   issue  concerns  the  inability  of  computerized
information systems and equipment to accurately  calculate,  store or use a date
after  December  31,  1999,  as a result of the year being stored as a two digit
number.  This  could  result  in a system  failure  or  miscalculations  causing
disruptions  of  operations.  Registrant  and NorthStar  Presidio  recognize the
importance  of ensuring  that its  business  operations  are not  disrupted as a
result of Year 2000 related computer system and software issues.
<PAGE>
NorthStar  Presidio  is in  the  process  of  assessing  its  internal  computer
information systems and is taking the steps necessary to remedy these systems so
that  they will be Year  2000  compliant.  In  connection  therewith,  NorthStar
Presidio has installed a new fully  compliant  accounting and reporting  system.
NorthStar  Presidio is also reviewing its other  internal  systems and programs,
along with those of its unaffiliated third party service providers,  in order to
ensure compliance.

Because this  assessment is ongoing,  the total cost of bringing all systems and
equipment into Year 2000  compliance has not been fully  quantified.  Based upon
available information, NorthStar Presidio does not believe that these costs will
have a material adverse effect on Registrant's business,  financial condition or
results.  While Registrant's  present intention is to wind up its business prior
to the end of 1999, it is possible that there could be adverse  consequences  to
Registrant  as a  result  of Year  2000  issues  that are  outside  Registrant's
control.  NorthStar  Presidio is in the preliminary  stages of evaluating  these
issues and will be developing contingency plans.

Results of Operations - 1998 as Compared to 1997

Net income  increased  for the year ended  December  31, 1998 as compared to the
year  ended  December  31,  1997  primarily  due to the gain on  disposition  of
aircraft which aggregated approximately $11,126,000 as compared to approximately
$632,000 for the year ended December 31, 1997.

Registrant's revenues decreased by approximately 45% for the year ended December
31, 1998 as compared to the year ended  December  31,  1997.  The  decrease  was
principally due to the following:

i)      rental  revenues  decreased  due to the  reduced  rentals  from a Boeing
        737-200  Advanced  aircraft leased to Aloha,  lower rentals from certain
        aircraft leased to Continental (as of December 1, 1997),  the expiration
        of the  lease  with  Southwest  as  well as due to the  sale of  certain
        aircraft in 1998;

ii)     interest income increased by  approximately  83% for 1998 as compared to
        1997 primarily due to higher case balances available for investment; and

iii)    in 1998,  Registrant  recognized  interest on the installment sale of an
        aircraft  leased to  Hawaiian of  approximately  $141,000 as compared to
        approximately $284,000 in 1997.

Costs and expenses  decreased  overall by  approximately  40% for the year ended
December 31, 1998 as compared to the year ended  December 31, 1997. The decrease
was primarily due to the following:

i)      a decrease in depreciation of approximately  66% for 1998 as compared to
        1997 due to certain  aircraft  having  previously  reached their salvage
        value as well due to the sale of certain aircraft in 1998;

ii)     a decrease in general and  administrative  expenses of approximately 29%
        primarily due to lower legal costs;

iii)    a reduction in management fees of  approximately  32% principally due to
        lower rental income in 1998 on which such fees are based, offset by:
<PAGE>
iv)     an increase in operating  expenses due to maintenance  costs  associated
        with  a  Boeing  737  aircraft  to  comply  with  certain  airworthiness
        directives,  insurance, remarketing fees, and storage costs for a Boeing
        737 aircraft  which went off lease in January 1998 and was sold on March
        31, 1998 and three McDonnell  Douglas DC-9 aircraft which went off lease
        in September 1998 and December 1998.

Allowance for equipment  impairment increased due to the current year impairment
recorded by Registrant totaling $1,350,000. This impairment recorded in the 1998
period was  comprised  of $600,000 and  $750,000  with respect to two  McDonnell
Douglas  DC9-32  aircraft  which were  previously  leased to  Continental.  Such
impairments were calculated based on current market conditions.

Registrant recognized approximately $11,126,000 of gain from the sale of certain
aircraft  for  the  year  ended  December  31,  1998  as  compared  to a gain of
approximately $632,000 from the sale of aircraft for the year ended December 31,
1997.

Registrant's  net income for the year ended December 31, 1998 was  approximately
$11,331,000 as compared to net income of  approximately  $1,706,000 for the year
ended  December 31, 1997. The change in net income for 1998 compared to 1997 was
principally due to the following:

i)      the  gain on sale  of  aircraft  of  approximately  $11,126,000  in 1998
        compared with a gain from sale of aircraft of approximately  $632,000 in
        1997;

ii)     the reduction in costs and expenses which were approximately  $4,316,000
        in 1998 compared to approximately $7,158,000 in 1997; and

iii)    the reduction in  revenues  which  were approximately $4,521,000 in 1998
        compared to revenues of approximately $8,232,000 in 1997.


Results of Operations - 1997 as Compared to 1996

Registrant's  rental revenues  decreased by approximately 20% for the year ended
December 31, 1997 as compared to the year ended  December 31, 1996. The decrease
was principally due to the following:

i)       a 100%  reduction  in rental  revenues on a McDonnell  Douglas  DC-9-51
         aircraft (the "Hawaiian Aircraft") leased to Hawaiian. The Aircraft was
         sold on an  installment  basis on September 1, 1996.  The  reduction in
         rental   revenues   recognized   represented   approximately   24%   of
         Registrant's   1997  rental  revenue   reduction  as  compared  to  the
         corresponding rental revenues recognized during 1996;

ii)      a 100% reduction in rental revenue on a Boeing 737-200 advance aircraft
         sold to Southwest on April 15, 1996.  The reduction in rental  revenues
         represented  approximately  7%  of  Registrant's  1997  rental  revenue
         reduction as compared to the corresponding  rental revenues  recognized
         during 1996; and
<PAGE>
iii)     a 57%  reduction  in rental  revenue  on two  Boeing  737-200  Advanced
         Aircraft  leased to Aloha.  One of the Aloha  Aircraft  was  originally
         scheduled  to come off lease on  February  1, 1996 and was renewed on a
         utilization  basis at $300 per  flight  hour  until  the  aircraft  was
         returned on October 15, 1996,  and was sold on May 22, 1997.  The other
         Aloha aircraft  lease was originally  scheduled to expire on August 15,
         1996,  and was renewed at 50% of its prior lease rate through  November
         15, 1997.  The  reduction  in rental  revenues  recognized  under these
         leases  represented  approximately  53%  of  Registrant's  1997  rental
         revenue  reduction  as compared to the  corresponding  rental  revenues
         recognized during 1996.

Investment  interest income decreased by approximately 21% for 1997, as compared
to 1996, primarily because of lower balances available for investment in 1997.

In 1997,  there was interest on  installment  sale of the  Hawaiian  Aircraft of
approximately $284,000 as compared to approximately $106,000 in 1996.

Other income/loss  decreased for 1997, as compared to 1996, primarily due to the
reduction of interest payments by Continental  associated with the repayments of
rent deferrals and modification advances.

Depreciation  expense  decreased by  approximately  28% for 1997, as compared to
1996,  primarily due to the Hawaiian  Aircraft and the Southwest  aircraft being
sold  during 1996 and  reduction  on an  aircraft  leased to Ladeco  S.A.  which
reached its salvage value during or prior to 1996.

Operating  expenses  increased in 1997,  as compared to 1996,  primarily  due to
increased costs associated with certain aircraft that came off lease.

Management fees decreased  approximately  37% for 1997, as compared to 1996, due
to lower rental income in 1997 on which such fees are based, due to the aircraft
sale in 1997, and lower renewal rates in 1997.

General and  administrative  expenses  increased  approximately  35% in 1997, as
compared to 1996.

Gain from the sale of aircraft was approximately $632,000 in 1997 represented by
the sale of the Aloha Aircraft compared to a gain of approximately $5,223,000 in
1996 represented by the sale of the Southwest and Hawaiian Aircraft.

Registrant's  net income for 1997 was  $1,706,235  as  compared to net income of
$5,988,174  recognized  in  1996.  The  principal  reasons  for the  changes  in
Registrant's 1997 net income compared to 1996 are:

i)       Gain on sale of aircraft  in 1997 of  approximately  $632,000  compared
         with a gain on sale of  aircraft in 1996 of  approximately  $5,223,000;
         and

ii)      reduction of depreciation expense,  approximately $6,227,000 in 1997 as
         compared to approximately $8,608,000 in 1996; and

iii)     reduction of management fee, $265,000 in 1997 as compared with $422,000
         in 1996; and

iv)      increase  in  operating  expenses,  approximately  $136,000  in 1997 as
         compared with $85,000 in 1996; offset by
<PAGE>
v)       reduction of rental revenue,  approximately $7,572,000 in 1997 compared
         with approximately $9,734,000 in 1996; and

vi)      increase in other loss of  approximately  $77,000 in 1997 compared with
         approximately $33,000 in 1996.




Item 7a.      Quantitative and Qualitative Disclosure  About Market Risk

Not applicable
<PAGE>
Item 8.       Financial Statements and Supplementary Data

                          AIRCRAFT INCOME PARTNERS L.P.

                              FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                      INDEX

                                                                     Page
                                                                    Number
                                                                    ------

Independent Auditor's Report                                          F-1

Financial statements - years ended
  December 31, 1998, 1997 and 1996

      Balance sheets                                                  F-2
      Statements of income                                            F-3
      Statement of partners' equity                                   F-4
      Statements of cash flows                                        F-5
      Notes to financial statements                          F-6    through F-18

Schedule:

    II -- Valuation and Qualifying Accounts                  F-19   through F-21

All other  schedules  have been  omitted  because they are  inapplicable  or the
information is included in the financial statements or notes thereto.
<PAGE>
To the Partners of
Aircraft Income Partners L.P.
Greenwich, Connecticut

                          INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying balance sheets of Aircraft Income Partners L.P.
(a limited  partnership)  as of  December  31,  1998 and 1997,  and the  related
statements  of  income,  partners'  equity  and cash flows for each of the three
years in the period  ended  December  31,  1998.  Our audits also  included  the
financial  statement  schedule  listed  in the  Index  at Item  14(a)  2.  These
financial statements and the financial statement schedule are the responsibility
of the Partnership's management.  Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Aircraft Income Partners L.P.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three  years in the  period  ended  December  31,  1998 in
conformity with generally accepted accounting principles.  Also, in our opinion,
such  financial  statement  schedule,  when  considered in relation to the basic
financial statements taken as a whole,  presents fairly in all material respects
the information set forth therein.



/s/ Hays & Company
    ------------------
    Hays & Company
    February 19, 1999
    New York, New York

                                       F-1

<PAGE>
<TABLE>
<CAPTION>
                              AIRCRAFT INCOME PARTNERS L.P.

                                     BALANCE SHEETS

                                                                     December 31,
                                                            ---------------------------
                                                               1998             1997
                                                            -----------     -----------
<S>                                                         <C>             <C>      
ASSETS

     Equipment held for sale - net                          $ 5,058,237     $      --
     Leased aircraft - net                                         --        20,012,212
     Cash and cash equivalents                                4,199,804       6,432,713
     Accounts receivable                                        471,250         505,730
     Other receivables                                           38,886          89,891
     Deferred costs                                              19,700          95,505
     Note receivable - installment sale                            --         2,911,906
     Restricted cash - security deposits                           --           506,120
     Prepaid expenses                                              --            13,170
                                                            -----------     -----------

                                                            $ 9,787,877     $30,567,247
                                                            ===========     ===========

LIABILITIES AND PARTNERS' EQUITY

Liabilities
     Accounts payable and accrued expenses                  $   540,437     $   168,561
     Maintenance reserves                                          --         2,129,110
     Security deposits payable                                     --           506,120
     Deferred income                                               --           133,217
     Deferred costs payable                                        --            50,000
                                                            -----------     -----------

            Total liabilities                                   540,437       2,987,008
                                                            -----------     -----------

Commitments and contingencies (Notes 3, 4, 8 and 9)

Partners' equity
     Limited partners' equity (385,805 units issued
        and outstanding)                                      8,313,741      24,813,260
     General partner's equity                                   933,699       2,766,979
                                                            -----------     -----------

            Total partners' equity                            9,247,440      27,580,239
                                                            -----------     -----------

                                                            $ 9,787,877     $30,567,247
                                                            ===========     ===========
</TABLE>
                       See notes to financial statements.

                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                               AIRCRAFT INCOME PARTNERS L.P.

                                   STATEMENTS OF INCOME

                                                        Year ended December 31,
                                               -------------------------------------------
                                                  1998            1997            1996
                                               -----------     -----------     -----------
<S>                                            <C>             <C>             <C>        
Revenues
     Rental                                    $ 3,692,729     $ 7,572,100     $ 9,734,331
     Interest                                      687,646         375,609         476,659
     Interest - installment note                   141,009         284,242         106,015
                                               -----------     -----------     -----------

                                                 4,521,384       8,231,951      10,317,005
                                               -----------     -----------     -----------

Costs and expenses
     Depreciation                                2,102,680       6,227,309       8,608,539
     Provision for equipment impairment          1,350,000            --              --
     General and administrative                    319,760         452,956         336,248
     Operating                                     319,480         135,658          84,522
     Management fee                                180,200         265,161         422,000
     Other                                          44,377          76,999          32,767
     Provision for bad debts                          --              --            66,133
     Interest                                         --              --             1,570
                                               -----------     -----------     -----------

                                                 4,316,497       7,158,083       9,551,779
                                               -----------     -----------     -----------

                                                   204,887       1,073,868         765,226

Gain on disposition of aircraft - net           11,126,432         632,367       5,222,948
                                               -----------     -----------     -----------

Net income                                     $11,331,319     $ 1,706,235     $ 5,988,174
                                               ===========     ===========     ===========

Net income attributable to
     Limited partners                          $10,198,187     $ 1,535,611     $ 5,389,357
     General partner                             1,133,132         170,624         598,817
                                               -----------     -----------     -----------

                                               $11,331,319     $ 1,706,235     $ 5,988,174
                                               ===========     ===========     ===========

Net income per unit of limited partnership
     interest (385,805 units outstanding)      $     26.43     $      3.98     $     13.97
                                               ===========     ===========     ===========

</TABLE>
                       See notes to financial statements.

                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                                   AIRCRAFT INCOME PARTNERS L.P.

                                   STATEMENT OF PARTNERS' EQUITY

                            YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998



                                                    Limited            General           Total
                                                    Partners'         Partner's         Partners'
                                                     Equity             Equity           Equity
                                                  ------------      ------------      ------------
<S>                                               <C>               <C>               <C>         
Balance, January 1, 1996                          $ 41,422,398      $  4,612,439      $ 46,034,837

Net income - 1996                                    5,389,357           598,817         5,988,174

Distributions to partners ($40.50 per limited
     partnership unit)                             (15,625,103)       (1,736,123)      (17,361,226)
                                                  ------------      ------------      ------------

Balance, December 31, 1996                          31,186,652         3,475,133        34,661,785

Net income - 1997                                    1,535,611           170,624         1,706,235

Distributions to partners ($20.50 per limited
     partnership unit)                              (7,909,003)         (878,778)       (8,787,781)
                                                  ------------      ------------      ------------

Balance, December 31, 1997                          24,813,260         2,766,979        27,580,239

Net income - 1998                                   10,198,187         1,133,132        11,331,319

Distributions to partners ($69.20 per limited
     partnership unit)                             (26,697,706)       (2,966,412)      (29,664,118)
                                                  ------------      ------------      ------------

Balance, December 31, 1998                        $  8,313,741      $    933,699      $  9,247,440
                                                  ============      ============      ============
</TABLE>
                       See notes to financial statements.

                                       F-4

<PAGE>
<TABLE>
<CAPTION>
                                          AIRCRAFT INCOME PARTNERS L.P.

                                            STATEMENTS OF CASH FLOWS

                                                                            Year ended December 31,
                                                               ------------------------------------------------
                                                                    1998              1997              1996
                                                               ------------      ------------      ------------
<S>                                                            <C>               <C>               <C>         
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS

Cash flows from operating activities
    Net income                                                 $ 11,331,319      $  1,706,235      $  5,988,174
    Adjustments to reconcile net income to net
       cash provided by operating activities
          Depreciation                                            2,102,680         6,227,309         8,608,539
          Provision for equipment impairment                      1,350,000               --                --
          Provision for bad debts                                        --               --             66,133
          Gain on disposition of aircraft - net                 (11,126,432)         (632,367)       (5,222,948)
    Changes in assets and liabilities
       Accounts receivable                                           34,480           263,817           552,346
       Deferred costs                                                75,805           128,361           128,360
       Other receivables                                             51,005           434,024          (406,963)
       Prepaid expenses                                              13,170            82,191            (4,733)
       Deferred rents and modification advances receivable             --             254,432           387,313
       Accounts payable and accrued expenses                        371,876            64,796            21,665
       Deferred income                                             (133,217)            1,667           (47,666)
       Maintenance reserves                                      (2,129,110)          (38,219)          362,698
       Deferred costs payable                                       (50,000)             --                --
       Management fee payable                                          --             (94,000)          (43,000)
                                                               ------------      ------------      ------------

             Net cash provided by operating activities            1,891,576         8,398,246        10,389,918
                                                               ------------      ------------      ------------
Cash flows from investing activities
    Proceeds from sale of aircraft - net                         25,157,627         1,922,265         6,784,400
    Proceeds from installment sale note receivable                  382,006           975,759           163,985
    Additions and modifications to leased aircraft - net               --               1,984           (73,914)
                                                               ------------      ------------      ------------

             Net cash provided by investing activities           25,539,633         2,900,008         6,874,471
                                                               ------------      ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                          AIRCRAFT INCOME PARTNERS L.P.

                                            STATEMENTS OF CASH FLOWS

                                                                            Year ended December 31,
                                                               ------------------------------------------------
                                                                    1998              1997              1996
                                                               ------------      ------------      ------------
<S>                                                            <C>               <C>               <C>         
Cash flows from financing activities
    Distributions to partners                                   (29,664,118)      (11,145,478)      (18,432,907)
                                                               ------------      ------------      ------------

Net (decrease) increase in cash and cash equivalents             (2,232,909)          152,776        (1,168,518)

Cash and cash equivalents, beginning of year                      6,432,713         6,279,937         7,448,455
                                                               ------------      ------------      ------------

Cash and cash equivalents, end of year                         $  4,199,804      $  6,432,713      $  6,279,937
                                                               ============      ============      ============

Supplemental disclosure of cash flow information
    Interest paid                                              $       --        $       --        $      1,570
                                                               ============      ============      ============
</TABLE>
                       See notes to financial statements.

                                       F-5
<PAGE>
                            AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

1         ORGANIZATION

         Aircraft  Income  Partners  L.P.  (the  "Partnership"),  was  formed in
         October 1987,  under the Delaware  Revised Uniform Limited  Partnership
         Act for the  purpose of  engaging  in the  business  of  acquiring  and
         leasing aircraft.  The Partnership will terminate on December 31, 2010,
         or sooner,  in  accordance  with the terms of the  Agreement of Limited
         Partnership (the "Limited Partnership Agreement").

         Limited partners' units were originally issued at a price value of $500
         per unit.  Five  limited  partner  units  were  issued to the  original
         limited partner for a capital contribution of $2,500. In addition,  the
         General  Partner  contributed  a total of $9,950 to the  capital of the
         Partnership.  Through the final admission of limited partners on May 1,
         1989,   the   Partnership   had  14  admissions  of  limited   partners
         representing an additional  385,800  limited partner units  aggregating
         $192,900,000.

         The  Partnership  is  attempting  to sell the 3  remaining  aircraft as
         promptly as possible with a view towards  liquidating the Partnership's
         entire  portfolio and winding up the business of the Partnership  prior
         to the end of 1999.

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Leases

         The  Partnership  accounts for all of its leases in accordance with the
         operating method. Under the operating method,  revenue is recognized on
         a straight-line basis and expenses (including depreciation) are charged
         to  operations  as  incurred.   When  the  Partnership  enters  into  a
         utilization arrangement, rents are recorded as earned based upon actual
         use of the related aircraft.

         Leased aircraft and equipment held for sale

         The cost of leased  aircraft and equipment held for sale represents the
         initial  cost of the  aircraft to the  Partnership  plus  miscellaneous
         acquisition  and  closing  costs  and  are  carried  at  the  lower  of
         depreciated cost or net realizable value.

         Depreciation  is  computed  using the  straight-line  method,  over the
         estimated useful lives of such aircraft (15 years for McDonnell Douglas
         DC9-32 aircraft, 12 to 12.5 years for Boeing 737-200 Advanced aircraft,
         Boeing  727-200   Advanced   aircraft  and  McDonnell   Douglas  DC9-51
         aircraft).  The Partnership capitalizes major additions to its aircraft
         and depreciates such capital  improvements over the remaining estimated
         useful life of the aircraft. No depreciation is taken on equipment held
         for sale.

         When  aircraft  are  sold  or  otherwise  disposed  of,  the  cost  and
         accumulated  depreciation  (and any  related  allowance  for  equipment
         impairment)  are removed from the accounts and any gain or loss on such
         sale or disposal is reflected in  operations.  Normal  maintenance  and
         repairs are charged to operations as incurred. The Partnership provides
         allowances for equipment impairment based upon a periodic review of all
         aircraft in its portfolio,  when management  believes that,  based upon
         market analysis,  appraisal  reports and leases currently in place with
         respect to specific  aircraft,  the investment in such aircraft may not
         be recoverable.

                                      F-6
<PAGE>
                            AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         The allowance is inherently  subjective and is based upon  management's
         best estimate of current  conditions  and  assumptions  about  expected
         future conditions. The Partnership may provide for additional losses in
         subsequent years and such provisions could be material.

         Financial statements

         The financial  statements include only those assets,  liabilities,  and
         results of operations which relate to the business of the Partnership.

         Cash and cash equivalents

         For the  purpose  of the  statements  of cash  flows,  the  Partnership
         considers all short-term  investments,  which have an original maturity
         of three months or less, to be cash equivalents.

         Substantially  all of the  Partnership's  cash and cash equivalents are
         held at one financial institution.

         Fair value of financial instruments

         The fair value of financial  instruments  is determined by reference to
         market  data  and  other  valuation  techniques  as  appropriate.   The
         Partnership's  financial instruments include cash and cash equivalents.
         Unless  otherwise  disclosed,  the fair value of financial  instruments
         approximates their recorded values.

         Maintenance reserves

         Maintenance  reserves  represent  cash received in accordance  with the
         terms of the leases of certain  aircraft,  which has been set aside for
         certain required repairs or scheduled maintenance on the aircraft.

         Deferred income

         Deferred income is comprised of the unearned portion of advance rentals
         received with respect to the leases of the aircraft.

         Net income and distributions per unit of limited partnership interest

         Net income and distributions per unit of limited  partnership  interest
         are  computed  based upon the  number of  outstanding  units  (385,805)
         during the year.

         Income taxes

         No provisions have been made for federal, state and local income taxes,
         since they are the personal responsibility of the partners.

                                      F-7
<PAGE>
                           AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Income taxes (continued)

         The income tax returns of the Partnership are subject to examination by
         federal,  state and local taxing  authorities.  Such examinations could
         result in adjustments to Partnership income, which changes could affect
         the income tax liability of the individual partners.

         Reclassifications

         Certain  reclassifications  have been made to the financial  statements
         shown for the prior  years in order to  conform to the  current  year's
         classifications.

         Estimates

         The  preparation  of  the  financial   statements  in  conformity  with
         generally accepted  accounting  principles  requires management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

3        CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

         The  general  partner  of the  Partnership,  Integrated  Aircraft  Fund
         Management  Corp.  ("IAFM"),  is a wholly owned  subsidiary of Presidio
         Capital  Corp.  ("Presidio").  Other limited  partnerships  and similar
         investment  programs  have been formed by affiliates of IAFM to acquire
         equipment and, accordingly, conflicts of interest may arise between the
         Partnership  and such other  limited  partnerships.  Affiliates of IAFM
         have also engaged in businesses  related to the management of equipment
         and the sale of various  types of equipment  and may transact  business
         with the Partnership.

         Subject  to the  rights  of the  Limited  Partners  under  the  Limited
         Partnership  Agreement,  Presidio controls the Partnership  through its
         indirect ownership of all of the shares of IAFM. On August 28, 1997, an
         affiliate of  NorthStar  Capital  Partners  acquired all of the Class B
         shares of Presidio,  the corporate  parent of IAFM.  This  acquisition,
         when aggregated with previous  acquisitions,  caused NorthStar  Capital
         Partners to acquire indirect control of IAFM.  Effective July 31, 1998,
         Presidio is  indirectly  owned by NorthStar  Capital  Investment  Corp.
         ("NorthStar"), a Maryland corporation.  Presidio was also a party to an
         Administrative   Services   Agreement   with  Wexford   Management  LLC
         ("Wexford")   pursuant  to  which  Wexford  was   responsible  for  the
         day-to-day   management  of  Presidio  and,  among  other  things,  had
         authority to designate directors of IAFM.

                                      F-8
<PAGE>
                           AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


3        CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)

         On November 2, 1997,  the  Administrative  Services  Agreement  between
         Presidio and Wexford expired.  Effective  November 3, 1997, Wexford and
         Presidio  entered into a new  Administrative  Services  Agreement  (the
         "ASA"),  which  expired  on May 3,  1998.  Under  the terms of the ASA,
         Wexford provided consulting and administrative services to Presidio and
         its  affiliates  including  IAFM  and the  Partnership.  Presidio  also
         entered into a management  agreement with NorthStar Presidio Management
         Company, LLC ("NorthStar Presidio").  Under the terms of the management
         agreement,  NorthStar  Presidio  provides the day-to-day  management of
         Presidio  and its  direct and  indirect  subsidiaries  and  affiliates.
         Reimbursable expenses to NorthStar Presidio and Wexford under the terms
         of the  Administrative  Services  Agreement  amounted  to  $20,250  and
         $29,898 for the years ended December 31, 1998 and 1997, respectively.

         Effective  November 3, 1997, the officers and employees of Wexford that
         had  served  as  officers  and/or  directors  of  IAFM  tendered  their
         resignation.  On the same  date,  the Board of  Directors  of  Presidio
         appointed  new  individuals  to serve as officers  and/or  directors of
         IAFM.

         IAFM is entitled to a 10 percent  interest in the net income,  loss and
         distributions  from operations and cash from sales. For the years ended
         December  31,  1998,  1997 and 1996,  IAFM  received or was entitled to
         distributions   approximating  $2,966,000,   $879,000  and  $1,736,000,
         respectively.

         As  compensation  for its services,  IAFM receives the  management  fee
         provided for in the Limited Partnership  Agreement which is equal to 4%
         of  Distributions  of Cash from Operations from Operating Leases and 2%
         of  Distributions  of Cash from Operations from Full Payout Leases,  as
         such  terms  are  defined  in the  Limited  Partnership  Agreement.  In
         conjunction  with  such  services,   IAFM  earned  management  fees  of
         $180,200, $265,161 and $422,000, for the years ended December 31, 1998,
         1997 and 1996, respectively.

         Upon ultimate  liquidation of the Partnership,  IAFM may be required to
         remit to the Partnership certain payments  representing capital account
         deficit  restoration  based upon a formula  provided within the Limited
         Partnership  Agreement.  Such  restoration  amount may be less than the
         recorded  IAFM  deficit,  which could  result in  distributions  to the
         limited partners of less than their recorded equity.

         In April 1995,  IAFM and certain  affiliates  entered into an agreement
         with Fieldstone Private Capital Group, L.P.  ("Fieldstone") pursuant to
         which  Fieldstone   performed  certain  management  and  administrative
         services relating to the Partnership.  Fieldstone  continued to perform
         such services until July 31, 1998.

                                      F-9
<PAGE>
                           AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


4         LEASED AIRCRAFT AND EQUIPMENT HELD FOR SALE

         Leased aircraft and related equipment is summarized as follows:
<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                          -----------------------------------
                                                                                               1998                 1997
                                                                                          ---------------     ---------------
<S>                                                                                        <C>                 <C>            

         Four  Boeing 737-200 Advanced aircraft (net of accumulated depreciation
               of  $27,738,015  and an allowance  for  equipment  impairment  of
               $13,068,000 at December 31, 1997)                                           $         -         $     6,530,485

                

         Four  Boeing 727-200 Advanced aircraft (net of accumulated depreciation
               of   $31,325,119   an  allowance  for  equipment   impairment  of
               $9,414,000 at December 31, 1997)                                                      -               6,069,871

                        

         Three McDonnell   Douglas   DC9-32   aircraft   (net   of   accumulated
               depreciation  of  $12,440,706  and  an  allowance  for  equipment
               impairment of $1,618,000 at December 31, 1997) (1)                                   -                7,411,856
                                                                                           ---------------     ---------------

                                                                                           $        -          $    20,012,212
                                                                                           ===============      ===============
</TABLE>
                  (1) Such aircraft have been  reclassified  as held for sale at
                      December 31, 1998.

         Equipment held for sale

         Equipment held for sale consists of the  Partnership's  three McDonnell
         Douglas  DC9-32  aircraft  with an  aggregate  net  carrying  value  of
         $5,058,237  (net of  accumulated  depreciation  of  $13,444,325  and an
         allowance for equipment impairment of $2,968,000) at December 31, 1998.

         The amounts in the above table do not reflect  potential  rent credits,
         as  provided  for  under  certain  leases,  to fund  the  Partnership's
         obligations under such leases.

         Maintenance  and repairs expense for the years ended December 31, 1998,
         1997 and 1996 was $256,000, $1,963 and $1,963, respectively.



                                      F-10
<PAGE>
                           AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


5         ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
                                                     December 31,
                                         -----------------------------------
                                               1998                1997
                                         ---------------     ---------------
<S>                                      <C>                 <C>        
              Management services        $       320,000     $         -
              Professional fees                   72,274              62,933
              Investor relations                  67,355              84,600
              Operating expenses                  54,308              14,778
              Other                               26,500               6,250
                                         ---------------     ---------------

                                         $       540,437     $       168,561
                                         ===============     ===============
</TABLE>
6         PARTNERS' EQUITY

         The General Partner holds a 10% equity interest in the Partnership.  At
         the inception of the Partnership,  the General Partner's equity account
         was credited with only the actual capital  contributed in cash, $9,950.
         The  Partnership's  management  determined that this accounting did not
         appropriately  reflect the limited  partners' and the General Partner's
         relative  participations in the Partnership's net assets,  since it did
         not  reflect  the  General   Partner's  10%  equity   interest  in  the
         Partnership.  During  1997,  the  Partnership  restated  its  financial
         statements to reallocate  $19,290,250 (10% of the gross proceeds raised
         at the Partnership's  formation) of the partners' equity to the General
         Partner's equity account.  This reallocation was made  retroactively as
         of the inception of the Partnership.  The reallocation had no impact on
         the  Partnership's  financial  position,  results of  operations,  cash
         flows,  distributions  to partners,  or the partners' tax basis capital
         accounts.

7         RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS 
          TO TAX BASIS

         The principal  differences between the financial statements and the tax
         basis of accounting are accelerated depreciation,  the tax treatment of
         an aircraft  purchased subject to a tax benefit transfer lease, and bad
         debts  provided for financial  statement  purposes in previous  periods
         offset by provisions for equipment impairment.  A reconciliation of net
         income per  financial  statements  to the tax basis of accounting is as
         follows:

                                      F-11
<PAGE>
                           AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


7         RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS 
          TO TAX BASIS (continued)
<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                       ------------------------------------------------
                                                            1998               1997             1996
                                                       ------------      ------------      ------------
<S>                                                    <C>               <C>               <C>         
Net income per financial statements                    $ 11,331,319      $  1,706,235      $  5,988,174

Difference  between  financial  statements and tax
  basis depreciation                                       (983,590)          241,038           869,343

Difference  between  financial  statements and tax
  basis in aircraft sold or disposed of                   4,965,770              --           4,266,647

Difference  between  financial  statements and tax
  basis in reserves                                      (1,574,249)          (53,457)          362,698

Provision  for equipment  impairment  provided for
  financial statement purposes                            1,350,000              --                --

Difference  between  financial basis and tax basis
  liabilities                                              (600,000)             --                --

Difference between tax basis and financial
  statement treatment of aircraft subject to
  Temporary  Regulation  Section5c.168(f)(8)-
  2(a)(5)  of  the  Internal  Revenue Code                      --         (6,183,974)       (1,189,364)
  
Financial statement  recognition of advance rental
  payments  recognized  in prior  periods  for tax
  purposes                                                 (133,218)            1,668           (47,666)
                                                       ------------      ------------      ------------

Net income (loss) per tax basis                        $ 14,356,032      $ (4,288,490)     $ 10,249,832
                                                       ============      ============      ============
</TABLE>
                                      F-12
<PAGE>
                            AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


7         RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS 
          TO TAX BASIS (continued)


         The  differences  between the  Partnership's  net assets per  financial
         statements and tax basis of accounting are as follows:
<TABLE>
<CAPTION>
                                                                 December 31,
                                                     -----------------------------------
                                                           1998                1997
                                                     ---------------     ---------------
<S>                                                  <C>                 <C>            
              Net assets per financial statements    $     9,247,440     $    27,580,239

              Net carrying value of aircraft              (5,058,237)        (10,390,421)

              Syndication costs                           22,665,750          22,665,750

              Receipt of:

                   - advanced rental payment                   -                 133,218
                   - maintenance reserves                      4,861           2,129,110
              Other                                            -                  50,000
                                                     ---------------     ---------------

              Net assets per tax basis               $    26,859,814     $    42,167,896
                                                     ===============     ===============
</TABLE>
                                      F-13

<PAGE>
                          AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


8         MAJOR LESSEES

         Revenues from aircraft  leased by individual  lessees,  which generated
         10% or more of rental revenues, are as follows:
<TABLE>
<CAPTION>
                                                                   Year ended December 31,
                                                 --------------------------------------------------------
                                                        1998                1997                1996
                                                 ----------------    ----------------    ----------------
<S>                                              <C>                 <C>                  <C>            
           Continental Airlines, Inc.            $      1,477,000    $      2,286,000     $     2,322,000
           % of revenues                                40%                 30%                   24%

           American Trans Air, Inc.              $      1,000,900    $      1,781,168     $     1,781,168
           % of revenues                                27%                 24%                   18%

           Ladeco S.A.                           $      665,000      $      1,140,000     $     1,140,000
           % of revenues                                18%                 15%                   12%

           Air Micronesia, Inc.                  $      513,533      $      895,056       $        -
           % of revenues                                14%                 12%                    -%

           Aloha Airlines, Inc.                  $       -           $      869,872       $     2,023,650
           % of revenues                                 -%                 11%                 21%

           Southwest Airlines, Co.               $       -           $       -            $     1,087,667
           % of revenues                                 -%                  -%                 11%

</TABLE>
9         COMMITMENTS AND CONTINGENCIES

         a       Hawaiian Airlines, Inc.

         On September 1, 1996,  the  Partnership  and  Hawaiian  Airlines,  Inc.
         ("Hawaiian") amended the lease agreement of the McDonnell Douglas Model
         DC9-51  aircraft  (the  "Hawaiian  Aircraft").  Under  the terms of the
         agreement, Hawaiian paid the Partnership a down payment of $450,000 and
         the  balance  was to be paid in monthly  installments  (39  payments of
         $72,000 and then 36 payments of $50,000)  until  November 30, 2002,  at
         which time Hawaiian had a bargain purchase option on the aircraft.  The
         Partnership  treated  this  transaction  as  an  installment  sale  and
         classified the net present value of the  anticipated  future cash flows
         of   approximately   $4,052,000   on  the   balance   sheet   as   note
         receivable-installment  sale.  On  September  1,  1996 the  Partnership
         removed the associated cost of the equipment and the net carrying value
         from the books of the Partnership, and recognized a gain on the sale of
         approximately $1,655,000.

         As  discussed  in Note 10, the  Partnership  sold its rights  under the
         amended lease agreement to an unaffiliated third party during the third
         quarter of 1998.

                                      F-14
<PAGE>
                            AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


9        COMMITMENTS AND CONTINGENCIES (continued)

         b       Continental Airlines, Inc.

         In November  1991,  in  connection  with its  reorganization  under the
         United   States   Bankruptcy   Code,    Continental   Airlines,    Inc.
         ("Continental")  rejected  the  leases  of  the  three  Boeing  727-100
         aircraft owned by the Partnership,  which had been out of service since
         1991.  Due to the condition and the related  market for such  aircraft,
         the Partnership  provided aggregate allowances for equipment impairment
         of  approximately  $6,483,000.  During 1993, the  Partnership  sold all
         three  Boeing  727-100  aircraft.  The  Partnership  retains its rights
         pursuant to a proof of claim and an  administrative  claim filed in the
         Continental   Bankruptcy  case  with  respect  to  such  aircraft.  The
         Partnership has recorded  $445,000 as accounts  receivable with respect
         to such aircraft.  The amount of recovery under such claims, if any, is
         impossible to predict at this time.

         During  1997,  the  leases  of three  McDonnell  Douglas  Model  DC9-32
         aircraft  owned by the  Partnership  were extended to September 1998 (2
         aircraft)  and  December  1998 (1  aircraft) at a rental of $52,500 per
         month,  per  aircraft.  Two of the aircraft  were returned in September
         1998  and the  third  aircraft  was  returned  in  December  1998.  The
         Partnership is actively attempting to sell such aircraft.

         c       Continental Air Micronesia

         On January 20, 1993, the Partnership  leased a Boeing 727-200  Advanced
         aircraft to  Continental  for a term of  approximately  71 months to be
         used by Continental Air Micronesia (the "Air Mike Lease"). The Air Mike
         Lease  provided  for  a  monthly  base  rent  of  $76,750,  subject  to
         adjustments  for rental  credits  relating  to  initial  modifications.
         Further,  the Partnership agreed to provide up to $813,500 of financing
         for  certain  new  image   modifications   through   credits   ("Lessor
         Financing")   against  base  rental  payments  due  from   Continental.
         Continental was repaying the Lessor  Financing  credits through monthly
         installments  which were  amortized at the rate of 9.31% per annum over
         the then remaining lease term.

         As  discussed  in Note 10, the  Partnership  sold this  aircraft  to an
         unaffiliated third party during the third quarter of 1998.

         d       Ladeco S.A.

         During 1993, the  Partnership  consummated  two leases with Ladeco S.A.
         ("Ladeco"), each for a Boeing 737-200 Advanced aircraft for terms of 48
         and 60 months.  Both leases  provided for, among other things,  monthly
         rentals of $47,500 each, plus certain maintenance  reserves for engines
         and  landing  gear,  based  upon the  number of hours  flown.  At lease
         inception of both aircraft,  Ladeco paid a security deposit of $125,000
         per  aircraft.  The Ladeco  aircraft  leases,  originally  scheduled to
         expire in October 1997 and March 1998, were each renewed for a one year
         period  at the same  lease  rate  beginning  at the  expiration  of the
         original leases.

         As  discussed in Note 10, the  Partnership  sold these  aircraft to an
         unaffiliated third party during the third quarter of 1998.

                                      F-15
<PAGE>
                          AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


9        COMMITMENTS AND CONTINGENCIES (continued)

         e       American Trans Air, Inc.

         In May 1996,  American Trans Air, Inc. ("ATA"),  the lessee of a Boeing
         727-200 Advanced  aircraft (in which the Partnership owned an undivided
         47.92231%  joint venture  interest) (the "JV  Aircraft")  exercised its
         renewal option. The lease,  originally  scheduled to expire in November
         1996, was renewed for an additional two years at the same lease rate.

         In addition,  ATA had leased two other Boeing 727-200 Advanced aircraft
         (the "ATA Aircraft"), pursuant to two separate leases that commenced in
         November and  December  1994,  respectively.  Each of the leases had an
         initial  term of  approximately  39 months  and  provided  for  monthly
         rentals of $59,000.  During  early 1995,  the  Partnership  contributed
         $75,000 per aircraft towards bridging "C" check inspections.

         In March 1998, the Partnership and ATA agreed to amend all three of the
         leases  extending the term at the same lease rentals  through  December
         31,  2000,  at which  time ATA  would  have a  purchase  obligation  of
         approximately $3.3 million per aircraft. During the term of the amended
         lease, ATA could, at its expense,  retrofit the aircraft to comply with
         the Stage III noise emission standards pursuant to FAR Part 36.

         As discussed in Note 10, the Partnership sold these aircraft (including
         its  undivided  joint venture  interest) to an  affiliated  third party
         during the third quarter of 1998.

         f       Aloha Airlines, Inc.

         Aloha  Airlines,  Inc.  ("Aloha"),  leased  a Boeing  737-297  Advanced
         aircraft  from the  Partnership,  the lease of which was  scheduled  to
         expire in  accordance  with its lease terms on August 15,  1996.  Aloha
         agreed to a fifteen  month  lease  extension  at 50% of the prior lease
         rate and the  aircraft  was  scheduled  to be  returned  following  the
         expiration  of the term  and the  completion  of  certain  repairs  and
         maintenance  to bring the aircraft in compliance  with the lease return
         provisions.  On November 15, 1997, the lease was scheduled to expire in
         accordance  with the  terms of the  lease.  Aloha  had  indicated  that
         certain  modifications to the aircraft as required by the Airworthiness
         Directives  issued  by the FAA were not  applicable  under  the  return
         conditions of the lease.

         On November 14, 1997, First Security Bank, National Association, acting
         not in its  individual  capacity,  but solely as trustee  under a trust
         agreement in which the  Partnership is  beneficiary,  filed a complaint
         for declaratory judgment in the United States District Court,  Southern
         District of New York.  The complaint  requested  interpretation  of the
         language under the lease regarding return  conditions for the aircraft.
         In December 1997, the foregoing  action was settled and Aloha agreed to
         satisfy certain return conditions of the lease.

         On May 19, 1998, the aircraft was sold to an  unaffiliated  third party
         for  proceeds  of   $4,100,000,   exclusive  of  selling   expenses  of
         approximately  $124,000.  The  aircraft  had a net  carrying  value  of
         approximately $2,617,000 at the time of sale.

                                      F-16
<PAGE>
                            AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


9        COMMITMENTS AND CONTINGENCIES (continued)

         g       Tax assessment

         In  September  1996,  the  Partnership  received  proposed  notices  of
         assessment  from the State of Hawaii with respect to general excise tax
         ("GET") of approximately  $1,338,000 (including interest and penalties)
         for the years 1991,  1992, 1993 and 1994. In July 1998, the Partnership
         received  additional proposed notices of assessment for GET aggregating
         approximately  $585,000 for the years 1995, 1996 and 1997. The state is
         alleging  that GET is owed by the  Partnership  with  respect  to rents
         received  from  Aloha  and  Hawaiian   under  the  leases  between  the
         Partnership and each of the airlines.

         The   leases   with  both   Aloha  and   Hawaiian   provide   for  full
         indemnification  of the Partnership for such taxes,  but the bankruptcy
         of Hawaiian may relieve Hawaiian of its indemnification  obligation for
         any  periods  prior  to  September  21,  1993,  when  Hawaiian  and its
         affiliates  sought  bankruptcy  protection.  In  any  event,  it is the
         Partnership,  as taxpayer,  who is ultimately liable for the GET, if it
         is applicable.

         The state of Hawaii  has never  previously  applied  the GET to rentals
         received by a lessor of aircraft  where the lessor's  only contact with
         the state of  Hawaiian  is the fact that it has leased its  aircraft to
         airlines which are based in the state.  Aloha and Hawaiian,  as well as
         the Partnership, have separately engaged tax counsel and, both airlines
         are cooperating with the Partnership to vigorously contest the proposed
         assessments.

         Final notices of assessments  have not yet been issued.  Although there
         can be no  assurance  that  the  contest  of the  assessments  will  be
         successful,  the Partnership  believes that the state's position on the
         applicability of GET in this instance is without merit. The Partnership
         has not recorded any provision or liability as a result of the proposed
         notices of assessments.

10        AIRCRAFT SALES

         Year ended December 31, 1996

         On April 15, 1996, the  Partnership  sold to Southwest a Boeing 737-200
         Advanced  aircraft  leased  to  Southwest.   The  Partnership  received
         proceeds of  approximately  $6,784,000,  net of an associated  aircraft
         sales  commission  and other related  costs.  The net proceeds from the
         sale were  distributed  to the  partners of the  Partnership  in August
         1996.  The  Southwest   aircraft  was   originally   purchased  by  the
         Partnership  in July 1988 for  approximately  $12,804,000  inclusive of
         associated  acquisition  costs. As of April 15, 1996, when it was sold,
         the net carrying  value of the aircraft  was  approximately  $3,216,000
         (net of allowance for equipment impairment of $2,300,000).

                                      F-17
<PAGE>
                          AIRCRAFT INCOME PARTNERS

                          NOTES TO FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

10       AIRCRAFT SALES (continued)

         Year ended December 31, 1997

         On May 22,  1997,  a  Boeing  737-297  Advanced  aircraft  owned by the
         Partnership  was sold to an  unaffiliated  third party for  proceeds of
         approximately $1,982,000 exclusive of selling expenses of approximately
         $60,000.  The aircraft,  which was formerly  leased to Aloha,  had been
         off-lease since October 15, 1996. At the time of the sale, the aircraft
         had a net carrying value of approximately $1,290,000.

         Year ended December 31, 1998

         On March 31, 1998, a Boeing 737-2H4  aircraft owned by the  Partnership
         was sold to an  unaffiliated  third party for  $3,500,000  exclusive of
         selling expenses of  approximately  $106,000.  The aircraft,  which was
         formerly leased to Southwest, had been off-lease since January 1998. At
         the  time  of  sale,   the  aircraft  had  a  net  carrying   value  of
         approximately $1,141,000.

         On May 19,  1998,  a  Boeing  737-297  Advanced  aircraft  owned by the
         Partnership  was sold to an  unaffiliated  third party for  proceeds of
         $4,100,000,  exclusive of selling expenses of  approximately  $124,000.
         The  aircraft,  which was  formerly  leased to Aloha had a net carrying
         value of approximately $2,617,000 at the time of sale.

         Between  August 17, 1998 and September 23, 1998, the  Partnership  sold
         its  interest  in two Boeing  737-200  aircraft,  four  Boeing  727-200
         aircraft (inclusive of an undivided 47.92231% joint venture interest in
         one aircraft) and one McDonnell Douglas DC9-51 aircraft. Aside from the
         DC9-51 aircraft, the six aircraft had an original cost of approximately
         $71,235,500,   represented   45.03%  of  the  net  carrying   value  of
         Partnership's  aircraft as of the end of June 30, 1998 and, at the time
         of sale,  had a net carrying  value of  approximately  $7,744,000.  The
         Partnership's interest in the DC9-51 aircraft consisted of the right to
         receive deferred payments of $2,529,900  related to a September 1, 1996
         installment  sale. The sales were made to an  unaffiliated  third party
         for gross sales proceeds, exclusive of closing costs, of $18,000,000.


                                      F-18
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                                    AIRCRAFT INCOME PARTNERS L.P.
                                                                                                                         Schedule II
                                           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

 
                                                                        Additions
                                                               -----------------------------
                                            Balance at         Charged to           Charged                              Balance at
                                           Beginning of        Costs and            to Other        Additions              End of
               Description                   Period             Expenses            Accounts      (Deductions)             Period
               -----------                   ------             --------            --------      ------------             ------
<S>                                        <C>                  <C>                 <C>         <C>                      <C>      
 YEAR ENDED DECEMBER 31, 1998

 Leased aircraft - valuation
      allowance for equipment
      impairment

      Four Boeing 737-200 Advanced
         aircraft                          $ 13,068,000         $        -          $      -    $ (13,068,000) (A)       $     -  
                                                                                                                                   
      Four Boeing 727-200 Advanced                                                                                                 
         aircraft                             9,414,000                  -                 -       (9,414,000) (A)             -  
                                                                                                                                   
      Three McDonnell Douglas DC9-32                                                                                               
         aircraft                             1,618,000                  -                 -       (1,618,000) (C)             -  
                                           ------------         -----------         --------      ------------           ---------- 
                                                                                                                                   
                                           $ 24,100,000         $        -          $      -     $(24,100,000)           $     -  
                                           ------------         ----------          --------     ------------             --------- 
                                                                                    
 Equipment held for sale - valuation
      allowance for equipment
      impairment

      Three McDonnell Douglas
         DC9-32 aircraft                   $          -         $ 1,350,000 (B)     $      -      $  1,618,000 (C)       $2,968,000
                                           ------------         -----------         --------      ------------           ---------- 




                                           $ 24,100,000        $  1,350,000         $      -     $ (22,482,000)          $2,968,000
                                           ============        ============         =========    =============           ========== 

</TABLE>
(A)  Represents valuation allowance for equipment impairment relating to certain
     equipment sold during 1998.

(B)  Represents valuation allowance for equipment impairment relating to certain
     equipment held for sale at December 31, 1998.

(C)  Represents  valuation  allowance  for  equipment  that was  transferred  to
     Equipment Held for Sale during 1998.

                                      F-19
<PAGE>
<TABLE>
<CAPTION>
                                                    AIRCRAFT INCOME PARTNERS L.P.
                                                                                                                         Schedule II
                                     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)

                                                                     Additions
                                                               ---------------------------
                                              Balance at       Charged to         Charged                                Balance at
                                             Beginning of      Costs and          to Other          Additions              End of
               Description                      Period          Expenses          Accounts        (Deductions)             Period
               -----------                      ------          --------          --------        ------------             ------
<S>                                           <C>               <C>               <C>              <C>                   <C>        
 YEAR ENDED DECEMBER 31, 1997

 Leased aircraft - valuation
      allowance for equipment
      impairment

Four Boeing 737-200 Advanced
   aircraft                                   $16,468,000       $      --         $      --        $ (3,400,000) (A)     $13,068,000
                                                                                                                                    
Four Boeing 727-200 Advanced                                                                                                        
   aircraft                                     9,414,000              --                --                  --            9,414,000
                                                                                                                                    
Three McDonnell Douglas DC9-32                                                                                                      
   aircraft                                     1,618,000              --                --                  --            1,618,000
                                              -----------       ---------         ---------        ------------          -----------
                                                                                                                                    
                                              $27,500,000       $      --         $      --        $ (3,400,000)         $24,100,000
                                              ===========       =========         =========        ============          ===========
</TABLE>

 (A) Represents valuation allowance for equipment impairment relating to certain
     equipment sold during 1997.


                                      F-20
<PAGE>
<TABLE>
<CAPTION>
                                                    AIRCRAFT INCOME PARTNERS L.P.
                                                                                                                         Schedule II
                                     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)

                                                                      Additions
                                                             ---------------------------
                                             Balance at       Charged to         Charged                               Balance at
                                            Beginning of     Costs and         to Other            Additions             End of
              Description                      Period         Expenses          Accounts          (Deductions)           Period
              -----------                      ------         --------          --------          ------------           ------
<S>                                          <C>             <C>              <C>                  <C>                <C>        
 YEAR ENDED DECEMBER 31, 1996

Leased aircraft - valuation
      allowance for equipment
      impairment

Five Boeing 737-200 Advanced
   aircraft                                  $18,768,000     $      --        $          --        $ (2,300,000)(A)   $16,468,000

Four Boeing 727-200 Advanced
   aircraft                                    9,414,000            --                   --                  --         9,414,000   

Three McDonnell Douglas DC9-32                                                                                                     
   aircraft                                    1,618,000            --                   --                  --         1,618,000

One McDonnell Douglas DC9-51
   aircraft                                    2,425,000            --                   --         (2,425,000)(A)             --
                                             -----------     ---------        -------------        -----------        -----------

                                             $32,225,000     $      --        $          --        $(4,725,000)       $27,500,000
                                             ===========     =========        =============        ===========        ===========
</TABLE>

 (A)  Represents  valuation  allowances  for  equipment  impairment  relating to
      certain equipment sold during 1996.





                                      F-21
<PAGE>

Item 9.       Changes in and Disagreements with Accountants on Accounting and 
              Financial Disclosure

None.

<PAGE>
PART III


Item 10.      Directors and Executive Officers of Registrant

Registrant  has no  officers  or  directors.  The  General  Partner  manages and
controls   substantially   all  of   Registrant's   affairs   and  has   general
responsibility and ultimate authority in all matters affecting its business. The
names and positions  held by the officers and  directors of the General  Partner
are described below.
<TABLE>
<CAPTION>
         Name                Age       Position Held                                 Has served as a        
                                                                                     Director and/or        
                                                                                      Officer of the        
                                                                                   General Partner since  
--------------------------------------------------------------------------------------------------------
<S>                           <C>      <C>                                             <C>                       
W. Edward Scheetz             34       Director                                        November 1997             
David Hamamoto                39       Director                                        November 1997             
Dallas E. Lucas               36       Director                                        August 1998               
David King                    36       Executive Vice President and Assistant          November 1997             
                                       Treasurer, Director                                                       
Lawrence R. Schachter         42       Senior Vice President and Chief                 January 1998              
                                       Financial Officer                                                         
J. Peter Paganelli            40       Senior Vice President, Secretary and            March 1998                
                                       Treasurer                                                                 
Allan B. Rothschild           37       President and Director                          December 1997             
Marc Gordon                   34       Vice President                                  November 1997             
Charles Humber                25       Vice President                                  November 1997             
Adam Anhang                   25       Vice President                                  November 1997             
Gregory Peck                  24       Assistant Secretary                             November 1997 
</TABLE>
--------------

Each director and officer of the General Partner will hold office until the next
annual meeting of stockholders of the General Partner and until his successor is
elected and qualified.

There are no family  relationships  between or among any of the directors and/or
executive officers of the General Partner.

W. Edward Scheetz co-founded  NorthStar Capital Partners LLC with David Hamamoto
in July 1997,  From 1993 through 1997,  Mr. Scheetz was a partner at Apollo Real
Estate Advisors L.P. From 1989 to 1993, Mr.
Scheetz was a principal with Trammell Crow Ventures.

David Hamamoto co-founded  NorthStar Capital Partners LLC with W. Edward Scheetz
in July 1997.  From 1988 to 1997, Mr Hamamoto was a partner and a co-head of the
real estate principal investment area at Goldman, Sachs & Co.

Dallas E. Lucas joined Northstar  Capital Partners LLC in August 1998. From 1994
until then he was the Chief  Financial  Officer of Crescent Real Estate Equities
Company.  Prior to that he was a financial  consulting  and audit manager in the
real estate services group of Arthur Anderson LLP.
<PAGE>
David King joined NorthStar  Capital Partners LLC in November 1997. From 1990 to
1997, Mr. King was associated  with Olympia & York Companies (USA) where he held
the  position of Senior Vice  President  of Finance.  Prior to that Mr. King was
employed with Bankers Trust in its real estate finance group.

Lawrence R.  Schachter  joined  NorthStar  Presidio in January 1998 From 1996 to
1998, Mr. Schachter was Controller at CB Commercial/Hampshire  LLC. From 1995 to
1996, Mr.  Schachter was Controller at Goodrich  Associates.  From 1992 to 1995,
Mr. Schachter was Controller at Greenthal/Harlan Realty Services Co.

J. Peter Paganelli  joined  NorthStar  Presido in March 1998. From 1997 to 1998,
Mr. Paganelli was Director of Asset Management at Argent Ventures LLC, a private
real estate  company.  From 1994 to 1997, Mr.  Paganelli was a Vice President at
Starwood Capital Group, LLC in its Asset  Management  Group.  From 1986 to 1994,
Mr.  Paganelli  was an Associate  Director at Cushman &  Wakefield,  Inc. in its
Financial Services and Asset Services Groups.

Allan B.  Rothschild  joined  NorthStar  Presidio in December 1997. From 1995 to
1997, Mr.  Rothschild  was Senior Vice President and General  Counsel of Newkirk
Limited  Partnership.  From 1987 to 1995, Mr. Rothschild was associated with the
law firm of Proskauer, Rose LLP in its real estate group.

Marc Gordon joined  NorthStar  Capital Partners LLC in October 1997 From 1993 to
1997, Mr. Gordon was Vice President in the real estate investment  banking group
at Merrill Lynch.  Prior to that, Mr. Gordon was associated with the law firm of
Irell & Manella in its real estate and banking group.

Charles Humber joined  NorthStar  Capital  Partners LLC in September  1997. From
1996 to 1997,  Mr Humber was  employed  with  Merrill  Lynch in its real  estate
investment  banking  group.  Prior to that,  Mr.  Humber  was a student at Brown
University.

Adam Anhang joined  NorthStar  Capital Partners LLC in August 1997. From 1996 to
1997,  Mr.  Anhang was  employed  by The Athena  Group as part of its Russia and
former Soviet Union development team. Prior to that, Mr. Anhang was a student at
the Wharton School of the University of Pennsylvania.

Gregory Peck joined  NorthStar  Capital  Partners LLC in July 1997. From 1996 to
1997,  Mr. Peck was employed by Morgan  Stanley as part of Morgan Stanley Realty
Real Estate Funds (MSREF) and Morgan  Stanley's Real Estate  Investment  Banking
Group.  From 1994 to 1996,  Mr. Peck  worked for Lazard  Freres & Co. LLC in the
Real Estate Investment Banking Group.

Messrs. Scheetz, Hamamoto, Lucas, King and Rothschild also serve as directors of
the  General  Partners  of the  following  limited  partnerships  whose  limited
partnership  units are registered under Section 12 of the Exchange Act: National
Lease Income Fund 6, L.P.,  Resources Pension Shares 5, L.P.,  Resources Accrued
Mortgage  Investors 2, L.P.,  Resources Accrued Mortgage  Investors - Series 86,
L.P.,  Integrated  Resources High Equity Partners - Series 85, L.P., High Equity
Partners,  L.P. - Series 86, and High Equity Partners, L.P. - Series 88. Each of
the foregoing general partners is affiliated with the General Partner.
<PAGE>
Registrant believes,  based on written representations  received by it, that for
1998 all filing  requirements under Section 16(a) of the Securities Exchange Act
of 1934 applicable to beneficial owners of Registrant's securities, Registrant's
General  Partner and the officers and  directors of such General  Partner,  were
complied with.


Item 11.      Executive Compensation

Registrant is not required to pay any  compensation to the officers or directors
of the  General  Partner.  The  General  Partner  does  not  currently  pay  any
compensation to any of its officers or directors.

Certain officers and directors of the General Partner receive  compensation from
affiliates  of the  General  Partner  (but not  from  Registrant)  for  services
performed for various affiliated entities,  which may include services performed
for  Registrant;  however,  the General Partner  believes that any  compensation
attributable to such services  performed for Registrant is immaterial.  See Item
13 "Certain Relationships and Related Transactions".


Item 12.      Security Ownership of Certain Beneficial Owners and Management

As of March 1, 1999 no person owned of record or was known by  Registrant to own
beneficially more than 5% of the Units of Registrant.

As of March 1, 1999,  neither the General Partner nor its officers and directors
were known by Registrant to  beneficially  own Units or shares of Presidio,  the
parent of the General Partner.

To the knowledge of the Registrant, the following sets forth certain information
regarding  ownership  of the Class A shares  of  Presidio  as of March 11,  1998
(except as otherwise  noted) by: (i) each person or entity who owns of record or
beneficially five percent or more of the Class A shares,  (ii) each director and
executive officer of Presidio, and (iii) all directors and executive officers of
Presidio as a group.  To the knowledge of Presidio,  each of such  share-holders
has sole voting and  investment  power as to the shares shown  unless  otherwise
noted.

All  outstanding  shares of Presidio  are owned by Presidio  Capital  Investment
Company,  LLC ("PCIC"),  a Delaware limited liability company.  The interests in
PCIC (and beneficial ownership in Presidio) are held as follows:
<TABLE>
<CAPTION>
                                             Percentage Ownership in PCIC
                                               and Percentage Beneficial
                                                    Ownership
    Name of Beneficial Owner                       in Presidio
    ------------------------                       -----------
<S>                                                   <C>
    Five Percent Holders:
    NorthStar Presidio Capital Holding Corp.(1)       71.93%
    AG Presidio Investors, LLC (2)                    14.12%
    DK Presidio Investors, LLC (3)                     8.45%
    Stonehill Partners, L.P. (4)                       5.50%
</TABLE>
<PAGE>
    The  holdings of the  directors  and  executive  officers of Presidio are as
    follows:
<TABLE>
<CAPTION>
    Directors and Officers:
    -----------------------

<S>                                                                 <C>
    Adam Anhang (5)                                                      0%
    Marc Gordon (5)                                                      0%
    David Hamamoto (5)                                               71.93%
    Charles Humber (5)                                                   0%
    David King (5)                                                       0%
    Gregory Peck (5)                                                     0%
    Dallas Lucas (5)                                                     0%
    Allan Rothschild (5)                                                 0%
    J. Peter Paganelli (5)                                               0%
    Lawrence Schachter (5)                                               0%

    W. Edward Scheetz (5)                                            71.93%

    Directors and Officers as a group:                               71.93%
    ----------------------------------
</TABLE>
------------- 

(1)       NorthStar Presidio Capital Holding Corp. ("NS Presidio") is a Delaware
          corporation whose address is c/o NorthStar  Capital  Investment Corp.,
          527 Madison Avenue,  16th Floor, New York, New York 10022. NS Presidio
          has three shareholders:  (i) NorthStar  Partnership,  L.P., a Delaware
          limited  partnership whose address is c/o NorthStar Capital Investment
          Corp., 527 Madison Avenue, 16th Floor, New York, New York 10022, holds
          99% of the common stock  (voting);  (ii) David  Hamamto holds 0.5% of
          the common stock  (voting);and  (iii) W. Edward  Scheetz holds 0.5% of
          the common stock (voting).


<PAGE>
(2)      Each of Angelo,  Gordon & Co.,  L.P.,  as sole  manager of AG  Presidio
         Investors,  LLC and John M.  Angelo and Michael L.  Gordon,  as general
         partners of the general  partner of Angelo,  Gordon & Co., L.P., may be
         deemed to  beneficially  own for purposes of Rule 13d-3 of the Exchange
         Act the securities  beneficially owned by AG Presidio  Investors,  LLC.
         Each of John M. Angelo and Michael L. Gordon  disclaims such beneficial
         ownership.  The business address for such persons is c/o Angelo, Gordon
         & Co., L.P., 245 Park Avenue, 26th Floor, New York, New York 10167.

(3)      M.H. Davidson & Company, as sole manager of DK Presidio Investors, LLC,
         may be deemed to  beneficially  own for  purposes  of Rule 13d-3 of the
         Exchange  Act  the  securities   beneficially   owned  by  DK  Presidio
         Investors,  LLC.  The  business  address  for such  persons is c/o M.H.
         Davidson & Company, 885 Third Avenue, New York, New York 10022.

(4)      Includes  shares  of PCIC  beneficially  owned  by  Stonehill  Offshore
         Partners  Limited and Stonehill  Institutional  Partners,  L.P. John A.
         Motulsky is a managing general partner of Stonehill  Partners,  L.P., a
         managing  member  of  the  investment  advisor  to  Stonehill  Offshore
         Partners  Limited  and a general  partner  of  Stonehill  Institutional
         Partners L.P. John A. Motulsky  disclaims  beneficial  ownership of the
         shares held by these entities. The business address for such persons is
         c/o Stonehill Investment  Corporation,  110 East 59th Street, New York,
         New York 10022.

(5)      The  business  address  for such  persons is 527 Madison  Avenue,  16th
         Floor, New York, New York 10022
<PAGE>
Item 13.      Certain Relationships and Related Transactions


The  General  Partner  received  $2,966,412  from  Registrant  as its  share  of
distributions  for the year ended  December 31, 1998.  No director or officer of
the General Partner received any direct  remuneration from Registrant during the
year ended December 31, 1998.

The  General  Partner  also  received  a  management  fee of  $180,200  for  the
performance of management services.

The General  Partner's share of  Registrant's  taxable income for the year ended
December 31, 1998 amounted to $1,435,604.
 
For a description of the interest of the General Partner in cash from operations
and  cash  from  sales,  reference  is made  to the  material  contained  in the
Prospectus  under the heading  MANAGEMENT  COMPENSATION,  which is  incorporated
herein by reference.

<PAGE>
PART IV


Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

1.       Financial Statements

         See Index to Financial  Statements and  Supplementary  Data in Part II,
         Item 8.

2.       Financial Schedules

         Schedule II. Valuation and Qualifying  Accounts (See Index to Financial
         Statements and Supplementary Data in Part II, Item 8).

3.       Exhibits

         3        Certificate of Limited Partnership.1

         4        Limited Partnership Agreement.1

         10.1     Agreement  between  Registrant  and  Integrated  Aircraft Fund
                  Management Corp.1

         10.2     Form of  Trust  Agreement  between  Integrated  Aircraft  Fund
                  Management  Corp., as beneficiary,  and First Security Bank of
                  Utah, N.A., as trustee.1

         10.3     Form  of  Aircraft  Purchase   Agreement  between   Integrated
                  Aircraft Fund Management Corp. and Continental Airlines, Inc.1

         10.4     Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee,  Integrated  Aircraft Fund Management  Corp.
                  and Continental Airlines, Inc.1

                  Note:  substantially identical leases in all material respects
                  except  for the  dates of term and  rental  amounts  cover the
                  equipment  described under  "Properties" as purchased on April
                  20, 1988 and the McDonnell Douglas DC-9-32 aircraft  purchased
                  on May 13, 1988.1

         10.5     Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee and Midway Airlines, Inc.1

         10.6     Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee,  and Braathens  South-American  and Far East
                  Airtransport A/S.2

         10.7     Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee, and U.S. Air, Inc.2

                  Note:  substantially identical leases in all material respects
                  except  for  dates  of  term  and  rental  amounts  cover  the
                  equipment  described in  "Properties" as purchased on December
                  15, 1988 and in  "Business - General" as  purchased on January
                  18, 1989.
<PAGE>
         10.8     Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee, and Southwest Airlines Co.2

         10.9     Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee, and Alaska Airlines.3

         10.10    Form of Lease Agreement I between First Security Bank of Utah,
                  N.A., as trustee, and Aloha Airlines, Inc.3
         10.11    Form of Lease  Agreement  II between  First  Security  Bank of
                  Utah, N.A., as trustee, and Aloha Airlines, Inc.3

         10.12    Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee, and Hawaiian Airlines, Inc.4

         10.13    Form of Lease Agreement dated as of May 1, 1991, between First
                  Security  Bank  of  Utah,  N.A.,  as  trustee,  and  Southwest
                  Airlines Co. to be supplemented by Lease Agreement No. 1 dated
                  June 14, 1991 and Amendment No. 2 to Lease  Agreement dated as
                  of May 1, 1991.5

         10.14    Form 11 of Lease Amendment No. 2 dated as of February 27, 1992
                  between  First  Security  Bank of Utah,  N.A.,  as trustee and
                  Braathens South-American and Far East Airtransport A/S.5

         10.15    Form of Lease  Agreement  No. 3 dated  as of  March  23,  1992
                  between  First  Security  Bank of Utah,  N.A.,  as trustee and
                  Braathens South-American and Far East Airtransport A/S.5

         10.16    Form of Purchase  Agreement  dated as of May 19, 1992  between
                  Alaska  Airlines,  Inc. and First Security Bank of Utah, N.A.,
                  as trustee and lessor.5

         10.17    Termination  Agreement  dated  July  28,  1992  by  and  among
                  Integrated  Aircraft Fund  Management  Corp.,  Registrant  and
                  Citicorp Aircraft Management, Inc.5

         10.18    Lease  Amendment  No. 2 dated as of July 7, 1992 between First
                  Security  Bank  of  Utah,   N.A.,  as  trustee  and  Braathens
                  South-American and Far East Airtransport A/S.5

         10.19    Remarketing   Agreement  between   Integrated   Aircraft  Fund
                  Management  Corp.  and Aviation  Capital  Group,  L.P.,  dated
                  August 1, 1992.6

         10.20    Amendment  No.  3 dated  as of  August  1,  1992 to the  Lease
                  Agreement  dated as of May 1, 1991 between First Security Bank
                  of Utah, N.A., as trustee and Southwest Airlines Co.6

         10.21    Amendment  No. 1 dated as of  November  1,  1992 to the  Lease
                  Agreement  dated as of December 1, 1988 between First Security
                  Bank of Utah, N.A., as trustee and USAir, Inc.6

         10.22    Amendment  No. 2 dated as of  December  1,  1992 to the  Lease
                  Agreement  dated as of December 1, 1988 between First Security
                  Bank of Utah, N.A., as trustee and USAir, Inc.6
<PAGE>
         10.23    Amendment  No. 1 dated as of  November  1,  1992 to the  Lease
                  Agreement  dated as of January 1, 1989 between First  Security
                  Bank of Utah, N.A., as trustee and USAir, Inc.6

         10.24    Lease  Agreement  dated January 5, 1993 between First Security
                  Bank of Utah,  N.A.,  as trustee,  and  Continental  Airlines,
                  Inc.6

         10.25    Participation  Agreement  dated  January 5, 1993 between First
                  Security  Bank of  Utah,  N.A.,  as  trustee,  Registrant  and
                  Continental Airlines, Inc.6

         10.26    Amendment  No. 2 dated as of  December  1,  1993 to the  Lease
                  Agreement  dated as of January 1, 1989 between First  Security
                  Bank of Utah, N.A., as trustee and USAir, Inc.7

         10.27    Amendment  No. 3 dated as of  December  1,  1993 to the  Lease
                  Agreement  dated as of December 1, 1988 between First Security
                  Bank of Utah, N.A., as trustee and USAir, Inc.7

         10.28    Amendment  dated as of December 1, 1993 to Lease  Agreement II
                  between  First  Security Bank of Utah,  N.A., as trustee,  and
                  Aloha Airlines, Inc.7

         10.29    Form of Lease  Agreement  between First Security Bank of Utah,
                  N.A., as trustee, Registrant, as lessor, and Ladeco S.A.7

         Note:    a  substantially  identical  lease  in all  material  respects
                  except for dates of term and rental  amounts covers the Second
                  Alaska Aircraft.  See "Business - Recent Developments,  Alaska
                  Airlines".

         10.30    Lease  Agreement  dated as of November 5, 1993  between  First
                  Security Bank of Utah,  N.A., as trustee,  and American  Trans
                  Air, Inc.7

         10.31    Lease  Agreement  dated as of November 1, 1994  between  First
                  Security Bank of Utah,  N.A., as trustee,  and American  Trans
                  Air, Inc.8

         10.32    Lease  Agreement  dated as of November 10, 1994 between  First
                  Security Bank of Utah,  N.A., as trustee,  and American  Trans
                  Air, Inc. 8

         10.33    Lease Amendment and Extension Agreement,  dated as of July 20,
                  1994,  between  First  Security Bank of Utah N.A., as trustee,
                  and Southwest Airlines Co. 8

         10.34    Second Lease  Extension  Agreement,  dated as of July 5, 1995,
                  between  First  Security Bank of Utah,  N.A., as trustee,  and
                  Southwest Airlines Co.

         10.35    Form of  Purchase  Agreement,  dated April 15,  1996,  between
                  Southwest Airlines Co.  ("Purchaser"),  First Security Bank of
                  Utah  N.A.  ("Trustee")  and  Aircraft  Income  Partners  L.P.
                  ("Beneficiary") 10
<PAGE>
         10.36    Lease Amendment, dated January 1, 1997, between First Security
                  Bank of Utah N.A., as Trustee, and Hawaiian Airlines, Inc. 10

         10.37    Lease Amendment and Extension Agreement,  dated June 24, 1996,
                  between  First  Security  Bank of Utah N.A.,  as Trustee,  and
                  American Trans Air, Inc. 10

         10.38    Lease Amendment and Extension Agreement,  dated July 29, 1996,
                  between  First  Security  Bank of Utah N.A.,  as Trustee,  and
                  Aloha Airlines, Inc. 10

         28       Prospectus   of  Registrant   dated   February  29,  1988,  as
                  supplemented  by  Supplements  dated May 20, 1988,  August 16,
                  1988,  November 4, 1988, January 6, 1989 and February 28, 1989
                  filed pursuant to Rules 424(b) and 424(c) under the Securities
                  Act of 1933.1

(b)      Current   reports  on  Form  8-K  filed  during  the  last  quarter  of
         Registrant's fiscal year

         None.
--------------- 
         1        Filed as an exhibit to Registrant's  Registration Statement on
                  Form S-1 (33-18891), and incorporated herein by reference.

         2        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1988, and  incorporated
                  herein by reference.

         3        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1989, and  incorporated
                  herein by reference.

         4        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1990, and  incorporated
                  herein by reference.

         5        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended  December 31, 1991 and  incorporated
                  herein by reference.

         6        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended  December 31, 1992 and  incorporated
                  herein by reference.

         7        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended  December 31, 1993 and  incorporated
                  herein by reference.

         8        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended  December 31, 1994 and  incorporated
                  herein by reference.
<PAGE>
         9        Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended  December 31, 1995 and  incorporated
                  herein by reference.

         10       Filed as an exhibit to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended  December 31, 1996 and  incorporated
                  herein by reference.


         *        Filed herewith.

<PAGE>

                                   EXHIBIT INDEX

                                                                           Page
Exhibits                                                                  Number
--------                                                                  ------

 
3        Certificate of Limited Partnership.1

4        Limited Partnership Agreement.1

10.1     Agreement  between  Registrant and  Integrated  Aircraft Fund
         Management Corp.1

10.2     Form of Trust  Agreement  between  Integrated  Aircraft  Fund
         Management Corp., as beneficiary,  and First Security Bank of
         Utah, N.A., as trustee.1

10.3     Form  of  Aircraft  Purchase   Agreement  between  Integrated
         Aircraft Fund  Management  Corp.  and  Continental  Airlines,
         Inc.1

10.4     Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee,  Integrated  Aircraft Fund Management Corp.
         and Continental Airlines, Inc.1

         Note: substantially identical leases in all material respects
         except  for the dates of term and  rental  amounts  cover the
         equipment  described under "Properties" as purchased on April
         20, 1988 and the McDonnell Douglas DC-9-32 aircraft purchased
         on May 13, 1988.1

10.5     Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee and Midway Airlines, Inc.1

10.6     Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee,  and Braathens  South-American and Far East
         Airtransport A/S.2

10.7     Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee, and U.S. Air, Inc.2

         Note: substantially identical leases in all material respects
         except  for  dates  of term  and  rental  amounts  cover  the
         equipment  described in "Properties" as purchased on December
         15, 1988 and in  "Business - General" as purchased on January
         18, 1989.

10.8     Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee, and Southwest Airlines Co.2

10.9     Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee, and Alaska Airlines.3

10.10    Form of Lease  Agreement  I between  First  Security  Bank of
         Utah, N.A., as trustee, and Aloha Airlines, Inc.3

10.11    Form of Lease  Agreement II between  First  Security  Bank of
         Utah, N.A., as trustee, and Aloha Airlines, Inc.3
<PAGE>
10.12    Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee, and Hawaiian Airlines, Inc.4

10.13    Form of  Lease  Agreement  dated as of May 1,  1991,  between
         First Security Bank of Utah, N.A., as trustee,  and Southwest
         Airlines  Co. to be  supplemented  by Lease  Agreement  No. 1
         dated June 14, 1991 and  Amendment  No. 2 to Lease  Agreement
         dated as of May 1, 1991.5

10.14    Form 11 of Lease  Amendment  No. 2 dated as of  February  27,
         1992 between First  Security  Bank of Utah,  N.A., as trustee
         and Braathens South-American and Far East Airtransport A/S.5

10.15    Form of Lease  Agreement  No. 3 dated  as of March  23,  1992
         between  First  Security  Bank of Utah,  N.A., as trustee and
         Braathens South-American and Far East Airtransport A/S.5

10.16    Form of Purchase  Agreement  dated as of May 19, 1992 between
         Alaska Airlines,  Inc. and First Security Bank of Utah, N.A.,
         as trustee and lessor.5

10.17    Termination  Agreement  dated  July  28,  1992  by and  among
         Integrated  Aircraft Fund  Management  Corp.,  Registrant and
         Citicorp Aircraft Management, Inc.5

10.18    Lease  Amendment No. 2 dated as of July 7, 1992 between First
         Security  Bank  of  Utah,  N.A.,  as  trustee  and  Braathens
         South-American and Far East Airtransport A/S.5

10.19    Remarketing   Agreement  between  Integrated   Aircraft  Fund
         Management  Corp.  and Aviation  Capital Group,  L.P.,  dated
         August 1, 1992.6

10.20    Amendment  No.  3 dated as of  August  1,  1992 to the  Lease
         Agreement dated as of May 1, 1991 between First Security Bank
         of Utah, N.A., as trustee and Southwest Airlines Co.6

10.21    Amendment  No. 1 dated as of  November  1,  1992 to the Lease
         Agreement dated as of December 1, 1988 between First Security
         Bank of Utah, N.A., as trustee and USAir, Inc.6

10.22    Amendment  No. 2 dated as of  December  1,  1992 to the Lease
         Agreement dated as of December 1, 1988 between First Security
         Bank of Utah, N.A., as trustee and USAir, Inc.6

10.23    Amendment  No. 1 dated as of  November  1,  1992 to the Lease
         Agreement  dated as of January 1, 1989 between First Security
         Bank of Utah, N.A., as trustee and USAir, Inc.6

10.24    Lease  Agreement dated January 5, 1993 between First Security
         Bank of Utah,  N.A., as trustee,  and  Continental  Airlines,
         Inc.6
<PAGE>
10.25    Participation  Agreement  dated January 5, 1993 between First
         Security  Bank of Utah,  N.A.,  as  trustee,  Registrant  and
         Continental Airlines, Inc.6

10.26    Amendment  No. 2 dated as of  December  1,  1993 to the Lease
         Agreement  dated as of January 1, 1989 between First Security
         Bank of Utah, N.A., as trustee and USAir, Inc.7

10.27    Amendment  No. 3 dated as of  December  1,  1993 to the Lease
         Agreement dated as of December 1, 1988 between First Security
         Bank of Utah, N.A., as trustee and USAir, Inc.7

10.28    Amendment  dated as of December 1, 1993 to Lease Agreement II
         between First  Security Bank of Utah,  N.A., as trustee,  and
         Aloha Airlines, Inc.7

10.29    Form of Lease Agreement  between First Security Bank of Utah,
         N.A., as trustee, Registrant, as lessor, and Ladeco S.A.7

         Note:  a  substantially   identical  lease  in  all  material
         respects  except for dates of term and rental  amounts covers
         the  Second   Alaska   Aircraft.   See   "Business  -  Recent
         Developments, Alaska Airlines".

10.30    Lease  Agreement  dated as of November 5, 1993 between  First
         Security Bank of Utah,  N.A., as trustee,  and American Trans
         Air, Inc.7

10.31    Lease  Agreement  dated as of November 1, 1994 between  First
         Security Bank of Utah,  N.A., as trustee,  and American Trans
         Air, Inc.8

10.32    Lease  Agreement  dated as of November 10, 1994 between First
         Security Bank of Utah,  N.A., as trustee,  and American Trans
         Air, Inc. 8

10.33    Lease Amendment and Extension Agreement, dated as of July 20,
         1994,  between First  Security Bank of Utah N.A., as trustee,
         and Southwest Airlines Co. 8

10.34    Second Lease Extension  Agreement,  dated as of July 5, 1995,
         between First  Security Bank of Utah,  N.A., as trustee,  and
         Southwest Airlines Co. 8

10.35    Form of Purchase  Agreement,  dated April 15,  1996,  between
         Southwest Airlines Co. ("Purchaser"),  First Security Bank of
         Utah N.A.  ("Trustee")  and  Aircraft  Income  Partners  L.P.
         ("Beneficiary") 10

10.36    Lease  Amendment,   dated  January  1,  1997,  between  First
         Security  Bank  of  Utah  N.A.,  as  Trustee,   and  Hawaiian
         Airlines, Inc. 10

10.37    Lease Amendment and Extension Agreement, dated June 24, 1996,
         between First  Security  Bank of Utah N.A.,  as Trustee,  and
         American Trans Air, Inc. 10
<PAGE>
10.38    Lease Amendment and Extension Agreement, dated July 29, 1996,
         between First  Security  Bank of Utah N.A.,  as Trustee,  and
         Aloha Airlines, Inc. 10

28       Prospectus  of  Registrant   dated   February  29,  1988,  as
         supplemented  by Supplements  dated May 20, 1988,  August 16,
         1988, November 4, 1988, January 6, 1989 and February 28, 1989
         filed   pursuant  to  Rules   424(b)  and  424(c)  under  the
         Securities Act of 1933.1

-------------------------
1          Filed as an exhibit to  Registrant's  Registration  Statement on Form
           S-1 (33-18891), and incorporated herein by reference.

2          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended December 31, 1988, and  incorporated  herein by
           reference.

3          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended December 31, 1989, and  incorporated  herein by
           reference.

4          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended December 31, 1990, and  incorporated  herein by
           reference.

5          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended  December 31, 1991 and  incorporated  herein by
           reference.

6          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended  December 31, 1992 and  incorporated  herein by
           reference.

7          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended  December 31, 1993 and  incorporated  herein by
           reference.

8          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended  December 31, 1994 and  incorporated  herein by
           reference.

9          Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended  December 31, 1995 and  incorporated  herein by
           reference.

10         Filed as an exhibit to  Registrant's  Annual  Report on Form 10-K for
           the fiscal year ended  December 31, 1996 and  incorporated  herein by
           reference


         * Filed herewith.
<PAGE>
                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  Registrant  has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 29th day of March 1999.

AIRCRAFT INCOME PARTNERS L.P.

By:      INTEGRATED AIRCRAFT FUND MANAGEMENT CORP.
         General Partner
                                                                   Date

By:      /s/ Allan B. Rothschild                              March  29 , 1999
         ------------------------------
         Allan B. Rothschild
         President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of Registrant in their
capacities as directors  and/or officers (as to the Managing General Partner) on
the date indicated below.


       Signature                     Title                            Date
       ---------                     -----                            ----
                                                             
/s/ Dallas Lucas                  Director                        March 29, 1999
-----------------                                                
Dallas Lucas                                                     
                                                                 
/s/ Lawrence R. Schachter         Senior Vice President and       March 29, 1999
------------------------          Chief Financial Officer        
Lawrence R. Schachter                                            
                                                                 
/s/ Allan B. Rothschild           Director and President          March 29, 1999
-----------------------                                          
Allan B. Rothschild                                              
                                                                 
/s/ David King                    Director and Executive          March 29, 1999
--------------                    Vice President and             
David King                        Assistant Treasurer